UNITED GUARDIAN INC
For the period ended Dec 31, 2024. Filed Mar 21, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 21, 2025
UG$6.71-1.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-22.
0001171843-24-001526
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-21.
0001171843-25-001611
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 62 previous paragraphs and 73 current paragraphs.
27 unchanged; 30 reworded; 15 added; 5 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 0 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
You should read the following discussion and analysis in conjunction with our financial statements and related notes contained elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors discussed in this report and those discussed in other documents we file with the SEC. In light of these risks, uncertainties and assumptions, readers are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements represent beliefs and assumptions as of the date of this report. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Past performance does not guarantee future results.
Current report
Executive Level Overview
Current report
We specialize in manufacturing cosmetic ingredients, pharmaceuticals, medical lubricants, and sexual wellness ingredients through our Guardian Laboratories division. With a long-standing reputation for delivering high-quality specialty products, we are committed to serving diverse markets with innovative solutions.
Current report
As part of our strategic focus, we discontinued our specialty industrial products line in mid-2023 due to low sales and limited growth potential. This shift allows us to concentrate on higher-value product categories with greater market opportunities.
Current report
In October 2023, we took a significant step toward expanding our presence in the sexual wellness market by partnering with Brenntag Specialties, a global leader in chemicals and ingredients distribution. Under this agreement, Brenntag will distribute our new Natrajel line of sexual wellness ingredients across North and South America. While we reported no sales of this product in 2024, we anticipate beginning manufacturing and revenue generation in 2025.
Current report
With a refined product portfolio and strategic partnerships, we are well-positioned for future growth, leveraging our expertise in specialty ingredients to capitalize on emerging market opportunities.
Current report
The Trump administration has communicated its intention to impose tariffs on many products imported from China, Canada and Mexico. Some of those tariffs went into effect on March 4, 2025. Since that time the Trump administration has increased some of those tariffs and postponed others. It has threatened to levy tariffs on additional countries, including those of the European Union. Many of the countries on which those tariffs have been levied have imposed their own retaliatory tariffs or threated to impose tariffs on goods they import from the U.S. The tariff situation remains fluid and is subject to modification at any time. At this time, it is difficult to determine the impact of these tariffs on our business. We will continue to monitor this situation closely.
Current report
While we obtain most of our raw materials and lab supplies from domestic sources, we have three suppliers that obtain their raw materials from China. These materials are not purchased by us in large quantities, and we have adequate stock on hand to cover the next six months. In addition, we have one direct raw material supplier in China; however, the raw materials we purchase from this supplier are not in large quantities and the effect of this tariff would not materially impact the pricing of our products.
Current report
Many of our products are used in the formulation of finished products that are manufactured in China and then imported back into the United States (“U.S.”) for sale. There is the possibility that the tariffs levied on these finished products could result in an increase in their price, which could potentially impact demand for these products in the U.S.
Current report
Due to the continued uncertainty of this, any other tariffs that may be imposed, there continues to be uncertainty regarding the future impact of any additional tariffs on our operations or financial results.
Current report
On January 31, 2024, we were notified by CMS that we qualified as a “specified small manufacturer” and would be entitled to a multi-year phase-in period during which we would pay a lower percentage discount on drugs dispensed to beneficiaries. Based on our “specified small manufacturer” designation, it appears, based on our current level of sales through the Medicare Part D Program, we would have reduced rebate liabilities in years 2025 and 2026, with rebates gradually increasing each year after, until they reach their full phase-in by 2031. By the end of the phase in period in 2031, these rebate liabilities are expected to significantly exceed the liabilities we have recorded under the CGDP in previous years.
Current report
The primary reason for the decrease in Renacidin sales was due to our contract manufacturer temporarily ceasing manufacturing during the latter part of 2023 and the beginning of 2024. During this time, we were unable to fill complete orders of Renacidin and were allocating product to all of our pharmaceutical distributors. We resumed filling orders in full towards the end of March 2024.
