U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 1O-KSB
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required] For the fiscal year ended December 31, 1995
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from
__________ to ____________
Commission file number 0-7855
UNITED-GUARDIAN, INC.
(Name of small business issuer in its charter)
___________Delaware_________ ____11-1719724___
State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
230 Marcus Blvd., Hauppauge, NY 11788
________________________________________
Issuer's telephone number, including area code: (516) 273-0900
Securities registered pursuant to Section l2(b) of the Exchange Act:
Title of each class Name of each exchange on
which registered
___________________ _________________________
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section l2(g) of the Exchange Act: None
Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or l5(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days. Yes |X| No |_|
Cover Page 1 of 2 Pages
<PAGE>
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10-KSB. |X|
The Registrant's revenues for the fiscal year ended December 31,
1995 were $ 6,962,615.
On March 8, 1996, the aggregate market value of the Registrant's
Common Stock (based upon the closing sales price of such shares on the
American Stock Exchange as reported in The Wall Street Journal) held by
non-affiliates of the Registrant was approximately $4,183,579. (Aggregate
market value has been estimated solely for the purposes of this report. For
the purpose of this report it has been assumed that all officers and
directors of the Registrant are affiliates of the Registrant and no person,
other than Alfred R. Globus, is an affiliate by virtue of his
stockholdings. The statements made herein shall not be construed as an
admission for determining the affiliate status of any person.)
On March 8, 1996 the Registrant had issued and outstanding 4,762,889
shares of Common Stock, $.10 par value per share ("Common Stock").
Transitional Small Business Disclosure Format (check one): Yes |_| No
|X|
DOCUMENTS INCORPORATED BY REFERENCE:
The information required by Part III (Items 10 and 11) is
incorporated by reference to the Registrant's definitive proxy statement
(the "1996 Proxy Statement") in connection with its 1996 annual meeting of
stockholders, which is to be filed no later than April 29, 1996 with the
Securities and Exchange Commission pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended.
Cover Page 2 of 2 Pages
<PAGE>
Item 1. Description of Business.
(a) General Development of Business
The Registrant is a Delaware corporation that conducts research,
product development, manufacturing and marketing of pharmaceuticals,
cosmetics, health care products, medical devices, and proprietary
industrial products. The Registrant also distributes a line of over 3,000
fine organic chemicals, research chemicals, test solutions, indicators,
dyes and reagents.
The Registrant operates in two industry segments:
(1) The Guardian Laboratories Division ("Guardian") conducts research,
development, manufacturing, and marketing of a variety of pharmaceuticals,
medical devices, health care and cosmetic products, and proprietary
specialty chemical products. The Research and Development Department of
Guardian engages in research and development in the fields of cosmetics,
health care products, and specialty industrial chemical products, for the
purpose of developing new products, and refining existing products, that
will be marketed or licensed by Guardian. Many of the products manufactured
by Guardian, particularly its LUBRAJEL(R) line of products, are marketed
worldwide through a network of distributors, and are currently used by many
of the major multinational cosmetic companies.
The Registrant presently has a broad range of products, some of which
are currently marketed, some of which are marketable but are not currently
marketed by the Registrant, and some of which are still in the
developmental stage. Of the products being actively marketed, the
Registrant's LUBRAJEL(R) line of cosmetic ingredients, and its line of
RENACIDIN(R) pharmaceutical products, accounted for approximately 63% of
the Registrant's sales in 1995. The Registrant actively seeks other
companies as potential marketers for its products, particularly for those
products that are not yet being actively marketed by the Registrant.
(2) The Registrant's Eastern Chemical Division ("Eastern"), a division
of the Registrant's wholly-owned subsidiary, Admiral Specialty Products,
Inc., distributes a line of over 3,000 fine organic chemicals, research
chemicals, test solutions, indicators, dyes, stains, and reagents. Because
Eastern's sales have not grown over the past few years, and since the
Registrant's business activities and marketing efforts over the past
several years have focused increasingly on the Guardian division, the
Registrant is currently exploring the feasibility of selling the Eastern
operation. The Registrant believes that by doing so it will be able to
focus its efforts on the Guardian division, which it believes has much
larger growth potential.
(b) Narrative Description of Business
Guardian Laboratories Division
Guardian conducts research, product development, manufacturing and
marketing of many different pharmaceuticals, medical devices, health care
products, cosmetic bases, and proprietary specialty chemical products, all
of which are developed by the Registrant. The products manufactured by
Guardian are marketed through agents, distributors, direct advertising and
mailings, and trade exhibitions. Guardian's proprietary cosmetic and
specialty chemical products are sold through distributors and are
incorporated into products marketed by many of the major international
cosmetic companies. Many of Guardian's products are marketed through
collaborative agreements with larger companies. The pharmaceutical products
are generally sold through drug wholesalers and surgical supply houses, as
well as directly to the Veteran's Administration, other government
agencies, hospitals, and physicians.
During 1995, Guardian's sales accounted for approximately 77% of
the Registrant's total product sales.
Guardian's products are sold under trademarks or trade names owned
by the Registrant. The marks for the most important products, LUBRAJEL and
RENACIDIN, are registered as trademarks in the United States Patent Office
("Patent Office"). In 1995 sales from these two product lines accounted for
approximately 82% of Guardian's sales, and 63% of the sales of the
Registrant as a whole.
LUBRAJEL
--------
LUBRAJEL is a non-drying water-based lubricating jelly which has
applications in the medical field as a lubricant, and in the cosmetic
industry as a moisturizer and as a base for other cosmetic products. As a
medical lubricant it is used on prelubricated enema tips and thermometers,
and as a lubricant for catheters. In the cosmetic industry it is used as a
stable gel for application around the eyes and on the face, and as an
ingredient in skin creams and moisturizers, makeup, body lotions, hair
preparations, salves, and ointments. During 1995, sales of LUBRAJEL
products increased by 8% compared with 1994. During 1995, sales of LUBRAJEL
products represented 59% of Guardian's sales and 45% of the sales of the
Registrant as a whole.
Sales of the Registrant's LUBRAJEL products increased compared with
the previous year as a result of (a) price increases instituted during
1995, which accounted for most of the increase, and (b) additional
marketing efforts resulting primarily from the addition of a major new
distributor, International Specialty Products ("ISP"). An increase in sales
of certain forms of LUBRAJEL also contributed to the increase. Sales of
LUBRAJEL DV (the most viscous form of LUBRAJEL) increased 30% from $367,906
in 1994 to $476,641 in 1995. Sales of LUBRAJEL NP (a form developed
primarily for the Japanese market) increased 211% from $61,011 in 1994 to
$189,717 in 1995. As a result of the new marketing agreement with ISP
(discussed in more detail below) the Registrant believes that LUBRAJEL
sales will increase in 1996, despite recent product introductions by two
European companies that compete directly with some of the Registrant's
LUBRAJEL products. The Registrant believes that its reputation for quality
and reliability, as well as innovations to its product line, will enable it
to compete effectively with these new products.
The Registrant is developing other uses for LUBRAJEL. See "Item 1.
Description of Business-Research and Development Activities."
RENACIDIN
---------
RENACIDIN is a urological prescription drug sold by the Registrant for
many years in powder form to prevent the formation of and to dissolve
calcifications in catheters implanted in the urinary bladder. The powder
form of the product has to be reconstituted prior to use by the hospital,
pharmacy, or nursing facility using it. On October 2, 1990 the Registrant
received approval from the FDA to market, under the tradename "RENACIDIN
IRRIGATION", a ready to use 10% sterile solution made from the RENACIDIN
Powder. In addition to the uses previously approved for the powder, the new
product is also approved for use in dissolving certain types of kidney
stones. Sales of RENACIDIN IRRIGATION accounted for 18% of Guardian's sales
in 1995, 79% of sales of all forms of RENACIDIN, and 14% of the sales of
the Registrant as a whole. Sales of all forms of RENACIDIN decreased by
2.5% in 1995 due to a discontinuation of one of the powder forms of
RENACIDIN (which resulted in a 16% reduction in powder sales only compared
to the previous year). During 1995, sales of all forms of RENACIDIN
represented 23% of Guardian's sales and 18% of the Registrant's total
sales.
RENACIDIN was designated an Orphan Drug by the FDA in 1990, entitling
the Registrant to seven years of exclusive marketing from the date of
approval of the New Drug Application ("NDA"). In addition, on October 9,
1990 the United States Patent Office issued to the Registrant a patent
covering the method of manufacturing the new product.
