U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
| | TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
COMMISSION FILE NUMBER:
UNITED-GUARDIAN, INC.
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices)
(
(Registrant’s Telephone Number)
N/A
(Former name, former address, and former fiscal year, if changed since last report)
Cover Page 1 of 2
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| | | |
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 preceding 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.
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).
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 | ☐ | 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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of November 1, 2022, the Registrant had issued and outstanding
Cover Page 2 of 2
UNITED-GUARDIAN, INC.
INDEX TO FINANCIAL STATEMENTS
UNITED-GUARDIAN, INC.
ITEM 1. Condensed Financial Statements
STATEMENTS OF INCOME
(UNAUDITED)
| THREE MONTHS ENDED | NINE MONTHS ENDED SEPTEMBER 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total costs and expenses | ||||||||||||||||
| Income from operations | ||||||||||||||||
| Other Income: | ||||||||||||||||
| Investment income | ||||||||||||||||
| Net (loss) gain on marketable securities | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other (loss) income | ( | ) | ( | ) | ||||||||||||
| Income before provision for income taxes | ||||||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Earnings per common share (Basic and Diluted) | $ | $ | $ | $ | ||||||||||||
| Weighted average shares – basic and diluted | ||||||||||||||||
See Notes to Condensed Financial Statements
UNITED-GUARDIAN, INC.
ASSETS
| SEPTEMBER 30, | DECEMBER 31, | |||||||
| 2022 | 2021 | |||||||
| (UNAUDITED) | (AUDITED) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Marketable securities | ||||||||
| Accounts receivable, net of allowance for doubtful accounts of $ at September 30, 2022 and $ at December 31, 2021 | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Prepaid income taxes | --- | |||||||
| Total current assets | ||||||||
| Deferred income taxes | --- | |||||||
| Net property, plant, and equipment: | ||||||||
| Land | ||||||||
| Factory equipment and fixtures | ||||||||
| Building and improvements | ||||||||
| Total property, plant, and equipment | ||||||||
| Less: Accumulated depreciation | ||||||||
| Total property, plant, and equipment, net | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
See Notes to Condensed Financial Statements
UNITED-GUARDIAN, INC.
BALANCE SHEETS
(continued)
LIABILITIES AND STOCKHOLDERS’ EQUITY
| SEPTEMBER 30, | DECEMBER 31, | |||||||
| 2022 | 2021 | |||||||
| Current liabilities: | (UNAUDITED) | (AUDITED) | ||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | --- | |||||||
| Income taxes payable | --- | |||||||
| Dividends payable | ||||||||
| Total current liabilities | ||||||||
| Deferred income taxes | --- | |||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock (at par value) ( shares authorized; shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively) | ||||||||
| Retained earnings | ||||||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See Notes to Condensed Financial Statements
UNITED-GUARDIAN, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
| Common stock | Retained | |||||||||||||||
| Shares | Amount | Earnings | Total | |||||||||||||
| Balance, January 1, 2022 | $ | $ | $ | |||||||||||||
| Net income | --- | --- | ||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | |||||||||||||
| Net income | --- | --- | ||||||||||||||
| Dividends declared and paid ($per share) | --- | --- | ( | ) | ( | ) | ||||||||||
| Dividends declared, not paid ($ per share) | --- | --- | ( | ) | ( | ) | ||||||||||
| Balance, June 30, 2022 | $ | $ | $ | |||||||||||||
| Net income | --- | --- | ||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | |||||||||||||
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
| Common stock | Retained | |||||||||||||||
| Shares | Amount | Earnings | Total | |||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | |||||||||||||
| Net income | --- | --- | ||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | |||||||||||||
| Net income | --- | --- | ||||||||||||||
| Dividends declared and paid ($ per share) | --- | --- | ( | ) | ( | ) | ||||||||||
| Dividends declared, not paid ($ per share) | --- | --- | ( | ) | ( | ) | ||||||||||
| Balance, June 30, 2021 | $ | $ | $ | |||||||||||||
| Net income | --- | --- | ||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | |||||||||||||
See Notes to Condensed Financial Statements
UNITED-GUARDIAN, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| NINE MONTHS ENDED | ||||||||
| SEPTEMBER 30, | ||||||||
| Cash flows from operating activities: | 2022 | 2021 | ||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Net loss (gain) on marketable securities | ( | ) | ||||||
| Gain on sale of asset | --- | ( | ) | |||||
| Allowance for doubtful accounts | ( | ) | ||||||
| Deferred income taxes | ( | ) | ||||||
| Decrease (Increase) in operating assets: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other current assets | ||||||||
| Prepaid income taxes | ( | ) | ||||||
| (Decrease) increase in operating liabilities: | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Income taxes payable | ( | ) | ||||||
| Deferred revenue | ( | ) | --- | |||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Acquisition of property, plant and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of marketable securities | ||||||||
| Purchases of marketable securities | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Dividends paid | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Taxes paid | $ | $ | ||||||
| Supplemental disclosure of non-cash items: | ||||||||
| Dividends payable | $ | $ | ||||||
| Trade-in received from sale of asset | $ | ----- | $ | |||||
See Notes to Condensed Financial Statements
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. The Company’s research and development department modifies, refines, and expands the uses for existing products for additional uses and markets. It also develops new products using natural and environmentally friendly raw materials, which is important to many of the Company's cosmetic customers.
| 2. | Basis of Presentation |
Interim condensed financial statements of the Company are prepared in accordance with United States Generally Accepted Accounting Principles (“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, including normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods have been included. The results of operations for the three and nine months ended September 30, 2022 (also referred to as the "third quarter of 2022" and the "first nine months of 2022", respectively) are not necessarily indicative of results that ultimately may be achieved for any other interim period or for the year ending December 31, 2022. The interim unaudited condensed financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2021.
| 3. | Impact of Coronavirus (COVID-19) |
While the coronavirus pandemic (“pandemic”) continues to impact certain areas of the Company’s operations, the current impact on the Company’s financial performance is coming primarily from higher raw material costs and increased shipping costs, which had an impact on the Company’s gross profit margins in the third quarter of 2022 and may continue to have a future impact on the Company’s gross profit margins in upcoming quarters. In addition, during the first half of 2022 it was more difficult to ship the Company’s products due to a shortage of truck drivers and limited availability of shipping vessels. This situation improved in the third quarter of 2022. The Company had been able to minimize the impact on customers by making them aware of longer lead times that may be necessary as a result of these issues.
The pandemic has not significantly affected the ability of the Company to obtain raw materials, but has created longer lead times for some of them. In response to the rising raw material prices the Company has instituted price increases on many of its products, which will help to reduce the impact on the Company’s gross margins in the future.
As a result of the lingering effects of the coronavirus pandemic as described above, there continues to be uncertainty in regard to the future potential impact of the pandemic on the Company’s operations or financial results. The Company believes that it is still unable to provide an accurate estimate or projection as to what the future impact of the pandemic will be on the Company’s future operations or financial results. The Company does not expect the carrying value of its assets or its liquidity to be impaired by the coronavirus pandemic
| 4. | Use of Estimates |
In preparing financial statements in conformity 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, as well as 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. | 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 September 30, 2022 and December 31, 2021, approximately $
| 6. | Revenue Recognition |
The Company records revenue in accordance with ASC Topic 606 “Revenue from Contracts with Customers.” Under this guidance, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company’s principal source of revenue is product sales.
The Company’s sales, as reported, are subject to a variety of deductions, some of which are estimated. These deductions are recorded in the same period in which the revenue is recognized. Such deductions, primarily related to the sale of the Company’s pharmaceutical products, include chargebacks from the United States Department of Veterans Affairs (‘VA”), rebates in connection with the Company’s current participation in Medicare programs and its past participation in Medicaid programs, distribution fees, discounts, and outdated product returns. These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on sales for a reporting period.
During 2022 and 2021, the Company participated in various government drug rebate programs related to the sale of Renacidin®, its most important pharmaceutical product. These programs include the Veterans Affairs Federal Supply Schedule (FSS), and the Medicare Part D Coverage Gap Discount Program (CGDP). These programs require the Company to sell its product at a discounted price. The Company’s sales, as reported, are net of these product rebates and discounts, some of which are estimated and are recorded in the same period that the revenue is recognized.
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 and the Company’s performance obligation is satisfied. 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 risk of loss and responsibility for the shipment passes to the customer, and the performance obligation of the Company 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 its pharmaceutical products.
The Company does not make sales on consignment, and the collection of the proceeds of the sale of any of the Company’s products is not contingent upon the customer being able to sell the goods to a third party.
Any allowances for returns are taken as a reduction of sales within the same period the revenue is recognized. Such allowances are determined based on historical experience under ASC Topic 606-10-32-8. The Company has not experienced significant fluctuations between estimated allowances and actual activity.
