U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities
--------- Exchange Act of 1934
For the quarterly period ended June 30, 2003
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_______ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to ___________
Commission File Number 1-10526
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UNITED-GUARDIAN, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 11-1719724
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
230 Marcus Boulevard., Hauppauge, New York 11788
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(Address of Principal Executive Offices)
(631) 273-0900
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(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the Company was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
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Cover Page 1 of 2 Pages
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the Company filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after
the distribution of securities under a plan confirmed by a court.
Yes _________ No ____________
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
4,907,839
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Cover Page 2 of 2 Pages
UNITED-GUARDIAN, INC.
INDEX
Page No.
----------
Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Income - Three and
Six Months Ended June 30, 2003 and 2002................. 2
Consolidated Balance Sheets -
June 30, 2003 and December 31, 2002..................... 3-4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2003 and 2002................... 5
Consolidated Notes to Financial Statements............... 6-11
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 11-14
Item 3 - Controls and Procedures................................... 14-15
Part II. OTHER INFORMATION
Item 1 - Legal Proceedings............................................ 15
Item 2 - Changes in Securities and Use of Proceeds.................... 15
Item 3 - Defaults Upon Senior Securities.............................. 15
Item 4 - Submission of Matters to a Vote of Security Holders.......... 15
Item 5 - Other Information............................................ 15
Item 6 - Exhibits and Reports On Form 8-K............................. 15
Signatures................................................................16
1
Part I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
2003 2002 2003 2002
------ ------ ------ ------
Revenue:
Net sales $ 6,317,077 $ 4,710,616 $ 3,099,544 $ 2,328,168
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales 3,053,516 2,551,786 1,523,369 1,279,051
Operating expenses 1,262,808 1,135,749 631,110 654,245
---------- ---------- ---------- ----------
4,316,324 3,687,535 2,154,479 1,933,296
---------- ---------- ---------- ----------
Income from
operations 2,000,753 1,023,081 945,065 394,872
Other income (expense):
Investment income 79,164 99,088 39,923 49,464
Gain on sale of assets 500 79 - -
Other (25) (49) (25) (49)
---------- ---------- ---------- ---------
Income before
income taxes 2,080,392 1,122,199 984,963 444,287
Provision for income taxes 742,000 393,000 350,000 153,000
--------- --------- --------- ---------
Net income $ 1,338,392 $ 729,199 $ 634,963 $ 291,287
========= ========= ========= =========
Earnings per common share
(basic and diluted) $ 0.27 $ 0.15 $ 0.13 $ 0.06
========= ========= ========= =========
Weighted average shares
- basic 4,883,951 4,875,617 4,886,733 4,880,386
========= ========= ========= =========
Weighted average shares
- diluted 4,900,032 4,890,378 4,905,740 4,893,622
========= ========= ========= =========
See notes to financial statements
2
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2003 2002
------------ -------------
ASSETS (UNAUDITED) (DERIVED FROM AUDITED
FINANCIAL STATEMENTS)
Current assets:
Cash and cash equivalents $ 5,966,482 $ 3,184,599
Temporary investments 2,774,275 4,151,787
Marketable securities 471,797 882,243
Accounts receivable, net of
allowance for doubtful accounts
of $25,500 at June 30, 2003 and
and December 31, 2002 respectively 1,257,608 704,560
Inventories (net) 654,140 1,037,315
Prepaid expenses and other
current assets 232,565 342,476
Deferred income taxes 289,494 297,774
----------- -----------
Total current assets 11,646,361 10,600,754
----------- -----------
Property, plant and equipment:
Land 69,000 69,000
Factory equipment and fixtures 2,792,492 2,738,110
Building and improvements 2,066,790 2,045,588
Waste disposal plant 133,532 133,532
----------- -----------
5,061,814 4,986,230
