United-guardian, Inc. NASDAQ:UG
United Guardian : FY-2024 Annual Report
Source: MarketScreener
Annual Report 2024
Cosmetic Ingredients
Medical Lubricants
Pharmaceutical Products
Sexual Wellness Ingredients
Excellence Through Innovation®
OFFICERS AND DIRECTORS
DONNA VIGILANTE
President
PETER A. HILTUNEN
Senior Vice President Production and Procurement
ANDREA YOUNG
Chief Financial Officer & Controller
Treasurer
Secretary
CORPORATE PROFILE
KEN GLOBUS
Chairman of the Board of Directors
ARTHUR M. DRESNER
Director; Counsel to the law firm of
Duane Morris LLP
New York, NY
LAWRENCE F. MAIETTA
Director; Partner in the accounting firm of PKF O'Connor Davies, LLP
New York, NY
ANDREW A. BOCCONE
Director; Independent Business Consultant, Former President of Kline & Company, Inc. (business consulting firm), Little Falls, NJ
S. ARI PAPOULIAS
Director; Principal of ChemRise LLC
(a business advisory firm providing advice to companies in the chemicals industry), Tarrytown, NY
CATHERINE KOLINSKI
Director; Independent Business Consultant,
Former Vice President of Ashland Specialty Ingredients (manufacturer and distributor of specialty chemicals), Bridgewater, NJ
United-Guardian, Inc. is a publicly-traded (NASDAQ:UG), fully integrated research, development, and manufacturing company that has been supplying unique and innovative products to the personal care, health care, pharmaceutical, and industrial sectors since 1942. The company's products are developed and manufactured by the company's Guardian Laboratories Division at its 50,000 square foot facility in Hauppauge, New York. The cosmetic ingredients are marketed through a worldwide network of distributors and are used by many of the major multinational cosmetic companies. The pharmaceutical products are sold primarily to full-line drug wholesalers, which distribute them to pharmacies, hospitals, physicians, long-term care facilities, and other health care providers. The health care products are primarily medical lubricants marketed directly to manufacturers of medical devices
and other medical products, which incorporate them into their finished products and distribute them to hospitals, pharmacies, and other health care facilities. The specialty industrial line of products was discontinued after the second quarter of 2023. The LUBRAJEL® line of hydrogels is the company's most important product line and are used in both personal care and medical products. Innovation is a central theme of United-Guardian's strategy. The focus, at this time, is to continue expanding the pipeline of classic and naturally derived hydrogel products to address unmet market and customer needs. Over the years, the company has been issued over 32 patents. The company currently relies primarily on proprietary manufacturing methods and product formulations, which are protected as trade secrets, rather than patent protection. United-Guardian has received ISO 9001:2015 registration from DQS Inc., indicating that the company's documented procedures and overall operations have attained the very high level of quality needed for this global certification level.
LETTER TO STOCKHOLDERS
Dear Stockholder:
I am pleased to report that 2024 was a stronger year for United-Guardian compared to 2023. We saw sales improve in both the cosmetic and medical lubricant markets. While pharmaceutical sales did not fully recover in 2024 due to a shutdown at our contract manufacturer for Renacidin®, we did start to recover from the deficit that we had seen earlier in the year.
Net sales and net income increased from FY 2023 to FY 2024. Net sales increased by 12% from $10,885,154 in 2023 to $12,181,971 in 2024 generating net income of $3,250,875 ($0.71 per share) in 2024 compared to $2,581,370 ($0.56 per share) in 2023. Sales of cosmetic ingredients and medical lubricants increased by 32% and 16%, respectively. The increase in cosmetic ingredient sales was primarily due to increased purchase orders from our largest distributor, Ashland Specialty Ingredients ("ASI"). ASI stated that there was greater demand for our products in China as a result of regaining market share at certain key accounts. The increase in medical lubricant sales was driven by greater demand from one of our large contract manufacturer customers in China. Pharmaceutical sales decreased by 5% in 2024, due to a supply disruption of Renacidin, our main pharmaceutical product, that we experienced at the end of 2023 and continued into the first quarter of 2024. This disruption impacted our sales of Renacidin for 2024. Sales began increasing once supply levels resumed and we saw a trend of returning sales as the year progressed. Our fourth quarter results were not as strong as the previous quarters in 2024, and the primary reason for this decrease was due to ASI's ordering patterns. While sales to ASI's customers remained steady, so did their inventory levels, which resulted in a decrease in the purchase orders we received from them in the fourth quarter.