The timing between recognition of revenue for product sales and the receipt of payment is not significant. 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 September 30, 2022 and December 31, 2021, the allowance for doubtful accounts receivable was $
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 sales by product class are as follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Cosmetic ingredients | $ | $ | $ | $ | ||||||||||||
| Pharmaceutical | ||||||||||||||||
| Medical | ||||||||||||||||
| Industrial products | ||||||||||||||||
| Total Sales | $ | $ | $ | $ | ||||||||||||
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
Disaggregated sales by geographic region are as follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| United States* | $ | $ | $ | $ | ||||||||||||
| Other countries | ||||||||||||||||
| Total Sales | $ | $ | $ | $ | ||||||||||||
* Substantially all purchases by ASI are shipped to ASI’s warehouses in the U.S. As a result, all sales to ASI are reported as U.S. sales for financial reporting purposes, even though a significant quantity of those purchases will be shipped by ASI to foreign customers. ASI has reported to the Company that approximately
For the nine months ended September 30, 2022 approximately
| 7. | Marketable Securities |
Marketable securities include investments in fixed income and equity mutual funds, which are reported at their fair values.
The disaggregated net gains and losses on the marketable securities recognized in the income statements for the three and nine months ended September 30, 2022 and 2021, respectively, are as follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net (losses) gains recognized during the period on marketable securities | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Less: Net (losses) gains recognized during the period on marketable securities sold during the period | --- | --- | ( | ) | ||||||||||||
| Unrealized losses recognized during the reporting period on marketable securities still held at the reporting date | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The fair values of the Company’s marketable securities are determined in accordance with US GAAP, with fair value being defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the Company utilizes the three-tier value hierarchy, as prescribed by US GAAP, which prioritizes the inputs used in measuring fair value as follows:
• Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
• 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:
September 30, 2022(Unaudited)
| Equity Securities | Cost | Fair Value | Unrealized Loss | |||||||||
| Fixed income mutual funds | $ | $ | $ | ( | ) | |||||||
| Equity and other mutual funds | ( | ) | ||||||||||
| Total equity securities | ( | ) | ||||||||||
| Total marketable securities | $ | $ | $ | ( | ) | |||||||
December 31, 2021(Audited)
| Equity Securities | Cost | Fair Value | Unrealized Gain | |||||||||
| Fixed income mutual funds | $ | $ | $ | |||||||||
| Equity and other mutual funds | ||||||||||||
| Total equity securities | ||||||||||||
| Total marketable securities | $ | $ | $ | |||||||||
Investment income is recognized when earned and consists principally of dividend income from equity and fixed income mutual funds. Realized gains and losses on sales of investments are determined on a specific identification basis.
Proceeds from the sale and redemption of marketable securities amounted to $
| 8. | Inventories |
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (UNAUDITED) | (AUDITED) | |||||||
| Inventories consist of the following: | ||||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished products | ||||||||
| Total inventories | $ | $ | ||||||
Inventories are valued at the lower of cost and net realizable value. Cost is determined using the average cost method, which approximates cost determined by the first-in, first-out (“FIFO”) method. Finished product inventories at September 30, 2022 and December 31, 2021 are stated net of a reserve of $
| 9. | 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 September 30, 2022 and December 31, 2021, the Company did have any unrecognized tax benefits. The Company’s provision for income taxes for the three and nine months ended September 30, 2022 and 2021 includes the following:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Provision for federal income taxes - current | $ | $ | $ | $ | ||||||||||||
| Provision for state income taxes - current | --- | --- | ||||||||||||||
| (Benefit from) provision for federal income taxes – deferred | ( | ) | ( | ) | ( | ) | ||||||||||
| Total provision for income taxes | $ | $ | $ | $ | ||||||||||||
| 10. | 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
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:
| 11. | Related-Party Transactions |
For the three-month periods ended September 30, 2022 and 2021, there were
| 12. | Other Information |
Accrued Expenses
Accrued expenses consist of the following:
|
|
| September 30, 2022 |
| December 31, 2021 | ||||
| Accrued Expenses | (Unaudited) | (Audited) | ||||||
| Bonuses | $ | $ | ||||||
| Distribution fees | ||||||||
| Payroll and related expenses | ||||||||
| Reserve for outdated material | ||||||||
| Company 401(k) contribution | ||||||||
| Audit fee | ||||||||
| Annual report expenses | ||||||||
| Sales rebates | ||||||||
| Other | ||||||||
| Total Accrued Expenses | $ | $ |
| 13. | Recent Accounting Pronouncements |
On January 1, 2021, the Company adopted Accounting Standards Update (ASU) 2019-12, “Simplifying the Accounting for Income Taxes.” This standard modified ASU 740 and simplifies the accounting for income taxes. The Company has determined that these modifications did not 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 currently evaluating if this pronouncement will have a 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 and its overall credit worthiness 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 is low.
For the three months ended September 30, 2022,
For the nine months ended September 30, 2022,
| 15. | Earnings Per Share |
Basic earnings per share is computed by dividing net 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 were $
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 by the use of such words as “believes”, “may”, “will”, “should”, “intends”, “plans”, “estimates”, “anticipates”, or other similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond the Company’s 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. 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.
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, non-pharmaceutical medical products, and proprietary specialty industrial products. All the products that the Company markets, with the exception of Renacidin, are produced at its facility in Hauppauge, New York. Renacidin, a urological product, is manufactured for the Company by an outside contract manufacturer.
The Company’s most important product line is its Lubrajel® line of water-based moisturizing and lubricating gels, which are used primarily as ingredients in cosmetic products but are also used in medical products, primarily catheter lubricants. These products are marketed worldwide for cosmetic uses by five marketing partners, each handling a different geographic area, with the largest being U.S.-based ASI. The Company’s research and development department is actively working on the development of new products to expand the Company’s line of cosmetic ingredients. Many of the Company’s products use proprietary manufacturing processes, and the company relies primarily on trade secret protection to protect its intellectual property.
Renacidin and the Company’s other pharmaceutical product, Clorpactin®, which is also used primarily in urology, are distributed through full-line drug wholesalers and marketed only in the United States. Those wholesalers 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 promotes Renacidin through internet advertising as well as a dedicated website. Clorpactin and some of the Company’s other products are marketed through information provided on the Company’s corporate website.
The Company’s non-pharmaceutical medical products, such as its catheter lubricants, as well as its specialty industrial products, are sold directly to end-users, or to contract manufacturers utilized by those end-users. They are also available for marketing on a non-exclusive basis by the Company’s marketing partners.
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 several registered trademarks, the two most important of which are “Lubrajel” and “Renacidin.” However, regarding the 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 globally. 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.
As discussed in Note 3 above, while the coronavirus pandemic (“pandemic”) continues to impact certain areas of the Company’s operations, the current impact on the Company’s financial performance is coming primarily from higher raw material costs and increased shipping costs, which had an impact on the Company’s gross profit margins in the first nine months of 2022 and may continue to have a future impact on the Company’s gross profit margins in upcoming quarters. In addition, during the first half of 2022 it was more difficult to ship the Company’s products due to a shortage of truck drivers and limited availability of shipping vessels. This situation improved in the third quarter of 2022. The Company had been able to minimize the impact on customers by making them aware of longer lead times that may be necessary as a result of these issues.
The pandemic has not significantly affected the ability of the Company to obtain raw materials, but it has created longer lead times for some of them. In response to the rising raw material prices the Company has instituted price increases on many of its products, which will help to reduce the impact on the Company’s gross margins in the future.
As a result of the lingering effects of the coronavirus pandemic as described above, there continues to be uncertainty in regard to the future potential impact of the pandemic on the Company’s operations or financial results. The Company believes that it is still unable to provide an accurate estimate or projection as to what the future impact of the pandemic will be on the Company’s future operations or financial results. The Company does not expect the carrying value of its assets or its liquidity to be impaired by the coronavirus pandemic.
CRITICAL ACCOUNTING POLICIES
As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, 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, 2021, 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, 2021, and a comparison of the results of operations for the third quarter of 2022 and 2021 and the first nine months of 2022 and 2021. This discussion and analysis should be read in conjunction with "Management's Discussion and Analysis or Plan of Operation" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. All references in this quarterly report to “sales” or “Sales” shall mean “net sales” unless specifically identified as “gross sales”.
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 its pharmaceutical products.