Other Products
Other products that are manufactured and sold by Guardian but which
did not individually comprise more than 5% of the Registrant's sales in
1995 are as follows:
CLORPACTIN(R) WCS-90 is a microbicidal product used primarily in
urology and surgery as an antiseptic for treating a wide range of localized
infections in the urinary bladder, the peritoneum, the abdominal cavity,
the eye, ear, nose and throat, and sinuses. The product is a white powder
that is made into a liquid prior to use. It is a powerful disinfectant,
fungicide, deodorizer, bleach and detergent. Although the Registrant's
patent on CLORPACTIN expired in June 1983, the Registrant does not believe
that it has experienced an increase in competition with respect to the
product. (See "Item 1. Description of Business - Trademarks and Patents.")
Sales of CLORPACTIN during 1995 accounted for approximately 5.7% of
Guardian's sales and 4.4% of the total sales of the Registrant.
LUBRAJEL RR is a special grade of LUBRAJEL that can withstand
sterilization by gamma radiation, which is the preferred method of
sterilizing medical and hospital products. In September, 1994 the
Registrant entered into a marketing agreement with Horizon Medical, Inc., a
California company engaged in the development and manufacturing of products
and services to the medical device and pharmaceutical industries. Horizon
was given the exclusive right to market the product as a catheter
lubricant, and has received notification from the FDA that it can begin
marketing the product for that use. An initial shipment of product to
Horizon for a test batch took place in January, 1996. The Registrant also
authorized Horizon to market another grade of LUBRAJEL RR as a component of
a wound healing system. Horizon made the appropriate submissions to the FDA
to market the product for this purpose, and received notification that it
could do so. In addition, on April 11, 1995 the Registrant was granted a
U.S. patent for these new forms of LUBRJEL.
LUBRASEPTIC(R) JELLY is a lubricating jelly used during urethral
instillations. LUBRASEPTIC also contains components that provide both local
anesthesia and antibacterial action without side effects. On September 30,
1992 the Registrant entered into a distribution agreement with Baker Norton
Pharmaceuticals ("Baker"), a division of IVAX Corp., whereby Baker obtained
the exclusive right to distribute this product in the U.S., Canada,
Ireland, and the United Kingdom. In April, 1994 the Registrant discovered
that the sterilization process for the product was adversely affecting the
level of active ingredients in the product, and the Registrant voluntarily
recalled the product. The Registrant has now decided to discontinue the
antibacterial and anesthetic claims and to promote the product just as a
urological lubricant until current inventory is depleted. The Registrant's
agreement with Baker Norton has now been terminated, and the FDA has agreed
to allow the Registrant to re-market the product with the new claims. The
product was put back on the market in November, 1995, and Registrant is
making arrangements to increase the sales of the product by using at least
one outside medical marketing organization to increase market penetration.
LUBRASIL is a special type of LUBRAJEL in which silicone oil is
incorporated into a LUBRAJEL base by microemulsification, while maintaining
the clarity of regular LUBRAJEL. The product has a silky feel, and is water
resistant while moisturizing the skin. Sales in 1995 amounted to $49,934,
an increase of 20% over 1994.
PHOSPHOCHOLATE is a new mouth moisturizer used primarily by cancer
patients. At the present time it is being marketed exclusively by Sage
Products, Inc., an Illinois health care company with which the Registrant
had been working since 1993. The new product is a significant improvement
over a product previously marketed by Sage for many years, and is expected
to replace all of the sales of the previous formulation. Shipments to Sage
began in November, 1994, and amounted to $150,296 in 1995.
OIL OF ORCHIDS(TM) is a base for skin creams, lotions, cleansers, and
other cosmetics. This product is an extract of fresh orchids, modified by
extractants, stabilizers and preservatives. It is soluble in water and
alcohol and acts as a supplementary moisturizer. It is also an enhancer for
fragrances in perfumes and toiletries. It is sold in two forms, water
soluble and oil soluble. Total sales in 1995 amounted to $95,557, and
increase of 48% over 1994.
POLYCOMPLEX(R) A-11 is a dispersant for oil and an industrial cleaner,
which does not require Environmental Protection Agency ("EPA") or other
governmental agency approval. Other POLYCOMPLEX products are used to
solubilize organic compounds (such as non-soluble germicides and
detergents) in water.
POLYSWEET(R) is in its various forms a low calorie and/or non-caloric
sweetener sold to food processors such as beverage makers, producers of
jellies, jams and dessert makers.
DESELEX(R) is a replacement for phosphates in detergents.
LUBRASLIDE(TM) and two related products, B-122(TM) and CALCIUM
STEARATE, are powders used in the manufacture of cosmetics such as pressed
powders, eye shadows, and rouges.
FOAMBREAKER(TM) is a defoamer for cleansing solutions in the
electroplating, painting, and electronics industries. The product does not
leave the typical "fish-eye" residues associated with silicone defoamers.
It is an industrial product that does not require governmental
registrations or approvals. It is an unpatented, proprietary product.
UNITWIX(TM) is a cosmetic additive used as a thickener for oils and
oil-based liquids. The product has recently stimulated interest on the part
of cosmetic manufacturers. It is a proprietary, unpatented product that
does not require government approval to market.
NORGEL is a preservative-free version of LUBRAJEL currently being
marketed by Societe D'Etudes Dermatologiques ("Sederma"), the Registrant's
distributor of LUBRAJEL in France and a major European cosmetic supplier.
Tests conducted by Sederma indicate that the product self-preserves, and
aids in the preservation of other cosmetic ingredients with which it is
formulated. Sales of Norgel in 1995 amounted to $137,348, a decrease of 30%
from 1994.
Development Activities
Guardian's Research and Development Department has developed a large
number of products that can be used in many different industries, including
the pharmaceutical, medical, cosmetic, health care, and specialty chemical
industries. These products are in various stages of development, some being
currently marketable and some being in the very early stages of development
requiring a substantial amount of development work to bring them to market.
New uses for currently marketed products are also being developed. Once a
product is created, the initial development work on it may consist of one
or more of the following: (a) laboratory refinements and adjustments to
suit the intended uses of the product; (b) stability studies to determine
the effective shelf-life of the product and suitable storage and
transportation conditions for the product; and (c) laboratory efficacy
tests to determine the effectiveness of the product under different
conditions.
After the Research and Development Department has completed its
initial work on a product and is satisfied with the results of that work,
further development work to bring the product to market will continue,
including some or all of the following: (a) animal and human clinical
studies needed to determine safety and effectiveness of drug or medical
device products, which would be needed for submissions to the appropriate
regulatory agencies, such as the FDA or EPA; (b) preparatory work for the
filing of Investigational New Drug Applications or New Drug Applications;
(c) market research to determine the marketability of the product,
including the potential market size and most effective method of marketing
the product; (d) scaling up from laboratory production batches to pilot
batches, and then to full scale production batches, including the
determination of the type of equipment necessary to produce the product;
(e) upgrading or purchasing new equipment to manufacture the products; and
(f) the negotiation of joint venture or distribution agreements to develop
and/or market the product. Some of the foregoing work may be done by
outside contractors.
While there can be no assurance that any particular project will
result in a new marketable product or a commercially successful product,
the Registrant believes that a number of its development projects,
including those discussed below, may have significant commercial potential.
LUBRAJEL
Preliminary studies indicated that LUBRAJEL may help to accelerate the
healing of wounds, such as leg ulcers, when applied daily and used in
conjunction with a Spandex or similar bandage. The Registrant believes that
an additional study done on a larger group of patients is warranted. The
Registrant is now working with Horizon Medical, Inc. (see "LUBRAJEL RR"
discussion above) to do further clinical work with this product. Horizon
received authorization from the FDA to market the product as an accessory
to a medical device for specific wound healing uses.
CLORONINE (also known as TRICLORINE)
Cloronine is a powerful disinfectant, germicide, and sanitizer for
disinfecting medical and surgical instruments and equipment (particularly
where autoclaves are not available), and for the purification of water
supplies. The product has been approved for certain uses in France and
Canada. Before this product can be marketed in the United States for any
purpose, additional tests will have to be done to determine if the product
can be registered with the EPA as a sterilizer or germicide. These tests
would comprise laboratory microbiological studies, compatibility studies,
and specific studies on its intended uses. The product will also have to be
registered with the FDA as an accessory to a medical device. Neither
registration process has yet begun. Due to the expense and time required,
the Registrant hopes to work jointly with other companies to obtain these
registrations. The Registrant was granted two patents for this product.
COLLAGENITE
Collagenite is a new product in which purified collagen is spun into
very fine fibers and made into pads to aid in burn and wound healing.
Collagen is found in human and animal connective tissue, and lends shape,
elasticity, and strength to skin, as well as functioning as a metabolic
component. The Registrant is interested in continuing its research into the
wound healing characteristics of the product. Independent outside tests
have indicated that collagen is capable of aiding in the healing of skin
wounds. The Registrant has been retained by a company in the medical field
to develop a method of spinning the Collagenite powder into fibers to make
a pad that would be soluble and absorb wound exudate, keeping the wound
from drying out, and then be easily and painlessly washed off. The initial
evaluation work was completed by mid-1995, and the Registrant is now
awaiting further word from its customer as to whether to proceed further.