We are continuing to explore the market for Renacidin by gaining valuable insights into patient product access, barriers limiting growth and brand awareness. Our next study, an investigation into the payer landscape, will begin in the second quarter of 2025. This study will explore barriers that may exist for patients to access Renacidin and develop strategies to mitigate the barriers, if present. We believe that obtaining a broader understanding of Renacidin in the marketplace will allow us to expand our sales and reach more patients. These studies are not only designed to increase our domestic market share but will allow us to demonstrate the potential value this product may have across the globe. Our wider plan is to expand Renacidin outside the United States, and we believe the information generated from our research will put us on a trajectory to accomplish that goal.
We have been actively working with our distributors to seek opportunities to expand our market position. We recently signed a distribution agreement with Azelis Group NV ("Azelis") for an additional territory, South Korea. The Korean market is at the forefront of innovation in the skin care category, and the Azelis team is ideally suited to introduce our products to new customers. Azelis has already begun introducing our ingredients to their customers and we are hopeful that we will gain greater market share in this territory. We continue
to have discussions with ASI on a new distribution agreement for our cosmetic ingredients. While finalizing this agreement has taken longer than expected, we are actively working with ASI to negotiate the terms of our agreement. We are hopeful that an agreement will be signed later this year. We continue to conduct business with ASI as we have previously, by fulfilling orders and discussing marketing strategies. We have been
United-Guardian, Inc. Annual Report 2024 1
discussing the topic of tariffs with our distributors as well as internally. The situation remains fluid and is subject to change. We are continuing to monitor the situation closely, and we will update our stockholders on the potential impact on our business, if any, in the next stockholders' letter.
Our Natrajel® line of sexual wellness ingredients was first introduced to the market in late 2023 and has been steadily gaining interest from customers. Brenntag Specialties ("Brenntag"), our marketer and distributor of the sexual wellness line in the Americas, has been promoting these products at trade shows and during customers visits. We have received positive feedback and interest, which we believe will put us in a strong position for growth as this market continues to gain traction among consumers. While all new products take time to grow, we have been very encouraged by the number of sample requests we have received so far and are hopeful we will receive orders for these products in 2025. We are still in the process of negotiating an extension to our current agreement for an additional territory in Europe.
We are excited to report that our marketing agreement with Azelis for our medical lubricant products in the UK and Ireland has been executed. Azelis has strong relationships with customers in the medical market and believes that our products are a natural fit for unmet needs within several medical categories. We are at the beginning of this process, and are preparing documentation, providing training materials and developing a marketing strategy. We will provide updates as we move forward.
Finally, our research and marketing teams continue to develop ingredients and promote existing products to new customers. Based on feedback from our customers and distributors, we know that our Lubrajel®
line of products provide multifunctional benefits with hydration, lubrication and sensory at the forefront. We have several new products in the later stages of development and will be providing samples to our distributors for feedback in the coming months. The products include a skin care ingredient designed for longer hydration benefits, a hair care ingredient that meets the growing need for natural ingredients and a new Natrajel ingredient for the sexual wellness market that addresses an unmet need. Our marketing team is creating documentation needed to provide a robust promotional effort, and we will provide additional updates once these products are launched. In addition, we are continuing to develop new products for our medical customers with several projects in various stages of development and our marketing team will be creating brochures, sample kits and training presentations to further expand our presence in the medical market.
We are still following our growth plan, which we believe is the best way to provide consistent growth to our stockholders. Our plan began in the second half of 2023 by identifying pathways for growth and expansion within our current markets. In 2024, we implemented key steps in our growth plan by adding marketing capabilities, signing a new distribution agreement, conducting studies to further our knowledge base, and assessing our commercialization channels. We believe that the core steps in our growth plan are in place, and we will continue to implement the changes needed to support our goal of growing the business.
Sincerely,
UNITED-GUARDIAN, INC.
