UNITED GUARDIAN INC

Previous wording

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

Current wording

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.

Previous wording

15 of 22 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.

Current wording

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; changes in our distribution partners; 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.

Previous wording

The Company is a Delaware corporation that, through its Guardian Laboratories division, manufactures and markets cosmetic ingredients, pharmaceuticals, medical lubricants, and sexual wellness products. Prior to July 1, 2023, the Company manufactured and reported sales of a line of specialty industrial products; however, this product line was discontinued after the second quarter of 2023 due to low sales volume with no growth prospects. In October 2023, the Company entered into an agreement with Brenntag Specialties, a global market leader in chemicals and ingredients distribution, for the marketing of the Company’s new line of sexual wellness ingredients, specifically called the “Natrajel®” line of products, in the United States, Canada, Mexico, Central America and South America. Although there were no sales of these products during 2023, the Company anticipates that it will begin manufacturing and reporting sales of this new line of products in the second half of 2024.

Current wording

The Company is a Delaware corporation that, through its Guardian Laboratories division, manufactures and markets cosmetic ingredients, pharmaceuticals, medical lubricants, and sexual wellness products. Prior to July 1, 2023, the Company manufactured and reported sales of a line of specialty industrial products; however, this product line was discontinued after the second quarter of 2023 due to low sales volume with no growth prospects. In October 2023, the Company entered into an agreement with Brenntag Specialties, a global market leader in chemicals and ingredients distribution, for the marketing of the Company’s new line of sexual wellness ingredients, specifically called the “Natrajel®” line of products, in the United States, Canada, Mexico, Central America and South America. Although there were no sales of these products during 2023 or year-to-date in 2024, the Company anticipates that it will begin manufacturing and reporting sales of this new line of products in 2025.

Previous wording

The Company’s most important product line is its Lubrajel® line of multifunctional hydrogels, which are designed to provide sensory enhancement, lubrication, and texture to both personal care and medical products.

Current wording

The Company’s most important product line is its Lubrajel® line of multifunctional hydrogels, which are designed to provide hydration, sensory enhancement, lubrication, and texture to both personal care and medical products.

Previous wording

The following discussion and analysis cover material changes in the financial condition of the Company since the year ended December 31, 2023, and a comparison of the results of operations for the three and six months ended June 30, 2024 and June 30, 2023. This discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. All references in this quarterly report to “sales” or “Sales” shall mean Net Sales unless specified otherwise.

Current wording

The following discussion and analysis cover material changes in the financial condition of the Company since the year ended December 31, 2023, and a comparison of the results of operations for the three and nine months ended September 30, 2024 and September 30, 2023. This discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. All references in this quarterly report to “sales” or “Sales” shall mean Net Sales unless specified otherwise.

Previous wording

Net sales for the second quarter of 2024 increased by $739,906 (28%) when compared with the same period in 2023. Net sales for the first half of 2024 increased by $1,424,526 (27%) as compared with the corresponding period in 2023. The increase in sales for the second quarter of 2024 and the first half of 2024 were attributable to changes in sales of the following product lines:

Current wording

Net sales for the third quarter of 2024 increased by $2,595 (less than 1%) when compared with the same period in 2023. Net sales for the first nine months of 2024 increased by $1,427,121(17%) as compared with the corresponding period in 2023. The increase in sales for the third quarter of 2024 and the first nine months of 2024 were attributable to changes in sales of the following product lines:

Previous wording

Because there are fees, rebates and allowances associated with sales of the Company’s two pharmaceutical products, Renacidin and Clorpactin WCS-90, discussion of the Company’s pharmaceutical sales includes references to bothgross sales (before fees, rebates, and allowances) andnet sales (after fees, rebates and allowances).

Current wording

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 bothgross sales (before fees, rebates and allowances) andnet sales (after fees, rebates and allowances).

Previous wording

Net sales of the Company’s pharmaceutical products for the three- and six-month periods ended June 30, 2024 saw a similar pattern, increasing by $37,063 (3%) for the three-month period and decreasing by $366,838 (13%) for the six-month period, with those decreases due primarily to the reasons noted above.

Current wording

Net sales of the Company’s pharmaceutical products for the three- and nine-month periods ended September 30, 2024 saw a similar pattern, decreasing by $74,386 (6%) for the three-month period and decreasing by $441,224 (11%) for the nine-month period, with those decreases due primarily to the reason noted above.

Previous wording

The difference between the change in net sales compared with the change in gross sales for these products is due to a combination of the change in gross sales of those products combined with changes in pharmaceutical sales allowances related to these products. Typically, these allowances have a direct relationship with the sales of the Company’s pharmaceutical products.