This product would require clinical studies to determine safety and
efficacy, and laboratory work to determine long-term stability. FDA
authorization under a Premarket Notification would be needed prior to
marketing as a medical device.
Trademarks and Patents
The Registrant strongly believes in protecting its intellectual
property and intends whenever possible to make efforts to obtain patents in
connection with its product development program. The Registrant currently
owns many United States patents relating to its products. The Registrant
has patent applications pending with respect to a number of its research
and development products. Patents formerly held by the Registrant on
certain products have expired. There can be no assurance that any patents
held by the Registrant will be valid or otherwise of value to the
Registrant or that any patent applied for will be granted. However, the
Registrant believes that its proprietary manufacturing techniques and
procedures with respect to certain products offer it some protection from
duplication by competitors regardless of the patent status of the products.
The various trademarks and trade names owned or used by the Registrant
in Guardian's business are of varying importance to the Registrant. The
most significant products for which the Registrant has a registered
trademark are LUBRAJEL, RENACIDIN, and CLORPACTIN.
Set forth below is a table listing certain information with respect to
all unexpired U.S. patents held by the Registrant:
<PAGE>
<TABLE>
<CAPTION>
PATENT NAME PATENT # ISSUE DATE EXPIRATION DATE
<S> <C> <C> <C>
Stabilization of ethanol/gasoline mixtures 4,328,004 5/4/82 5/4/99
Treatment of Hazardous Waste 4,581,130 4/8/86 4/8/03
Treatment of Hazardous Materials; Dehalogenation 4,601,817 7/22/86 7/22/03
with sodium-copper-lead alloy
Treatment of Hazardous Waste - ternary alloy and oil 4,695,400 9/22/87 9/22/04
slurry thereof; sodium, copper, lead
Iodophor; Polyethylene Glycol Alkylaryl-sulfonate 4,873,354 10/10/89 10/10/06
Iodine complex
Thermal Resistant Microbial Agent ("Cloronine") 4,954,316 9/4/90 9/4/07
Method of Preparing Time-Stable Solutions of Non- 4,962,208 10/9/90 10/9/07
Pyrogenic Magnesium Gluconocitrate ("Renacidin
Irrigation")
Use of Clorpactin for the Treatment of Animal 4,983,634 1/8/91 1/8/08
Mastitis & the applicator used in that treatment
(owned jointly by the Registrant and Diversey Ltd.)
Iodophor; biocide; reacting polyethylene glycol, 5,013,859 5/7/91 5/7/08
alkylarylsulfonate and Iodine water-propylene glycol
solvent refluxing
Stabilized Beta Carotene 5,023,355 6/11/91 6/11/08
Stable, Active Chlorine Containing Anti-microbial 5,128,342 7/7/92 7/7/09
Compositions ("Cloronine")
Gamma Radiation Resistant Lubricating Gel 5,405,622 4/11/95 4/11/12
</TABLE>
The Registrant requires all employees and consultants who may receive
proprietary information to agree in writing to keep such proprietary
information confidential.
Eastern Chemical Division
Eastern, a division of the Registrant's wholly-owned subsidiary,
Admiral Specialty Products, Inc., distributes a line of over 3,000 fine
organic chemicals, research chemicals, test solutions, indicators, dyes and
stains, and reagents. In 1995 Eastern's sales accounted for approximately
23% of the total product sales of the Registrant.
Marketing
Guardian markets its products through (a) distributors; (b)
advertising in medical and trade journals, by mailings to physicians and to
the trade; and (c) exhibitions at appropriate medical meetings. The
pharmaceutical products are generally sold in the United States to drug
wholesalers, surgical supply houses and drug stores for resale, and
directly to hospitals, physicians, the Veteran's Administration, and other
government agencies. The proprietary cosmetic and specialty chemical
products are sold to distributors for resale and directly to manufacturers
for use as ingredients or additives in the manufacture or compounding of
other cosmetic or chemical products.
Eastern's products are marketed through advertising in trade
publications and direct mailings. They are sold to distributors and
directly to users in a wide variety of applications. Eastern does not sell
any unique products and is not dependent on any single customer or group of
customers on a continuous basis.
In 1995 the Registrant derived approximately 33% of its sales from
customers in foreign countries, primarily from sales of its cosmetic
products in Europe, compared to 32% in 1994. The Registrant currently has
seven major distributors for its cosmetic products in Europe: S. Black
(Import & Export) Ltd. in the United Kingdom ("S. Black"); Societe D'Etudes
Dermatologies ("Sederma") and Warwick-Chimilux S.A. in France;
International Specialty Products ("ISP") in Germany and the Benelux
countries; S.A. de Especialidades Quimicas in Spain; Luigi & Felice
Castelli S.R.L. in Italy; and Mimox AG in Switzerland.. During 1994 most
shipments to the Registrant's European distributors were handled through S.
Black. In 1995 the Registrant negotiated new arrangements with its European
distributors, and began shipping directly to some of the larger European
distributors, decreasing the amount shipped to S. Black. Products shipped
to S. Black accounted for approximately 10.4% of Registrant's sales in
1995, and products shipped to Sederma accounted for approximately 9.5% of
Registrant's sales in 1995. Products shipped to the Amerchol Corporation,
the Registrant's exclusive cosmetic distributor in the United States,
Canada, Mexico, and South and Central America, accounted for approximately
9.5% of the Registrant's sales.
In December, 1994 the Registrant entered into a new marketing
agreement with ISP, a subsidiary of the GAF Corporation with 1994 sales of
approximately $600 million. ISP manufactures and markets an extensive line
of personal care, pharmaceutical, and industrial products on a global
basis. The agreement establishes an alliance with ISP which is intended to
bring the Registrant's products to many regions of the world where either
they had not been marketed before, or where previous marketing efforts had
been unsatisfactory. The major focus of the agreement is in the Far East,
but also includes Eastern Europe, Russia, and some countries in Western
Europe, most importantly Germany. The agreement provides for exclusivity in
those areas as long as minimum purchase requirements are met. The
Registrant believes that this new agreement should have a significant
impact on sales in the next few years. In 1995 sales to ISP accounted for
6.2% of the Registrant's sales.
In an effort to accelerate the marketing of its products, the
Registrant in late 1995 entered into an agreement with Creative
Technologies, Inc., a marketing consulting company. Creative will be
endeavoring to place some of Guardian's products with companies not
previously contacted by the Registrant, as well as to provide Guardian with
market information that will enable it to develop products to fill existing
market needs. The agreement with Creative is for an initial six month
period which ends May 31, 1996. Thirty days prior to that the Registrant
and Creative will jointly review the progress that has been made, and
determine whether, and on what terms, the agreement will be renewed.
Raw Materials
The principal raw materials used by the Registrant consist of common
industrial organic chemicals, laboratory reagents, and common inorganic
chemicals. These materials are available in ample supply from numerous
sources. The Registrant's principal raw material suppliers are Callahan
Chemical Company, Van Waters & Rogers, Inc., Protameen Chemicals Inc.,
Alzo, Inc., Independent Chemical Corp., Kramer Chemicals, B.A.S.F., Chemie
Linz U.S., Inc., Eastman Chemical, Hoechst Celanese, Ishihara U.S.A.,
Nissei Trading Co., Rhone-Poulenc, Inc., and Varessa, Ltd.
Inventories; Returns and Allowances
The Registrant's business requires that it maintain large inventories
of finished goods for Eastern, but not Guardian. Returns and allowances are
not a significant factor in the Registrant's business.
Backlog
The Registrant currently does not have any significant backlog.
Competition
Guardian has many products or processes that 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. However, the pharmaceutical, health
care, and cosmetic industries are all highly competitive, and the
Registrant expects competition to intensify as advances in the field are
made and become widely known. There may be many domestic and foreign
companies which are engaged in the same or similar areas of research as
those in which the Registrant is engaged, many of which have substantially
greater financial, research, manpower, marketing and distribution resources
than the Registrant. In addition, there are many large, integrated and
established pharmaceutical, chemical and cosmetic companies which have
greater capacity than the Registrant to develop and to commercialize types
of products upon which the Registrant's research and development programs
are based. The Registrant believes that manufacturing, regulatory,
distribution and marketing expertise will be increasingly important
competitive factors. In this regard, the Registrant believes that
arrangements with major health care and medical or hospital products
suppliers will be important factors in the commercialization of many of the
products which it is currently developing.