Current report
Operating expenses increased by approximately 13%, from $2,078,564 in 2023 to $2,356,819 in 2024. The increase was mainly attributable to the following: 1) increases in sales and marketing expenses incurred in connection with the hiring of our new Marketing Director; 2) an increase in payroll and payroll-related expenses; and 3) an increase in fees paid to our Board of Directors. In connection with our growth initiatives, we anticipate that operating expenses will increase modestly in 2025.
Current report
Net Gain on Marketable Securities
Current report
During the fourth quarter of 2024, the Company replaced the roof on a portion of its facility in Hauppauge, New York at a cost of approximately $237,000.
Removed paragraphs (5)
Previous report
The primary reason for the decrease in Renacidin sales was due to the Company’s packaging supplier of Renacidin temporarily ceasing manufacturing during the fourth quarter of 2023. According to information provided to the Company from its supplier, this temporary shutdown was done to perform required maintenance and address observations made by the FDA at their facility. According to the supplier, it anticipates filling the Company’s outstanding orders in early March of 2024.
Previous report
Operating expenses decreased by approximately 4%, from $2,174,127 in 2022 to $2,078,564 in 2023. The decrease was mainly attributable to decreases in employee bonuses and depreciation expenses. In connection with the Company’s 2024 growth initiative, we anticipate that operating expenses will increase modestly in 2024.
Previous report
Net gain (loss) on Marketable Securities
Previous report
For the year ended December 31, 2023, the Company recorded net gains on its marketable securities portfolio of $81,095, compared with recording net losses of $1,046,245 in 2022. The reason for the fluctuation was due to the following factors: 1) during 2022, the Company’s fixed income mutual funds (which made up approximately 90% of the investment portfolio) lost a significant amount of value due to increases in interest rates, and those unrealized losses were recorded during 2022; and 2) a majority of those mutual funds were sold during the second quarter of 2023, and while most of the losses had already been recorded in 2022, there were some increases in market value at the time of these sales, which created unrealized gains in that period.
Previous report
Item **7A. Quantitative and Qualitative Disclosures about Market Risk.
Reworded paragraphs (30)
Previous wording
Impact of Global Supply Chain Instability and Inflation
Current wording
Impact of Global Supply Chain Instability, Inflation and Tariffs
Previous wording
The increased raw material prices that the Company experienced during 2022 and the beginning of 2023 stabilized during the latter part of 2023 as inflation started to decline. The continued supply chain instability, primarily caused by military tensions in the Middle East, has impacted vessels’ access to the Red Sea and Suez Canal. The Company is working closely with its suppliers regarding lead times, and continues to closely monitor this situation. Although we have not yet experienced any delays in receiving raw materials or an increase in shipping costs, we are aware that the situation is fluid and could impact us at any time. If that occurs, we may experience longer lead times and increased shipping costs for some of our raw materials, which may impact our future gross margins. As a result of this global supply chain instability, there continues to be uncertainty regarding the potential impact on our operations or financial results and we are unable to provide an accurate estimate or projection as to what the future impact will be.
Current wording
The continued supply chain instability, primarily caused by military tensions in the Middle East, continues to impact vessels’ access to the Red Sea and Suez Canal. Shipping experts say this crisis may last into the first half of 2025. We continue to work with our suppliers regarding lead times and continue to closely monitor this situation. Although we have not yet experienced any delays in receiving raw materials or an increase in shipping costs, we are aware that the situation is fluid and could impact us at any time. If that occurs, we may experience longer lead times and increased shipping costs for some of our raw materials, which may impact our future gross margins. As a result of this global supply chain instability, there continues to be uncertainty regarding the potential impact on our operations or financial results and we are unable to provide an accurate estimate or projection as to what the future impact will be.
Previous wording
Our marketable securities include investments in equity and fixed income mutual funds and Certificates of deposit. Our marketable equity securities are reported at fair value with the related unrealized and realized gains and losses included in net income. Certificates of Deposit with original maturities of more than 3 months are recorded at amortized cost. Realized gains or losses on mutual funds are determined on a specific identification basis. We evaluate our investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value had been below cost basis, the financial condition of the issuer, and our ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery of market value. We record an impairment charge to the extent that the cost of the available-for-sale securities exceeds the estimated fair value of the securities and the decline in value is determined to be other-than-temporary. During 2023 and 2022, we did not record an impairment charge regarding our investment in marketable securities because management believes, based on an evaluation of the circumstances, that any decline in fair value below the cost of certain of our marketable securities is temporary.