RESULTS OF OPERATIONS
Net Sales
Net sales for the third quarter of 2022 decreased by $762,724 (24%) when compared with the same period in 2021. Net sales for the first nine months of 2022 decreased by $333,035 (3%) as compared with the corresponding period in 2021. The decrease in sales for both the third quarter of 2022 and the first nine months of 2022 were attributable to changes in sales of the following product lines:
| Cosmetic ingredients: |
| a) |
Third quarter sales: For the third quarter of 2022, the Company’s sales of cosmetic ingredients decreased by $737,389 (47%) when compared with the third quarter of 2021. The decrease in third quarter sales was due primarily to a decrease of $502,678 (39%) in gross sales of the Company’s cosmetic products to ASI (the net sales decrease, which incorporates rebates totaling $54,091, was $556,769). Based on information provided to the Company by ASI, the Company’s marketing partner in China, the decrease was due to several reasons, the most significant being a decrease in shipments of the Company’s products to China due to the continuing impact in China of the coronavirus pandemic. In addition, ordering patterns by certain customers, as well as some overstocking issues by one of ASI’s customers that switched to a different formulation of one of the Company’s products, all added to the lower sales for the quarter. ASI has indicated that it is not aware of any significant loss of customers and anticipates that sales will increase during the next twelve months. |
| Third quarter sales to the Company’s four other marketing partners, as well as to one direct cosmetic ingredient customer, decreased by a net of $180,620 (65%) compared with the third quarter of 2021. Sales to the Company’s marketing partners in the United Kingdom, Switzerland, France, and one direct customer decreased by a total of $205,248 (77%), while sales to the Company’s marketing partner in Italy increased by $24,628 (297%). |
| b) |
Nine-month sales: For the first nine months of 2022, the Company’s sales of cosmetic ingredients decreased by $751,883 (15%) when compared with the same period in 2021. This decrease was due primarily to a decrease of $478,986 (12%) in gross sales to ASI (the net sales decrease, which incorporates rebates totaling $182,371, was $662,677). The reason for the decrease in sales to ASI during the first nine months of 2022 are the same as the decrease in sales for the third quarter discussed above. |
| Cosmetic ingredient sales for the first nine months of the year to the Company’s four other marketing partners, as well as to four direct cosmetic customers, decreased by a net of $89,206 (9%) compared with the same period in 2021. Nine-month sales to the Company’s marketing partners in the UK, France, Switzerland and four small direct cosmetic customers decreased by $124,251 (13%), while sales to the Company’s marketing partner in Italy, increased by $35,045 (54%). |
Pharmaceuticals:
Because there are fees, rebates and allowances associated with sales of the Company’s two pharmaceutical products, Renacidin and Clorpactin, discussion of the Company’s pharmaceutical sales includes references to both gross sales (before fees, rebates and allowances) and net sales (after fees, rebates and allowances).
Gross sales of the Company’s pharmaceutical products for the three-month period ended September 30, 2022 decreased by $71,583 (5%) compared with the corresponding period in 2021, while gross sales for the nine-month period ended September 30, 2022 increased by $91,299 (2%). The decrease in sales for the three-month period ended September 30, 2022 was due primarily to a decrease of $83,746 (6%) in gross sales of Renacidin. For the nine-month period ended September 30,2022, the increase was due to an increase in gross sales of Renacidin of $44,263 (1%) combined with an increase in gross sales of the Company’s other pharmaceutical product, Clorpactin, in the amount of $47,036 (9%). The Company believes that the fluctuations in sales for both periods are due to the timing of orders from its distributors of those products.
As sales of the Company’s pharmaceutical products fluctuate there is typically a corresponding direct relationship in the related allowances, such as for distribution fees, VA chargebacks, Medicare rebates, sales rebates and discounts and outdated material returns. For the three-month period ended September 30, 2022, these pharmaceutical related allowances decreased by $14,203 (5%), compared with the same period in 2021. For the nine-month period ended September 30, 2022 these allowances decreased by $22,430 (3%). Despite experiencing an increase in pharmaceutical sales for the first nine months of 2022, the Company believes that the decrease in allowances was a result of having a more favorable pricing structure in place on its VA contract sales during 2022.
Medical (non-pharmaceutical) products:
Sales of the Company’s medical products increased by $40,664 (12%) and $323,767 (20%), respectively, for the three- and nine-month periods ended September 30, 2022, compared with the same periods in 2021. The increase in medical product sales for both periods was primarily attributable to an increase in shipments to one of the Company’s larger direct medical product customers located in China.
Industrial products:
Sales of the Company's industrial products decreased by $8,619 (21%) and by $18,648 (16%), respectively, for the three and nine months ended September 30, 2022, when compared with the corresponding periods in 2021. The decrease in sales for both periods was primarily due to a decrease in orders from one of the Company’s larger industrial product customers, who was purchasing a product that the Company discontinued during the second quarter of 2022.
Cost of Sales
Cost of sales as a percentage of sales increased to 45% in the third quarter of 2022, up from 42% in the third quarter of 2021. For the first nine months of 2022, cost of sales as a percentage of sales increased to 45%, up from 41% in 2021. The increases in both periods were a result of 1) increased raw material costs in 2022 compared with 2021; 2) increased freight costs in 2022 compared with 2021; 3) the increased percentage of sales derived from the Company’s pharmaceutical products, especially in the third quarter of 2022, as these products are sold at a lower profit margin than the Company’s other product lines; and 4) the recording of $182,371 in rebates payable to one of the Company’s marketing partners during the nine-month period ending September 30, 2022. In addition, the Company had recorded a one-time Employee Retention Credit (“ERC”) of $104,827 in the first nine months of 2021, which reduced the cost of sales for that period.
Operating Expenses
Operating expenses, consisting of selling and general and administrative expenses, increased by $73,751 (16%) for the third quarter of 2022 compared with the equivalent period in 2021. Operating expenses increased by $270,590 (19%) for the first nine months of 2022, compared with the equivalent period in 2021. The increase in operating expenses for the third quarter of 2022 was due primarily to (a) an increase of $24,000 in fees to the independent members of the Company’s Board of Directors in connection with the effort to recruit a new President & CEO; (b) increases in the Company’s Directors & Officers liability insurance and other insurance-related expenses; and (c) an increase in legal fees to the Company’s outside SEC counsel. The increase in operating expenses for the first nine months of 2022 was due to (a) an increase of $95,000 in fees to the independent members of the Company’s Board of Directors relating to the Company’s efforts to explore strategic alternatives for the Company, as well as the Board’s effort to recruit a new President and CEO for the Company; (b) an increase of $35,000 in insurance-related expenses; (c) increases in certain employee fringe benefits; and (d) the recording of an ERC in 2021, which offset some of the Company’s payroll expense in 2021 and which was not available to the Company in 2022. Due to the current inflationary environment, the Company expects to see minor increases in operating expenses for the remainder of the year.
Research and Development Expenses
Research and development expenses decreased by $9,818 (8%) for the third quarter of 2022, and increased by $15,803 (5%) for the first nine months of 2022 compared with the same periods in 2021. The decrease for the third quarter was primarily due to a decrease in certain employee fringe benefit costs. The increase for the nine-month period was primarily due to the recording of the ERC in 2021, which reduced research and development costs. After taking the ERC into account, research and development expenses for the nine-month period ending September 30, 2022 decreased by 3%.
Investment Income
Investment income increased by $8,248 (21%) and by $22,258 (18%), respectively, for the three and nine-month periods ending September 30, 2022, compared with the equivalent periods in 2021. The increases in both periods were due to increases in dividend income received from both equity and fixed income mutual funds.
Net (loss) Gain on Marketable Securities
The net loss on marketable securities increased by $275,418 and $1,194,883 for the three and nine-month periods ended September 30, 2022 compared with the same periods in 2021. Approximately 90% of the Company’s marketable securities portfolio is composed of fixed income mutual funds. The Company intentionally weighted its portfolio as such in an effort to minimize significant stock market fluctuations. However, given the current inflationary environment and the rise of interest rates, management believes that the decrease in the market value of the Company’s fixed income mutual funds will be temporary but will continue to be volatile. The Company’s management and Board of Directors are continuing to closely monitor the Company's investment portfolio and will make any adjustments they believe may be necessary or appropriate in order to minimize the future impact on the Company’s financial position that the volatility of the global financial markets may have.
Provision for Income Taxes
The Company's effective income tax rate was approximately 21% for the first nine months of 2022 and 2021. The Company’s tax rate is expected to remain at 21% for the current fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased from $9,245,629 at December 31, 2021 to $9,210,314 at September 30, 2022, a decrease of $35,315. The current ratio increased from 5.0 to 1 at December 31, 2021 to 6.5 to 1 at September 30, 2022. The decrease in working capital was primarily due to decreases in marketable securities and accounts receivable, partially offset by an increase in inventories. The increase in the current ratio was primarily due to decreases in accounts payable, deferred revenue and income taxes payable.
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 expects to incur costs of approximately $100,000 in the fourth quarter of 2022 in connection with an upgrade to its building sprinkler system.
The Company generated cash from operations of $1,900,456 and $3,648,744 for the nine months ended September 30, 2022 and September 30, 2021, respectively. The decrease in cash from operations was primarily due to a decrease in net income.
Cash used in investing activities for the nine-month period ended September 30, 2022 was $235,751. Cash used in investing activities for the nine-months ended September 30, 2021 was $1,343,651. The decrease was primarily due to a decrease in purchases of marketable securities during 2022. Due to rising raw material and freight costs over the first nine months of 2022, the Company utilized excess cash flow to support these increased production costs, thereby reducing its marketable securities purchases.
Cash used in financing activities was $1,699,392 and $2,204,616 for the nine months ended September 30, 2022 and September 30, 2021, respectively. The decrease was due to a decrease in the dividends paid from $0.48 per share in 2021 to $0.37 per share in 2022.
The Company expects to continue to use its cash to make dividend payments, to purchase marketable securities, and to take advantage of other opportunities that may arise that are in the best interest of the Company and its shareholders.
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.
Item 4. CONTROLS AND PROCEDURES
| (a) |
DISCLOSURE CONTROLS AND PROCEDURES |
The Company’s management, including its Principal Executive Officer and Chief 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 Chief 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 Chief 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 Chief 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.
