10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended           March 31, 2020          

☐ TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 1-10526

UNITED-GUARDIAN, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	11-1719724
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)

230 Marcus Boulevard, Hauppauge, New York 11788

(Address of Principal Executive Offices)

(631) 273-0900

(Registrant’s Telephone Number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   ☑    No ☐

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐
Non-accelerated filer	☐
Accelerated filer	☐
Smaller reporting company	☑
Emerging growth company	☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes ☐     No þ

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.10 par value per share	UG	NASDAQ Global Market

The registrant had 4,594,319 shares of common stock, $.10 par value per share, outstanding at May 1, 2020.

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UNITED-GUARDIAN, INC.

INDEX TO FINANCIAL STATEMENTS

Page No.

Part I. FINANCIAL INFORMATION
Item 1 - Condensed Financial Statements (unaudited unless indicated otherwise):
Statements of Income - Three months ended March 31, 2020 and 2019	2
Balance Sheets - March 31, 2020 (unaudited) and December 31, 2019 (audited)	3-4
Statements of Changes in Stockholder’s Equity – Three months ended March 31, 2020 and 2019	5
Statements of Cash Flows – Three months ended March 31, 2020 and 2019	6
Notes to Condensed Financial Statements	7-15
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	15-21
Item 3 - Quantitative and Qualitative Disclosures About Market Risk	21
Item 4 - Controls and Procedures	22
Part II. OTHER INFORMATION
Item 1 -Legal Proceedings	22
Item 1A - Risk Factors	22-23
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3 - Defaults Upon Senior Securities	23
Item 4 - Mine Safety Disclosures	23
Item 5 - Other Information	23
Item 6 - Exhibits	24
Signatures	24

Page 1 of 24

Part I. FINANCIAL INFORMATION

ITEM 1. Condensed Financial Statements.

UNITED-GUARDIAN, INC.

STATEMENTS OF INCOME
(UNAUDITED)

	THREE MONTHS ENDED MARCH 31,
	2020			2019
Net Sales	$	3,322,914		$	3,180,318
Costs and expenses:
Cost of sales		1,389,331			1,288,345
Operating expenses		515,275			546,962
Research and development		107,732			98,659
Total costs and expenses		2,012,338			1,933,966
Income from operations		1,310,576			1,246,352
Other (expense) income:
Investment income		44,067			44,167
Net (loss) gain on marketable securities		(356,595	)		257,194
Total other (expense) income		(312,528	)		301,361
Income before provision for income taxes		998,048			1,547,713
Provision for income taxes		207,741			325,019
Net income	$	790,307		$	1,222,694
Earnings per common share
(basic and diluted)	$	0.17		$	0.27
Weighted average shares – basic and diluted		4,594,319			4,594,319

See notes to condensed financial statements

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UNITED-GUARDIAN, INC.

BALANCE SHEETS

ASSETS	MARCH 31,		DECEMBER 31,
	2020		2019.
	(UNAUDITED)		(AUDITED)
Current assets:
Cash and cash equivalents	$	790,190	$	1,048,311
Marketable securities		8,055,289		6,867,516
Accounts receivable, net of allowance for doubtful accounts of $20,186 at March 31, 2020 and $21,178 at December 31, 2019		2,105,428		2,098,411
Inventories (net)		1,362,787		1,217,277
Prepaid expenses and other current assets		227,872		170,466
Prepaid income taxes		–		165,300
Total current assets		12,541,566		11,567,281
Property, plant and equipment:
Land		69,000		69,000
Factory equipment and fixtures		4,482,236		4,482,236
Building and improvements		2,840,337		2,839,289
Total property, plant and equipment		7,391,573		7,390,525
Less: accumulated depreciation		6,646,631		6,609,818
Total property, plant and equipment (net)		744,942		780,707
Other assets (net)		11,118		14,824
TOTAL ASSETS	$	13,297,626	$	12,362,812

See notes to condensed financial statements

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UNITED-GUARDIAN, INC.

BALANCE SHEETS

(continued)

LIABILITIES AND STOCKHOLDERS’ EQUITY

	MARCH 31,		DECEMBER 31,
	2020		2019
Current liabilities:	(UNAUDITED)		(AUDITED)
Accounts payable	$	32,085	$	71,385
Accrued expenses		1,271,108		1,129,126
Income taxes payable		126,453		–
Dividends payable		141,932		142,548
Total current liabilities		1,571,578		1,343,059
Deferred income taxes (net)		302,843		386,855
Commitments and contingencies
Stockholders’ equity:
Common stock $.10 par value; 10,000,000 shares authorized; 4,594,319 shares issued and outstanding at March 31, 2020 and December 31, 2019		459,432		459,432
Retained earnings		10,963,773		10,173,466
Total stockholders’ equity		11,423,205		10,632,898
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	13,297,626	$	12,362,812

See notes to condensed financial statements

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UNITED-GUARDIAN, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2020

	Common stock				Retained
	Shares		Amount		Earnings		Total
Balance, January 1, 2020		4,594,319	$	459,432	$	10,173,466	$	10,632,898
Net income		–		–		790,307		790,307
Balance, March 31, 2020		4,594,319	$	459,432	$	10,963,773	$	11,423,205

THREE MONTHS ENDED MARCH 31, 2019

	Common stock				Retained
	Shares		Amount		Earnings		Total
Balance, January 1, 2019		4,594,319	$	459,432	$	10,465,506	$	10,924,938
Net income		–		–		1,222,694		1,222,694
Balance, March 31, 2019		4,594,319	$	459,432	$	11,688,200	$	12,147,632

See notes to condensed financial statements

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UNITED-GUARDIAN, INC.

STATEMENTS OF CASH FLOWS
(UNAUDITED)

	THREE MONTHS ENDED
	MARCH 31,
	2020			2019
Cash flows from operating activities:
Net income	$	790,307		$	1,222,694
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		40,519			42,105
Net loss (gain) on marketable securities		356,595			(257,194	)
Allowance for Doubtful Accounts		(992	)		–
Deferred income taxes		(84,012	)		10,856
(Increase) decrease in operating assets:
Accounts receivable		(6,025	)		67,707
Inventories		(145,510	)		157,380
Prepaid expenses and other current assets		(57,406	)		(68,068	)
Prepaid income taxes		165,300			164,163
(Decrease) increase in operating liabilities:
Accounts payable		(39,300	)		(44,305	)
Accrued expenses		141,982			236,316
Income taxes payable		126,453			–
Dividends payable		(616	)		–
Net cash provided by operating activities		1,287,295			1,531,654
Cash flows from investing activities:
Acquisition of property, plant and equipment		(1,048	)		(12,992	)
Purchase of marketable securities		(3,544,368	)		(6,049,914	)
Proceeds from sales of marketable securities		2,000,000			4,480,373
Net cash used in investing activities		(1,545,416	)		(1,582,533	)
Net decrease in cash and cash equivalents		(258,121	)		(50,879	)
Cash and cash equivalents at beginning of period		1,048,311			550,135
Cash and cash equivalents at end of period	$	790,190		$	499,256
Supplemental disclosure of cash flow information
Taxes paid	$	–		$	150,000

See notes to condensed financial statements

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UNITED-GUARDIAN, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

1. Nature of Business

United-Guardian, Inc. (the “Company”) is a Delaware corporation that, through its Guardian Laboratories division, conducts research, product development, manufacturing and marketing of cosmetic ingredients, pharmaceuticals, medical products, and proprietary specialty industrial products.

2. Basis of Presentation

Interim condensed financial statements of the Company are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information, pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments considered necessary for the fair presentation of financial statements for the interim periods have been included. The results of operations for the three-month period ended March 31, 2020 (also referred to as the “first quarter of 2020”) are not necessarily indicative of results that ultimately may be achieved for any other interim period or for the year ending December 31, 2020. The interim unaudited condensed financial statements and notes thereto should be read in conjunction with the audited condensed financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2019.

3. Impact of coronavirus (COVID-19)

In March 2020, the spread of the coronavirus (COVID-19) began to cause disruptions among businesses and markets worldwide. On March 20, 2020 the Governor of New York issued an executive order which closed non-essential businesses. The Company, as a manufacturer of pharmaceutical and medical products, is considered an essential business, and continues to operate. The Company has taken a series of actions aimed at safeguarding its employees while operations continue. While many of the Company’s customers are in essential businesses as well, there may be other customers that are considered non-essential, in which case there may be a decrease in orders from those customers until they reopen. In addition, the Company distributes products to marketing partners globally, and it is difficult to assess the current conditions that exist in other countries where our products are sold. While these disruptions are expected to be temporary, until the crisis passes in the different countries it is likely that there will be a negative impact on the Company’s sales in those countries. Since there is uncertainty as what the duration of the pandemic will be, the Company is unable to provide any accurate estimate or projection as to what the full impact of the coronavirus will be on the Company’s operations or financial results.