Current wording
Our marketable securities include investments in equity mutual funds, Certificates of Deposit and U.S. Treasury Bills with original maturities of greater than three months. Our marketable equity securities are reported at fair value with the related unrealized and realized gains and losses included in net income. Certificates of Deposit and U.S. Treasury Bills with original maturities of more than 3 months are recorded at amortized cost. Realized gains or losses on mutual funds are determined on a specific identification basis. We evaluate our investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value had been below cost basis, the financial condition of the issuer, and our ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery of market value. We record an impairment charge to the extent that the cost of the available-for-sale securities exceeds the estimated fair value of the securities and the decline in value is determined to be other-than-temporary. During 2024 and 2023, we did not record an impairment charge regarding our investment in marketable securities because management believes, based on an evaluation of the circumstances, that any decline in fair value below the cost of certain of our marketable securities is temporary.
Previous wording
In August of 2022, the Inflation Reduction Act (“IRA”) was signed into law. The IRA made significant changes to the current Medicare Part D benefit design as it relates to discounts available to enrollees from pharmaceutical manufacturers of brand name drugs. Beginning on January 1, 2025, the Centers for Medicare & Medicaid Services (“CMS”) will implement a new Medicare Part D Manufacturer Discount Program (“Discount Program”), which will replace the current CGDP. The new Discount Program eliminates the coverage gap benefit phase, introduces pharmaceutical manufacturer discounts in the initial and catastrophic coverage phases, and lowers the cap on enrollee out-of-pocket costs. Under the new Discount Program, additional rebates are expected to be owed by pharmaceutical manufacturers due to the restructuring of the benefit periods. The overall financial impact of this new program will vary depending on the products being reimbursed, but does have the potential to increase Medicare Part D rebates for drug manufacturers. At this time, the Company is unable to predict what future impact this new program will have on its financial condition; however, it submitted information to CMS requesting to be classified as a “specified small manufacturer.” If designated as such, the Company would be entitled to a multi-year phase-in period during which it would pay a lower percentage discount on drugs dispensed to beneficiaries. On January 31, 2024, the Company was notified by CMS that it qualified as a specified small manufacturer and will receive the discount phase-in discussed above.
Current wording
On January 1, 2025, the Centers for Medicare & Medicaid Services (“CMS”) implemented a new Medicare Part D Manufacturer Discount Program (“Discount Program”), which replaced the prior CGDP. The new Discount Program eliminates the coverage gap benefit phase, introduces pharmaceutical manufacturer discounts in the initial and catastrophic coverage phases, and lowers the cap on enrollee out-of-pocket costs. Under the new Discount Program, additional rebates are expected to be owed by pharmaceutical manufacturers due to the restructuring of the benefit periods and removal of the cap that was in place that limited the drug manufacturer’s liability. The overall financial impact of this new program will vary depending on the products being reimbursed but it is expected to increase Medicare Part D rebates for drug manufacturers.
Previous wording
As long as a valid purchase order has been received and future collection of the sale amount is reasonably assured, we recognize revenue from sales of our products when those products are shipped, which is when our performance obligation is satisfied. Our cosmetic products are shipped “Ex-Works” from our facility in Hauppauge, NY, and the risk of loss and responsibility for the shipment passes to the customer upon shipment. Sales of our medical lubricant products are deemed final upon shipment, and we have no obligation to repurchase or allow the return of these goods unless they are defective. Sales of our pharmaceutical products are final upon shipment unless (a) they are found to be defective; (b) the product is damaged in shipping; (c) the product is too close to its expiration date for the customer to sell; or (d) the product is expired but is not more than one year after its expiration date. These return policies are in conformance with standard pharmaceutical industry practice. We estimate an allowance for outdated material returns based on previous years’ historical returns of our pharmaceutical products.