NONE
IMPACT OF COVID-19
The impact of the coronavirus pandemic on the Company’s sales significantly lessened in 2021 compared with 2020, when the pandemic has its most significant impact on the Company’s sales. While the global impact of the pandemic continues to abate, it is likely that there will continue to be some impact on sales of the Company’s cosmetic ingredients, especially in connection with the Company’s sales in China, where the pandemic is still having a significant impact on the economy. The pandemic is still causing increases in Company’s packaging, shipping, and raw material costs. Due to the uncertainty surrounding the duration of the pandemic and its impact in the various countries in which the Company does business, it is difficult for the Company to provide an accurate estimate or projection as to what the future impact of the pandemic will be on the Company’s future operations or financial results. The pandemic had not impacted sales of the Company’s pharmaceutical products, and has had only a minor impact on sales of some of the Company’s medical products.
The Company does not anticipate that the pandemic will affect its ability to obtain raw materials and maintain production, and the Company has multiple sources for many of its raw materials. However, some of the Company’s raw materials have experienced price increases, which could impact the manufacturing cost of some of the Company’s products in the future. The Company may or may not be able to pass along and recoup these price increases, depending on the product. The Company expects to be able to maintain production levels sufficient to ship orders on a timely basis, subject to availability of truck drivers.
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
NONE
| Employment Agreement between Beatriz Blanco and the Company dated October 10, 2022 |
|
| 101.INS* |
Inline XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document. |
| 101.SCH* |
Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF* |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB* |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104* |
Cover Page Interactive Data File (Embedded within the inline XBRL document and included in Exhibit 101.1). |
* Filed herewith
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.
| Date: November 3, 2022 | UNITED-GUARDIAN, INC. |
| (Registrant) | |
| By: /S/ BEATRIZ BLANCO | |
| Beatriz Blanco | |
| President | |
| By: /S/ ANDREA YOUNG | |
| Andrea Young | |
| Chief Financial Officer |
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (the “Agreement”) is effective as of October 10, 2022 (the “Effective Date”), and is made by and between United-Guardian, Inc. (together with its parents, affiliates, subsidiaries, successors and assigns, “United-Guardian” or the “Company”), and Beatriz Blanco (the “Executive”).
WHEREAS, the Company desires to employ Executive as Chief Executive Officer (“CEO”) and President of the Company and Executive desires to serve in that capacity;
NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive (each, a “Party” and collectively, the “Parties”) agree as follows:
1. Term. The Company shall employ the Executive starting on November 1, 2022 until employment ceases as provided in Section 5 of this Agreement (the “Employment Period”).
2. Position and Duties
(a) During the Employment Period, the Executive shall be employed as the CEO and President, and shall report to the Board of Directors of the Company (the “Board”). The Executive shall also serve as a member of the Board. The Executive shall perform such duties as are customarily exercised by a CEO and President, as well as such additional duties and responsibilities as the Board may assign from time to time.
(b) The Executive shall devote her full business time and attention to the business and affairs of the Company and the Executive shall use her best efforts to faithfully and efficiently carry out all duties and responsibilities assigned to her.
3. Compensation
(a) Base Salary. During the Employment Period, the Executive shall receive an annualized base salary of $280,000.00 (“Base Salary”), payable in accordance with the regular payroll practices of the Company.
(b) Bonus/Profit Sharing Plan. In addition to Base Salary, the Executive will be eligible to participate in the Company’s Discretionary Bonus/Profit Sharing Plan. This Plan is based on the annual performance of the Company and the Executive, provided the Executive is employed on the date such bonus is paid. The amount of such bonus, if any, shall be determined by the Compensation Committee of the Board in the first half of the following fiscal year.
4. Other Benefits
(a) During the Employment Period: (i) the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in, and shall receive all benefits under, all welfare benefit plans, practices, policies and programs provided by the Company to other executive employees; (ii) the Executive shall be entitled to participate in the Company’s 401k Plan; and (iii) the Executive shall be entitled to, and the Company shall provide the Executive with, thirty (30) Personal Time Off (“PTO”) days during each calendar year in accordance with the Company’s policy.
(b) The Executive shall be eligible for coverage under any applicable Directors’ and Officers’ (“D&O”) insurance policies of the Company and its affiliates to the same extent and in the same manner to which other senior management employees of the Company are entitled to coverage under such D&O insurance policies, subject to the terms and conditions of any such D&O insurance policies.
(c) Reimbursement of Other Expenses. The Company shall reimburse the Executive for the reasonable and necessary out-of-pocket business expenses incurred by the Executive for or on behalf of the Company in furtherance of the performance of the Executive’s duties hereunder in accordance with the Company’s policies as approved by the Board from time to time, subject in all cases to the Company’s requirements with respect to reporting and documentation of such expenses. Executive will also be reimbursed for any payments she makes pursuant to COBRA to maintain her current medical insurance, until such time as she is added to the Company’s medical plan.
5. Termination of Employment
(a) By the Company. The Company may terminate the Executive’s employment under this Agreement during the Employment Period without Cause upon thirty (30) days’ written notice or for Cause. For purposes of this Agreement, “Cause” means the Executive’s (i) conviction of (or plea of guilty or nolo contendere to) a crime that constitutes a felony (or state law equivalent), or a crime that constitutes a misdemeanor involving moral turpitude, dishonesty, theft, fraud, or any other crime which materially affects the Company’s business interests; (ii) gross negligence, willful misconduct, or habitual neglect in the performance of her duties and responsibilities hereunder (other than any such failure resulting from a Disability) which the Executive has failed to cure (if curable) within thirty (30) days following her receipt of written notice of same from the Company; (iii) willful failure to comply with any ethical or legal directive of the Company; (iv) embezzlement, misappropriation or fraud against the Company; or (v) a material breach of this Agreement or a Company policy, if the Executive has failed to cure (if curable) within thirty (30) days following her receipt of written notice of same from the Board.
(b) By the Executive. The Executive may terminate employment under this Agreement without Good Reason upon ninety (90) days’ written notice or for Good Reason. For purposes of this Agreement, “Good Reason” means the occurrence of any of the following events without the Executive’s prior written consent: (i) any reduction in Base Salary; (ii) a material diminution in the Executive’s title, authority, duties or responsibilities; or (iii) any material breach by the Company or any of its affiliates of this Agreement, so long as (x) the Executive has provided written notice to the Board setting forth in reasonable detail the specific conduct of the Company that constitutes Good Reason within thirty (30) days of the date the Executive first becomes aware of its existence, (y) the Company has failed to cure such conduct within thirty (30) days following the date of receipt of such notice, and (z) the Executive has terminated her employment within thirty (30) days following such failure to cure. Notwithstanding the foregoing, "Good Reason" for purposes of Section 5(b)(i) shall not include a reduction in Base Salary if such reduction is coincident with a reduction applicable to all executives of the Company.
(c) Death or Disability. The Executive’s employment and the Employment Period shall terminate automatically upon the Executive’s death or Disability during the Employment Period. For purposes of this Agreement, “Disability” means a physical or mental disability that prevents the Executive from performing her essential job functions, with or without reasonable accommodation, lasting for a period of eighteen (18) consecutive weeks or for a period of twenty-four (24) weeks in any twelve-month period.
6. Payments Upon Termination
(a) Accrued Obligations. If the Executive’s employment hereunder is terminated for any reason, then the Executive (or her estate, as applicable) shall be entitled to receive her Base Salary through the date of termination and the per diem value of all accrued but unused PTO days.
(b) By the Company Without Cause or By the Executive for Good Reason. If the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason, then, in addition to the Accrued Obligations:
i. the Executive shall be entitled to severance in an amount equal to three (3) months’ Base Salary (“Severance Pay”), paid in accordance with the Company’s regular payroll practices; provided, however, that (x) the Executive completed at least one year of employment with the Company, (y) the Executive’s right to receive Severance Pay is expressly conditioned upon receipt by the Company of a written general release executed by the Executive within twenty-one (21) days after the termination date, in a form satisfactory to the Company, which release shall become irrevocable seven (7) days following the execution and delivery thereof (and no Severance Pay shall be required to be paid until the date upon which such release has been delivered and becomes irrevocable), and (z) the Executive continues to comply with the terms of Section 7 of this Agreement.
(c) Termination for Cause or by the Executive Without Good Reason. If the Executive’s employment is terminated by the Company for Cause or by the Executive without Good Reason, then the Executive shall be entitled to receive the Accrued Obligations.
7. Restrictive Covenants
(a) Unauthorized Disclosure. The Executive acknowledges that by reason of the Executive’s employment with the Company, the Executive has and will continue to have access to Confidential Information and trade secrets of the Company and its Affiliates. The Executive agrees that both during and after her employment with the Company, she will not disclose to any individual or other entity, except in the proper course of her employment with the Company, or use for the Executive’s own purposes or for purposes other than those of the Company or its Affiliates, any Confidential Information or trade secrets of the Company or its Affiliates acquired by the Executive. “Confidential Information” means information concerning the Company and its business that is not generally known outside of the Company, and includes trade secrets; intellectual property; the Company’s methods of operation and processes; information regarding the Company’s present and/or future products, developments, systems, including patents, trademarks and copyrights; information on customers or potential customers, clients, etc.; personnel data; the Company’s business plans, marketing plans, financial data and projections; and information received in confidence by the Company from third parties. The foregoing shall not apply to information that (i) was known to the public prior to its disclosure to Executive; (ii) becomes generally known to the public subsequent to disclosure to Executive through no wrongful act of Executive or any representative of Executive; or (iii) Executive is required to disclose by applicable law, regulation or legal process (in which event Executive will give the Company prompt notice of such legal process in order to permit the Company to seek appropriate protective orders). The Executive shall sign the Company’s Confidential Information and Inventions Assignment Agreement.