As of the date of this report the Company does not anticipate that the coronavirus pandemic will affect the ability of the Company to obtain raw materials and maintain production. The Company has price protection on its most important raw material, and has multiple sources for many of its raw materials. The Company also brought in additional quantities of some raw materials at the beginning of the pandemic, and as a result it does not anticipate that it will have a problem maintaining production. Although the rate of production will be impacted due to staggered production hours, the Company does not expect that to affect its ability to maintain sufficient inventory and production levels to be able to fulfill sales orders on a timely basis. The Company does not expect the carrying value of its assets or its liquidity to be impaired.

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4. Use of Estimates

In preparing financial statements in accordance with 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 revenues 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.

5. Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net income.

In accordance with ASC Topic 606 “Revenue from Contracts with Customers”, for the three-month period ended March 31, 2019, the Company reclassified certain sales rebates from Cost of Sales to Net Sales in the amount of $101,706. The reclassification had no effect on gross profit, net income, the provision for income taxes or earnings per share for the three-month period ended March 31, 2019. See “Revenue Recognition” below for further discussion regarding ASU Topic 606.

6. 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 March 31, 2020, approximately $699,000 exceeded the FDIC limit.

7. 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, which generally are estimated and recorded in the same period that the revenues are recognized. Such variable consideration, primarily related to the sale of the Company’s pharmaceutical products, includes chargebacks from the United States Department of Veterans Affairs (‘VA”), rebates in connection with participation in Medicare and Medicaid programs, distribution fees, discounts and outdated product returns. These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on sales for a reporting period.

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The Company recognizes revenue from sales of its cosmetic ingredients, medical, and industrial products when those products are shipped, as long as a valid purchase order has been received and future collection of the sale amount is reasonably assured. These products are shipped “Ex-Works” from the Company’s facility in Hauppauge, NY, and it is at this time that risk of loss and responsibility for the shipment passes to the customer. Sales of these products are deemed final, and there is no obligation on the part of the Company to repurchase or allow the return of these goods unless they are defective.

The Company’s pharmaceutical products are shipped via common carrier upon receipt of a valid purchase order, with, in most cases, the Company paying the shipping costs. Sales of pharmaceutical products are final, and revenue is recognized at the time of shipment, which is when the performance obligation is satisfied. Pharmaceutical products are returnable only at the discretion of the Company unless (a) they are found to be defective; (b) the product is damaged in shipping; or (c) the product is outdated (but not more than one year after their expiration date, which is a return policy which conforms to standard pharmaceutical industry practice). The Company estimates an allowance for outdated material returns based on prior year historical returns of their pharmaceutical products.

The Company does not make sales on consignment, and the collection of the proceeds of the sale of any of the Company’s products is not contingent upon the customer being able to sell the goods to a third party.

Any allowances for returns are taken as a reduction of sales within the same period the revenue is recognized. Such allowances are determined based on historical experience under ASC Topic 606-10-32-8. The Company has not experienced significant fluctuations between estimated allowances and actual activity.

The timing between recognition of revenue for product sales and the receipt of payment is not significant. Due to the Covid-19 pandemic the Company has experienced minor delays in receiving payments from customers, but nothing significant. The Company’s standard credit terms, which vary depending on the customer, range between 30 and 60 days. The Company uses its judgment on a case-by-case basis to determine its ability to collect outstanding receivables, and provides allowances for any receivables for which collection has become doubtful. As of March 31, 2020 and December 31, 2019, the allowance for doubtful accounts receivable was $20,186 and $21,178, respectively. Prompt pay discounts are offered to some customers; however, due the uncertainty of the customers taking the discounts, the discounts are recorded when they are taken.

The Company has distribution fee contracts with certain distributors of its pharmaceutical products that entitles them to distribution and service-related fees. The Company records distribution fees and estimates distribution fees as offsets to revenue.

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Disaggregated revenue by product class is as follows:

	Three months ended March 31,
	2020		2019
Cosmetic Ingredients	$	1,702,860	$	1,651,722
Pharmaceutical		1,038,710		887,601
Medical		539,196		610,508
Industrial and other		42,148		30,487
Net Sales	$	3,322,914	$	3,180,318

The Company’s cosmetic ingredients are marketed worldwide by five marketing partners, of which U.S.-based Ashland Specialty Ingredients (“ASI”) purchases the largest volume. Approximately 16% of the Company’s total sales were to customers located outside of the United States in the first quarter of 2020, compared with approximately 20% in the first quarter of 2019.

Disaggregated revenue by geographic region is as follows:

	Three months ended March 31,
	2020		2019
United States*	$	2,791,679	$	2,553,743
Other countries		531,235		626,575
Net Sales	$	3,322,914	$	3,180,318

*Since all purchases by ASI are shipped to ASI’s warehouses in the U.S. they are reported as U.S. sales for financial reporting purposes. However, ASI has reported to the Company that approximately 67% of ASI’s sales of the Company’s products in the first quarter of 2020 were to customers in other countries, with China representing approximately 27% of ASI’s sales of the Company’s products.

8. Marketable Securities

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

The Company’s U.S. Treasury Bills are considered debt securities and any unrealized gains and losses are reported in other comprehensive income. The U.S. Treasury Bills are considered held to maturity securities, as they are purchased direct from the U.S. Government and are unable to be sold before the maturity date.

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The disaggregated net gains and losses on the marketable securities recognized in the statements of income for the three months ended March 31, 2020 and 2019 are as follows:

	Three months ended March 31,
	2020			2019
Net (losses) gains recognized during the period on marketable securities	$	(356,595	)	$	262,423
Less: Net losses recognized during the period on marketable securities sold during the period		–			(5,229	)
Unrealized (losses) gains recognized during the reporting period on marketable securities still held at the reporting date	$	(356,595	)	$	257,194

The fair values of the Company’s marketable securities are determined in accordance with US GAAP, with fair value being defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the Company utilizes the three-tier value hierarchy, as prescribed by US GAAP, which prioritizes the inputs used in measuring fair value as follows:

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

•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:

March 31, 2020 (unaudited)

Debt Securities	Cost		Fair Value		Unrealized Gain
U.S. Treasury Bills (original maturities of greater than three months up to one year)	$	1,493,466	$	1,493,466	$	–
Total debt securities		1,493,466		1,493,466		–
Equity Securities
Fixed income mutual funds		5,740,749		5,774,765		34,016
Equity and other mutual funds		756,429		787,058		30,629
Total equity securities		6,497,178		6,561,823		64,645
Total marketable securities	$	7,990,644	$	8,055,289	$	64,645

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December 31, 2019 (audited)

Debt Securities	Cost		Fair Value		Unrealized Gain
U.S. Treasury Bills (original maturities of greater than three months up to one year)	$	3,481,625	$	3,481,625	$	–
Total debt securities		3,481,625		3,481,625		–
Equity Securities
Fixed income mutual funds		1,940,071		2,122,157		182,086
Equity and other mutual funds		1,024,580		1,263,734		239,154
Total equity securities		2,964,651		3,385,891		421,240
Total marketable securities	$	6,446,276	$	6,867,516	$	421,240

Investment income is recognized when earned and consists principally of interest income from fixed income mutual funds and U.S Treasury Bills, and dividend income from equity and other mutual funds. Realized gains and losses on sales of investments are determined on a specific identification basis.

Proceeds from the redemption of marketable securities amounted to $2,000,000 for the first quarter of 2020. There was no gain or loss on the redemptions, as they represented maturities of U.S. Treasury Bills. Proceeds from the sale and redemption of marketable securities amounted to $4,480,373 for the first quarter of 2019, which includes a net loss on sales of $5,229.

9. Inventories

	March 31,		December 31,
	2020		2019
	(Unaudited)		(Audited)
Inventories consist of the following:
Raw materials	$	413,450	$	320,507
Work in process		62,478		81,002
Finished products		886,859		815,768
Total Inventories	$	1,362,787	$	1,217,277

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. Finished product inventories at March 31, 2020 and December 31, 2019 are stated net of a reserve of $35,000 for slow moving and obsolete inventory. At March 31, 2020 and December 31, 2019, the Company had an allowance of $260,374 and $231,392 respectively, for possible outdated material returns, which is included in accrued expenses.

The Company does not expect the coronavirus pandemic to have an impact on the valuation of the Company’s finished products, work in process, or raw materials inventories.

10. Income Taxes

The Company’s tax provision is based on its estimated annual effective tax rate. The Company continues to fully recognize its tax benefits, and as of March 31, 2020 and December 31, 2019, the Company did not have any unrecognized tax benefits. The Company’s provision for income taxes for the three months ended March 31 comprises the following:

	Three-months ended March 31
	2020			2019
Provision for federal income taxes - current	$	291,603		$	314,163
Provision for state income taxes - current		150			–
(Benefit) provision for federal income taxes - deferred		(84,012	)		10,856
Total provision for income taxes	$	207,741		$	325,019

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In response to the COVID-19 pandemic, the Internal Revenue Service (IRS) granted tax payment relief to companies who were due to make their estimated tax payments by April 15, 2020. In connection with the IRS relief order, the Company has delayed its first quarter federal tax payment, and currently plans to make the required payment by the revised due date of July 15, 2020.