Current wording
As long as a valid purchase order has been received and future collection of the sale amount is reasonably assured, we recognize revenue from sales of our products when those products are shipped, which is when our performance obligation is satisfied. Our cosmetic products are shipped EXW from our facility in Hauppauge, NY, and the risk of loss and responsibility for the shipment passes to the customer upon shipment. Sales of our medical lubricant products are deemed final upon shipment, and we have no obligation to repurchase or allow the return of these goods unless they are defective. Sales of our pharmaceutical products are final upon shipment unless (a) they are found to be defective; (b) the product is damaged in shipping; (c) the product is too close to its expiration date for the customer to sell; or (d) the product is expired but is not more than one year after its expiration date. These return policies are in conformance with standard pharmaceutical industry practice. We estimate an allowance for outdated material returns based on previous years’ historical returns of our pharmaceutical products.
Previous wording
We do 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.
Current wording
We do not make sales on consignment, and the collection of the proceeds of the sale of any of our products is not contingent upon the customer being able to sell the goods to a third party.
Previous wording
On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses. In accordance with this standard, the Company recognizes an allowance for credit losses for its trade receivables to present the net amount expected to be collected as of the balance sheet date. This allowance is based on the credit losses expected to arise over the life of the asset and are based on Current Expected Credit Losses (CECL). Implementation of this standard did not have a material effect on the Company’s financial statements.
Current wording
We recognize an allowance for our trade receivables to present the net amount expected to be collected as of the balance sheet date. This allowance is based on the credit losses expected to arise over the life of the asset and are based on Current Expected Credit Losses (CECL).
Previous wording
The Company performs ongoing credit evaluations of our customers and adjusts credit limits, as determined by a review of current credit information. We continuously monitor collection and payments from customers and maintain an allowance for credit losses based upon historical experience, anticipation of uncollectible accounts receivable and any specific customer collection issues that have been identified. While our credit losses have historically been low and within expectations, we may not continue to experience the same credit loss rates that have historically been attained. The receivables are highly concentrated in a relatively small number of customers. Therefore, a significant change in the liquidity, financial position, or willingness to pay timely, or at all, of any one of our significant customers would have a significant impact on our results of operations and cash flows. When determining the reserve for credit losses, the Company takes into consideration current and future economic conditions and the impact that these changing dynamics may have on potential future losses.
Current wording
We perform ongoing credit evaluations of our customers and adjust credit limits, as determined by a review of current credit information. We continuously monitor collection and payments from customers and maintain an allowance for credit losses based upon historical experience, anticipation of uncollectible accounts receivable and any specific customer collection issues that have been identified. While our credit losses have historically been low and within expectations, we may not experience the same credit loss rates that have historically been attained in the future. The receivables are highly concentrated in a relatively small number of customers. Therefore, a significant change in the liquidity, financial position, or willingness to pay timely, or at all, of any one of our significant customers would have a significant impact on our results of operations and cash flows. When determining the reserve for credit losses, we take into consideration current and future economic conditions and the impact that these changing dynamics may have on potential future losses.
Previous wording
The timing between recognition of revenue for product sales and the receipt of payment is not significant. Our standard credit terms, which vary depending on the customer, range between 30 and 60 days. The Company provides an allowance for credit losses related to its accounts receivable for which collection is doubtful in accordance with ASU 2016-13. As of December 31, 2023 and December 31, 2022, the allowance for credit losses on accounts receivable was $16,672 and $20,063, 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.
Current wording
As of December 31, 2024 and December 31, 2023, the allowance for credit losses on accounts receivable was $14,342 and $16,672, 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.
Previous wording
In conjunction with our ongoing analysis of inventory valuation, management constantly monitors projected demand on a product-by-product basis. Based on these projections, management evaluates the levels of write-downs required for inventory on hand and inventory on order from contract manufacturers. Although we believe that we have been reasonably successful in identifying write-downs in a timely manner, sudden changes in buying patterns from customers, either due to a shift in product interest and/or a complete pull back from their expected order levels, may result in the recognition of larger-than-anticipated write-downs. We have performed an evaluation of our inventory on hand as of December 31, 2023 and December 31, 2022, and believe the reserves are adequate to cover any slow-moving or obsolete inventory.