(b) Return of Company Property. Upon termination of the Executive’s employment hereunder (or at any other time upon the Company’s request), the Executive shall promptly supply to the Company (or destroy, at the Company’s option) all Company property, including and not limited to all data, documents, records, communications, drawings, models, prototypes or similar visual or conceptual presentations of any type, and all duplicates and copies thereof, that contain any confidential and/or proprietary information, charge cards, customer lists, passes, identification material, automobiles, keys or access devices, cell phones or communications devices, computers or devices, tools and any other equipment or other property.
(c) Non-Competition. In the event Executive’s employment with the Company is terminated by the Company for Cause, or by the Executive without Good Reason, then during the two (2) year period following the date of termination (the “Restricted Period”), the Executive agrees that she shall not own an interest in, manage, operate, join, control, participate in or be connected with, as an officer, member, manager, director, employee, independent contractor, consultant or otherwise, any individual, partnership, firm, corporation, company, or other organization or entity which is in competition with the Company within the geographic area in which the Company renders its enterprises (a “Competitive Enterprise”); provided that the Executive may invest in a Competitive Enterprise if (i) its shares are listed on any national securities exchange or have been registered under Section 12(g) of the Securities Exchange Act and (ii) the Executive’s investment does not constitute more than five percent (5%) of the issued and outstanding shares of the Competitive Enterprise.
(d) Non-Solicitation. During the Restricted Period, the Executive shall not (i) personally solicit any business from any customers with which the Company has a business relationship as of the Date of Termination, (ii) personally solicit, aid in the solicitation of, induce or otherwise encourage (whether directly or indirectly) any employee of the Company to cease such employment, or (iii) directly or indirectly interfere with or assist or otherwise partake in any third party attempt to interfere with the Company’s business operations.
(e) Non-Disparagement. During and after the Employment Period and without any limitation as to time, the Executive shall not, whether in writing or orally, malign, denigrate or disparage the Company or any of its Affiliates, or any of their current or former directors and officers, or otherwise publish (whether in writing or orally) statements that portray any of the aforementioned parties in an unfavorable light; provided that nothing herein shall or shall be deemed to prevent or impair the Executive from testifying truthfully in any legal or administrative proceeding where such testimony is compelled or requested or from otherwise complying with legal requirements.
(f) Injunctive Relief. The Executive acknowledges and agrees that the business of the Company and the services it provides are highly competitive, and that the restrictions contained in this Section 7 are reasonable and necessary to protect the Company’s legitimate business interests. The Executive further acknowledges that any breach may irreparably cause damage to the Company for which money damages may not be adequate. Therefore, in the event of any actual or threatened breach by the Executive of any of the provisions of this Section 7, the Company shall be entitled to seek from any court with jurisdiction over the matter and the Executive, temporary, preliminary and permanent equitable/injunctive relief restraining the Executive from violating such provision and to seek any and all other remedies available under applicable law, including but not limited to attorneys’ fees and costs.
(g) Confidentiality of Agreement. The Executive agrees not to disclose the terms of this Agreement to any Person (other than in connection with carrying out responsibilities for the Company); provided that (i) the Executive may disclose the terms of this Agreement in confidence to her immediate family, financial and other professional advisors, and attorneys, so long as any such person to whom the Executive makes such disclosure agrees not to disclose the terms of this Agreement further, and (ii) the Executive may disclose this Agreement and its terms when required by law, subpoena, court order or the like.
(h) Survivorship. Except as otherwise set forth in this Section 7, the respective rights and obligations of the Parties hereunder shall survive any termination of the Executive’s employment.
8. Assignability; Binding Nature. This Agreement shall inure to the benefit of, and be binding on, the Parties and each of their respective successors, heirs (in the Executive’s case) and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights and obligations may be assigned or transferred pursuant to a merger or consolidation, or the sale or liquidation of all or substantially all of the business and assets of the Company; provided that the assignee or transferee is the successor to all or substantially all of the business and assets of the Company and such assignee or transferee contractually assumes the liabilities, obligations and duties of the Company, as contained in this Agreement.
9. Representations. Each Party represents and warrants (a) that such Party is not subject to any contract, arrangement, agreement, policy or understanding, or to any statute, governmental rule or regulation, that in any way limits such Party’s ability to enter into and fully perform such Party’s obligations under this Agreement, (b) that such Party is not otherwise unable to enter into and fully perform such Party’s obligations under this Agreement, and (c) that, upon the execution and delivery of this Agreement by both Parties, this Agreement shall be such Party’s valid and binding obligation, enforceable against such Party in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally. The Company represents and warrants that it is fully authorized to enter into this Agreement and to perform its obligations under it.
10. Notices. Any notice or other communication required or permitted to be delivered under this Agreement shall be (a) in writing, (b) delivered personally, by facsimile, by electronic mail, by courier service or by certified or registered mail, first class postage prepaid and return receipt requested, (c) deemed to have been received on the date of delivery or, if so mailed, on the third business day after the mailing thereof, and (d) addressed as follows (or to such other address as the Party entitled to notice shall hereafter designate in accordance with the terms hereof):
If to the Company: United-Guardian, Inc.
230 Marcus Blvd.
P.O. Box 18050
Hauppauge, New York 11788
Email: ayoung@u-g.com
If to the Executive: Beatriz Blanco
473 Church Hill Rd.
Fairfield, CT 06825
Email: beatrizblanco473@gmail.com
11. Tax Withholding. The Company shall be entitled to withhold all applicable federal, state and local taxes, social security and workers’ compensation contributions and other amounts as may be required by law with respect to compensation payable to the Executive pursuant to this Agreement.
12. Miscellaneous.
(a) Entire Agreement. As of the Effective Date, this Agreement shall constitute the entire agreement between the Parties with respect to the subject matter hereof, and such agreement shall supersede all prior representations, agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof.
(b) Amendment or Waiver. No provision in this Agreement may be amended unless such amendment is set forth in a writing that expressly refers to the provision of this Agreement that is being amended and that is signed by the Executive and by the Board. No waiver by either Party of any breach of any condition or provision contained in this Agreement shall be deemed a waiver of any similar or dissimilar condition or provision at the same or any prior or subsequent time. To be effective, any waiver must be set forth in a writing signed by the waiving Party and must specifically refer to the condition(s) or provision(s) of this Agreement being waived.
(c) Headings. The headings of the Sections and sub-sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.
(d) Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but the invalidity or unenforceability of any provision or portion of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision or portion of any provision, in any other jurisdiction. In addition, should a court or arbitrator determine that any provision or portion of any provision of this Agreement, including those contained in Section 7 hereof, is not reasonable or valid, either in period of time, Designated Territory, or otherwise, the Parties agree that such provision should be interpreted and enforced to the maximum extent which such court or arbitrator deems reasonable or valid.
(e) Construction. The Parties acknowledge that this Agreement is the result of arm’s-length negotiations between sophisticated Parties. Each and every provision of this Agreement shall be construed as though both Parties participated equally in the drafting of the same, and any rule of construction that a document shall be construed against the drafting Party shall not be applicable to this Agreement.
(f) Governing Law. This Agreement shall be governed, construed, performed and enforced in accordance with its express terms and otherwise in accordance with the laws of the State of New York, without reference to principles of conflict of laws.
(g) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. Signatures delivered by facsimile or other electronic transmission shall be effective for all purposes.