Donna Vigilante
President
2 United-Guardian, Inc. Annual Report 2024
STATEMENTS OF INCOME
Years ended December 31, | ||||||||
2024 | 2023 | |||||||
Net sales | $ | 12,181,971 | $ | 10,885,154 | ||||
Costs and expenses: | ||||||||
Cost of sales | 5,721,584 | 5,479,566 | ||||||
Operating expenses | 2,356,819 | 2,078,564 | ||||||
Research and development | 456,779 | 463,992 | ||||||
Total costs and expenses | 8,535,182 | 8,022,122 | ||||||
Income from operations | 3,646,789 | 2,863,032 | ||||||
Other income: | ||||||||
Investment income | 434,679 | 306,651 | ||||||
Net gain on marketable securities | 26,989 | 81,095 | ||||||
Total other income | 461,668 | 387,746 | ||||||
Income before provision for income taxes | 4,108,457 | 3,250,778 | ||||||
Provision for income taxes | 857,582 | 669,408 | ||||||
Net income | $ | 3,250,875 | $ | 2,581,370 | ||||
Earnings per common share (basic and diluted) | $ | 0.71 | $ | 0.56 | ||||
Weighted average shares (basic and diluted) | 4,594,319 | 4,594,319 |
See Notes to Financial Statements
United-Guardian, Inc. Annual Report 2024 3
BALANCE SHEETS
ASSETS
December 31, | |||||||
2024 | 2023 | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,875,655 | $ | 8,243,122 | |||
Marketable securities | 7,522,625 | 851,318 | |||||
Accounts receivable, net of allowance for credit losses | |||||||
of $14,342 in 2024 and $16,672 in 2023 | 1,428,455 | 1,566,839 | |||||
Inventories, net | 1,451,995 | 1,223,506 | |||||
Prepaid expenses and other current assets | 207,804 | 191,708 | |||||
Prepaid income taxes | 179,017 | 176,220 | |||||
Total current assets | 12,665,551 | 12,252,713 | |||||
Deferred income taxes, net | 175,397 | 50,930 | |||||
Property, plant, and equipment: | |||||||
Land | 69,000 | 69,000 | |||||
Factory equipment and fixtures | 4,743,238 | 4,669,936 | |||||
Building and improvements | 3,336,352 | 2,976,577 | |||||
Total property, plant, and equipment | 8,148,590 | 7,715,513 | |||||
Less accumulated depreciation | 7,192,203 | 7,096,318 | |||||
Total property, plant, and equipment, net | 956,387 | 619,195 | |||||
TOTAL ASSETS | $ | 13,797,335 | $ | 12,922,838 | |||
See Notes to Financial Statements
4 United-Guardian, Inc. Annual Report 2024
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, | ||||||||
2024 | 2023 | |||||||
Current liabilities: | ||||||||
Accounts payable | $ | 425,003 | $ | 134,449 | ||||
Accrued expenses | 1,467,933 | 1,363,044 | ||||||
Deferred revenue | - | 15,498 | ||||||
Dividends payable | 21,533 | 21,265 | ||||||
Total current liabilities | 1,914,469 | 1,534,256 | ||||||
Total liabilities | ||||||||
1,914,469 | 1,534,256 | |||||||
Commitments and contingencies | ||||||||
Stockholders' equity: | ||||||||
Common stock, $0.10 par value; 10,000,000 shares | ||||||||
authorized; 4,594,319 shares issued and outstanding at | ||||||||
December 31, 2024 and 2023, respectively | 459,432 | 459,432 | ||||||
Retained earnings | 11,423,434 | 10,929,150 | ||||||
Total stockholders' equity | 11,882,866 | 11,388,582 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 13,797,335 | $ | 12,922,838 | ||||
See Notes to Financial Statements
United-Guardian, Inc. Annual Report 2024 5
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 2024 and 2023 | ||||||||||||||
Common stock | Retained | |||||||||||||
Shares | Amount | earnings | Total | |||||||||||
Balance, January 1, 2023 | 4,594,319 | $459,432 | $ 8,807,212 | $ 9,266,644 | ||||||||||
Net income | - | - | 2,581,370 | 2,581,370 | ||||||||||
Dividends declared, not paid | ||||||||||||||
($0.10 per share) | - | - | (45) | (45) | ||||||||||
Dividends declared and paid | ||||||||||||||
($0.10 per share) | - | - | (459,387) | (459,387) | ||||||||||
Balance, December 31, 2023 | 4,594,319 | $459,432 | $ 10,929,150 | $11,388,582 | ||||||||||
Net income | - | - | 3,250,875 | 3,250,875 | ||||||||||
Dividends declared, not paid | ||||||||||||||
($0.60 per share) | - | - | (268) | (268) | ||||||||||
Dividends declared and paid | ||||||||||||||
($0.60 per share) | - | - | (2,756,323) | (2,756,323) | ||||||||||
Balance, December 31, 2024 | 4,594,319 | $459,432 | $ 11,423,434 | $11,882,866 | ||||||||||
See Notes to Financial Statements
6 United-Guardian, Inc. Annual Report 2024
STATEMENTS OF CASH FLOWS
Years ended December 31, | |||||||||
2024 | 2023 | ||||||||
Cash flows from operating activities: | |||||||||
Net income | $ 3,250,875 | $ | 2,581,370 | ||||||
Adjustments to reconcile net income to net cash provided by | |||||||||
operating activities: | |||||||||
Depreciation and amortization | 95,885 | 105,682 | |||||||
Gain on sale of asset | - | (10,000) | |||||||
Net gain on marketable securities | (26,989) | (81,095) | |||||||
Allowance for credit losses | (2,330) | (3,391) | |||||||
Allowance for obsolete inventory | (14,208) | (17,000) | |||||||
Deferred income taxes | (124,467) | 59,614 | |||||||
Decrease (increase) in operating assets: | |||||||||
Accounts receivable | 140,714 | (135,872) | |||||||
Inventories | (214,281) | 465,506 | |||||||