Current wording
In conjunction with our ongoing analysis of inventory valuation, management constantly monitors projected demand on a product-by-product basis. Based on these projections, management evaluates the levels of write-downs required for inventory on hand and inventory on order from contract manufacturers. Although we believe that we have been reasonably successful in identifying write-downs in a timely manner, sudden changes in buying patterns from customers, either due to a shift in product interest and/or a complete pullback from their expected order levels, may result in the recognition of larger-than-anticipated write-downs. We have performed an evaluation of our inventory on hand as of December 31, 2024 and December 31, 2023, and believe the reserves are adequate to cover any slow-moving or obsolete inventory.
Previous wording
Sales decreased by approximately 14%, from $12,698,503 in 2022 to $10,885,154 in 2023. The decrease in sales was primarily due to a decrease in sales of our cosmetic ingredient products, specifically a decrease of 19% in sales to our largest distributor, ASI, in 2023 compared with 2022. In addition, sales of the Company’s medical lubricants decreased by 29%, primarily due to a decrease in demand in 2023 due to foreign customers’ overstocking during 2022.
Current wording
Sales increased by approximately 12%, from $10,885,154 in 2023 to $12,181,971 in 2024. The increase in sales was primarily due to an increase in sales of our cosmetic ingredient products, specifically an increase of 51% in sales to our largest distributor, ASI, in 2024 compared with 2023. In addition, sales of our medical lubricants increased by 16%, primarily due to increased orders placed by our largest customer in China.
Previous wording
Sales of our cosmetic ingredients decreased by approximately 20%, from $5,167,909 in 2022, to $4,132,334 in 2023. A significant part of the decrease was due to the decrease in sales to ASI. Based on information provided to the Company by ASI, the reasons for the decrease during 2023 was due to 1) decreased demand for the Company’s products in China; 2) increased competition from lower-priced local competitors, especially Asian producers; and 3) customers working off excess stock, maintaining lower inventory levels and changing ordering patterns to just in time. In addition, sales to our other four distributors decreased by a net of approximately 26%, while sales to four of our small direct cosmetic ingredient customers increased by approximately 71%.
Current wording
Sales of our cosmetic ingredients increased by approximately 32%, from $4,132,334 in 2023 to $5,438,262 in 2024. The increase was primarily due to an increase in sales to ASI. Based on information provided to the Company by ASI, the reasons for the increase during 2024 was due to increased demand for our products in China due to regaining market share at certain key accounts. This increase was offset by sales to our other four distributors, whose sales decreased by a net of approximately 49%, while sales from two of our small direct cosmetic ingredient customers increased by approximately 19%. This decrease was primarily due to reformulations.
Previous wording
We continue to experience global competition from Asian and European companies that manufacture and sell products that are competitive with our products. These competitive products are usually sold at a lower price than our products; however, they may not compare favorably to the level of performance and quality of our products. We work closely with our network of distributors to price our products as competitively as possible and, when appropriate, to offer additional volume discounts and more aggressive pricing to maintain and increase sales and expand our customer base. We expect that this competitive environment will continue in 2024 and we plan to enhance our competitive position by strengthening our core capabilities and investing in new products, especially in the area of naturally-derived products. We will also continue providing high-quality products, excellent technical support, and the reliability our customers have come to expect from us.
Current wording
We continue to experience global competition from Asian and European companies that manufacture and sell products that are competitive with our products. These competitive products are usually sold at a lower price than our products; however, they may not compare favorably to the level of performance and quality of our products. We work closely with our network of distributors to price our products as competitively as possible and, when appropriate, to offer additional volume discounts and more aggressive pricing to maintain and increase sales and expand our customer base. We expect that this competitive environment will continue in 2025 and we plan to enhance our competitive position by strengthening our core capabilities and investing in new products, especially in the area of naturally derived products. We will continue to provid high-quality products, technical expertise, and the reliability our customers have come to expect from us.