11. Defined Contribution Plan

The Company sponsors a 401(k) defined contribution plan (“DC Plan”) that provides for a dollar-for-dollar employer matching contribution of the first 4% of each employee’s pay that is deferred by the employee. Employees become fully vested in employer matching contributions after one year of employment.

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. 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. In the fourth quarter of 2018 the Company’s Board of Directors authorized a discretionary contribution in the amount of $150,000, which was allocated among the accounts of all eligible employees and paid into their accounts in the DC Plan in December 2018. Based on that 2018 contribution, in the first quarter of 2019 the Company accrued $37,500 for a possible discretionary contribution at the end of 2019. However, in May 2019 the Company’s Board of Directors reduced the projected discretionary contribution for 2019 to $145,000, and that is the amount that was allocated among and paid into employees’ accounts in December 2019. Based on that 2019 contribution, in the first quarter of 2020 the Company accrued $36,250 towards the projected December 2020 discretionary contribution. For the first quarters of 2020 and 2019 the Company did not make any discretionary payments into the DC Plan.

12. Other Information

Accrued Expenses	March 31, 2020		December 31, 2019
	(unaudited)		(audited)
Bonuses	$	324,000	$	216,000
Distribution fees		311,354		309,190
Payroll and related expenses		137,441		175,433
Reserve for outdated material		260,374		231,392
Audit fee		30,750		48,500
Insurance		86,453		–
Annual report expenses		34,824		64,324
Company 401K contribution		36,250		–
Sales rebates		28,000		46,100
Other		21,662		38,187
Total Accrued Expenses	$	1,271,108	$	1,129,126

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13. Recent Accounting Pronouncements

On December 18, 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”, which modifies ASU 740, to simplify the accounting for income taxes. The amendments in ASU 2019-12 are effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating if any of the modifications in this pronouncement will have an impact on its financial statements.

In June 2016, the FASB issued ASU-2016-13 “Financial Instruments – Credit Losses”. This guidance affects organizations that hold financial assets and net investments in leases that are not accounted for at fair value with changes in fair value reported in net income. The guidance requires organizations to measure all expected credit losses for financial instruments at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. In November 2019, the FASB amended the effective date of implementation of this standard for smaller reporting companies. The new effective date is for fiscal years beginning after December 15, 2022. The Company is evaluating the potential impact on its financial statements.

14. Concentrations of Credit Risk

Customer concentration: 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. 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 credit risk from accounts receivable has been reduced.

For the three months ended March 31, 2020, one of the Company’s distributors and one of its marketing partners together accounted for 57% of the Company’s gross sales, and 57% of its outstanding accounts receivable at March 31, 2020. During the three-month period ended March 31, 2019, the same distributor and marketing partner together were responsible for a total of approximately 55% of the Company’s net sales. They also accounted for 51% of the Company’s outstanding accounts receivable at March 31, 2019.

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15. Earnings Per Share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued.

Per share basic and diluted earnings amounted to $0.17 and $0.27 for the three months ended March 31, 2020 and 2019, respectively.

16. Subsequent Events

The Company has evaluated all subsequent events from the date of the financial statements through the date of this report.  As detailed in Note 3 above, the Covid-19 pandemic is an ongoing event, and as such, the Company is not able to project or quantify the impact of this event on the Company’s future operations and financial results.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

Statements made in this Form 10-Q which are not purely historical are forward-looking statements with respect to the goals, plans, objectives, intentions, expectations, financial condition, results of operations, future performance and business of the Company. Forward-looking statements may be identified using such words as "believes," "may," "will," "should," "intends," "plans," "estimates," or "anticipates" or other similar expressions.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) could cause actual results to differ materially from those set forth in the forward-looking statements. In addition to those specific risks and uncertainties set forth in the Company's reports currently on file with the SEC, some other factors that may affect the future results of operations of the Company are: the development of products that may be superior to those of the Company; changes in the quality or composition of the Company's products; lack of market acceptance of the Company's products; the Company's ability to develop new products; general economic or industry conditions; changes in intellectual property rights; changes in interest rates; new legislation or regulatory requirements; conditions of the securities markets; the Company's ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; and other economic, competitive, governmental, regulatory and technical factors that may affect the Company's operations, products, services and prices. See the Company’s discussion of risk factors in “ITEM 1A. RISK FACTORS” below for the potential impact of the coronavirus on the Company’s future operations and financial results.

Accordingly, results achieved may differ materially from those anticipated as a result of such forward-looking statements, and those statements speak only as of the date they are made.

Page 15 of 24

The Company does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

OVERVIEW

The Company is a Delaware corporation that, through its Guardian Laboratories division, conducts research, product development, manufacturing and marketing of cosmetic ingredients, personal and health care products, pharmaceuticals, medical products, and proprietary specialty industrial products. All the products that the Company manufactures, with the exception of Renacidin^®, are produced at its facility in Hauppauge, New York, and are marketed through marketing partners, distributors, wholesalers, direct advertising, mailings, and trade exhibitions. Its most important product line is its Lubrajel^® line of water-based moisturizing and lubricating gels, which are used primarily as ingredients in cosmetic products. The Company’s research and development department is actively working on the development of new products to expand the Company’s line of personal care products. Many of the Company’s products use proprietary manufacturing processes, and the company relies primarily on trade secret protection to protect its intellectual property.

The Company’s cosmetic ingredients are marketed worldwide by five marketing partners, the largest of which is U.S.-based ASI. The Company also sells two pharmaceutical products for urological uses. Those products are sold primarily in the United States through the major drug wholesalers, which in turn sell the products to pharmacies, hospitals, nursing homes and other long-term care facilities, and to government agencies, primarily the VA.

The Company’s non-pharmaceutical medical products (referred to hereinafter as “medical products”), such as its catheter lubricants, as well as its specialty industrial products, are sold directly by the Company to the end users or to contract manufacturers utilized by the end users, although they are available for sale on a non-exclusive basis by its marketing partners as well.

While the Company does have competition in the marketplace for some of its products, particularly its cosmetic ingredients, some of its pharmaceutical and medical products have some unique characteristics, and do not have direct competitors. However, these products may have indirect competition from other products that are not marketed as direct competitors to the Company’s products but may have functionality or properties that are similar to the Company’s products.

The Company recognizes revenue when all of the following requirements are satisfied: (a) persuasive evidence of a sales arrangement exists; (b) products are shipped, which is when the performance obligation is satisfied and title and risk of loss pass to the customers; and (c) collections are reasonably assured. An allowance for returns, based on historical experience, is taken as a reduction of sales within the same period the revenue is recognized.

Over the years the Company has been issued many patents and trademarks, and it still maintains a number of registered trademarks, the two most important of which are “Lubrajel” and “Renacidin”. However, in regard to protection of the Company’s proprietary formulations and manufacturing technology the Company currently relies primarily on trade secret protection rather than patent protection due to the current disclosure requirements needed to obtain patents, the limited protection they afford, and the difficulty and expense of enforcing them. However, the Company may, from time to time, seek patent protection when it believes it would be in the Company’s best interest to do so. All of the Company’s previously-issued patents have expired; however, the Company does not believe that the expiration of those patents has had, or will have, any material impact on its sales, since in recent years protection for the Company’s most important products has been based on trade secrets and proprietary manufacturing methods rather than patent protection.

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As discussed in Note 3 above, while the Company is continuing to operate due to its status as an “essential business,” it is likely that the coronavirus pandemic will have a negative impact on the Company’s sales during 2020. The Company anticipates that its sales of pharmaceuticals and medical products will not be materially impacted, but it is likely that its sales of cosmetic ingredients will be negatively impacted commensurate with reduced customer demand for, and the consequent reduced production of, consumer cosmetic products. In addition, the Company distributes products to marketing partners globally, and it is difficult to assess the current conditions that exist in other countries where the Company’s products are sold, and how those conditions will affect the sales of the Company’s products. However, it is likely that there will be a negative impact on the Company’s sales of its cosmetic ingredients in those countries. Since there is uncertainty as to what the duration of the pandemic will be, the Company is unable to provide any accurate estimate or projection as to what the full impact of the coronavirus will be on the Company’s operations and financial results for the upcoming quarters.

As of the date of this report the Company does not anticipate that the coronavirus pandemic will affect the ability of the Company to obtain raw materials and maintain production. The Company has price protection on its most important raw material, and has multiple sources for many of its other raw materials. The Company also brought in additional quantities of some raw materials at the beginning of the pandemic, and as a result does not anticipate that it will have a problem maintaining production. Although the rate of production will be impacted due to staggered production hours, the Company does not expect that to affect its ability to maintain sufficient inventory and production levels to be able to fulfill sales orders on a timely basis.

Critical Accounting Policies

As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, the discussion and analysis of the Company’s financial condition and results of operations are based on its financial statements, which have been prepared in conformity with US GAAP. The preparation of those financial statements required the Company to make estimates and assumptions that affect the carrying value of assets, liabilities, revenues and expenses reported in those financial statements. Those estimates and assumptions can be subjective and complex, and consequently actual results could differ from those estimates and assumptions. The Company’s most critical accounting policies relate to revenue recognition, concentration of credit risk, investments, inventory, and income taxes. Since December 31, 2019, there have been no significant changes to the assumptions and estimates related to those critical accounting policies.