Less: Accumulated depreciation 3,975,004 3,880,660
----------- -----------
1,086,810 1,105,570
----------- -----------
Other assets:
Processes and patents, net of
accumulated amortization of
$981,536 and $981,341 at
June 30, 2003 and December 31,
2002, respectively 261 456
Other 700 700
----------- -----------
961 1,156
----------- -----------
$ 12,734,132 $ 11,707,480
=========== ===========
See notes to financial statements
3
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2003 2002
--------------- ------------
LIABILITIES AND (UNAUDITED) (DERIVED FROM AUDITED
STOCKHOLDERS' EQUITY FINANCIAL STATEMENTS)
Current liabilities:
Dividends payable $ - $ 488,114
Accounts payable 189,861 188,868
Accrued expenses 405,775 345,407
--------- ---------
Total current liabilities 595,636 1,022,389
--------- ---------
Deferred income taxes 10,000 10,000
--------- ---------
Stockholders' equity:
Common stock $.10 par value,
authorized, 10,000,000 shares;
4,970,039 and 4,943,339 shares
issued, respectively; 4,907,839
and 4,881,139 shares outstanding,
respectively 497,004 494,334
Capital in excess of par value 3,636,803 3,538,423
Accumulated other comprehensive loss (41,813) (55,776)
Retained earnings 8,396,132 7,057,740
Treasury stock, at cost; 62,200 shares (359,630) (359,630)
--------- ---------
Total stockholders' equity 12,128,496 10,675,091
--------- ---------
$ 12,734,132 $ 11,707,480
========== ==========
See notes to financial statements
4
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
June 30,
------------
2003 2002
------- -------
Cash flows provided by operating activities:
Net income $ 1,338,392 $ 729,199
Adjustments to reconcile net earnings
to net cash flows from operations:
Depreciation and amortization 102,539 130,529
Amortization of bond premium 4,589 6,102
Net gain on sale of equipment (500) (79)
Provision for doubtful accounts 11,406 -
Provision for inventory obsolescence 34,000 -
(Increase) decrease in assets:
Accounts receivable (564,454) 10,928
Inventories 349,175 51,200
Prepaid expenses and other current
and non-current assets 109,911 77,843
Increase (decrease) in liabilities:
Accounts payable 993 (40,040)
Accrued expenses and taxes payable 60,368 29,292
---------- --------
Net cash provided by operating activities 1,446,419 994,974
---------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (83,584) (72,502)
Proceeds from sale of equipment 500 14,500
Net change in temporary investments 1,377,512 (231,654)
Proceeds from sale of marketable securities 430,000 -
Purchase of marketable securities (1,900) (2,002)
---------- --------
Net cash provided by (used in)
investing activities 1,722,528 (291,658)
---------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options 101,050 35,975
Dividends paid (488,114) (487,044)
---------- --------
Net cash used in financing activities (387,064) (451,069)
---------- --------
Net increase in cash and cash equivalents 2,781,883 252,247
Cash and cash equivalents at beginning of period 3,184,599 1,599,857
---------- ---------
Cash and cash equivalents at end of period $ 5,966,482 $ 1,852,104
========== =========
See notes to financial statements
5
UNITED-GUARDIAN, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of June 30, 2003
and the results of operations and cash flows for the three and six months ended
June 30, 2003 and 2002. The accounting policies followed by the Company are set
forth in the Company's financial statements included in its December 31, 2002
Annual Report to Shareholders.
2. The results of operations for the three and six months ended June 30,
2003 and 2002 are not necessarily indicative of the results to be expected for
the full year.
3. Stock-Based Compensation: At June 30, 2003, the Company had two
stock-based employee compensation plans. As permitted under SFAS NO. 148,
(Accounting for Stock-Based Compensation-Transition and Disclosure), which
amended SFAS NO. 123, (Accounting for Stock-Based Compensation), United-Guardian
has elected to continue to follow the intrinsic value method in accounting for
its stock-based employee compensation arrangement as defined by Accounting
Principle Board Opinion ("APB") No. 25, (Accounting for Stock Issued to
Employees), and related interpretations including Financial Accounting Standards
Board Interpretation No. 44, (Accounting for Certain Transactions involving
Stock Compensation), an interpretation of APB No. 25. The following table
illustrates the effect on net income and earnings per share if the company had
applied the fair value recognition provisions of SFAS No.123 to stock-based
employee compensation.