(h) Section 409A. The intent of the Parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended, together with the Treasury Regulations promulgated thereunder (hereinafter “the Code”), to the extent subject thereto, and accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in compliance therewith. Notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated employment with the Company for purposes of any payments under this Agreement which are subject to Section 409A of the Code until the Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separate identified payment for purposes of Section 409A of the Code. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement or any other arrangement between the Executive and the Company during the six-month period immediately following the Executive’s separation from service shall instead be paid on the first business day after the date that is six months following the Executive’s separation from service (or, if earlier, the Executive’s date of death). To the extent required to avoid an accelerated or additional tax under Section 409A of the Code, amounts reimbursable to the Executive under this Agreement shall be paid to the Executive on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in kind benefits provided to the Executive) during one year may not affect amounts reimbursable or provided in any subsequent year.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above.
| THE COMPANY | |
| United-Guardian, Inc. | |
| By: /S/ Ken Globus | |
| (Signature) | |
| Name: Ken Globus | |
| Title: President | |
| EXECUTIVE: | |
| /S/ Beatriz Blanco | |
| Beatriz Blanco |
EXHIBIT 10.2
MEMORANDUM OF UNDERSTANDING
Dated as of November 1, 2022
BY AND BETWEEN UNITED GUARDIAN, INC., AS REPRESENTED BY ITS BOARD OF DIRECTORS (THE “COMPANY”) AND KEN GLOBUS (“MR. GLOBUS”)
As of November 1, 2022, Mr. Globus will be separated as an employee from the Company. The following terms and conditions will be applicable to the period subsequent to November 1, 2022 and will be binding as applied by NY law when signed by the parties below. The parties expect that any future disputed matters not covered by these terms will be worked out by reasonable discussion between the Company and Mr. Globus.
|
1. |
Monthly retainer: The Company will retain Mr. Globus as a consultant to render management guidance and advice in connection with routine business matters, commencing November 1, 2022 through February 28, 2023. The Company will pay Mr. Globus a consulting fee of $10,000 per month at the end of each month. It is estimated that no more than 20 hours of work per month will be required. In the event he works more than 20 hours in any given month, he will not receive any additional compensation. Mr. Globus will not be required to submit any accounting or breakdown as to the services rendered during this period, Mr. Globus will assist in the transition of the position of CEO to Beatriz Blanco including but not limited to such matters as sales assistance, management and employee guidance, preparation of the 10-Qs, 10-K, Annual Report, Proxy Statement, stockholders’ letter(s), annual meeting preparation, and press releases. |
|
2. |
Board of Directors: Mr. Globus will remain on the Board of Directors as Chairman and receive Board fees, prorated where necessary, at a compensation rate comparable to the other non-employee Board members. |
|
3. |
Health Insurance: Mr. Globus, like all separated employees will be entitled to purchase continuing health insurance under COBRA, or an alternate plan, such as Medicare, at his own expense. |
|
4. |
Profit Sharing Bonus: Because Mr. Globus will not be an employee at the end of FY 2022, he will not be eligible to a performance bonus nor to the company contribution to the profit sharing program for FY 2022. However, the Company shall pay to Mr. Globus a one time retirement payment, in the amount of $90,000. |
|
5. |
Car: Mr. Globus may purchase his current Company car from the Company at the fair market value to be determined by a review of the value of the car as reported by the Kelley Blue Book, Edmunds or other reputable sources. |
| United Guardian, Inc. | Ken Globus |
| By: /S/ Arthur Dresner | /S/ Ken Globus |
| Director |
EXHIBIT 31.1
SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Beatriz Blanco, certify that:
|
1. |
I have reviewed this Quarterly Report of United-Guardian, Inc. on Form 10-Q for the three-month period ended September 30, 2022; |
|
| 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: November 3, 2022 | By: | /s/ Beatriz Blanco |
| Beatriz Blanco | ||
| President and Principal Executive Officer |
EXHIBIT 31.2
SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Andrea Young, certify that:
| 1. | I have reviewed this Quarterly Report of United-Guardian, Inc. on Form 10-Q for the three-month period ended September 30, 2022; | |
| 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: November 3, 2022 | By: | /s/ Andrea Young |
| Andrea Young | ||
| Chief Financial Officer |
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 September 30, 2022, as filed with the Securities and Exchange Commission (the "Report"), I, Beatriz Blanco, President and Principal Executive Officer of the Company, and I, Andrea 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: November 3, 2022 | By: | /s/ Beatriz Blanco |
| Beatriz Blanco | ||
| President & Principal Executive Officer | ||
| By: | /s/ Andrea Young | |
| Andrea Young | ||
| Chief Financial Officer |
Statements of Income (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Net sales | $ 2,417,022 | $ 3,179,746 | $ 9,935,557 | $ 10,268,592 |
| Costs and expenses: | ||||
| Cost of sales | 1,076,035 | 1,320,509 | 4,479,905 | 4,180,912 |
| Operating expenses | 532,333 | 458,582 | 1,699,311 | 1,428,721 |
| Research and development | 120,924 | 130,742 | 364,856 | 349,053 |
| Total costs and expenses | 1,729,292 | 1,909,833 | 6,544,072 | 5,958,686 |
| Income from operations | 687,730 | 1,269,913 | 3,391,485 | 4,309,906 |
| Other Income: | ||||
| Investment income | 46,995 | 38,747 | 146,405 | 124,147 |
| Net (loss) gain on marketable securities | (300,526) | (25,108) | (1,154,464) | 40,419 |
| Total other (loss) income | (253,531) | 13,639 | (1,008,059) | 164,566 |
| Income before provision for income taxes | 434,199 | 1,283,552 | 2,383,426 | 4,474,472 |
| Provision for income taxes | 88,681 | 267,046 | 493,119 | 932,240 |
| Net income | $ 345,518 | $ 1,016,506 | $ 1,890,307 | $ 3,542,232 |
| Earnings per common share (Basic and Diluted) (in dollars per share) | $ 0.07 | $ 0.22 | $ 0.41 | $ 0.77 |
| Weighted average shares – basic and diluted (in shares) | 4,594,319 | 4,594,319 | 4,594,319 | 4,594,319 |
Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Accounts receivable, allowance for doubtful accounts | $ 18,401 | $ 20,252 |
| 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 |
Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) |
Dividend Paid [Member]
Retained Earnings [Member]
|
Dividend Paid [Member] |
Dividend Declared [Member]
Retained Earnings [Member]
|
Dividend Declared [Member] |
Common Stock [Member] |
Retained Earnings [Member] |
Total |
|---|---|---|---|---|---|---|---|
| Balance (in shares) at Dec. 31, 2020 | 4,594,319 | ||||||
| Balance at Dec. 31, 2020 | $ 459,432 | $ 9,894,875 | $ 10,354,307 | ||||
| Net income | 1,181,202 | 1,181,202 | |||||
| Balance (in shares) at Mar. 31, 2021 | 4,594,319 | ||||||
| Balance at Mar. 31, 2021 | $ 459,432 | 11,076,077 | 11,535,509 | ||||
| Balance (in shares) at Dec. 31, 2020 | 4,594,319 | ||||||
| Balance at Dec. 31, 2020 | $ 459,432 | 9,894,875 | 10,354,307 | ||||
| Net income | 3,542,232 | ||||||
| Dividends | (657) | ||||||
| Balance (in shares) at Sep. 30, 2021 | 4,594,319 | ||||||
| Balance at Sep. 30, 2021 | $ 459,432 | 11,231,834 | 11,691,266 | ||||
| Balance (in shares) at Mar. 31, 2021 | 4,594,319 | ||||||
| Balance at Mar. 31, 2021 | $ 459,432 | 11,076,077 | 11,535,509 | ||||
| Net income | 1,344,524 | 1,344,524 | |||||
| Dividends | $ (2,204,616) | $ (2,204,616) | $ (657) | $ (657) | |||
| Balance (in shares) at Jun. 30, 2021 | 4,594,319 | ||||||
| Balance at Jun. 30, 2021 | $ 459,432 | 10,215,328 | 10,674,760 | ||||
| Net income | 1,016,506 | 1,016,506 | |||||
| Balance (in shares) at Sep. 30, 2021 | 4,594,319 | ||||||
| Balance at Sep. 30, 2021 | $ 459,432 | 11,231,834 | 11,691,266 | ||||
| Balance (in shares) at Dec. 31, 2021 | 4,594,319 | ||||||
| Balance at Dec. 31, 2021 | $ 459,432 | 9,361,837 | 9,821,269 | ||||
| Net income | 911,465 | 911,465 | |||||
| Balance (in shares) at Mar. 31, 2022 | 4,594,319 | ||||||
| Balance at Mar. 31, 2022 | $ 459,432 | 10,273,202 | 10,732,734 | ||||
| Balance (in shares) at Dec. 31, 2021 | 4,594,319 | ||||||
| Balance at Dec. 31, 2021 | $ 459,432 | 9,361,837 | 9,821,269 | ||||
| Net income | 1,890,307 | ||||||
| Dividends | (506) | ||||||
| Balance (in shares) at Sep. 30, 2022 | 4,594,319 | ||||||
| Balance at Sep. 30, 2022 | $ 459,432 | 9,552,246 | 10,011,678 | ||||
| Balance (in shares) at Mar. 31, 2022 | 4,594,319 | ||||||
| Balance at Mar. 31, 2022 | $ 459,432 | 10,273,202 | 10,732,734 | ||||
| Net income | 633,324 | 633,324 | |||||
| Dividends | $ (1,699,392) | $ (1,699,392) | $ (506) | $ (506) | |||
| Balance (in shares) at Jun. 30, 2022 | 4,594,319 | ||||||
| Balance at Jun. 30, 2022 | $ 459,432 | 9,206,728 | 9,666,160 | ||||
| Net income | 345,518 | 345,518 | |||||
| Balance (in shares) at Sep. 30, 2022 | 4,594,319 | ||||||
| Balance at Sep. 30, 2022 | $ 459,432 | $ 9,552,246 | $ 10,011,678 |
Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares |
3 Months Ended | |
|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Dividend Paid [Member] | ||
| Dividends declared per share (in dollars per share) | $ 0.37 | $ 0.48 |
| Dividend Declared [Member] | ||
| Dividends declared per share (in dollars per share) | $ 0.37 | $ 0.48 |
Note 1 - Nature of Business |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] |
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. The Company’s research and development department modifies, refines, and expands the uses for existing products for additional uses and markets. It also develops new products using natural and environmentally friendly raw materials, which is important to many of the Company's cosmetic customers. |
Note 2 - Basis of Presentation |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Basis of Accounting [Text Block] |
Interim condensed financial statements of the Company are prepared in accordance with United States Generally Accepted Accounting Principles (“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, including normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods have been included. The results of operations for the three and nine months ended September 30, 2022 (also referred to as the "third quarter of 2022" and the "first nine months of 2022", respectively) are not necessarily indicative of results that ultimately may be achieved for any other interim period or for the year ending December 31, 2022. The interim unaudited condensed financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2021. |
Note 3 - Impact of Coronavirus (COVID-19) |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Impact of Coronavirus (COVID-19) [Text Block] |
While the coronavirus pandemic (“pandemic”) continues to impact certain areas of the Company’s operations, the current impact on the Company’s financial performance is coming primarily from higher raw material costs and increased shipping costs, which had an impact on the Company’s gross profit margins in the third quarter of 2022 and may continue to have a future impact on the Company’s gross profit margins in upcoming quarters. In addition, during the first half of 2022 it was more difficult to ship the Company’s products due to a shortage of truck drivers and limited availability of shipping vessels. This situation improved in the third quarter of 2022. The Company had been able to minimize the impact on customers by making them aware of longer lead times that may be necessary as a result of these issues.