Eastern faces competition from many other chemical manufacturers and
distributors, many of which have much greater financial resources than
those of the Registrant. Eastern's competition is based primarily upon
price, service and quality. Eastern attempts to maintain its competitive
position in the industry through its ability to (i) locate and make
wholesale arrangements to purchase the chemicals with suppliers located all
over the world, (ii) maintain a sufficient inventory of each of its items
at all times, and (iii) customize each order as to quantity of the item
requested and to tailor the price of the order to such quantity. Eastern's
primary competitors are Fluka Chemicals, Sigma Chemical Company, Aldrich
Chemical Co., Inc., and Spectrum Chemical Mfg. Corp.
Government Regulation
Regulation by governmental authorities in the United States and other
countries is a significant factor in the manufacturing and marketing of
many of the Registrant's products. The Registrant and many of Registrant's
products are subject to certain government regulations. Products that may
be developed and sold by the Registrant in the United States may require
approval from federal regulatory agencies, such as the FDA, as well as
state regulatory agencies. Products that may be developed and sold by the
Registrant outside of the United States may require approval from foreign
regulatory agencies. The medical device products being developed by the
Registrant will be subject to regulation by the Center for Devices and
Radiological Health of the FDA, and will require some form of pre-market
notification. Most pharmaceutical products will require clinical evaluation
under an Investigational New Drug ("IND") application prior to submission
of a New Drug Application ("NDA") for approval of a new drug product.
A drug product normally must go through several phases in order to
obtain FDA approval. The research phase involves work up to and including
discovery, research and initial production. Next is the pre-clinical phase,
which involves studies in animal models necessary to support an IND
application to the FDA and foreign health registration authorities to
commence clinical testing in humans. Clinical trials for pharmaceutical
products are conducted in three phases. In Phase I, studies are conducted
to determine safety and dosages. In Phase II, studies are conducted to gain
preliminary evidence as to the efficacy of the product. In Phase III,
studies are conducted to provide sufficient data for the statistical proof
of safety and efficacy, including dose regimen. Phase III is the final
stage of such clinical studies prior to the submission of an application
for approval of an NDA. The amount of time necessary to complete any of
these phases cannot be predicted with any certainty.
In all cases, the Registrant is required to comply with all pertinent
Good Manufacturing Practices of the FDA for medical devices and drugs.
Accordingly, the regulations to which the Registrant and certain of its
products may be subject, and any changes with respect thereto, may
materially affect the Registrant's ability to produce and market new
products developed by the Registrant.
The Registrant's present and future activities are, and will likely
continue to be, subject to varying degrees of additional regulation under
the Occupational Safety and Health Act, Environmental Protection Act,
import, export and customs regulations, and other present and possible
future foreign, federal, state and local regulations.
A portion of the Registrant's operating expenses are directly
attributable to complying with federal, state, and local environmental
statutes and regulations. In 1995 and 1994 the Registrant incurred
approximately $82,000 and $95,000 respectively, in environmental compliance
costs.
Research and Development Expense
A portion of the Registrant's operating expenses are directly
attributable to research and development the Registrant performs. In 1995
and 1994, the Registrant incurred $215,000 and $210,000 respectively, in
research and development expenses. The expenses consist of direct costs as
well as factory overhead. No portion of the research and development
expenses were directly paid by the Registrant's customers.
<PAGE>
Revenue and Earnings
The tables below set forth, for the years indicated, the revenue
(including fees and retainers), and earnings from operations attributable
to the Registrant and to the Registrant's industry segments:
YEAR ENDED YEAR ENDED
December 31, December 31,
1995 1994
---- ----
Revenue:
Guardian $ 5,333,993 $ 5,094,194
Eastern 1,628,622 1,595,788
--------- ---------
$ 6,962,615 $ 6,689,982
========= =========
Earnings from Operations:
Guardian $ 668,495 $ 438,361
Eastern 9,035 4,749
Corporate (128,802) (114,073)
--------- ---------
$ 548,728 $ 329,037
========= =========
Identifiable Assets
The table below sets forth as of the dates indicated the
identifiable assets of the Registrant as a whole, as well as the
identifiable assets of the Registrant's industry segments:
As of:
December 31, December 31,
1995 1994
---- ----
Guardian $ 2,963,289 $ 2,935,725
Eastern 1,296,509 1,317,806
Corporate 1,656,017 1,761,101
--------- ---------
$ 5,915,815 $ 6,014,632
========= =========
For certain additional financial information concerning the
Registrant's industry segments see Note 8 of Notes to Consolidated
Financial Statements of the Registrant contained in Item 7 herein.
Employees
The Registrant presently employs 46 people, 6 of whom serve in an
executive capacity, 26 in research, quality control and manufacturing, 5 in
maintenance and construction and 9 in office and clerical work. Of the
total number of employees, 43 are full time employees. None of the
Registrant's employees are covered by a collective bargaining agreement.
The Registrant believes that its relations with its employees are
satisfactory.
Item 2. Description of Property.
The Registrant maintains its principal offices and conducts most of
its research at 230 Marcus Boulevard, Hauppauge, New York 11788. These
premises, which the Registrant owns, contain approximately 30,000 square
feet of manufacturing space, 15,000 square feet of warehouse space, and
5,000 square feet of office and laboratory space on approximately 2.7 acres
of land. The Registrant has now fully developed the 2.7 acres, and fully
utilizes the buildings occupying the land. The Registrant believes that the
aforementioned property is adequate for its immediately foreseeable needs.
The Registrant has given a first mortgage on the property to Extebank
to secure a note in the original amount of $1,500,000 (balance at December
31, 1995 of $808,334 with interest at 1.0% per annum over that bank's prime
lending rate, as it may be adjusted from time to time, up to a maximum of
3% per annum higher or lower than the initial rate. Every three years the
floor and ceiling figures are adjusted for the rate in effect at that time,
and those new figures remain in effect for the duration of that three year
period. Monthly principal payments are $8,333.33 plus accrued interest. The
loan is due in full on January 10, 2004 but is callable, at the option of
Extebank, at any time after January 10, 1998 upon 120 days notice to the
Registrant. The loan can be prepaid at any time without penalty. The
Registrant is currently in the process of transferring this loan to its new
primary bank, the State Bank of Long Island ("State Bank"), at which time
the terms of the note will be modified to provide for the same basic terms
but no call option until the year 2001.
Item 3. Legal Proceedings.
In February, 1994 Eastern was served with a complaint filed by the
State of New Jersey to recover the costs it incurred in cleaning up a
warehouse in New Jersey where the State found several thousand drums of
surplus and waste chemicals, some of which it feared contained hazardous
materials that could contaminate the site. Approximately 10 drums were
surplus chemicals sold by Eastern to a company that stored the drums to
that site. Eastern is one of approximately 30 defendants named in the
complaint, which includes many large chemical companies, as well as several
universities around the country. The State of New Jersey and most of the
defendants, including the Registrant, recently agreed to settle the case
without any admission of responsibility on the part of the defendants, and
the Registrant is now awaiting the final settlement, which it expects to
take place by the end of April, 1996. The Registrant believes that in the
long run settling the case will be far less costly to it than litigation.
The Registrant's share of the settlement amount is anticipated to be
$25,904.80. A reserve this amount has been provided for in the 1995
financial statements.
Item 4. Submission of Matters to a Vote of Security Holders: None.
<PAGE>
Item 5. Market for Common Equity and Related Stockholder Matters.
Market Information
Since April 30, 1990, the Common Stock has been traded on the American
Stock Exchange (the "AMEX") under the symbol "UG". Prior to that date the
Common Stock was traded on the National Association of Securities Dealers
Automated Quotation System National Market System. The following table sets
forth for the periods indicated the high and low closing sale prices of the
shares of Common Stock, as reported by the AMEX Market Statistics for the
period January 1, 1994 to December 31, 1995. The quotations represent
prices between dealers and do not include retail markup, markdown or
commission:
Year Ended Year Ended
Quarters December 31, 1995 December 31, 1994
- -------- ----------------- -----------------
High Low High Low
---- --- ---- ---
First (1/1 - 3/31) $ 2 1/2 $ 1 11/16 $ 5 1/2 $ 4
Second (4/1 - 6/30) 2 1/8 1 5/8 4 7/8 3 7/8
Third (7/1 - 9/30) 2 3/8 1 11/16 4 1/16 1 5/8
Fourth (10/1 - 12/31) 2 3/8 1 1/2 2 1/4 1 7/16
Holders of Record
As of March 8, 1996 there were 1,827 holders of record of Common
Stock.
Cash Dividends
The Registrant has not paid any cash dividends on the Common Stock
since 1983. Since the prior accumulated deficit of the Registrant has been
eliminated, the Registrant may pay cash dividends at such time as it deems
appropriate.
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results Of Operations:
Year Ended December 31, 1995 Compared to
Year Ended December 31, 1994
Revenue
Revenue in 1995 increased by $272,633 (4%) compared to 1994 due to
revenue increases in the Guardian and Eastern Divisions of $239,799 (5%)
and $32,834 (2%) respectively. The increase in sales of the Guardian
Division was primarily due to increased sales volume and price increases on
certain cosmetic products.