Six months ended Three months ended
June 30, June 30,
2003 2002 2003 2002
-------- -------- -------- --------
Reported net income $1,338,392 $ 729,199 $634,963 $291,287
Stock-based employee compensation
expense included in reported net
income, net of related tax effects 0 0 0 0
Stock-based employee compensation
determined under the fair value based
method, net of related tax effect (13,195) 0 (5,979) 0
--------- -------- -------- --------
Pro forma net income $1,325,197 $729,199 $628,984 $291,287
========== ======== ======== ========
Earnings per share (basic and diluted)
As reported $ .27 $ .15 $ .13 $ .06
Pro forma $ .27 $ .15 $ .13 $ .06
6
4. Inventories - Net
Inventories consist of the following: June 30, December 31,
2003 2002
---------- ----------
Raw materials and work in process $ 323,105 $ 269,067
Finished products and fine chemicals 331,035 768,248
---------- ----------
$ 654,140 $1,037,315
========== ==========
At June 30, 2003 and December 31, 2002, the Company has reserved $332,000
and $366,000 respectively for slow moving and obsolete inventory.
5. For purposes of the Statement of Cash Flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents.
Cash payments for taxes were $617,645 and $290,928 for the six months ended
June 30, 2003 and 2002, respectively.
6. Comprehensive Income (Loss)
The components of comprehensive income (loss) are as follows:
Six months ended June 30, Three months ended June 30,
2003 2002 2003 2002
------ ------ ------ ------
Net income $1,338,392 $ 729,199 $634,963 $291,287
--------- ------- ------- -------
Other comprehensive income (loss)
Unrealized gain (loss) on
marketable securities 22,243 (32,852) 27,369 (31,732)
------- ------- ------- -------
Income tax benefit on
comprehensive gain (loss) 8,280 (14,557) 10,193 (13,195)
------- ------- ------- -------
Other comprehensive income (loss) 13,963 (18,295) 17,176 (18,537)
------- ------- ------- -------
Comprehensive income $1,352,355 $ 710,904 $652,139 $272,750
========= ======= ======= =======
Accumulated other comprehensive income (loss) is comprised of unrealized
gains and losses on marketable securities, net of the related tax effect.
7
7. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share at June 30, 2003 and 2002.
Six months ended Three months ended
June 30, June 30,
2003 2002 2003 2002
------ ------ ------ ------
Numerator:
Net income $1,338,392 $ 729,199 $ 634,963 $ 291,287
======= ======= ======= =======
Denominator:
Denominator for basic earnings
per share (weighted average
shares) 4,883,951 4,875,617 4,886,733 4,880,386
Effect of dilutive securities:
Employee stock options 16,081 14,761 19,007 13,236
--------- --------- --------- ---------
Denominator for diluted earnings
per share (adjusted weighted-average
shares) and assumed conversions 4,900,032 4,890,378 4,905,740 4,893,622
========= ========= ========= =========
Basic and diluted earnings per share $ 0.27 $ 0.15 $ 0.13 $ 0.06
========= ========= ========= =========
8. The Company has the following two reportable business segments: Guardian
Laboratories and Eastern Chemical. The Guardian segment conducts research,
development and manufacturing of pharmaceuticals, medical devices, cosmetics,
products and proprietary specialty chemical products. The Eastern segment
distributes fine chemicals, solutions, dyes and reagents.
The accounting policies used to develop segment information correspond to
those described in the summary of significant accounting policies as set forth
in the Annual Report for the year ended December 31, 2002. Segment earnings or
loss is based on earnings or loss from operations before income taxes. The
reportable segments are distinct business units operating in different
industries. They are separately managed, with separate marketing and
distribution systems. The following information about the two segments is for
the six and three month periods ended June 30, 2003 and 2002.