Previous wording
Because there are fees, rebates, and allowances associated with sales of our two pharmaceutical products, Renacidin and Clorpactin, discussion of our pharmaceutical sales includes references to both gross sales (before fees, rebates and allowances) and net sales (after fees, rebates and allowances). Gross sales of our two pharmaceutical products, Renacidin and Clorpactin, together decreased by less than 1%, from $5,929,216 in 2022 to $5,894,220 in 2023. Gross sales of Renacidin decreased by approximately 1%, from $5,181,190 in 2022 to $5,127,069 in 2023, and gross sales of Clorpactin increased by 3% from $748,026 in 2022 to $767,151 in 2023.
Current wording
Because there are fees, rebates, and allowances associated with sales of our two pharmaceutical products, Renacidin and Clorpactin, discussion of our pharmaceutical sales includes references to both gross sales (before fees, rebates and allowances) and net sales (after fees, rebates and allowances). Gross sales of our two pharmaceutical products, Renacidin and Clorpactin, together decreased by approximately 5%, from $5,894,220 in 2023 to $5,602,259 in 2024. Gross sales of Renacidin decreased by approximately 4%, from $5,127,069 in 2023 to $4,897,331 in 2024, and gross sales of Clorpactin decreased by 8% from $767,151 in 2023 to $704,928 in 2024.
Previous wording
Net sales of our pharmaceutical products decreased by less than 1% in 2023 compared with the same period in 2022. The decrease in net sales was due to a decrease in certain pharmaceutical-related rebates and allowances. The decrease in pharmaceutical-related rebates and allowances in 2023 was primarily due to a decrease in allowances for outdated material returns.
Current wording
Net sales of our pharmaceutical products decreased by approximately 5% in 2024 compared with the same period in 2023. The decrease in net sales was due to a decrease in gross sales combined with a commensurate decrease in certain pharmaceutical-related rebates and allowances. The decrease in pharmaceutical-related rebates and allowances in 2024 was primarily due to a decrease in VA Chargebacks and Medicare rebates.
Previous wording
Sales of our medical lubricants decreased by approximately 29% in 2023, from $2,470,163 in 2022 to $1,750,632 in 2023. The decrease in sales was driven by decreased demand from one of our larger contract manufacturer customers located in China, who had built up inventory levels during 2022 to accommodate their customers’ delivery concerns.
Current wording
Sales of our medical lubricants increased by approximately 16% in 2024, from $1,750,632 in 2023 to $2,028,564 in 2024. The increase in sales was driven by increased demand from one of our larger contract manufacturer customers located in China.
Previous wording
There were no sales of our sexual wellness ingredients in 2023, since the Company only began its marketing efforts for those products in mid-2023 and it is not unusual for it to take a year or more for new ingredients to find their way into new products in the marketplace. We are hopeful we will begin to receive orders for these products in 2024.
Current wording
There were no sales of our sexual wellness ingredients in 2024, since we only began our marketing efforts for those products in mid-2023. Customers need to qualify new ingredients and perform product development testing prior to launching a new product. It is not unusual for this process to take a year or more and inherently it will require additional time for new ingredients to generate sales. Our distributor for these products has informed us of the possibility of orders being placed in mid-2025.
Previous wording
Sales of our industrial products decreased by 56% in 2023 compared with 2022. The decrease in sales was due to this product line being discontinued after the second quarter of 2023 due to low sales volume with minimal growth.
Current wording
There were no sales of our industrial products during 2024 due to this product line being discontinued after the second quarter of 2023.
Previous wording
Gross profit on sales was 50% in 2023 compared with 53% in 2022. The decrease in gross profit was primarily due to two factors. The first was a decrease in sales of our cosmetic ingredients in 2023 compared to 2022 which carry a higher profit margin than our pharmaceutical products, and in 2023 the percentage of pharmaceutical sales was 45% compared with 39% in 2022. The second factor was higher per unit overhead costs due to reduced production, which was caused by lower demand for some of the Company’s products.
Current wording
Gross profit on sales was 53% in 2024 compared with 50% in 2023. The increase in gross profit was primarily due to two factors. The first was an increase in sales of our cosmetic ingredients of 32% in 2024 compared to 2023, which carry a higher profit margin than our pharmaceutical products, combined with the fact that in 2024, the percentage of cosmetic product sales as a percentage of total sales increased to approximately 45%, compared with 38% in 2023. The second factor was lower per unit overhead costs due to increased production, which was caused by higher demand for some of our products.