The following discussion and analysis covers material changes in the financial condition of the Company since the year ended December 31, 2019, and a comparison of the results of operations for the three months ended March 31, 2020 and March 31, 2019. This discussion and analysis should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. All references in this quarterly report to “sales” or “Sales” shall mean Net Sales.

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The Company recognizes revenue from sales of its cosmetic ingredients, medical products, and industrial products when all of the following requirements are satisfied: (a) a valid purchase order has been received; (b) products are shipped, which is when the performance obligation is satisfied and title and risk of loss pass to the customers; and (c) future collection of the sale amount is reasonably assured. These products are shipped “Ex-Works” from the Company’s facility in Hauppauge, NY, and it is at this time that risk of loss and responsibility for the shipment passes to the customer. Sales of these products are deemed final, and there is no obligation on the part of the Company to repurchase or allow the return of these goods unless they are defective.

The Company’s pharmaceutical products are shipped via common carrier upon receipt of a valid purchase order, with, in most cases, the Company paying the shipping costs. The Company assumes responsibility for the shipment arriving at its intended destination. Sales of pharmaceutical products are final and revenue is recognized at the time of shipment. Pharmaceutical products are returnable only at the discretion of the Company unless (a) they are found to be defective; (b) the product is damaged in shipping; or (c) the product is outdated (but not more than one year after their expiration date, which is a return policy which conforms to standard pharmaceutical industry practice). The Company estimates an allowance for outdated material returns based on gross sales of their pharmaceutical products.

RESULTS OF OPERATIONS

Net Sales

Net sales for the first quarter of 2020 increased by $142,596 (approximately 4%) as compared with the first quarter of 2019. The increase in sales for the three-month period ended March 31, 2020 was primarily attributable to an increase in sales of the Company’s pharmaceutical products and industrial products, which was partially offset by decreased sales of the Company’s medical products. Sales of the Company’s cosmetic ingredients did not materially change compared with the first quarter of 2019. The changes in the sales of the products in the Company’s different products lines were as follows:

(a) Cosmetic Ingredients: Sales of the Company’s cosmetic ingredients increased by $51,138 (approximately 3%) when compared with the same period in 2019. The increase was primarily attributable to an increase in purchases of the Company’s cosmetic ingredients by ASI, whose purchases increased by $26,561 (approximately 2%) compared with the same period in 2019 and an increase in sales to the Company’s marketing partner in France, which increased by $87,635 (approximately 82%) compared to the same quarter in 2019.

The increases in cosmetic ingredients sales were partially offset by a decrease in sales to the Company’s three other marketing partners in Europe. Sales to the Company’s marketing partners in the UK, Italy and Switzerland decreased by a total of $50,349 (approximately 35%) compared with the first quarter of 2019. In addition, during the first quarter of 2019, the Company had sales to its former marketing partner in Korea of $13,979. The Company is no longer working with that former marketing partner, and has appointed ASI its marketing partner in Korea. In late 2019, the Company began transitioning the Korean business to ASI. In addition to the increases and decreases in sales attributable to the Company’s European marketing partners, there was an increase of $1,270 in direct sales to two cosmetic ingredient customers in the United States during the first quarter of 2020.

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The sales fluctuations to the Company’s European marketing partners are the result of both the timing of customer orders as well as continuing competition from companies selling competitive products at lower prices, particularly a number of Asian manufacturers. This has resulted in a loss of some business in Europe to these less expensive products. As a result, from time to time the Company has adjusted its prices in order to retain or attract customers and be more competitive with some of the lower-priced products. Although there has been some impact on the Company’s profit margins on those sales, to date this impact has not been significant. The Company intends to continue to aggressively compete with these products whenever possible.

(b) Pharmaceuticals: Net pharmaceutical sales increased by $151,109 (approximately 17%) in the first quarter of 2020 compared with the same period in 2019. Gross sales of Renacidin increased by $194,295 (approximately 19%), and gross sales of the Company’s other pharmaceutical product, Clorpactin WCS-90, decreased by $3,745 (approximately 3%), with the overall increase in gross pharmaceutical sales being partially reduced by pharmaceutical-related fees, rebates, and allowances of $39,441. The increase in Renacidin sales was the result of an increase in purchases by the drug wholesalers, while the small decrease in Clorpactin sales was due primarily to the timing of orders.

(c) Medical (non-pharmaceutical) products: Sales of medical products decreased by $71,312 (approximately 12%) for the first quarter of 2020 when compared with the same period in 2019. The decrease was primarily due to the lack of orders in the first quarter of 2020 from one of the Company’s larger direct customers located in China due to the coronavirus pandemic. With the economy in China now beginning to emerge from the coronavirus pandemic, customers’ orders that were expected in the first quarter are now expected in the second quarter of 2020.

(d) Industrial and other products: Sales of specialty industrial products, as well as other miscellaneous products, increased by $11,661 (approximately 38%) for the first quarter of 2020 compared with the same period in 2019. The increase was primarily due to an increase in sales to one customer who purchases one of the Company’s specialty industrial products.

As a result of the increase in the sales of the Company’s pharmaceutical products there was an increase in allowances for distribution fees, VA chargebacks, Medicaid and Medicare rebates, sales rebates and discounts, and outdated material returns. The fees, rebates, and allowances attributable to the company’s pharmaceutical products increase proportionately as sales of those products increase. During the first quarter of 2020, the allowances for all the Company’s products increased by a net of $38,425 (approximately 14%) compared with the same period in 2019, primarily due to the increase in Renacidin sales.

Cost of Sales

Cost of sales as a percentage of net sales increased to approximately 42% for the first quarter of 2020, up from approximately 41% for the first quarter in 2019. The increase was primarily the result of the increase in sales of Renacidin, which carries a higher cost to manufacture than some of the Company’s other products. The Company did not experience any significant impact on costs of sales due to COVID-19.

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Operating Expenses

Operating expenses, consisting of selling, general, and administrative expenses, decreased by $31,687 (approximately 6%) for the first quarter of 2020 compared with the first quarter of 2019. The decrease was mainly due to decreases in computer services, consulting fees and certain employee fringe benefits. The Company did not experience any significant impact on selling, general, and administrative expenses due to COVID-19.

Research and Development Expenses

Research and development (“R&D”) expenses increased by $9,073 (approximately 9%) for the first quarter of 2020 compared with the first quarter of 2019. The increase was due to increases in payroll and payroll-related expenses. The Company did not experience any significant impact on its R&D work, or its R&D expenses, due to COVID-19.

Investment Income

Investment income decreased by $100 (less than 1%) for the first quarter of 2020 compared with the first quarter of 2019. The Company did not experience any significant impact on its investment income due to COVID-19.

Net (loss) gain on Marketable Securities

Net (loss) gain on marketable securities decreased by $613,789 (approximately 239%) for the first quarter of 2020 compared with the first quarter of 2019. In the first quarter of 2020, there was an unrealized loss of $356,595 that resulted from the decrease in value of the Company’s marketable securities due to the negative impact of the coronavirus epidemic on the stock and bond markets. Those markets took a steep drop in the first few weeks of 2020 after COVID-19 reached the United States. Since that time the market has been slowly recovering, and while it is not possible to predict future market performance overall, as of the date of this report the Company had recovered a substantial amount of the first quarter unrealized losses. In the first quarter of 2019, there had been a realized gain of $257,194, which was the result of the stock market rebounding from a steep drop that occurred in the fourth quarter of 2018.

Provision for Income Taxes

The Company's effective income tax rate was approximately 21% for the first quarter of 2020 and 2019. The Company’s tax rate is expected to remain at 21% for the current fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

Working capital increased by $745,766 to $10,969,988 at March 31, 2020, up from $10,224,222 at December 31, 2019. The increase in working capital was primarily due to increases in marketable securities. The current ratio decreased to 8.0 to 1 at March 31, 2020, down from 8.6 to 1 at December 31, 2019. The decrease in the current ratio was primarily due to an increase in income taxes payable and accrued expenses.

Page 20 of 24

The Company believes that its working capital is, and will continue to be, sufficient to support its operating requirements for at least the next twelve months. The Company does not expect to incur any material capital expenditures for the remainder of 2020. The Company intends to utilize its available cash and assets primarily for its continued organic growth and potential future strategic transactions, as well as to mitigate the potential impact of COVID-19 on the Company's business.

The Company generated cash from operations of $1,287,295 and $1,531,654 for the three months ended March 31, 2020 and March 31, 2019, respectively. The decrease was due to the increase in inventories and decrease in deferred income taxes.

Cash used in investing activities for the three-month period ended March 31, 2020 was $1,545,416, compared with $1,582,533 for the three-month period ended March 31, 2019. The decrease was primarily due to a decrease in the amount of marketable securities purchased in the first quarter of 2020 compared with the first quarter of 2019.