8
Six months ended June 30,
2003 2002
------------------------------------ ------------------------------------
GUARDIAN EASTERN TOTAL GUARDIAN EASTERN TOTAL
------------ ------------ ----------- ------------ ------------ -----------
Revenues from external customers $ 5,738,137 $ 578,940 $ 6,317,077 $ 4,086,007 $ 624,609 $ 4,710,616
Depreciation and amortization 45,807 - 45,807 71,171 - 71,171
Segment income (loss) before
income taxes 2,126,841 (39,988) 2,086,853 1,130,770 (27,163) 1,103,607
Segment assets 2,406,962 275,078 2,682,040 2,309,156 459,881 2,769,037
Expenditures for segment assets 58,845 - 58,845 14,524 - 14,524
Reconciliation to Consolidated Amounts
Income before income taxes
----------------------------
Total earnings for reportable segments $ 2,086,853 $ 1,103,607
Other income, net 79,639 99,118
Corporate headquarters expense (86,100) (80,526)
---------- ----------
Consolidated earnings before income
taxes $ 2,080,392 $ 1,122,199
========== ==========
Assets
------
Total assets for reportable segments $ 2,682,040 $ 2,769,037
Corporate headquarters 10,052,092 8,261,603
---------- ----------
Total consolidated assets $12,734,132 $11,030,640
========== ==========
Three months ended June 30,
2003 2002
------------------------------------ ------------------------------------
GUARDIAN EASTERN TOTAL GUARDIAN EASTERN TOTAL
------------ ------------ ----------- ------------ ------------ -----------
Revenues from external customers $ 2,842,162 $ 257,382 $ 3,099,544 $ 1,988,156 $ 340,012 $ 2,328,168
Depreciation and amortization 25,611 - 25,611 34,992 - 34,992
Segment income (loss) before
income taxes 1,013,127 (29,212) 983,915 456,862 (21,648) 435,214
9
Earnings before income taxes
----------------------------
Total income for reportable segments $ 983,915 $ 435,214
Other income, net 39,898 49,415
Corporate headquarters expense (38,850) (40,342)
---------- ---------
Consolidated earnings before income
taxes $ 984,963 $ 444,287
========== =========
Other significant items
-----------------------
Six Months ended June 30,
2003 2002
------------------------------------------ -------------------------------------------
Segment Consolidated Segment Consolidated
Totals Corporate Totals Totals Corporate Totals
------------ ------------ ------------- ------------- ------------ -------------
Expenditures for assets 58,845 24,739 83,584 14,524 57,978 72,502
Depreciation and amortization 45,807 56,732 102,539 71,171 59,358 130,529
Geographic Information
----------------------
2003 2002
--------------------------- ---------------------------
Revenues Long-Lived Revenues Long-Lived
Assets Assets
----------- ------------- ----------- -------------
United States $ 2,323,878 $ 1,087,071 $ 2,229,946 $ 1,161,115
France 714,879 732,871
Other countries 3,278,320 1,747,799
----------- ------------- ----------- -------------
$ 6,317,077 $ 1,087,071 $ 4,710,616 $ 1,161,115
=========== ============= =========== =============
Major Customers
---------------
Customer A (Guardian) $ 2,230,979 $ 1,439,142
Customer B (Guardian) 621,640 573 127
All other customers 3,464,458 2,698,347
----------- -----------
$ 6,317,077 $ 4,710,616
=========== ===========
10
9. Impact of Recently Issued Accounting Pronouncements
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses accounting for
restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, principally Emerging Issues Task Force Issue No. 94-3. SFAS No. 146
requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. SFAS No. 146 also
establishes that the liability should initially be measured and recorded at fair
value. Accordingly SFAS No. 146 may affect the timing of recognizing future
restructuring costs as well as the amount recognized. SFAS No. 146 is effective
for exit or disposal activities that are initiated after December 31, 2002.