Costs and Expenses
Costs and expenses in 1995 increased by $52,942 (1%) compared to
the prior year due to increases in operating expenses of $62,480. This
increase is primarily due to increases in payroll and payroll related
costs. Costs of sales as a percentage of sales decreased from 68% in 1994
to 65% in 1995. This decrease is primarily due to the absorption of plant
fixed costs by higher revenue in 1995 as compared to 1994, along with
increased margins resulting from the Company's negotiation of new
arrangements with some of its distributors.
Other Income (Expense)
Interest expense decreased from $117,396 to $107,085 due to a
reduction in bank loans outstanding, which more than offset increases in
interest rates.
Provision for Income Taxes
The provision for income taxes increased from $96,619 in 1994 to
$178,000 in 1995. This increase is primarily due to the increase in
earnings before income taxes of $226,693 (101%) between years.
Liquidity and Capital Resources
Working capital increased from $2,816,772 as of the end of 1994 to
$2,936,295 as of the end of 1995, an increase of $119,523 (4%). The
increase was primarily the result of the net cash provided by operations.
Current Ratios were as follows:
December 31, 1995: 4.2 to 1
December 31, 1994: 3.4 to 1
The Company has line of credit agreements with two banks, which
provide for borrowings of up to $250,000 and $700,000, respectively. As of
December 31, 1995, the unused portion of these lines, in the aggregate, was
$850,000.
While the Company believes that its working capital is sufficient
to support its operating requirements for the next fiscal year, the
Company's long-term liquidity position will be dependent upon its ability
to generate sufficient cash flow from operations. The Company has no
material commitments for future capital expenditures.
Impact of Inflation and Changing Prices
While it is difficult to assess the impact of inflation on the
Company's operations, management believes, because of the proprietary
nature of the majority of its product line, that inflation has had little
effect on net sales. Sales have changed as a result of volume, price and
product mix. While inflation has had an impact on the cost of sales and
payroll, these increases have been recaptured by price increases to the
greatest extent possible.
Item 7. Financial Statements.
Annexed hereto starting on page F.
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
None
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
Set forth in the table below is certain information as of March 8,
1996 with respect to the executive officers and directors of the
Registrant:
Name Age Position(s) with the Registrant
Dr. Alfred R. Globus 75 Chairman of the Board, Chief
Executive Officer and Director
Kenneth H. Globus 44 President, General Counsel and
Director
Robert S. Rubinger 53 Executive Vice President, Secre-
tary, Treasurer and Director
Charles W. Castanza 63 Vice President and Director
Derek Hampson 56 Vice President
Joseph J. Vernice 37 Vice President
Lawrence Maietta 38 Controller and Director
Henry P. Globus 73 Director
Benjamin Wm. Mehlman 85 Director
Howard A. Gellis 67 Director
Alan E. Katz 52 Director
Dr. Alfred Globus has been Chairman of the Board and Chief
Executive Officer of the Registrant since July, 1988. He served as Chairman
of the Board and President of the Registrant from the inception of the
Registrant in 1942 until July, 1988. He has been a director of the
Registrant since 1942.
Kenneth H. Globus has been President and General Counsel of the
Registrant since July, 1988. He served as Vice President and General
Counsel of the Registrant from July, 1983 until July, 1988. He has been a
director of the Registrant since 1984.
Robert S. Rubinger has been Executive Vice President and Secretary
of the Registrant since July, 1988, and Treasurer since May, 1994. He
served as Vice President and Secretary of the Registrant from February,
1982 until July, 1988. He has been a director of the Registrant since 1982.
Charles W. Castanza has been a Vice President of the Registrant
since April, 1986. He served as Operations Manager of Chemicals and
Pharmaceuticals of the Registrant from February, 1982 until April, 1986. He
has been a director of the Registrant since 1982.
Derek Hampson has been a Vice President of the Registrant since
October, 1987. He has served as Manager of the Eastern Chemical division
since 1971.
Joseph J. Vernice has been a Vice President of the Registrant
since February, 1995. He served as Assistant Vice President of the
Registrant from November, 1991 until February, 1995.
Lawrence Maietta has been a partner in the public accounting firm
of Bonamassa & Maietta, C.P.A.s in Brooklyn, NY since October, 1991. For
five years prior to that he was a partner in the public accounting firm of
Wilfred, Wyler & Co. in New York, NY. He has been controller for the
Registrant since October, 1991, and a director of the Registrant since
February, 1994.
Henry P. Globus has been a consultant to the Registrant since
July, 1988. He served as Executive Vice President of the Registrant from
1982 until July, 1988. He has been a director of the Registrant since 1947.
Benjamin William Mehlman has been counsel to the law firm of
William T. Friedman and its predecessor, Friedman and Shaftan, P.C. since
1984. He has been a director of the Registrant since 1964.
Howard A. Gellis has been President of one or more private
investment companies since 1986. He has been a director of the Registrant
since July, 1991.
Alan E. Katz has been a partner in the law firm of Greenfield
Stein & Senior, LLP, New York, NY since November, 1984. He has been a
director of the Registrant since February, 1994.
Dr. Alfred R. Globus and Henry P. Globus are brothers. Kenneth H.
Globus is the son of Henry P. Globus and the nephew of Dr. Alfred R.
Globus. There are no other family relationships between any directors or
officers of the Registrant.
Item 10. Executive Compensation.
The information required by this Item is incorporated herein by
reference to the section entitled "Management Remuneration" of the 1996
Proxy Statement.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The information required by this Item is incorporated herein by
reference to the section entitled "Security Ownership of Management" of the
1996 Proxy Statement.
Item 12. Certain Relationships and Related Transactions.
None
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
3(a) Certificate of Incorporation of the Registrant as filed April
22, 1987. Incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K, dated September 21,
1987 (the "1987 8-K").
3(b) Certificate of Merger of United-Guardian, Inc. (New York) with
and into the Registrant as filed with the Secretary of State
of the State of Delaware on September 10, 1987. Incorporated
by reference to Exhibit 3(b) to the Registrant's Annual Report
on Form 10-K for the fiscal year ended February 29, 1988 (the
"1988 10-K").
3(c) By-laws of the Registrant. Incorporated by reference to
Exhibit 4.2 to the 1987 8-K.
4(a) Specimen Certificate for shares of common stock of the
Registrant. Incorporated by reference to Exhibit 4(a) to the
1988 10-K.
4(b) Form of Common Stock Purchase Warrant dated January 1, 1993
issued by the Registrant to the two partners of Steuben
Energy. Incorporated by reference to Exhibit 4(b) to the
Registrant's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1992 (the "1992 10-KSB")
10(a) Qualified Retirement Income Plan for Employees of the
Registrant, as restated April 1, 1976. Incorporated by
reference to Exhibit 11(c) of the Registrant's Registration
Statement on Form S-1 (Registration No. 2-63114) declared
effective February 9, 1979.
10(b) Royalty Agreement, dated February 27, 1986, between
UNIR-Clorpactin and the Registrant. Incorporated by reference
to Exhibit 10(h) to the 1986 10-K.
10(c) Mortgage, dated January 10, 1989, from the Registrant to
Extebank securing a mortgage note in the amount of $1,500,000.
Incorporated by reference to Exhibit 10(f) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1989 (the "1989 10-K").
10(d) Mortgage Note from the Registrant to Extebank, dated January
10, 1989, in the amount of $1,500,000. Incorporated by
reference to Exhibit 10(g) to the 1989 10-K
10(e) Employment Termination Agreement dated July 8, 1988 between
the Registrant and Henry Globus. Incorporated by reference to
Exhibit 10(i) to the Registrant's Annual Report on Form 10-K
for the 10-month transition period from March 1, 1991 to
December 31, 1991.
10(f) Agreement dated February 28, 1990 between the Registrant and
the Schering Corporation. Incorporated by reference to Exhibit
10(j) to the Registrant's Annual Report on Form 10-K for the
10-month transition period from March 1, 1991 to December 31,
1991.
10(g) Distribution Agreement between the Registrant and Societe
D'Etudes Dermatologies, dated November 20, 1991. Incorporated
by reference to Exhibit 10(k) to the Registrant's Annual
Report on Form 10-K for the 10-month transition period from
March 1, 1991 to December 31, 1991.
10(h) Exclusive Distributor Agreement between the Registrant and ISP
(Switzerland) A.G. dated December 9, 1994. Incorporated by
reference to Exhibit 10(m) of the 1994 10-KSB. The Registrant
has been granted confidential treatment of portions of some of
the schedules to this Agreement.