There was no cash used in financing activities for the first quarters of 2020 and 2019.

The Company expects to continue to use its cash to make dividend payments, purchase marketable securities, and take advantage of other market opportunities that may arise that are in the best interests of the Company and its shareholders.

In connection with the coronavirus pandemic it is possible that certain customers of the Company may have their invoices outstanding longer than they have in the past, either due to slower payments from their customers, or as a result of having to shut down their business from time to time. However, the vast majority of the Company’s customers are large companies, and the Company does not expect to have to increase its bad debt reserve, and anticipates that its invoices will be paid with minimal delays.

OFF BALANCE-SHEET ARRANGEMENTS

The Company has no off balance-sheet transactions that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

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

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

Page 21 of 24

Item 4. CONTROLS AND PROCEDURES

(a) DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, including its Principal Executive Officer and Principal Financial Officer, has evaluated the design, operation, and effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon the evaluation performed by the Company’s management, including its Principal Executive Officer and Principal Financial Officer, it was determined that, as of the end of the period covered by this quarterly report, the Company’s disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in the 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 the Company’s management, including its Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding disclosures.

(b) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company's Principal Executive Officer and Principal Financial Officer have determined that, during the period covered by this quarterly report, there were no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. They have also concluded that there were no significant changes in the Company’s internal controls after the date of the evaluation.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A. RISK FACTORS

IMPACT OF COVID-19

As a result of the coronavirus pandemic, global consumer purchases have declined, including purchases of cosmetic products. Until sales of those products resume their previous levels, it is likely that some of the cosmetic manufacturers that use the Company’s products will decrease their purchases of the Company’s cosmetic ingredients, both in the U.S. and overseas. As a result, it is likely that sales of the Company’s cosmetic ingredients for the next few months or quarters will decrease compared with its sales for the same periods in 2019.

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Over the past few years China has become a significant market for the Company’s products, and it is anticipated that the impact of the coronavirus in China will negatively impact those sales until the pandemic has passed. It is also possible that the payment of some of the Company’s outstanding invoices, not only for cosmetic ingredients but for the Company’s other products as well, may be delayed as a result of temporary closures or cash flow problems on the part of some of the Company’s customers. However, because most of the Company’s customers are large distributors and wholesalers, it is anticipated that the Company will not experience any significant increase in bad debt.

Due to the uncertainly surrounding the duration of the pandemic and its impact on the various countries in which the Company does business, the Company is unable to provide any accurate estimate or projection as to what the full impact of the coronavirus will be on the Company’s operations and financial results. However, the Company does not anticipate that its sales of pharmaceuticals and medical products will be materially impacted.

The Company also does not anticipate that the coronavirus pandemic will affect its ability to obtain raw materials and maintain production. The Company has price protection on its most important raw material, and multiple sources for many of its other raw materials. The Company also brought in additional quantities of some raw materials at the beginning of the pandemic, and as a result does not anticipate that it will have a problem maintaining production. However, in order to reduce working density to minimize the chances of its workers getting the virus, the Company has implemented a staggered work schedule that has resulted in fewer working hours for its employees. As a result, the Company expects its inventory levels to remain lower than usual. However, it still expects to maintain production levels sufficient to ship orders on a timely basis, and will increase its inventory levels to historical levels once it resumes it regular working hours.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None       

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

None

ITEM 5. OTHER INFORMATION

None

Page 23 of 24

ITEM 6. EXHIBITS

31.1	Certification of Kenneth H. Globus, President and Principal Executive Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Andrea J. Young, Chief Financial Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certifications of Principal Executive Officer and Chief Financial Officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

UNITED-GUARDIAN, INC.
(Registrant)
By:	/S/ KENNETH H. GLOBUS
	Kenneth H. Globus
	President
By:	/S/ ANDREA J. YOUNG
	Andrea J. Young
	Chief Financial Officer

Date: May 12, 2020

Page 24 of 24

EX-31.1

EXHIBIT 31.1

SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Kenneth H. Globus, certify that:

1.	I have reviewed this Quarterly Report of United-Guardian, Inc. on Form 10-Q for the three-month period ended March 31, 2020;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2020	By:	/s/ Kenneth H. Globus
		Kenneth H. Globus
		President and Principal Executive Officer

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Andrea J. Young, certify that:

1.	I have reviewed this Quarterly Report of United-Guardian, Inc. on Form 10-Q for the three-month period ended March 31, 2020;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2020	By:	/s/ Andrea J. Young
		Andrea J. Young
		Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of United-Guardian, Inc. (the "Company") on Form 10-Q for the quarterly period ended March 31, 2020, as filed with the Securities and Exchange Commission (the "Report"), I, Kenneth H. Globus, President and Principal Executive Officer of the Company, and I, Andrea J. Young, Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(i) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 12, 2020	By:	/s/ Kenneth H. Globus
		Kenneth H. Globus
		President & Principal Executive Officer
	By:	/s/ Andrea J. Young
		Andrea J. Young
		Chief Financial Officer

XML

Note 7 - Revenue Recognition (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Accounts Receivable, Allowance for Credit Loss, Ending Balance	$ 20,186		$ 21,178
Revenue, Segment Benchmark [Member] | Geographic Concentration Risk [Member] | Non-US [Member] | Cosmetic Ingredients [Member]
Concentration Risk, Percentage	16.00%	20.00%
Revenue, Segment Benchmark [Member] | Geographic Concentration Risk [Member] | Non-US [Member] | ASI [Member]
Concentration Risk, Percentage	67.00%
Revenue, Segment Benchmark [Member] | Geographic Concentration Risk [Member] | CHINA | ASI [Member]
Concentration Risk, Percentage	27.00%

XML

Note 8 - Marketable Securities - Net Gains and Losses on Marketable Securities (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Net (losses) gains recognized during the period on marketable securities	$ (356,595)	$ 262,423
Less: Net losses recognized during the period on marketable securities sold during the period	0	(5,229)
Unrealized (losses) gains recognized during the reporting period on marketable securities still held at the reporting date	$ (356,595)	$ 257,194

XML

Note 10 - Income Taxes (Details Textual) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Unrecognized Tax Benefits, Ending Balance	$ 0	$ 0

XML

Note 11 - Defined Contribution Plan

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Retirement Benefits [Text Block]

11. Defined Contribution Plan

The Company sponsors a

401

(k) defined contribution plan (“DC Plan”) that provides for a dollar-for-dollar employer matching contribution of the

first

4%

of each employee’s pay that is deferred by the employee. Employees become fully vested in employer matching contributions after

one

year of employment.

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. 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. In the

fourth

quarter of

2018

the Company’s Board of Directors authorized a discretionary contribution in the amount of

$150,000,

which was allocated among the accounts of all eligible employees and paid into their accounts in the DC Plan in

December 2018.

Based on that

2018

contribution, in the

first

quarter of

2019

the Company accrued

$37,500

for a possible discretionary contribution at the end of

2019.

However, in

May 2019

the Company’s Board of Directors reduced the projected discretionary contribution for

2019

to

$145,000,

and that is the amount that was allocated among and paid into employees’ accounts in

December 2019.

Based on that

2019

contribution, in the

first

quarter of

2020

the Company accrued

$36,250

towards the projected

December 2020

discretionary contribution. For the

first

quarters of

2020

and

2019

the Company did

not

make any discretionary payments into the DC Plan.

XML

Note 3 - Impact of Coronavirus (COVID-19)

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Impact of Coronavirus (COVID-19) [Text Block]

3. Impact of coronavirus (COVID- 19 )

In

March 2020,

the spread of the coronavirus (COVID-

19

) began to cause disruptions among businesses and markets worldwide. On

March 20, 2020

the Governor of New York issued an executive order which closed non-essential businesses. The Company, as a manufacturer of pharmaceutical and medical products, is considered an essential business, and continues to operate. The Company has taken a series of actions aimed at safeguarding its employees while operations continue. While many of the Company’s customers are in essential businesses as well, there

may

be other customers that are considered non-essential, in which case there

may

be a decrease in orders from those customers until they reopen. In addition, the Company distributes products to marketing partners globally, and it is difficult to assess the current conditions that exist in other countries where our products are sold. While these disruptions are expected to be temporary, until the crisis passes in the different countries it is likely that there will be a negative impact on the Company’s sales in those countries. Since there is uncertainty as what the duration of the pandemic will be, the Company is unable to provide any accurate estimate or projection as to what the full impact of the coronavirus will be on the Company’s operations or financial results.

As of the date of this report the Company does

not

anticipate that the coronavirus pandemic will affect the ability of the Company to obtain raw materials and maintain production. The Company has price protection on its most important raw material, and has multiple sources for many of its raw materials. The Company also brought in additional quantities of some raw materials at the beginning of the pandemic, and as a result it does

not

anticipate that it will have a problem maintaining production. Although the rate of production will be impacted due to staggered production hours, the Company does

not

expect that to affect its ability to maintain sufficient inventory and production levels to be able to fulfill sales orders on a timely basis. The Company does

not

expect the carrying value of its assets or its liquidity to be impaired.