Previous wording
Research and development expenses decreased by approximately 5%, from $490,770 in 2022 to $463,992 in 2023. The decrease was primarily related to a decrease in payroll and payroll-related expenses. In connection with the Company’s growth initiatives that are expected to be put into place in 2024, the Company expects its research and development expenses to increase modestly during 2024.
Current wording
Research and development expenses decreased by approximately 2%, from $463,992 in 2023 to $456,779 in 2024. In connection with the Company’s growth initiatives, we expect our research and development expenses to increase modestly during 2025.
Previous wording
Investment income increased by approximately 30%, from $236,695 in 2022 to $306,651 in 2023. The increase was primarily due to the Company repositioning its marketable securities portfolio and selling most of its equity and fixed income mutual funds. The proceeds from these sales were used to purchase U.S. Treasury Bills and certificates of deposit to take advantage of the increase in interest rates in 2023. In addition, in connection with the Company changing its dividend policy during 2023, cash flow increased and the additional monies were used to purchase both U.S. Treasury Bills and certificates of deposit.
Current wording
Investment income increased by approximately 42%, from $306,651 in 2023 to $434,679 in 2024. The increase was primarily due to an increase in interest income from investments in longer term U.S. Treasury Bills and Certificates of Deposit in 2024 compared to 2023. In addition, during 2024 we held more funds in money market accounts which yielded higher interest income compared to 2023. During the second half of 2023, we repositioned our marketable securities portfolio, liquidating most of our equity and fixed income mutual funds. The proceeds from these sales were used to purchase U.S. Treasury Bills and Certificates of Deposit to take advantage of the increase in interest rates.
Previous wording
As previously discussed, the Company repositioned its marketable securities portfolio in the first half of 2023 to take advantage of the increase in interest rates. Company management, as well as the Investment Committee of the Board of Directors, continue 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 performance due to volatility of the global financial markets.
Current wording
For the year ended December 31, 2024, we recorded net gains on our marketable securities portfolio of $26,989 compared with net gains of $81,095 in 2023. We repositioned our marketable securities portfolio in the second half of 2023 to take advantage of the increase in interest rates. Management, as well as the Investment Committee of the Board of Directors, continue to closely monitor our investment portfolio and will make any adjustments they believe may be necessary or appropriate in order to minimize the future impact on our financial performance due to volatility of the global financial markets.
Previous wording
The provision for income taxes increased from $658,168 in 2022 to $669,408 in 2023. This increase was due to an increase in income before taxes. Our effective income tax rate was 20.6% in 2023 and 20.4% in 2022.
Current wording
The provision for income taxes increased from $669,408 in 2023 to $857,582 in 2024. This increase was due to an increase in income before taxes. Our effective income tax rate was 20.9% in 2024 and 20.6% in 2023.
Previous wording
Working capital increased from $8,596,939 at December 31, 2022 to $10,718,457 at December 31, 2023. The current ratio increased from 7.3 to 1 at December 31, 2022 to 8.0 to 1 at December 31, 2023. The increase in working capital was mainly due to an increase in cash and cash equivalents.
Current wording
Working capital increased from $10,718,457 at December 31, 2023 to $10,751,082 at December 31, 2024. The increase in working capital was mainly due to an increase in cash and cash equivalents, marketable securities and inventories. The current ratio decreased from 8.0 to 1 at December 31, 2023 to 6.6 to 1 at December 31, 2024. The decrease in the current ratio was due mainly due to an increase in accounts payable.
Previous wording
Accounts receivable (net of allowance for credit losses) as of December 31, 2023 increased from $1,427,576 in 2022 to $1,566,839 in 2023. The increase in accounts receivable was due to an increase in sales during the third and latter part of the fourth quarter of 2023. The receivables turnover, or “Days Sales Outstanding,” for 2023, was 50 days, compared with 47 days in 2022. The allowance for credit losses on accounts receivable decreased from $20,063 in 2022 to $16,672 in 2023, and we believe that the net balance of our accounts receivable as of December 31, 2022 was, and continues to be, fully collectible.