Current wording

The difference between the change in net sales compared with the change in gross sales for these products is due to a combination of the change in gross sales of those products combined with changes in pharmaceutical sales allowances related to these products. Typically, these allowances have a direct relationship with the sales of the Company’s pharmaceutical products. For the three and nine-month period ended September 30, 2024, sales allowances related to the Company’s pharmaceutical products decreased by $107,154 (41%) and $61,277 (7%), respectively, and was primarily related to a decrease in VA and Medicare CDGP Program rebates.

Previous wording

Sales of the Company's industrial products, as well as other miscellaneous products, for the three- and six-month periods ended June 30, 2024, decreased by $18,299 and $51,467, respectively, when compared with the corresponding periods in 2023. The decrease in sales for both periods was due to the discontinuation of this product line after the second quarter of 2023.

Current wording

Sales of the Company's industrial products, as well as other miscellaneous products, for the nine-month period ended September 30, 2024, decreased by $51,594 (100%), when compared with the corresponding period in 2023. The decrease in sales was due to the discontinuation of this product line after the second quarter of 2023. There were no sales of this product line in the third quarters of both 2024 and 2023.

Previous wording

Cost of sales as a percentage of net sales decreased to 46% in the second quarter of 2024 from 54% in the second quarter of 2023. For the first six months of 2024, cost of sales as a percentage of sales decreased to 47% compared with 48% for the first six months of 2023. The decreases in both periods were the result of the product sales mix in 2024 compared with the same periods in 2023. The Company’s cosmetic ingredient sales represented a larger percentage of the Company’s total sales for both the three- and six-month periods ended June 30, 2024 compared with the same periods in 2023. These products carry a higher gross margin than the Company’s pharmaceutical products and lower per unit overhead costs, which was the result of an increase in production of these products due to higher demand in 2024.

Current wording

Cost of sales as a percentage of sales decreased to 46% in the third quarter of 2024, down from 57% in the third quarter of 2023. For the first nine months of 2024, cost of sales as a percentage of sales decreased to 47%, down from 52% in 2023. The decreases in both periods were the result of the Company’s cosmetic ingredient sales represented a larger percentage of the Company’s total sales for both the three- and nine-month periods ended September 30, 2024 compared with the same periods in 2023. These products carry a higher gross margin than the Company’s pharmaceutical products. In addition, there were lower per unit overhead costs in 2024, which was the result of an increase in production of cosmetic products due to higher demand in 2024 compared to the same periods in 2023.

Previous wording

Operating expenses, consisting of selling and general and administrative expenses, increased by $28,684 (5%) and $79,603 (7%), respectively, for the three- and six-month periods ended June 30, 2024 compared with the equivalent periods in 2023. The increase in both periods was mainly due an increase in fees paid to the company’s Board of Directors and increases in payroll and payroll-related expenses.

Current wording

Operating expenses, consisting of selling and general and administrative expenses, increased by $102,583 (21%) for the third quarter of 2024 compared with the equivalent period in 2023 and increased by $182,186 (12%) for the first nine months of 2024, compared with the equivalent period in 2023. The increase in operating expenses for both periods was due primarily to increases in fees paid to the Company’s Board of Directors and increases in payroll and payroll related expenses.

Previous wording

Research and development expenses decreased by $17,069 (13%) and $41,046 (16%), respectively, for the three- and six-month periods ended June 30, 2024, compared with the equivalent periods in 2023. The decrease was primarily due to decreases in payroll and payroll-related expenses.

Current wording

Research and development expenses increased by $12,931 (13%) for the third quarter of 2024, and decreased by $28,115 (8%) for the first nine months of 2024 compared with the same periods in 2023. The increase in the third quarter was primarily due to an increase in payroll and payroll-related expenses.

Previous wording

Investment income increased by $45,057 (82%) for the second quarter of 2024 compared with the second quarter of 2023 and increased by $95,498 (93%) for the first half of 2024 compared with the same period in 2023. The increases in both periods were primarily due to an increase in interest income from investments in United States Treasury Bills compared with the dividend income on the Company’s equity and fixed income mutual funds recorded during the same periods in 2023.

Current wording

Investment income increased by $20,252 (25%) and $115,750 (64%) for the three- and nine-month periods, respectively, ending September 30, 2024, compared with the equivalent periods in 2023. The increases in both periods were primarily due to an increase in interest income from investments in U. S. Treasury Bills and Certificates of Deposit compared with the dividend income on the Company’s equity and fixed income mutual funds recorded during the same periods in 2023.

Previous wording

This change in the makeup of the investment income was attributable to the Company repositioning its marketable securities portfolio late in the second quarter of 2023. During that time, the Company liquidated most of its holdings of equity and fixed income mutual funds. The Company then used the proceeds from these sales to take advantage of higher interest rates by purchasing U.S. Treasury Bills.