XML

Note 7 - Revenue Recognition

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

7. 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, which generally are estimated and recorded in the same period that the revenues are recognized. Such variable consideration, primarily related to the sale of the Company’s pharmaceutical products, includes chargebacks from the United States Department of Veterans Affairs (‘VA”), rebates in connection with participation in Medicare and Medicaid programs, distribution fees, discounts and outdated product returns. These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on sales for a reporting period.

The Company recognizes revenue from sales of its cosmetic ingredients, medical, and industrial products when those products are shipped, as long as a valid purchase order has been received and future collection of the sale amount is reasonably assured. These products are shipped “Ex-Works” from the Company’s facility in Hauppauge, NY, and it is at this time that risk of loss and responsibility for the shipment passes to the customer. Sales of these products are deemed final, and there is

no

obligation on the part of the Company to repurchase or allow the return of these goods unless they are defective.

The Company’s pharmaceutical products are shipped via common carrier upon receipt of a valid purchase order, with, in most cases, the Company paying the shipping costs. Sales of pharmaceutical products are final, and revenue is recognized at the time of shipment, which is when the performance obligation is satisfied. Pharmaceutical products are returnable only at the discretion of the Company unless (a) they are found to be defective; (b) the product is damaged in shipping; or (c) the product is outdated (but

not

more than

one

year after their expiration date, which is a return policy which conforms to standard pharmaceutical industry practice). The Company estimates an allowance for outdated material returns based on prior year historical returns of their pharmaceutical products.

The Company does

not

make sales on consignment, and the collection of the proceeds of the sale of any of the Company’s products is

not

contingent upon the customer being able to sell the goods to a

third

party.

Any allowances for returns are taken as a reduction of sales within the same period the revenue is recognized. Such allowances are determined based on historical experience under ASC Topic

606

-

10

-

32

-

8.

The Company has

not

experienced significant fluctuations between estimated allowances and actual activity.

The timing between recognition of revenue for product sales and the receipt of payment is

not

significant. Due to the Covid-

19

pandemic the Company has experienced minor delays in receiving payments from customers, but nothing significant. The Company’s standard credit terms, which vary depending on the customer, range between

30

and

60

days. The Company uses its judgment on a case-by-case basis to determine its ability to collect outstanding receivables, and provides allowances for any receivables for which collection has become doubtful. As of

March 31, 2020

and

December 31, 2019,

the allowance for doubtful accounts receivable was

$20,186

and

$21,178,

respectively. Prompt pay discounts are offered to some customers; however, due the uncertainty of the customers taking the discounts, the discounts are recorded when they are taken.

The Company has distribution fee contracts with certain distributors of its pharmaceutical products that entitles them to distribution and service-related fees. The Company records distribution fees and estimates distribution fees as offsets to revenue.

Disaggregated revenue by product class is as follows:

	Three months ended March 31,
	2020		2019
Cosmetic Ingredients	$	1,702,860	$	1,651,722
Pharmaceutical		1,038,710		887,601
Medical		539,196		610,508
Industrial and other		42,148		30,487
Net Sales	$	3,322,914	$	3,180,318

The Company’s cosmetic ingredients are marketed worldwide by

five

marketing partners, of which U.S.-based Ashland Specialty Ingredients (“ASI”) purchases the largest volume. Approximately

16%

of the Company’s total sales were to customers located outside of the United States in the

first

quarter of

2020,

compared with approximately

20%

in the

first

quarter of

2019.

Disaggregated revenue by geographic region is as follows:

	Three months ended March 31,
	2020		2019
United States *	$	2,791,679	$	2,553,743
Other countries		531,235		626,575
Net Sales	$	3,322,914	$	3,180,318

*

Since all purchases by ASI are shipped to ASI’s warehouses in the U.S. they are reported as U.S. sales for financial reporting purposes. However, ASI has reported to the Company that approximately

67%

of ASI’s sales of the Company’s products in the

first

quarter of

2020

were to customers in other countries, with China representing approximately

27%

of ASI’s sales of the Company’s products.

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 01, 2020
Document Information [Line Items]
Entity Registrant Name	UNITED GUARDIAN INC
Entity Central Index Key	0000101295
Trading Symbol	ug
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		4,594,319
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false
Title of 12(b) Security	Common Stock, $.10 par value

XML

Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Dec. 31, 2018	4,594,319
Balance at Dec. 31, 2018	$ 459,432	$ 10,465,506	$ 10,924,938
Net income		1,222,694	1,222,694	$ 1,222,694
Balance (in shares) at Mar. 31, 2019	4,594,319
Balance at Mar. 31, 2019	$ 459,432	11,688,200	12,147,632
Balance (in shares) at Dec. 31, 2019	4,594,319
Balance at Dec. 31, 2019	$ 459,432	10,173,466	10,632,898	10,632,898
Net income		790,307	790,307	790,307
Balance (in shares) at Mar. 31, 2020	4,594,319
Balance at Mar. 31, 2020	$ 459,432	$ 10,963,773	$ 11,423,205	$ 11,423,205

XML

Note 11 - Defined Contribution Plan (Details Textual) - USD ($)	1 Months Ended	3 Months Ended
	May 31, 2019	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Defined Contribution Plan, Cost		$ 36,250	$ 37,500
DC Plan [Member]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay		4.00%
Defined Contribution, Discretionary Contribution Plan, Vesting Period (Year)		1 year
Defined Contribution Plan, Employer Discretionary Contribution Amount Per Year Authorized	$ 145,000				$ 150,000
Defined Contribution Plan, Employer Discretionary Contribution Amount		$ 0		$ 0
DC Plan [Member] | Discretionary Contributions Vesting at Two Years [Member]
Defined Contribution, Discretionary Contribution Plan, Vesting Period (Year)		2 years
Defined Contribution Plan, Employers Matching Contribution, Annual Vesting Percentage		20.00%
DC Plan [Member] | Discretionary Contributions Vesting Each Additional Year [Member]
Defined Contribution, Discretionary Contribution Plan, Vesting Period (Year)		6 years
Defined Contribution Plan, Employers Matching Contribution, Annual Vesting Percentage		20.00%

XML

Note 6 - Cash and Cash Equivalents (Details Textual)	Mar. 31, 2020 USD ($)
Cash, Uninsured Amount	$ 699,000

XML

Note 9 - Inventories (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	March 31,		December 31,
	2020		2019
	(Unaudited)		(Audited)
Inventories consist of the following:
Raw materials	$	413,450	$	320,507
Work in process		62,478		81,002
Finished products		886,859		815,768
Total Inventories	$	1,362,787	$	1,217,277

XML

Note 15 - Earnings Per Share

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Earnings Per Share [Text Block]

15. Earnings Per Share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued.

Per share basic and diluted earnings amounted to

$0.17

and

$0.27

for the

three

months ended

March 31, 2020

and

2019,

respectively.

XML

Note 12 - Other Information - Summary of Accrued Expenses (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Bonuses	$ 324,000	$ 216,000
Distribution fees	311,354	309,190
Payroll and related expenses	137,441	175,433
Accrued Reserve for Outdated Material	260,374	231,392
Audit fee	30,750	48,500
Insurance	86,453
Annual report expenses	34,824	64,324
Company 401K contribution	36,250
Sales rebates	28,000	46,100
Other	21,662	38,187
Total Accrued Expenses	$ 1,271,108	$ 1,129,126

XML

Note 8 - Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Gain (Loss) on Securities [Table Text Block]

	Three months ended March 31,
	2020			2019
Net (losses) gains recognized during the period on marketable securities	$	(356,595	)	$	262,423
Less: Net losses recognized during the period on marketable securities sold during the period		–			(5,229	)
Unrealized (losses) gains recognized during the reporting period on marketable securities still held at the reporting date	$	(356,595	)	$	257,194

Marketable Securities [Table Text Block]

Debt Securities	Cost		Fair Value		Unrealized Gain
U.S. Treasury Bills (original maturities of greater than three months up to one year)	$	1,493,466	$	1,493,466	$	–
Total debt securities		1,493,466		1,493,466		–
Equity Securities
Fixed income mutual funds		5,740,749		5,774,765		34,016
Equity and other mutual funds		756,429		787,058		30,629
Total equity securities		6,497,178		6,561,823		64,645
Total marketable securities	$	7,990,644	$	8,055,289	$	64,645

Debt Securities	Cost		Fair Value		Unrealized Gain
U.S. Treasury Bills (original maturities of greater than three months up to one year)	$	3,481,625	$	3,481,625	$	–
Total debt securities		3,481,625		3,481,625		–
Equity Securities
Fixed income mutual funds		1,940,071		2,122,157		182,086
Equity and other mutual funds		1,024,580		1,263,734		239,154
Total equity securities		2,964,651		3,385,891		421,240
Total marketable securities	$	6,446,276	$	6,867,516	$	421,240

XML

Note 14 - Concentrations of Credit Risk

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

14. Concentrations of Credit Risk

Customer concentration

: 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. 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 credit risk from accounts receivable has been reduced.