The pandemic has not significantly affected the ability of the Company to obtain raw materials, but has created longer lead times for some of them. In response to the rising raw material prices the Company has instituted price increases on many of its products, which will help to reduce the impact on the Company’s gross margins in the future.
As a result of the lingering effects of the coronavirus pandemic as described above, there continues to be uncertainty in regard to the future potential impact of the pandemic on the Company’s operations or financial results. The Company believes that it is still unable to provide an accurate estimate or projection as to what the future impact of the pandemic will be on the Company’s future operations or financial results. The Company does not expect the carrying value of its assets or its liquidity to be impaired by the coronavirus pandemic |
Note 4 - Use of Estimates |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Use of Estimates Disclosure [Text Block] |
In preparing financial statements in conformity 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, as well as 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. |
Note 5 - Cash and Cash Equivalents |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Cash and Cash Equivalents Disclosure [Text Block] |
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 September 30, 2022 and December 31, 2021, approximately $363,000 and $410,000, respectively, exceeded the FDIC limit. |
Note 6 - Revenue Recognition |
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| Revenue from Contract with Customer [Text Block] |
The Company records revenue in accordance with ASC Topic 606 “Revenue from Contracts with Customers.” Under this guidance, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company’s principal source of revenue is product sales.
The Company’s sales, as reported, are subject to a variety of deductions, some of which are estimated. These deductions are recorded in the same period in which the revenue is recognized. Such deductions, primarily related to the sale of the Company’s pharmaceutical products, include chargebacks from the United States Department of Veterans Affairs (‘VA”), rebates in connection with the Company’s current participation in Medicare programs and its past participation in Medicaid programs, distribution fees, discounts, and outdated product returns. These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on sales for a reporting period.
During 2022 and 2021, the Company participated in various government drug rebate programs related to the sale of Renacidin®, its most important pharmaceutical product. These programs include the Veterans Affairs Federal Supply Schedule (FSS), and the Medicare Part D Coverage Gap Discount Program (CGDP). These programs require the Company to sell its product at a discounted price. The Company’s sales, as reported, are net of these product rebates and discounts, some of which are estimated and are recorded in the same period that the revenue is recognized.
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 and the Company’s performance obligation is satisfied. 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 risk of loss and responsibility for the shipment passes to the customer, and the performance obligation of the Company 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 its pharmaceutical products.
The Company does not make sales on consignment, and the collection of the proceeds of the sale of any of the Company’s products is not contingent upon the customer being able to sell the goods to a third party.
Any allowances for returns are taken as a reduction of sales within the same period the revenue is recognized. Such allowances are determined based on historical experience under ASC Topic 606-10-32-8. The Company has not experienced significant fluctuations between estimated allowances and actual activity.
The timing between recognition of revenue for product sales and the receipt of payment is not significant. 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 September 30, 2022 and December 31, 2021, the allowance for doubtful accounts receivable was $18,401 and $20,252, respectively. Prompt-pay discounts are offered to some customers; however, due to the uncertainty of the customers taking the discounts, the discounts are recorded when they 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 sales by product class are as follows:
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 18% of the Company’s total sales in the third quarter of 2022 were to customers located outside of the United States, compared with approximately 16% in the third quarter of 2021. For the nine months ended September 30, 2022, approximately 25% of the Company’s total sales were to customers located outside of the United States, compared with approximately 21% for the nine months ended September 30, 2021.
Disaggregated sales by geographic region are as follows:
* Substantially all purchases by ASI are shipped to ASI’s warehouses in the U.S. As a result, all sales to ASI are reported as U.S. sales for financial reporting purposes, even though a significant quantity of those purchases will be shipped by ASI to foreign customers. ASI has reported to the Company that approximately 60% of its sales of the Company’s products in the third quarter of 2022 were to foreign customers compared with 76% for the same period in 2021, with China representing approximately 37% of those foreign sales in the third quarter of 2022, compared with approximately 29% in the third quarter of 2021.
For the nine months ended September 30, 2022 approximately 71% of ASI’s sales of the Company’s products were to customers in other countries, with China accounting for approximately 43% of ASI’s sales of the Company’s products, as compared with approximately 72% of ASI’s sales going to customers in other countries for the nine months ended September 30, 2021, with China accounting for approximately 36% of ASI’s sales of the Company’s products during that period. |
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Note 7 - Marketable Securities |
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| Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block] |
Marketable securities include investments in fixed income and equity mutual funds, which are reported at their fair values.
The disaggregated net gains and losses on the marketable securities recognized in the income statements for the three and nine months ended September 30, 2022 and 2021, respectively, are as follows:
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:
September 30, 2022(Unaudited)
December 31, 2021(Audited)
Investment income is recognized when earned and consists principally of dividend income from equity and fixed income mutual funds. Realized gains and losses on sales of investments are determined on a specific identification basis.
Proceeds from the sale and redemption of marketable securities amounted to $1,658,293 for the nine months ended September 30, 2022, which included realized losses of $207,936. Proceeds from the sale and redemption of marketable securities amounted to $1,832,829 for the nine months ended September 30, 2021, which included realized gains of $112,180. |
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Note 8 - Inventories |
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| Inventory Disclosure [Text Block] |
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 September 30, 2022 and December 31, 2021 are stated net of a reserve of $35,000 for slow moving and obsolete inventory. |
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Note 9 - Income Taxes |
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| Income Tax Disclosure [Text Block] |
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 September 30, 2022 and December 31, 2021, the Company did have any unrecognized tax benefits. The Company’s provision for income taxes for the three and nine months ended September 30, 2022 and 2021 includes the following:
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Note 10 - Defined Contribution Plan |
9 Months Ended | ||
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Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Retirement Benefits [Text Block] |
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 immediately.
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 years of employment, and 20% for each year of employment thereafter until the employee becomes fully vested after years of employment. The Company accrued $81,750 in contributions to the DC Plan for the nine months ended September 30, 2022, and $87,000 for the nine months ended September 30, 2021. In the first nine months of 2022, the Company made discretionary contributions of $109,000 to the DC Plan. This payment represented the Company’s 2021 discretionary contribution. For the first nine months of 2021, the Company did make any discretionary contributions to the DC Plan. |
Note 11 - Related-party Transactions |
9 Months Ended | ||
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| Notes to Financial Statements | |||
| Related Party Transactions Disclosure [Text Block] |
For the three-month periods ended September 30, 2022 and 2021, there were no payments made to related parties. For the nine-month periods ended September 30, 2022 and 2021, the Company made payments of $4,000 and $9,500, respectively, to the accounting firm PKF O’Connor Davies (“PKF”) for accounting and tax services. Lawrence Maietta, a partner at PKF, is a director of the Company. |
Note 12 - Other Information |
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| Other Liabilities Disclosure [Text Block] |
Accrued expenses consist of the following:
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Note 13 - Recent Accounting Pronouncements |
9 Months Ended | ||
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| Notes to Financial Statements | |||
| Accounting Standards Update and Change in Accounting Principle [Text Block] |
On January 1, 2021, the Company adopted Accounting Standards Update (ASU) 2019-12, “Simplifying the Accounting for Income Taxes.” This standard modified ASU 740 and simplifies the accounting for income taxes. The Company has determined that these modifications did not 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 currently evaluating if this pronouncement will have a potential impact on its financial statements. |
Note 14 - Concentrations of Credit Risk |
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| Notes to Financial Statements | |||
| Concentration Risk Disclosure [Text Block] |
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 and its overall credit worthiness 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 is low.
For the three months ended September 30, 2022, one of the Company’s cosmetic ingredient marketing partners, and three of its pharmaceutical distributors, together accounted for 89% of the Company’s sales and 86% of its outstanding accounts receivable at September 30, 2022. During the three months ended September 30, 2021, the same marketing partner and three distributors together were responsible for 86% of the Company’s sales and 79% of its outstanding accounts receivable at September 30, 2021.