Current wording
Accounts receivable (net of allowance for credit losses) as of December 31, 2024 decreased from $1,566,839 in 2023 to $1,428,455 in 2024. The decrease in accounts receivable was due to a decrease in sales during the fourth quarter of 2024. The receivables turnover, or “Days Sales Outstanding,” for 2024, was 45 days, compared with 50 days in 2023. The allowance for credit losses on accounts receivable decreased from $16,672 in 2023 to $14,342 in 2024, and we believe that the net balance of our accounts receivable as of December 31, 2024 was, and continues to be, fully collectible.
Previous wording
We generated cash from operations of $3,144,480 in 2023 compared with $2,525,169 in 2022. The increase in 2023 was primarily due to a decrease in inventories and an increase in accounts payable.
Current wording
We generated cash from operations of $3,466,251 in 2024 compared with $3,144,480 in 2023. The increase in 2024 was primarily due to an increase in net income, offset by increases in inventories and deferred income taxes.
Previous wording
Net cash provided by investing activities was $4,727,577 for the year ended December 31, 2023 compared with $897,562 for the year ended December 31, 2022. The increase in net cash provided by investing activities was mainly due an increase in the sales of the Company’s marketable securities in the first half of 2023 compared with 2022. The proceeds from these sales were primarily reinvested in short-term U.S. Treasury Bills, which are included in cash and cash equivalents.
Current wording
Net cash used in investing activities was $7,077,395 for the year ended December 31, 2024, compared with net cash provided by investing activities of $4,277,577 for the year ended December 31, 2023. The shift was primarily due an increase in the purchase of longer-term investments in 2024 that are classified as marketable securities. During 2023, most of the of our marketable securities consisted of U.S. Treasury Bills and Certificates of Deposit that had maturities of less than three months and were included in cash and cash equivalents. During 2024, we changed our investment strategy to longer term fixed income investments due to the anticipated decrease in interest rates.
Previous wording
Net cash used in financing activities was $459,387 and $3,123,492 for the years ended December 31, 2023 and 2022, respectively. The decrease was due to the payment of lower dividends in 2023 compared with 2022. During 2023, we paid dividends of $0.10 per share compared with $0.68 per share in 2022.
Current wording
Net cash used in financing activities was $2,756,323 and $459,387 for the years ended December 31, 2024 and 2023, respectively. The increase was due to the payment of higher dividends in 2024 compared with 2023. During 2024, we paid dividends of $0.60 per share compared with $0.10 per share in 2023.
Previous wording
We believe that our working capital is sufficient to support our operating requirements for the next fiscal year. Our long-term liquidity position will be dependent upon our ability to generate sufficient cash flow from profitable operations, and we expect to continue to use our cash to make dividend payments, purchase marketable securities, and to take advantage of growth opportunities that may arise that are in the best interest of our Company and our stockholders.
Current wording
We believe that our working capital is sufficient to support our operating requirements for the next fiscal year. Our long-term liquidity position will be dependent upon our ability to generate sufficient cash flow from profitable operations, and we expect to continue to use our cash to make dividend payments, purchase marketable securities, and to take advantage of growth opportunities that may arise that are in the best interest of the business and our stockholders.
Previous wording
In connection with an upgrade to our building sprinkler system, costs of approximately $99,000 have been incurred to date. The project is expected to be completed during the first half of 2024 with additional planned expenditures of $69,000.
Current wording
In connection with an upgrade to our building sprinkler system, costs of approximately $181,000 have been incurred as of December 31, 2024. The project is substantially complete and is expected to be fully complete by the end of the first quarter of 2025, with additional planned expenditures of $14,000.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The timing between recognition of revenue for product sales and the receipt of payment is not significant. Our standard credit terms, which vary depending on the customer, range between 30 and 60 days. We provide an allowance for credit losses related to our accounts receivable for which collection is doubtful in accordance with ASU 2016-13. In accordance with FASB ASC Topic 326, “Financial Instruments–* Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,* (“ASC 326”), we present financial assets at the net amount expected to be collected, requiring immediate recognition of estimated credit losses expected to occur over the asset’s remaining life.