For the

three

months ended

March 31, 2020,

one

of the Company’s distributors and

one

of its marketing partners together accounted for

57%

of the Company’s gross sales, and

57%

of its outstanding accounts receivable at

March 31, 2020.

During the

three

-month period ended

March 31, 2019,

the same distributor and marketing partner together were responsible for a total of approximately

55%

of the Company’s net sales. They also accounted for

51%

of the Company’s outstanding accounts receivable at

March 31, 2019.

XML

Note 5 - Reclassifications (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cost of Goods and Services Sold, Total	$ 1,389,331	$ 1,288,345
Reclassified Certain Sales Rebates From Cost of Sales to Net Sales [Member]
Cost of Goods and Services Sold, Total		$ 101,706

XML

Note 10 - Income Taxes - Provision for Income Taxes (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Provision for federal income taxes - current	$ 291,603	$ 314,163
Provision for state income taxes - current	150
(Benefit) provision for federal income taxes - deferred	(84,012)	10,856
Total provision for income taxes	$ 207,741	$ 325,019

XML

Note 7 - Revenue Recognition - Disaggregated Revenue (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Net Sales	$ 3,322,914	$ 3,180,318
Cosmetic Ingredients [Member]
Net Sales	1,702,860	1,651,722
Pharmaceuticals [Member]
Net Sales	1,038,710	887,601
Medical Product [Member]
Net Sales	539,196	610,508
Industrial And Other [Member]
Net Sales	$ 42,148	$ 30,487

XML

Note 8 - Marketable Securities - Summary of Investments (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Debt securities, cost	$ 1,493,466	$ 3,481,625
Debt securities	1,493,466	3,481,625
Debt securities, unrealized gain
Equity securities, cost	6,497,178	2,964,651
Equity securities	6,561,823	3,385,891
Equity securities, unrealized gain	64,645	421,240
Marketable securities, cost	7,990,644	6,446,276
Marketable securities	8,055,289	6,867,516
Marketable securities, unrealized gain	64,645	421,240
US Treasury Securities [Member]
Debt securities, cost	1,493,466	3,481,625
Debt securities	1,493,466	3,481,625
Debt securities, unrealized gain
Fixed Income Securities [Member]
Equity securities, cost	5,740,749	1,940,071
Equity securities	5,774,765	2,122,157
Equity securities, unrealized gain	34,016	182,086
Equity And Other Mutual Funds [Member]
Equity securities, cost	756,429	1,024,580
Equity securities	787,058	1,263,734
Equity securities, unrealized gain	$ 30,629	$ 239,154

XML

Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Accounts receivable, allowance for doubtful accounts	$ 20,186	$ 21,178
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized (in shares)	10,000,000	10,000,000
Common stock, shares issued (in shares)	4,594,319	4,594,319
Common stock, shares outstanding (in shares)	4,594,319	4,594,319

XML

Note 10 - Income Taxes

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

10. Income Taxes

The Company’s tax provision is based on its estimated annual effective tax rate. The Company continues to fully recognize its tax benefits, and as of

March 31, 2020

and

December 31, 2019,

the Company did

not

have any unrecognized tax benefits. The Company’s provision for income taxes for the

three

months ended

March 31

comprises the following:

	Three-months ended March 31
	2020			2019
Provision for federal income taxes - current	$	291,603		$	314,163
Provision for state income taxes - current		150			–
(Benefit) provision for federal income taxes - deferred		(84,012	)		10,856
Total provision for income taxes	$	207,741		$	325,019

In response to the COVID-

19

pandemic, the Internal Revenue Service (IRS) granted tax payment relief to companies who were due to make their estimated tax payments by

April 15, 2020.

In connection with the IRS relief order, the Company has delayed its

first

quarter federal tax payment, and currently plans to make the required payment by the revised due date of

July 15, 2020.

XML

Note 2 - Basis of Presentation

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Basis of Accounting [Text Block]

2. Basis of Presentation

Interim condensed financial statements of the Company are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information, pursuant to the requirements for reporting on Form

10

-Q and Regulation S-

X.

In the opinion of management, all adjustments considered necessary for the fair presentation of financial statements for the interim periods have been included. The results of operations for the

three

-month period ended

March 31, 2020 (

also referred to as the “first quarter of

2020”

) are

not

necessarily indicative of results that ultimately

may

be achieved for any other interim period or for the year ending

December 31, 2020.

The interim unaudited condensed financial statements and notes thereto should be read in conjunction with the audited condensed financial statements and notes thereto contained in our Annual Report on Form

10

-K for the year ended

December 31, 2019.

XML

Note 6 - Cash and Cash Equivalents

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Cash and Cash Equivalents Disclosure [Text Block]

6. 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

March 31, 2020,

approximately

$699,000

exceeded the FDIC limit.

XML

Note 15 - Earnings Per Share (Details Textual) - $ / shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Earnings Per Share, Basic and Diluted, Total (in dollars per share)	$ 0.17	$ 0.27

XML

Note 10 - Income Taxes (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	Three-months ended March 31
	2020			2019
Provision for federal income taxes - current	$	291,603		$	314,163
Provision for state income taxes - current		150			–
(Benefit) provision for federal income taxes - deferred		(84,012	)		10,856
Total provision for income taxes	$	207,741		$	325,019

XML

Note 16 - Subsequent Events

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Subsequent Events [Text Block]

16. Subsequent Events

The Company has evaluated all subsequent events from the date of the financial statements through the date of this report.  As detailed in Note

3

above, the Covid-

19

pandemic is an ongoing event, and as such, the Company is

not

able to project or quantify the impact of this event on the Company’s future operations and financial results.

XML

Statements of Income (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Net Sales	$ 3,322,914	$ 3,180,318
Costs and expenses:
Cost of sales	1,389,331	1,288,345
Operating expenses	515,275	546,962
Research and development	107,732	98,659
Total costs and expenses	2,012,338	1,933,966
Income from operations	1,310,576	1,246,352
Other (expense) income:
Investment income	44,067	44,167
Net (loss) gain on marketable securities	(356,595)	257,194
Total other (expense) income	(312,528)	301,361
Income before provision for income taxes	998,048	1,547,713
Provision for income taxes	207,741	325,019
Net income	790,307	1,222,694
Earnings per common share
(basic and diluted)	$ 0.17	$ 0.27
Weighted average shares – basic and diluted (in shares)	4,594,319	4,594,319

XML

Note 12 - Other Information

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Other Liabilities Disclosure [Text Block]

12. Other Information

Accrued Expenses	March 31, 2020		December 31, 2019
	(unaudited)		(audited)
Bonuses	$	324,000	$	216,000
Distribution fees		311,354		309,190
Payroll and related expenses		137,441		175,433
Reserve for outdated material		260,374		231,392
Audit fee		30,750		48,500
Insurance		86,453		–
Annual report expenses		34,824		64,324
Company 401K contribution		36,250		–
Sales rebates		28,000		46,100
Other		21,662		38,187
Total Accrued Expenses	$	1,271,108	$	1,129,126

XML

Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Net income	$ 790,307	$ 1,222,694
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	40,519	42,105
Net loss (gain) on marketable securities	356,595	(257,194)
Allowance for Doubtful Accounts	(992)
Deferred income taxes	(84,012)	10,856
(Increase) decrease in operating assets:
Accounts receivable	(6,025)	67,707
Inventories	(145,510)	157,380
Prepaid expenses and other current assets	(57,406)	(68,068)
Prepaid income taxes	165,300	164,163
(Decrease) increase in operating liabilities:
Accounts payable	(39,300)	(44,305)
Accrued expenses	141,982	236,316
Income taxes payable	126,453
Dividends payable	(616)
Net cash provided by operating activities	1,287,295	1,531,654
Cash flows from investing activities:
Acquisition of property, plant and equipment	(1,048)	(12,992)
Purchase of marketable securities	(3,544,368)	(6,049,914)
Proceeds from sales of marketable securities	2,000,000	4,480,373
Net cash used in investing activities	(1,545,416)	(1,582,533)
Net decrease in cash and cash equivalents	(258,121)	(50,879)
Cash and cash equivalents at beginning of period	1,048,311	550,135
Cash and cash equivalents at end of period	790,190	499,256
Supplemental disclosure of cash flow information
Taxes paid		$ 150,000

XML

Note 8 - Marketable Securities

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

8. Marketable Securities

Marketable securities include investments in fixed income and equity mutual funds and U.S. Government securities with maturities greater than

3

months, which are reported at their fair values.

The Company’s U.S. Treasury Bills are considered debt securities and any unrealized gains and losses are reported in other comprehensive income. The U.S. Treasury Bills are considered held to maturity securities, as they are purchased direct from the U.S. Government and are unable to be sold before the maturity date.