Prepaid expenses and other current assets | (16,096) | 10,138 | |||||||
Prepaid income taxes | (2,797) | 9,008 | |||||||
Increase (decrease) in operating liabilities: | |||||||||
Accounts payable | 290,554 | 104,034 | |||||||
Accrued expenses | 104,889 | 40,988 | |||||||
Deferred revenue | (15,498) | 15,498 | |||||||
Net cash provided by operating activities | 3,466,251 | 3,144,480 | |||||||
Cash flows from investing activities: | |||||||||
Acquisitions of property, plant and equipment | (433,077) | (165,716) | |||||||
Proceeds from sale of asset | - | 10,000 | |||||||
Purchases of marketable securities | (8,459,318) | (621,852) | |||||||
Proceeds from sales of marketable securities | 1,815,000 | 5,505,145 | |||||||
Net cash (used in) provided by investing activities | (7,077,395 | ) | 4,727,577 | ||||||
Cash flows from financing activities: | |||||||||
Dividends paid | (2,756,323) | (459,387) | |||||||
Net cash used in financing activities | (2,756,323) | (459,387) | |||||||
Net (decrease) increase in cash and cash equivalents | (6,367,467) | 7,412,670 | |||||||
Cash and cash equivalents, beginning of year | 8,243,122 | 830,452 | |||||||
Cash and cash equivalents, end of year | $ 1,875,655 | $ | 8,243,122 | ||||||
Supplemental disclosure of cash flow information: | |||||||||
Taxes paid | $ 1,050,795 | $ | 600,000 | ||||||
Supplemental disclosure of non-cash items: | |||||||||
Dividends payable | $ | 268 | $ | 45 | |||||
See Notes to Financial Statements
United-Guardian, Inc. Annual Report 2024 7
NOTES TO FINANCIAL STATEMENTS
NOTE A
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
United-Guardian, Inc. ("Registrant" or "Company") is a Delaware corporation that, through its Guardian Laboratories division, manufactures, markets and develops specialty cosmetic ingredients, pharmaceutical products, medical lubricants and sexual wellness ingredients. Prior to July 1, 2023, the Company manufactured and reported sales of a line of specialty industrial products; however, this product line was discontinued after the second quarter of 2023 due
to low sales volume with no growth prospects. The Company also conducts research and product development, primarily related to the development of new and unique cosmetic ingredients. The Company's research and development department also modifies, refines, and expands the uses for existing products, with the goal of further developing the market for the Company's products. Two major product lines, Lubrajel and Renacidin Irrigation Solution ("Renacidin") together accounted for approximately 93% and 92% of the Company's sales for the years ended December 31, 2024 and December 31, 2023, respectively. Lubrajel accounted for approximately 60% and 54% of the Company's sales for the years ended December 31, 2024 and December 31, 2023, respectively, and Renacidin accounted for approximately 33% and 38% of the Company's sales for the years ended December 31, 2024 and December 31, 2023, respectively.
Segment Information
The Company operates its business under one operating segment, which is also its reportable segment. The Company's chief operating decision maker ("CODM"), who is the President, reviews financial information presented at the consolidated level and decides how to allocate resources based on financial metrics, including net income. The measure of segment assets is reported on the balance sheet
as total consolidated assets. The CODM, along with the Board Of Directors, use such financial metrics,
including net income, to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits or allocate to other parts of the organization, such as working capital needs, mandatory and discretionary capital expenditures or other growth opportunities that may arise that are in the Company's best interest and the best interest of the stockholders.
Net income, other financial metrics and sales forecasts are used to monitor budget versus actual results. The reported segment revenue, segment profit or loss and significant segment expenses are the same as the consolidated results disclosed on the consolidated statements of income.
Impact of Global Supply Chain Instability, Inflation
and Tariffs
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. The Company continues to work with its suppliers regarding lead times and is closely monitoring this situation. Although the Company has not yet experienced any delays in receiving raw materials or an increase in shipping costs, the Company is aware that the situation is fluid and could impact it at any time. If that occurs, the Company may experience longer lead times and increased shipping costs for some of its raw materials, which may impact future gross margins. As a result of this global supply chain instability, there continues to be uncertainty regarding the potential impact on the Company's operations or financial results and its unable to provide an accurate estimate or projection as to what the future impact will be.
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
8 United-Guardian, Inc. Annual Report 2023