Management believes that the adoption of SFAS No. 146 will not have a material
impact on its results of operations or financial position.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FORWARD LOOKING STATEMENTS
Statements made in this Form 10-QSB 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," or "anticipates" or other similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and
important factors (many of which are beyond our control) could cause actual
results to differ materially from those set forth in the forward-looking
statements. In addition to those specific risks and uncertainties set forth in
the Company's reports currently on file with the SEC, some other factors that
may affect the future results of operations of the Company are: the development
of products that may be superior to the 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; 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 principals, 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 actually 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 operates in two business
segments. Its Guardian Laboratories Division ("Guardian") conducts research,
product development, manufacturing and marketing of cosmetic ingredients,
personal and health care products, pharmaceuticals, and specialty industrial
11
products. The products manufactured by Guardian are marketed through marketing
partners, distributors, direct advertising, mailings, and trade exhibitions. Its
most important personal care product line is its LUBRAJEL(R) line of water based
moisturizing and lubricating gels. It also sells two pharmaceutical products,
which are distributed primarily through drug wholesalers and surgical supply
houses. There are also indirect sales to the Veteran's Administration and other
government agencies, and to some hospitals and physicians.
While the Company does have competition in the marketplace for some of its
products, many of its products or processes are either unique in their field or
have some unique characteristics, and therefore are not in direct competition
with the products or processes of other pharmaceutical, chemical, or health care
companies. Guardian's research and development department is actively working on
the development of new products to expand the Company's personal care line.
The Company has been issued many patents and trademarks, and intends
whenever possible to make efforts to obtain patents in connection with its
product development program.
The Company's Eastern Chemical subsidiary distributes an extensive line of
fine organic chemicals, research chemicals, test solutions, indicators, dyes and
reagents. Eastern's products are marketed through advertising in trade
publications and direct mailings and are sold to both to distributors and
directly to users for use in a wide variety of applications. Since the Company's
business activities and marketing efforts over the past several years have
focused increasingly on the Guardian division, which the Company believes has
greater growth potential, the Company is in the process of reducing Eastern's
inventory levels in order to make the subsidiary more marketable in the event
the Company decides to sell the Eastern operation at some future date.
Products manufactured by the Company are marketed worldwide through its
extensive marketing and distribution arrangements. Approximately half of the
Company's sales are to foreign customers.
The following discussion and analysis covers material changes in the
financial condition of the Company since year end December 31, 2002, and a
comparison of the results of operations for the three and six month periods
ended June 30, 2003 and June 30, 2002. This discussion and analysis should be
read in conjunction with "Management's Discussion and Analysis or Plan of
Operation" included in the Company's Form 10-KSB for the year ended December 31,
2002.
RESULTS OF OPERATIONS
Gross revenue from operations
-----------------------------
For the six month period ended June 30, 2003 net sales increased $1,606,461
(34.1%) versus the comparable period in 2002. The Guardian Laboratories division
("Guardian") had a sales increase of $1,652,130 (40.4%) while the Eastern
Chemical subsidiary ("Eastern") had a sales decrease of $45,669 (7.3%).
12
For the three month period ended June 30, 2003 revenue increased $771,376
(33.1%) over the comparable period in 2002. Guardian sales increased $854,006
(43.0%), while Eastern sales decreased $82,630 (24.3%).
The increase in Guardian's sales for the three and six month periods is due
to an overall increase in demand for Guardian's products. Some of this demand
may be attributable to new launches of personal care products that contain
ingredients produced by Guardian, by companies that had been refraining from
launching new products due to the poor economic conditions that have prevailed
in both the U.S. and overseas. Based on information provided to the Company by
its distributors, over the past six to nine months there has been an increase in
activity on the part of many customers, which has resulted in increased demand
for the Company's products.
The decline in Eastern's sales is believed to be due mainly to normal
fluctuations in the purchasing patterns of its customers, but may also be
partially attributable to some loss of business due to an inability to provide
some products as a result of the ongoing program to reduce Eastern's on-hand
inventory. The Company does not anticipate any significant increase or decrease
in Eastern's sales in the near future.