The disaggregated net gains and losses on the marketable securities recognized in the statements of income for the

three

months ended

March 31, 2020

and

2019

are as follows:

	Three months ended March 31,
	2020			2019
Net (losses) gains recognized during the period on marketable securities	$	(356,595	)	$	262,423
Less: Net losses recognized during the period on marketable securities sold during the period		–			(5,229	)
Unrealized (losses) gains recognized during the reporting period on marketable securities still held at the reporting date	$	(356,595	)	$	257,194

The fair values of the Company’s marketable securities are determined in accordance with US GAAP, with fair value being defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the Company utilizes the

three

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

•Level

1

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

•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:

March 31, 2020 (

unaudited)

Debt Securities	Cost		Fair Value		Unrealized Gain
U.S. Treasury Bills (original maturities of greater than three months up to one year)	$	1,493,466	$	1,493,466	$	–
Total debt securities		1,493,466		1,493,466		–
Equity Securities
Fixed income mutual funds		5,740,749		5,774,765		34,016
Equity and other mutual funds		756,429		787,058		30,629
Total equity securities		6,497,178		6,561,823		64,645
Total marketable securities	$	7,990,644	$	8,055,289	$	64,645

December 31, 2019 (

audited)

Debt Securities	Cost		Fair Value		Unrealized Gain
U.S. Treasury Bills (original maturities of greater than three months up to one year)	$	3,481,625	$	3,481,625	$	–
Total debt securities		3,481,625		3,481,625		–
Equity Securities
Fixed income mutual funds		1,940,071		2,122,157		182,086
Equity and other mutual funds		1,024,580		1,263,734		239,154
Total equity securities		2,964,651		3,385,891		421,240
Total marketable securities	$	6,446,276	$	6,867,516	$	421,240

Investment income is recognized when earned and consists principally of interest income from fixed income mutual funds and U.S Treasury Bills, and dividend income from equity and other mutual funds. Realized gains and losses on sales of investments are determined on a specific identification basis.

Proceeds from the redemption of marketable securities amounted to

$2,000,000

for the

first

quarter of

2020.

There was

no

gain or loss on the redemptions, as they represented maturities of U.S. Treasury Bills. Proceeds from the sale and redemption of marketable securities amounted to

$4,480,373

for the

first

quarter of

2019,

which includes a net loss on sales of

$5,229.

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Note 4 - Use of Estimates

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Use of Estimates Disclosure [Text Block]

4. Use of Estimates

In preparing financial statements in accordance with 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 revenues 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.

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Note 8 - Marketable Securities (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Proceeds from Sale and Maturity of Marketable Securities, Total	$ 2,000,000	$ 4,480,373
Debt and Equity Securities, Realized Gain (Loss), Total	$ 0	$ (5,229)

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Note 9 - Inventories - Summary of Inventories (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Raw materials	$ 413,450	$ 320,507
Work in process	62,478	81,002
Finished products	886,859	815,768
Total Inventories	$ 1,362,787	$ 1,217,277

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Note 9 - Inventories

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Inventory Disclosure [Text Block]

9 . Inventories

	March 31,		December 31,
	2020		2019
	(Unaudited)		(Audited)
Inventories consist of the following:
Raw materials	$	413,450	$	320,507
Work in process		62,478		81,002
Finished products		886,859		815,768
Total Inventories	$	1,362,787	$	1,217,277

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. Finished product inventories at

March 31, 2020

and

December 31, 2019

are stated net of a reserve of

$

35,000

for slow moving and obsolete inventory. At

March 31, 2020

and

December 31, 2019,

the Company had an allowance of

$260,374

and

$231,392

respectively, for possible outdated material returns, which is included in accrued expenses.

The Company does

not

expect the coronavirus pandemic to have an impact on the valuation of the Company’s finished products, work in process, or raw materials inventories.

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Note 5 - Reclassifications

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Reclassifications [Text Block]

5. Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had

no

effect on the previously reported net income.

In accordance with ASC Topic

606

“Revenue from Contracts with Customers”, for the

three

-month period ended

March 31, 2019,

the Company reclassified certain sales rebates from Cost of Sales to Net Sales in the amount of

$101,706.

The reclassification had

no

effect on gross profit, net income, the provision for income taxes or earnings per share for the

three

-month period ended

March 31, 2019.

See “Revenue Recognition” below for further discussion regarding ASU Topic

606.

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Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 790,190	$ 1,048,311
Marketable securities	8,055,289	6,867,516
Accounts receivable, net of allowance for doubtful accounts of $20,186 at March 31, 2020 and $21,178 at December 31, 2019	2,105,428	2,098,411
Inventories (net)	1,362,787	1,217,277
Prepaid expenses and other current assets	227,872	170,466
Prepaid income taxes		165,300
Total current assets	12,541,566	11,567,281
Property, plant and equipment:
Land	69,000	69,000
Factory equipment and fixtures	4,482,236	4,482,236
Building and improvements	2,840,337	2,839,289
Total property, plant and equipment	7,391,573	7,390,525
Less: accumulated depreciation	6,646,631	6,609,818
Total property, plant and equipment (net)	744,942	780,707
Other assets (net)	11,118	14,824
TOTAL ASSETS	13,297,626	12,362,812
Current liabilities:
Accounts payable	32,085	71,385
Accrued expenses	1,271,108	1,129,126
Income taxes payable	126,453
Dividends payable	141,932	142,548
Total current liabilities	1,571,578	1,343,059
Deferred income taxes (net)	302,843	386,855
Commitments and contingencies
Stockholders’ equity:
Common stock $.10 par value; 10,000,000 shares authorized; 4,594,319 shares issued and outstanding at March 31, 2020 and December 31, 2019	459,432	459,432
Retained earnings	10,963,773	10,173,466
Total stockholders’ equity	11,423,205	10,632,898
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 13,297,626	$ 12,362,812

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Note 13 - Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Accounting Standards Update and Change in Accounting Principle [Text Block]

13. Recent Accounting Pronouncements

On

December 18, 2019,

the FASB issued ASU

2019

-

12,

“Simplifying the Accounting for Income Taxes”, which modifies ASU

740,

to simplify the accounting for income taxes. The amendments in ASU

2019

-

12

are effective for fiscal years beginning after

December 15, 2020.

Early adoption is permitted. The Company is currently evaluating if any of the modifications in this pronouncement will have an impact on its financial statements.

In

June 2016,

the FASB issued ASU-

2016

-

13

“Financial Instruments – Credit Losses”. This guidance affects organizations that hold financial assets and net investments in leases that are

not

accounted for at fair value with changes in fair value reported in net income. The guidance requires organizations to measure all expected credit losses for financial instruments at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. In

November 2019,

the FASB amended the effective date of implementation of this standard for smaller reporting companies. The new effective date is for fiscal years beginning after

December 15, 2022.

The Company is evaluating the potential impact on its financial statements.

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Note 1 - Nature of Business

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

1. Nature of Business

United-Guardian, Inc. (the “Company”) is a Delaware corporation that, through its Guardian Laboratories division, conducts research, product development, manufacturing and marketing of cosmetic ingredients, pharmaceuticals, medical products, and proprietary specialty industrial products.

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Note 7 - Revenue Recognition - Revenue by Geographic Region (Details) - USD ($)		3 Months Ended
		Mar. 31, 2020	Mar. 31, 2019
Net Sales		$ 3,322,914	$ 3,180,318
UNITED STATES
Net Sales	[1]	2,791,679	2,553,743
Non-US [Member]
Net Sales		$ 531,235	$ 626,575

[1] Since all purchases by ASI are shipped to ASI's warehouses in the U.S. they are reported as U.S. sales for financial reporting purposes. However, ASI has reported to the Company that approximately 67% of ASI's sales of the Company's products in the first quarter of 2020 were to customers in other countries, with China representing approximately 27% of ASI's sales of the Company's products.

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Note 9 - Inventories (Details Textual) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Inventory Valuation Reserves, Ending Balance	$ 35,000	$ 35,000
Accrued Reserve for Outdated Material	$ 260,374	$ 231,392

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Note 14 - Concentrations of Credit Risk (Details Textual) - Distributors and Marketing Partners [Member]	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Number of Customers	1	1
Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Concentration Risk, Percentage	57.00%	55.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Concentration Risk, Percentage	57.00%	51.00%

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Note 12 - Other Information (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

Accrued Expenses	March 31, 2020		December 31, 2019
	(unaudited)		(audited)
Bonuses	$	324,000	$	216,000
Distribution fees		311,354		309,190
Payroll and related expenses		137,441		175,433
Reserve for outdated material		260,374		231,392
Audit fee		30,750		48,500
Insurance		86,453		–
Annual report expenses		34,824		64,324
Company 401K contribution		36,250		–
Sales rebates		28,000		46,100
Other		21,662		38,187
Total Accrued Expenses	$	1,271,108	$	1,129,126

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Note 7 - Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2020

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three months ended March 31,
	2020		2019
Cosmetic Ingredients	$	1,702,860	$	1,651,722
Pharmaceutical		1,038,710		887,601
Medical		539,196		610,508
Industrial and other		42,148		30,487
Net Sales	$	3,322,914	$	3,180,318

Revenue from External Customers by Geographic Areas [Table Text Block]

	Three months ended March 31,
	2020		2019
United States *	$	2,791,679	$	2,553,743
Other countries		531,235		626,575
Net Sales	$	3,322,914	$	3,180,318