11 Statement re: Computation of Per Share Earnings - not required.
18 Letter on Change in Accounting Principles - not applicable.
21 Subsidiaries of the Registrant:
Jurisdiction of Name Under Which It
Name Incorporation Does Business
---- --------------- -------------------
Admiral Specialty Products, Inc. New York Eastern Chemical
Division
Transcontinental Processes (Pty.) Ltd.* Australia N/A
Dieselite Corporation** Delaware N/A
Paragon Organic Chemicals, Inc. New York Paragon Organic
Chemicals
Shield Chemical Ltd.*** Canada N/A
* Inactive without assets
** Inactive; formerly Vital Industries, Inc.
*** Inactive without assets; in the process of liquidation
(b) Reports on Form 8-K: None
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED-GUARDIAN, INC.
Dated: March 26, 1996 By: Alfred R. Globus
Chief Executive Officer & Director
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
By: Alfred R. Globus Chief Executive Officer, Director March 29, 1996
(Principal Executive Officer and
Principal Financial Officer)
By: Kenneth H. Globus President, General Counsel, March 29, 1996
Director
By: Robert S. Rubinger Executive Vice President, March 29, 1996
Secretary, Treasurer, Director
(Principal Accounting Officer)
By: Charles W. Castanza Vice President, Director March 29, 1996
By: Henry P. Globus Director March 29, 1996
By: Benjamin Wm. Mehlman Director March 29, 1996
By: Howard A. Gellis Director March 29, 1996
By: Lawrence F. Maietta Controller, Director March 29, 1996
By: Alan E. Katz Director March 29, 1996
[/TABLE]
UNITED-GUARDIAN, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
-----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1995 and 1994 F-2
Consolidated Statements of Earnings for the years ended
December 31, 1995 and 1994 F-3
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1995 and 1994 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994 F-5
Notes to Consolidated Financial Statements F-6
F
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To United-Guardian, Inc.:
We have audited the accompanying consolidated balance sheets of
United-Guardian, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of
earnings, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of United-Guardian, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Melville, New York
March 11, 1996
F-1
<PAGE>
UNITED-GUARDIAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS December 31, December 31,
1995 1994
---------- ------
CURRENT ASSETS:
Cash and cash equivalents $ 307,061 $ 477,324
Accounts receivable, net 1,044,678 926,694
Inventories 2,289,328 2,275,247
Prepaid expenses and other current assets 148,678 207,408
Deferred income taxes 59,503 83,845
--------- ---------
Total current assets 3,849,248 3,970,518
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land 69,000 69,000
Factory equipment and fixtures 1,973,589 1,776,439
Building and improvements 1,698,205 1,653,643
Waste disposal plant 133,532 133,532
--------- ---------
3,874,326 3,632,614
Less: Accumulated depreciation 2,380,652 2,187,653
--------- ---------
1,493,674 1,444,961
Assets under capital leases, net 22,965 39,424
--------- ---------
1,516,639 1,484,385
OTHER ASSETS:
Processes and patents, net 459,546 547,258
Other 90,382 12,471
--------- ---------
549,928 559,729
--------- ---------
$5,915,815 $6,014,632
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt 119,382 126,908
and capital lease obligations
Notes payable - banks 100,000 150,000
Accounts payable $ 545,901 $ 730,544
Accrued expenses 147,670 146,294
--------- ---------
Total current liabilities 912,953 1,153,746
--------- ---------
LONG-TERM DEBT 727,462 842,491
--------- ---------
CAPITAL LEASE OBLIGATIONS 5,053 9,385
--------- ---------
DEFERRED INCOME TAXES 43,121 54,625
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value, authorized
10,000,000 shares, issued and outstanding
4,762,889 shares 476,289 476,289
Capital in excess of par value 3,089,380 3,089,380
Retained earnings 661,557 388,716
--------- ---------
Total stockholders' equity 4,227,226 3,954,385
--------- ---------
$5,915,815 $6,014,632
========= =========
The accompanying notes are an integral part of these consolidated balance
sheets.
F-2
<PAGE>
UNITED-GUARDIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended Year Ended
December 31, December 31,
1995 1994
------ ----
REVENUE:
Net sales $6,937,615 $6,659,982
Fees and retainers 25,000 30,000
--------- ---------
6,962,615 6,689,982
COSTS AND EXPENSES:
Cost of sales 4,511,507 4,521,045
Operating expenses 1,902,380 1,839,900
--------- ---------
6,413,887 6,360,945
Earnings from operations 548,728 329,037
OTHER INCOME (EXPENSE):
Interest expense (107,085) (117,396)
Other 9,198 12,507
-------- ---------
Earnings before income taxes 450,841 224,148
PROVISION FOR INCOME TAXES 178,000 96,619
-------- ---------
Net earnings $ 272,841 $ 127,529
======== =========
EARNINGS PER COMMON SHARE $.06 $.03
==== ====
The accompanying notes are an integral part of these consolidated
statements.
F-3
<PAGE>
UNITED-GUARDIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Capital in
Common Stock Excess of Retained
Shares Amount Par Value Earnings Total
--------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 4,762,889 $476,289 $3,089,380 $261,187 $3,826,856
Net earnings - - - 127,529 127,529
--------- --------- ---------- --------- ---------
BALANCE, December 31, 1994 4,762,889 476,289 3,089,380 388,716 3,954,385
Net earnings - - - 272,841 272,841
--------- --------- ---------- --------- ----------
BALANCE, December 31, 1995 4,762,889 $476,289 $3,089,380 $661,557 $4,227,226
========= ======== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
F-4
<PAGE>
UNITED-GUARDIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended Year Ended
December 31, December 31,
1995 1994
------ ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 272,841 $ 127,529
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 308,923 287,000
Gain on sale of equipment - (4,584)
Deferred income taxes 12,838 (23,820)
Increases/(decreases) in cash resulting
from changes in operating assets and
liabilities:
Accounts receivable 17,984) 40,712
Inventories (14,081) (218,862)
Prepaid expenses and other assets (19,181) (82,017)
Accounts payable (184,643) 375,022
Accrued expenses 1,376 (99,003)
--------- ---------
Net cash provided by operating 260,089 401,977
activities --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of plant and equipment, net (253,465) (275,598)
Proceeds from the sale of plant and equipment - 7,300
--------- ---------
Net cash used in investing (253,465) (268,298)
activities --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in notes payable - banks (50,000) (320,000)
Principal payments of long-term debt (114,644) (51,199)
Principal payments of capital lease obligations (12,243) (21,424)
--------- ---------
Net cash used in financing (176,887) (392,623)
activities --------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (170,263) (258,944)
CASH AND CASH EQUIVALENTS, beginning of year 477,324 736,268
--------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 307,061 $ 477,324
========= =========
The accompanying notes are an integral part of these consolidated
statements.
F-5
<PAGE>
UNITED-GUARDIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
United-Guardian, Inc. (the "Company") is a Delaware corporation that
operates in two industry segments, 1) the Guardian Laboratories Division
which conducts research, product development, manufacturing and marketing
of pharmaceuticals, cosmetics, health care products, medical devices and
proprietary industrial products, and 2) the Eastern Chemical Division which
distributes a line of fine organic chemicals, research chemicals, test
solutions, indicators, dyes and reagents. Sales from the Company's two
major product lines, Lubrajel and Renacidin, accounted for approximately
63% of consolidated sales for the years ended December 31, 1995 and 1994.
The Company's predecessor, United International Research Corp. (name later
changed to United International Research, Inc.), was founded and
incorporated in New York in 1942 by Dr. Alfred R. Globus, the Company's
Chairman and Chief Executive Officer. On February 10, 1982, a merger took
place between the Company and Guardian Chemical Corp. ("GCC"), whereby GCC
was merged into the Company and the name was changed to United-Guardian,
Inc. On September 14, 1987, United-Guardian, Inc. (New York) was merged
with and into United-Guardian, Inc., a newly incorporated Delaware
corporation formed for the purpose of changing the domicile of the Company.
Principles of Consolidation
The consolidated financial statements of the Company include the accounts
of United-Guardian, Inc. and its wholly-owned subsidiaries, Admiral
Specialty Products, Inc., and Paragon Organic Chemicals, Inc. All
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers as cash equivalents all highly liquid investments
with an original maturity of three months or less.
Inventories
Inventories are valued at the lower of cost or current market value. Costs
are determined using the first-in, first-out method ("FIFO") for the
Eastern Chemical Division, and the average cost method (which approximates
FIFO) for the Guardian Laboratories Division. Inventory costs include
material, labor and factory overhead.
Property, Plant and Equipment
Property, plant and equipment are carried at cost, less accumulated
depreciation. Major replacements and betterments are capitalized while
routine maintenance and repairs are expensed as incurred. Assets are
depreciated under both accelerated and straight-line methods. Depreciation
charged to earnings as a result of using accelerated methods was not
materially different than that which would result from using the
straight-line method for all periods presented. Certain factory equipment
and fixtures are constructed by the Company using purchased materials and
in-house labor. Such assets are capitalized and depreciated on a basis
consistent with the Company's purchased fixed assets.