Cost of sales
-------------
Cost of sales as a percentage of sales decreased to 48.3% for the six
months ended June 30, 2003 from 54.2% for the comparable period ended June 30,
2002. For the three month period ended June 30, 2003 compared to the three month
period ended June 30, 2002 the cost of sales as a percentage of sales decreased
to 49.1% from 54.9%. These decreases are mainly due to the absorption of fixed
costs by higher sales volume for the three and six month periods in 2003 as
compared to the same periods in the prior year.
Operating Expenses
------------------
Operating expenses increased $127,059 (11.2%) for the six months ended June
30, 2003 compared to the comparable period in 2002. For the three month period
ended June 30, 2003 operating expenses decreased $23,135 (3.5%) over the
comparable period in 2002. The increase was primarily due to increases in
insurance costs, advertising costs and payroll and payroll related costs for the
six month period ended June 30, 2003 as compared to the same period in the prior
year. The decrease for the three month period ended June 30, 2003 is primarily
due to a decrease in payroll and payroll related costs compared to the prior
year.
Investment income
---------------
Investment income decreased $19,924 (20.1%) for the six months ended June
30, 2003 as compared to the comparable period in 2002, and $9,541 (19.3%) for
the three months ended June 30, 2003 when compared to the comparable period in
2002. These decreases were attributable to a decline in interest rates.
13
Provision for income taxes
--------------------------
The provision for income taxes increased $349,000 (88.8%) for the six
months ended June 30, 2003 when compared to the comparable period in 2002, and
$197,000 (128.8%) for the three months ended June 30, 2003 when compared to the
comparable period in 2002. These increases are due to increased earnings before
taxes of $958,193 for the six months ended June 30, 2003 and $540,676 for the
three months ended June 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from $9,578,365 at December 31, 2002 to
$11,050,725 at June 30, 2003. The current ratio increased from 10.4 to 1 at
December 31, 2002 to 19.6 to 1 at June 30, 2003. The Company has no commitments
for any further significant capital expenditures during the remainder of 2003,
and believes that its working capital is and will continue to be sufficient to
support its operating requirements.
The company generated cash from operations of $1,446,419 and $994,974 for
the six months ended June 30, 2003 and June 30, 2002 respectively. The increase
was primarily due to the increase in net income.
During the six month period ended June 30, 2003 $1,722,528 was provided by
investment activities, as compared to the six months ended June 30, 2002 when
$291,658 was used in investing activities. The change from $291,658 used in
investing activities in 2002 to $1,722,528 provided by investing activities in
2003 was due to a decrease in purchases of temporary investments (primarily
certificates of deposit) and marketable securities, and redemption of some
certificates of deposit.
Cash used in financing activities was $387,064 and $451,069 for the six
months ended June 30, 2003 and June 30, 2002 respectively. The decrease is due
primarily to an increase in stock options exercised during the six months ended
June 30, 2003 as compared to the six months ended June 30, 2002. 13
Item 3. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Within 90 days prior to the filing of this Quarterly Report on Form 10-QSB
the Company's principal executive officer and principal financial officer
evaluated the effectiveness of the design and operation of Company's disclosure
controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934 (the "Exchange Act")) and concluded that the
Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is accumulated and communicated to the Company's
management, including its officers, as appropriate to allow timely decisions
regarding required disclosure, and are effective to ensure that such information
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.
14
(b Changes in Internal Controls
The Company's principal executive officer and principal financial officer
have also concluded there were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
While the Company has claims arise from time to time in the ordinary course
of its business, the settlement of such claims in the past has not had a
material adverse effect on the Company's financial position and results of
operations. The Company does not have any claims pending at the present time.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS: NONE
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES: NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: NONE
ITEM 5 - OTHER INFORMATION: NONE
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
31.1 Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
b. Reports on Form 8-K
There was one report on Form 8-K filed on May 8, 2003 pertaining
to the issuance of an earnings release by the Company on May 7,
2003.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED-GUARDIAN, INC.
(Registrant)
By: /s/ Alfred R. Globus
--------------------
Alfred R. Globus
Chief Executive Officer
By: /s/ Kenneth H. Globus
---------------------
Kenneth H. Globus
Chief Financial Officer
Date: August 5, 2003
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