For the nine months ended September 30, 2022, one of the Company’s cosmetic ingredient marketing partners, and of its pharmaceutical distributors, together accounted for 78% of the Company’s sales and 86% of its outstanding accounts receivable at September 30, 2022. During the nine months ended September 30, 2021, the same marketing partner and three distributors together were responsible for 79% of the Company’s sales and 79% of its outstanding accounts receivable at September 30, 2021. |
Note 15 - Earnings Per Share |
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| Notes to Financial Statements | |||
| Earnings Per Share [Text Block] |
Basic earnings per share is computed by dividing net 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 were $0.07 and $0.22 for the three months ended September 30, 2022 and 2021, respectively, and $0.41 and $0.77 for the nine months ended September 30, 2022 and 2021, respectively. |
Note 6 - Revenue Recognition (Tables) |
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| Revenue from External Customers by Geographic Areas [Table Text Block] |
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Note 7 - Marketable Securities (Tables) |
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| Gain (Loss) on Securities [Table Text Block] |
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| Marketable Securities [Table Text Block] |
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Note 8 - Inventories (Tables) |
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| Schedule of Inventory, Current [Table Text Block] |
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Note 9 - Income Taxes (Tables) |
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Note 12 - Other Information (Tables) |
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| Schedule of Accrued Liabilities [Table Text Block] |
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Note 5 - Cash and Cash Equivalents (Details Textual) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
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| Cash, Uninsured Amount | $ 363,000 | $ 410,000 |
Note 6 - Revenue Recognition (Details Textual) - USD ($) |
3 Months Ended | 9 Months Ended | |||
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Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
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| Accounts Receivable, Allowance for Credit Loss, Ending Balance | $ 18,401 | $ 18,401 | $ 20,252 | ||
| Cosmetic Ingredients [Member] | Non-US [Member] | Geographic Concentration Risk [Member] | Revenue Benchmark [Member] | |||||
| Concentration Risk, Percentage | 18.00% | 16.00% | 25.00% | 21.00% | |
| ASI [Member] | Non-US [Member] | Geographic Concentration Risk [Member] | Revenue Benchmark [Member] | |||||
| Concentration Risk, Percentage | 60.00% | 76.00% | 71.00% | 72.00% | |
| ASI [Member] | CHINA | Geographic Concentration Risk [Member] | Revenue Benchmark [Member] | |||||
| Concentration Risk, Percentage | 37.00% | 29.00% | 43.00% | 36.00% | |
Note 6 - Revenue Recognition - Disaggregated Revenue (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Net Sales | $ 2,417,022 | $ 3,179,746 | $ 9,935,557 | $ 10,268,592 |
| Cosmetic Ingredients [Member] | ||||
| Net Sales | 841,261 | 1,578,650 | 4,313,139 | 5,065,022 |
| Pharmaceuticals [Member] | ||||
| Net Sales | 1,159,367 | 1,216,747 | 3,622,964 | 3,509,235 |
| Medical [Member] | ||||
| Net Sales | 384,548 | 343,884 | 1,904,424 | 1,580,657 |
| Industrial And Other [Member] | ||||
| Net Sales | $ 31,846 | $ 40,465 | $ 95,030 | $ 113,678 |
Note 6 - Revenue Recognition - Revenue by Geographic Region (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|||
| Net Sales | $ 2,417,022 | $ 3,179,746 | $ 9,935,557 | $ 10,268,592 | ||
| UNITED STATES | ||||||
| Net Sales | [1] | 1,969,907 | 2,670,515 | 7,403,752 | 8,115,145 | |
| Non-US [Member] | ||||||
| Net Sales | $ 447,115 | $ 509,231 | $ 2,531,805 | $ 2,153,447 | ||
| ||||||
Note 7 - Marketable Securities (Details Textual) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Proceeds from Sale and Maturity of Marketable Securities | $ 1,658,293 | $ 1,832,829 |
| Debt and Equity Securities, Realized Gain (Loss), Total | $ (207,936) | $ 112,180 |
Note 7 - Marketable Securities - Net Gains and Losses on Marketable Securities (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Net (losses) gains recognized during the period on marketable securities | $ (300,526) | $ (25,108) | $ (1,154,464) | $ 40,419 |
| Less: Net (losses) gains recognized during the period on marketable securities sold during the period | (207,936) | 112,180 | ||
| Unrealized losses recognized during the reporting period on marketable securities still held at the reporting date | $ (300,526) | $ (25,108) | $ (946,528) | $ (71,761) |
Note 7 - Marketable Securities - Summary of Investments (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Equity securities, cost | $ 7,433,818 | $ 7,466,168 |
| Equity securities | 6,656,585 | 7,635,463 |
| Equity securities, unrealized gain | (777,233) | 169,295 |
| Marketable securities, cost | 7,433,818 | 7,466,168 |
| Marketable securities | 6,656,585 | 7,635,463 |
| Marketable securities, unrealized gain | (777,233) | 169,295 |
| Fixed Income Securities [Member] | ||
| Equity securities, cost | 6,757,797 | 6,814,420 |
| Equity securities | 6,007,216 | 6,873,333 |
| Equity securities, unrealized gain | (750,581) | 58,913 |
| Equity And Other Mutual Funds [Member] | ||
| Equity securities, cost | 676,021 | 651,748 |
| Equity securities | 649,369 | 762,130 |
| Equity securities, unrealized gain | $ (26,652) | $ 110,382 |
Note 8 - Inventories (Details Textual) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Inventory Valuation Reserves, Ending Balance | $ 35,000 | $ 35,000 |
Note 8 - Inventories - Summary of Inventories (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Raw materials | $ 752,340 | $ 494,348 |
| Work in process | 88,393 | 119,069 |
| Finished products | 1,453,881 | 797,372 |
| Total inventories | $ 2,294,614 | $ 1,410,789 |
Note 9 - Income Taxes (Details Textual) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Unrecognized Tax Benefits, Ending Balance | $ 0 | $ 0 |
Note 9 - Income Taxes - Provision for Income Taxes (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Provision for federal income taxes - current | $ 305,772 | $ 340,981 | $ 761,429 | $ 856,621 |
| Provision for state income taxes - current | 100 | 100 | ||
| (Benefit from) provision for federal income taxes – deferred | (217,091) | (73,935) | (268,410) | 75,519 |
| Total provision for income taxes | $ 88,681 | $ 267,046 | $ 493,119 | $ 932,240 |
Note 10 - Defined Contribution Plan (Details Textual) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Defined Contribution Plan, Cost | $ 81,750 | $ 87,000 |
| DC Plan [Member] | ||
| Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay | 4.00% | |
| Defined Contribution Plan, Employer Discretionary Contribution Amount | $ 109,000 | $ 0 |
| DC Plan [Member] | Discretionary Contributions Vesting at Two Years [Member] | ||
| Defined Contribution Plan, Employers Matching Contribution, Annual Vesting Percentage | 20.00% | |
| Defined Contribution, Discretionary Contribution Plan, Vesting Period (Year) | 2 years | |
| DC Plan [Member] | Discretionary Contributions Vesting Each Additional Year [Member] | ||
| Defined Contribution Plan, Employers Matching Contribution, Annual Vesting Percentage | 20.00% | |
| Defined Contribution, Discretionary Contribution Plan, Vesting Period (Year) | 6 years | |
Note 11 - Related-party Transactions (Details Textual) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Director [Member] | Accounting and Tax Services [Member] | ||||
| Related Party Transaction, Expenses from Transactions with Related Party | $ 0 | $ 0 | $ 4,000 | $ 9,500 |
Note 12 - Other Information - Summary of Accrued Expenses (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Bonuses | $ 218,323 | $ 348,000 |
| Distribution fees | 373,625 | 359,550 |
| Payroll and related expenses | 257,744 | 292,560 |
| Reserve for outdated material | 353,259 | 313,904 |
| Company 401(k) contribution | 81,750 | 109,000 |
| Audit fee | 62,250 | 61,500 |
| Annual report expenses | 49,451 | 64,038 |
| Sales rebates | 108,928 | 56,857 |
| Other | 41,307 | 21,981 |
| Total Accrued Expenses | $ 1,546,637 | $ 1,627,390 |
Note 14 - Concentrations of Credit Risk (Details Textual) |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Jun. 30, 2022 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Marketing Partner [Member] | |||||
| Number of Customers | 1 | 1 | |||
| Distributor [Member] | |||||
| Number of Customers | 3 | 3 | 3 | ||
| Distributors and Marketing Partners [Member] | |||||
| Number of Customers | 3 | ||||
| Distributors and Marketing Partners [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | |||||
| Concentration Risk, Percentage | 89.00% | 86.00% | 78.00% | 79.00% | |
| Distributors and Marketing Partners [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | |||||
| Concentration Risk, Percentage | 86.00% | 79.00% | 86.00% | 79.00% | |
Note 15 - Earnings Per Share (Details Textual) - $ / shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Earnings Per Share, Basic, Total (in dollars per share) | $ 0.07 | $ 0.22 | $ 0.41 | $ 0.77 |
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