F-6
<PAGE>
Estimated useful lives are as follows:
Factory equipment and fixtures 5-7 years
Building 40 years
Building improvements Lesser of useful life
or 20 years
Waste disposal plant 7 years
Processes and Patents
Processes and patents are amortized over periods ranging from 5 to 15
years. Amounts are shown net of accumulated amortization.
Income Taxes
Deferred tax assets and liabilities reflect the future tax consequences of
the differences between the financial reporting and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized.
Research and Development
The Company's research and development expenses are recorded in the year
incurred. Research and development expenses were approximately $215,000 and
$210,000 for the years ended December 31, 1995 and 1994, respectively.
Per Share Information
Earnings per share is based on the weighted average number of common shares
issued and outstanding during the year. The weighted average number of
common shares outstanding were 4,762,889 for the years ended December 31,
1995 and 1994, respectively. There were no common stock equivalents
outstanding for the years ended December 31, 1995 and 1994.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year presentation.
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". This Statement requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
pronouncement is effective for fiscal years beginning after December 15,
1995, although earlier implementation is permitted.
F-7
<PAGE>
In management's opinion, when adopted in fiscal 1996, the aforementioned
pronouncements will not have a material effect on the Company's financial
position or results of operations.
2. INVENTORIES:
Inventories consist of the following:
December 31, December 31,
1995 1994
--------- ----------
Raw materials and work-in-process $ 360,742 $ 314,359
Finished products and fine chemicals 1,928,586 1,960,888
--------- ----------
Total $2,289,328 $2,275,247
========= ==========
3. PROCESSES AND PATENTS:
On October 1, 1984, a partnership agreed to provide the Company with
funding of $454,800 for a liquid Renacidin research and development
project. In 1985, funds of $154,800 were received, and the balance was
payable by a $300,000 note due on November 30, 1992 bearing interest at
12%. On August 14, 1992, the Company and the partnership terminated the
agreement. Pursuant to the termination agreement, the partnership conveyed
its interest in the technology to the Company in exchange for cancellation
of the note plus accrued interest which together amounted to $513,000. The
technology is being amortized by the Company under the straight-line method
over a ten-year period commencing in 1992. Additionally, during 1993, the
Company and a stockholder issued warrants to the two partners of the
partnership to purchase a total of 104,000 shares of the Company's common
stock at $6.00 per share, which approximated market value at that time.
During 1994, the Company renegotiated its warrant agreement (64,000
warrants) to reflect a reduced price of $4.00 per share with an expiration
date of December 31, 1998. The warrants previously issued in 1993 by a
stockholder to purchase 40,000 shares of the Company's common stock were
cancelled.
During 1991, the Company contracted with Abbott Laboratories, Inc.
("Abbott") for the production of Renacidin Irrigation. Such production was
to commence following approval by the Food and Drug Administration ("FDA")
of Abbott as the producer. In conjunction with this agreement, the Company
paid a non-refundable fee of $154,370 to Abbott for their assistance in
obtaining an approved supplement to the Company's New Drug Application
("NDA") for Renacidin Irrigation. The NDA supplement covers the manufacture
of Renacidin Irrigation at the Abbott plant in North Carolina. During 1993,
FDA approval was granted and production commenced. Amounts paid to Abbott
have been recorded as deferred costs, and are being amortized over a
five-year period consistent with the initial term of the production
agreement.
F-8
<PAGE>
Processes and patents consist of the following:
December 31, December 31,
1995 1994
---------- ----------
Capitalized technology - Renacidin $513,000 $513,000
Deferred costs - Renacidin 154,370 154,370
Patents 78,177 78,177
---------- ----------
Total 745,547 745,547
Less: Accumulated amortization 286,001 198,289
--------- ---------
$459,546 $547,258
========= =========
4. NOTES PAYABLE - BANKS:
The Company has line of credit agreements with two banks which provide for
borrowings of up to $250,000 and $700,000, and expire in April 1996 and
June 1996, respectively. It is the Company's intention to renew both line
of credit agreements before they expire. Interest under each line is at the
bank's prime rate (8.5% at December 31, 1995 and 1994), plus 1/2%. The
outstanding line of credit agreements contain financial covenants relating
to minimum net worth, working capital, current ratio and debt to
capitalization. As of December 31, 1995 and 1994, the Company was in
compliance with all covenants.
Demand notes payable under lines of credit are as follows:
December 31, December 31,
1995 1994
Balance outstanding at year-end $100,000 $150,000
Average interest rate at year-end 9% 9%
Average month-end notes outstanding
during the year $112,500 $279,167
Weighted average interest rate for the year 9.33% 7.44%
5. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS:
Long-term debt is as follows:
December 31, December 31,
1995 1994
---------- ----------
Mortgage (a) $808,333 $908,333
Term Loan (b) 12,500 22,500
Auto Loan (c) 21,658 26,301
---------- ----------
Total long-term debt 842,491 957,134
Less: Current portion 115,029 114,643
--------- ---------
$727,462 $842,491
F-9
<PAGE>
(a) The Company has a mortgage on its building which bears interest at the
bank's prime rate (8.5% at December 31, 1995 and 1994, respectively,)
plus 1%, up to a maximum of 3% higher or lower than the base rate in
effect, which is reset every three years at the bank's prime rate plus
1% as in effect the first day of each three year period. The land and
building have been pledged as collateral for the debt. The principal
of this mortgage is payable in monthly installments of $8,333 until
January 10, 2004. The holder of the note may accelerate payment at any
time after January 10, 1998.
(b) The principal of this term loan is payable in monthly installments of
$833 through March 1997. The term loan bears interest at a bank's
prime rate (8.5% at December 31, 1995 and 1994) plus 0.75% per annum.
The term loan is collateralized by the underlying computer equipment
purchased.
(c) The auto loan is payable in monthly installments of $548 through
November 1997. The auto loan bears interest at a fixed rate of 7.99%
and is collateralized by the underlying automobile purchased.
Maturities of long-term debt as of December 31, 1995 are as follows:
1996 $115,029
1997 107,946
1998 105,897 ($614,230 if mortgage is called prior)
1999 105,286 ($5,286 if mortgage is called prior)
2000 100,000 ($-0- if mortgage is called prior)
2001 and thereafter 308,333 ($-0- if mortgage is called prior)
---------
$842,491
The Company leases certain equipment under capital leases expiring through
1998. Future minimum obligations under these capital leases as of December
31, 1995 are as follows:
1996 $ 6,237
1997 6,237
1998 1,039
---------
13,513
Less: Amounts representing interest 4,107
Capital lease obligations 9,406
Less: Current portion 4,353
--------
Long-term portion $ 5,053
=======
F-10
<PAGE>
6. INCOME TAXES:
The provision for income taxes consists of the following:
Year Ended Year Ended
December 31, December 31,
1995 1994
------------------------------
Current:
Federal $138,821 $102,854
State 26,341 17,585
-------- --------
165,162 120,439
Deferred:
Federal 11,117 (17,124)
State 1,721 (6,696)
-------- ---------
12,838 (23,820)
Total provision $178,000 $ 96,619
======== =========
The difference between the Company's effective income tax rate and the
United States statutory rate is reconciled below:
Year Ended Year Ended
December 31, December 31,
1995 1994
----------- -----------
(000's) % (000's) %
Tax expense at statutory Federal income
tax rate $153 34 $76 34
State income taxes, net of Federal benefit 19 4 7 3
Meals and entertainment disallowance 5 1 3 1
Life insurance, net - - 4 2
Other, net 1 - 7 3
----- ---- ---- ----
Actual tax expense $178 39 $97 43
===== ==== ==== ====
The tax effects of temporary differences which comprise the deferred tax
assets and liabilities are as follows:
December 31, December 31,
1995 1994
-------- ---------
Deferred tax assets:
Accounts receivable $ 9,251 $ 7,323
Inventories 36,181 62,451
Accrued vacation 3,171 3,171
State net operating loss carryforward 10,900 10,900
------- --------
59,503 83,845
Deferred tax liabilities:
Deferred costs - Renacidin (33,121) (44,625)
Other (10,000) (10,000)
------- --------
(43,121) (54,625)
Net deferred tax asset $16,382 $29,220
======= =======
As of December 31, 1995 and 1994, no valuation allowance was required with
respect to realization of the Company's deferred tax assets.
F-11
<PAGE>
7. BENEFIT PLANS:
Pension Plan
The Company has a non-contributory defined benefit pension plan which
covers substantially all of its employees. Benefits are based on years of
service and employees' compensation prior to retirement. Amounts are funded
in accordance with the requirements of ERISA (Employee Retirement Income
Security Act of 1974) and the plan is administered by a trustee who is
responsible for payments to retirees. The plan assets primarily consist of
cash equivalents, bonds, commercial paper and mortgage backed securities,
and are recorded at fair value within the plan.