Current wording

The change in the makeup of the Company’s investment income was attributable to the Company repositioning its marketable securities portfolio late in the second quarter of 2023. During that time, the Company liquidated most of its holdings of equity and fixed income mutual funds. The Company used the proceeds from these sales to take advantage of higher interest rates by purchasing U.S. Treasury Bills.

Previous wording

The net (loss) gain on marketable securities decreased from a gain of $7,479 for the quarter ended June 30, 2023, to a loss of $9,501 for the quarter ended June 30, 2024. For the six-month periods ended June 30, 2024 and 2023, the net gain on marketable securities decreased from $80,180 to $31,995, respectively. These decreases were primarily due to the factors discussed above regarding the Company’s repositioning of its marketable securities portfolio. For a significant part of the first half of 2023, the Company’s marketable securities’ portfolio was primarily invested in equity and fixed income mutual funds, and in the first half of 2024, these funds were invested primarily in U.S. Treasury Bills, which are considered cash equivalents and the carrying amount approximates fair value due to the short-term nature of the securities. The Company’s management and Board of Directors are continuing to closely monitor the Company's investment portfolio and have made and will continue to make any changes they believe may be necessary or appropriate to minimize the future impact on the Company’s financial position that the volatility of the global financial markets may have.

Current wording

The net gain (loss) on marketable securities increased from a loss of $14,357 for the quarter ended September 30, 2023, to a gain of $47,223 for the quarter ended September 30, 2024. For the nine-month periods ended September 30, 2023 and 2024, the net gain on marketable securities increased from $65,823 to $79,218, respectively. These increased gains were primarily due to the factors discussed above regarding the Company’s repositioning of its marketable securities portfolio. For a significant part of 2023, the Company’s marketable securities portfolio was primarily invested in equity and fixed income mutual funds, and for the three- and nine-month periods ended September 30, 2024, these funds were invested primarily in U.S. Treasury Bills and Certificates of Deposit, which are recorded at amortized cost and are not subject to the same market volatility that the equity and fixed income mutual funds experience. The Company’s management and Board of Directors continue to closely monitor the Company's investment portfolio, and have made and will continue to make any changes they believe may be necessary or appropriate to minimize the future impact on the Company’s financial position that the volatility of the global financial markets may have.

Previous wording

The Company's effective income tax rate was 21% for the first half and second quarter of both 2024 and 2023. The Company’s tax rate is expected to remain at 21% for the current fiscal year.

Current wording

The Company's effective income tax rate was approximately 21% for the first nine months of 2024 and 2023. The Company’s tax rate is expected to remain at 21% for the current fiscal year.

Previous wording

Working capital increased from $10,718,457 at December 31, 2023 to $11,429,499 at June 30, 2024, an increase of $711,042. The current ratio decreased from 8.0 to 1 at December 31, 2023 to 7.7 to 1 at June 30, 2024. The increase in working capital was primarily due to an increase in marketable securities and accounts receivable. The decrease in the current ratio was primarily due to an increase in accounts payable.

Current wording

Working capital decreased from $10,718,457 at December 31, 2023 to $10,609,401 at September 30, 2024, a decrease of $109,056. The current ratio decreased from 8.0 to 1 at December 31, 2023 to 6.7 to 1 at September 30, 2024. The decrease in working capital and the current ratio was primarily due to an increase in accounts payable which was partially offset by an increase in the combination of cash and marketable securities.

Previous wording

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 intends to utilize its available cash and assets primarily for its continued organic growth and potential future strategic transactions, as well as to mitigate the potential impact of inflation on the Company's business.

Current wording

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.

Previous wording

The Company is in the process of upgrading its building sprinkler system and has incurred costs of $137,000 to date and expects to incur additional costs of $41,000 during the third quarter of 2024. The project is expected to be completed during the third quarter of 2024.

Current wording

The Company is in the process of upgrading its building sprinkler system and has incurred costs of $155,000 to date and expects to incur additional costs of $23,000 during the fourth quarter of 2024. The project is expected to be completed by the end of 2024.

Previous wording

The Company generated cash from operations of $1,968,250 and $852,247 for the first half of 2024 and 2023, respectively. The increase from 2023 to 2024 was primarily due to the increase in net income.

Current wording

The Company generated cash from operations of $3,196,954 and $2,016,910 for the nine months ended September 30, 2024 and September 30, 2023, respectively. The increase in cash from operations was primarily due to an increase in net income, combined with an increase in accounts payable.

Previous wording

The Company expects to continue to use its cash to make dividend payments, purchase marketable securities, and take advantage of growth opportunities that are in the best interest of the Company and its shareholders.

Current wording

The Company expects to continue to use its cash to make dividend payments, to purchase marketable securities, and to take advantage of growth opportunities that are in the best interest of the Company and its shareholders.

Previous wording

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

Current wording

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.