Net pension cost, included the following components:
Year Ended Year Ended
December 31, December 31,
1995 1994
---------- ----------
Service cost - benefits earned during the period $ 57,502 $ 54,756
Interest cost on projected benefit obligation 75,906 76,456
Actual return on plan assets (149,198) 35,920
Net amortization and deferral 59,957 (145,040)
--------- --------
Net pension cost $ 44,167 $ 22,092
======== ========
In calculating amortization for any prior service costs, the straight-line
method has been used over the average remaining service period of employees
expected to receive benefits under the plan.
The funded status of the Company's pension plan was as follows:
December 31, December 31,
1995 1994
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $918,972 and $779,085 $ 931,833 $ 793,953
=========== ===========
Projected benefit obligation $1,390,435 $1,056,161
Plan assets at fair value 1,085,850 1,043,041
----------- -----------
Projected benefit obligation in excess of 304,585 13,120
plan assets
Unrecognized net (loss) gain (261,979) 5,127
Unrecognized net transition obligation (31,280) (35,779)
------------ ------------
Accrued (prepaid) pension cost $ 11,326 $ (17,532)
============ ============
For the years ended December 31, 1995 and 1994, the projected benefit
obligation was determined using a discount rate of 6.25% and 7.25% and a
rate of increase in future compensation of 5.16% and 5.12%, respectively.
For the years ended December 31, 1995 and 1994, the expected long-term rate
of return on plan assets was 9%.
F-12
<PAGE>
401(k) Plan
The Company maintains a 401(k) Plan for all of its employees. Under the
plan, employees may defer up to 15% of their weekly pay as a pretax
investment in a savings plan. In addition, the Company makes a contribution
of 50% of each employee's elective deferral up to 2% of weekly pay for a 4%
employee deferral. Employees become fully vested in Company contributions
after one year of employment. 401(k) Company contributions were
approximately $26,000 and $25,000 for the years ended December 31, 1995 and
1994, respectively.
Stock Option Plans
The Company maintains two stock option plans, the 1993 Employee Incentive
Stock Option Plan ("EISOP") and the Non-Statutory Stock Option Plan for
Directors ("NSSOPD"), each of which provide for the issuance of up to
100,000 shares of common stock. Such options are exercisable either upon
grant or after a waiting period specified in the agreement.
The following summarizes the stock option transactions under both plans.
EISOP NSSOPD
------ ------
Options outstanding, December 31, 1993 33,500 8,000
Granted 6,500 8,000
Surrendered/expired (7,000) (2,000)
------ ------
Options outstanding, December 31, 1994 33,000 14,000
Surrendered/expired (2,500) -
------ ------
Options outstanding, December 31, 1995 30,500 14,000
====== ======
Exercisable at December 31, 1995 30,500 14,000
====== ======
Available for grant, December 31, 1995 69,500 86,000
====== ======
(a) The exercise prices of the options outstanding at December 31, 1995
range from $2.125 to $5.00.
F-13
<PAGE>
8. NATURE OF BUSINESS AND SEGMENT INFORMATION:
The Company operates in two industry segments (Note 1). Certain financial
and operating data related to the Company's segments are as follows:
As of or for As of or for
the year ended the year ended
December 31, December 31,
1995 1994
----------- -----------
Revenue:
Guardian $5,333,993 $5,094,194
Eastern 1,628,622 1,595,788
----------- -----------
Total $6,962,615 $6,689,982
========== ==========
Earnings from operations:
Guardian $ 668,495 $ 438,361
Eastern 9,035 4,749
Corporate (128,802) (114,073)
----------- -----------
Total $ 548,728 $ 329,037
=========== ==========
Identifiable Assets:
Guardian $2,963,289 $2,935,725
Eastern 1,296,509 1,317,806
Corporate 1,656,017 1,761,101
----------- -----------
Total $5,915,815 $6,014,632
========== ==========
Depreciation and Amortization:
Guardian $211,901 $199,121
Corporate 97,022 87,879
---------- ----------
Total $308,923 $287,000
======== ========
Capital Expenditures:
Guardian $152,662 $116,035
Corporate 100,803 159,563
--------- ---------
Total $253,465 $275,598
======== ========
The Company sells to companies in various industries throughout the United
States and Europe. Due to the diversity of its product line, distribution
area and customer base, management does not believe there is a significant
concentration of credit risk. During 1994, most shipments to Europe were
handled through Customer A. In 1995, the Company negotiated new
arrangements with its European distributors and began shipping directly to
some of the larger European distributors, thus decreasing the sales to
Customer A. Revenues from significant customers exceeding 10% of total
revenue and to companies in foreign countries are summarized as follows:
Percentage of Revenue
---------------------
Year Ended Year Ended
December 31, 1995 December 31, 1994
Significant customers:
Customer A (United Kingdom) 10% 18%
Customer B (United States) 10% 12%
Customer C (France) 10% -
F-14
<PAGE>
9. CASH FLOW INFORMATION:
Cash payments for interest were $108,349 and $115,049 for the years ended
December 31, 1995 and 1994, respectively. Cash payments for income taxes
were $207,315 and $175,976 for the years ended December 31, 1995 and 1994,
respectively.
10. COMMITMENTS AND CONTINGENCIES:
Royalties
In 1986, the Company executed a royalty agreement with UNIR-Clorpactin, a
Texas partnership. In 1986, the partnership paid the Company a $350,000
fee, which is non-refundable and whose use is unrestricted. Under the
original terms of the agreement, the partnership was to receive for a
seven-year period a 10% royalty on all sales by the Company of the product
Clorpactin. On February 24, 1993 this agreement was extended for a period
of three years. The royalty payments shall be made quarterly during such
period which runs from March 1, 1993 to February 28, 1996. Royalty expense
related to this agreement was $31,111 and $30,849 for the years ended
December 31, 1995 and 1994, respectively.
Recall
On September 30, 1992, the Company entered into a distribution agreement
with Baker Norton Pharmaceuticals ("Baker"), a division of IVAX Corp.,
whereby Baker obtained the exclusive right to distribute Lubraseptic Jelly
in the U.S., Canada, Ireland and the United Kingdom. During fiscal 1994,
the Company voluntarily recalled Lubraseptic Jelly in response to newly
acquired knowledge that the sterilization process for the product was
adversely affecting the level of active ingredients in the product. The
Food and Drug Administration has agreed to permit the Company to re-market
the recalled inventory as a urological lubricant. As a result, the
agreement with Baker was terminated and Baker returned a total of
approximately $200,000 of product to the Company, for which the Company has
recorded a liability to Baker of an equal amount. The Company is in the
process of relabeling the product and believes it will be sold, without
loss.
Litigation
In February, 1994 the Eastern Chemical Division ("Eastern") was served with
a complaint filed by the State of New Jersey to recover the costs it
incurred in cleaning up a warehouse in New Jersey where the State found
several thousand drums of surplus and waste chemicals, some of which it
feared contained hazardous materials that could contaminate the site.
Approximately 10 drums were surplus chemicals sold by Eastern to a company
that stored the drums on the site. Eastern is one of approximately 30
defendants named in the complaint, which includes many large chemical
companies, as well as several universities around the United States. The
State of New Jersey and most of the defendants including the Company,
recently agreed to settle the case without any admission of responsibility
on the part of the defendants, and the Company is now awaiting the final
settlement, which it expects to take place by the end of April, 1996. The
Company believes that settling the case will be far less costly to it than
litigation. The Company's share of the settlement amount is anticipated to
be approximately $26,000. A reserve for this amount has been provided for
in the December 31, 1995 financial statements.
The Company is involved in various legal matters involving claims and
counterclaims arising from the ordinary course of business. In the opinion
of the Company's management and its in-house legal counsel, any unfavorable
outcome associated with these matters would not have a material adverse
effect on the Company's financial position and results of operations.
F-15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 307,061
<SECURITIES> 0
<RECEIVABLES> 1,069,480
<ALLOWANCES> 24,802
<INVENTORY> 2,289,328
<CURRENT-ASSETS> 3,849,248
<PP&E> 3,874,326
<DEPRECIATION> 2,380,652
<TOTAL-ASSETS> 5,915,815
<CURRENT-LIABILITIES> 912,953
<BONDS> 727,462
0
0
<COMMON> 476,289
<OTHER-SE> 3,750,937
<TOTAL-LIABILITY-AND-EQUITY> 5,915,815
<SALES> 6,937,615
<TOTAL-REVENUES> 6,962,615
<CGS> 4,511,507
<TOTAL-COSTS> 4,511,507
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107,085
<INCOME-PRETAX> 450,841
<INCOME-TAX> 178,000
<INCOME-CONTINUING> 272,841
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 272,841
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
