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, 1997
----------------------
_______ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to ___________
Commission File Number 0-7855
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UNITED-GUARDIAN, INC.
- -------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 11-1719724
- ------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
230 Marcus Boulevard., Hauppauge, New York 11788
- -------------------------------------------------------------------------
(Address of Principal Executive Offices)
(516) 273-0900
- -------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- -------------------------------------------------------------------------
(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 registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
---------- -----------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant 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 June 30, 1997
-------------------
4,862,889
- -------------------------------------------------------------------------
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UNITED-GUARDIAN, INC.
INDEX
Page No.
--------
Part I. Financial Information:
Consolidated Statements of Earnings -
Three and Six Months Ended
June 30, 1997 and 1996 2
Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 3-4
Consolidated Statements of Cash Flows -
Six Months Ended
June 30, 1997 and 1996 5
Consolidated Notes to Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
Part II. Other Information 8
1
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
---- ---- ---- ----
Revenue:
Net sales $ 4,452,665 $ 4,058,741 $ 2,558,077 $ 2,129,355
Fees and retainers --- 25,000 --- 25,000
--------- --------- --------- ---------
4,452,665 4,083,741 2,558,077 2,154.355
--------- --------- --------- ---------
Costs and expenses:
Cost of sales 2,728,722 2,596,856 1,536,665 1,351,102
Operating expenses 998,620 983,039 528,596 495,519
--------- --------- --------- ---------
3,727,342 3,579,895 2,065,261 1,846,621
--------- --------- --------- ---------
Earnings from
operations 725,323 503,846 492,816 307,734
Other income (expense):
Interest income 11,473 4,166 6,580 2,257
Interest expense (25,356) (45,869) (11,329) (23,316)
--------- --------- --------- ---------
Earnings before
income taxes 711,440 462,143 488,067 286,675
Provision for
income taxes 270,330 175,300 185,430 108,700
--------- --------- --------- ---------
Net earnings $ 441,110 $ 286,843 $ 302,637 $ 177,975
========= ========= ========= =========
Earnings per common
share $ 0.09 $ 0.06 $ 0.06 $ 0.04
========= ========= ========= =========
Weighted average shares
outstanding 4,792,723 4,762,889 4,822,230 4,762,889
========= ========= ========= =========
See notes to financial statements.
2
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UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30 DECEMBER 31
1997 1996
------------ -------------
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $ 827,622 $ 826,079
Accounts receivable
(less allowance for doubtful
accounts of $24,600 at
June 30, 1997 and 38,900 at
December 31, 1996) 1,002,339 859,146
Inventories 1,434,919 1,812,629
Prepaid expenses and other
current assets 219,624 199,516
Deferred income taxes 116,233 116,233
----------- -----------
Total current assets 3,600,737 3,813,063
----------- -----------
Property, plant and equipment:
Land 69,000 69,000
Factory equipment and fixtures 2,235,453 2,119,223
Building and improvements 1,780,202 1,766,174
Waste disposal plant 133,532 133,532
----------- -----------
4,218,187 4,087,929
Less: Accumulated depreciation 2,716,842 2,583,297
----------- -----------
1,501.345 1,504,632
Assets under capital leases, net 3,609 6.934
----------- -----------
1,504,954 1,511,566
----------- -----------
Other assets:
Processes and patents, net 606,131 351,835
Other 263,684 177,135
----------- -----------
869,815 528,970
----------- -----------
$ 5,975,506 $ 5,854,139
=========== ===========
See notes to financial statements.
3
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1997 1996
--------------- ------------
LIABILITIES AND (UNAUDITED)
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 342,044 $ 222,743
Notes payable - banks --- 238,144
Accrued expense and other 199,899 100,772
Current portion of long term
debt and capital lease
obligations 109,575 114,241
Taxes payable 31,953 155,231
--------- ---------
Total current liabilities 683,471 831.131
--------- ---------
Long-term debt 96,667 475,000
--------- ---------
Capital lease obligations --- ---
--------- ---------
Deferred income taxes 31,618 31,618
--------- ---------
Stockholders' equity:
Common stock $.10 par value, 486,289 476,289
authorized 10,000,000 shares,
issued and outstanding
4,862,889 shares at June 30,1997
and 4,762,889 at December 31, 1996
Capital in excess of par value 3,285,630 3,089,380
Retained earnings 1,391,831 950,721
--------- ---------
Total stockholders' equity 5,163,750 4,516,390
--------- ---------
$ 5,975,506 $ 5,854,139
========= =========
See notes to financial statements.
4
<PAGE>
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
--------
1997 1996
------- ------
Cash flows provided by operating activities:
Net earnings $ 441,110 $ 286,843
Adjustments to reconcile net earnings
to net cash flows from operations:
Depreciation and amortization 188,824 141,166
(Increase) decrease in assets:
Accounts receivable (143,193) (16,954)
Inventories 377,710 103,043
Prepaid expense and other assets (106,657) (125,957)
Increase (decrease) in liabilities:
Accounts payable 119,301 (194,554)
Accrued expenses and other (24,151) 52,462
-------- --------
Net cash provided by operating activities 852,944 246,049
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (130,258) (81,787)
Acquisition of intangible assets (100,000) ---
-------- --------
Net cash (used in) investing activities (230,258) (81,787)
-------- --------
Cash flows from financing activities:
Dividends Paid (238,144) ---
(Decrease) notes payable-bank, net --- (100,000)
Principal payments on long-term debt (380,833) (57,462)
Principal payments on capital lease
obligations (2,166) (3,028)
-------- --------
Net cash (used in) financing activities (621,143) (160,490)
-------- --------
Net increase in cash and cash
equivalents 1,543 3,772
Cash and cash equivalents at beginning
of period 826,079 307,061
-------- ---------
Cash and cash equivalents at end of period $ 827,622 $ 310,833
======== =========
See notes to financial statements.
5
<PAGE>
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, 1997 and the results of operations for the three and six
months ended June 30, 1997 and 1996 and cash flows for the six months
ended June 30, 1997 and 1996. The accounting policies followed by the
Company are set forth in the Company's financial statements included in
its December 31, 1996 Annual Report to Shareholders.
2. The results of operations for the three and six months ended
June 30, 1997 and 1996 are not necessarily indicative of the results to
be expected for the full year.
3. 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 interest were $27,246 and $47,257 for the
six months ended June 30, 1997 and 1996 respectively.
Cash payments for taxes were $393,608 and $125,308 for the
six months ended June 30, 1997 and 1996 respectively.
4. On May 8, 1997, the Company re-acquired the rights to its
"Sonarite" technology for $100,000 in cash and the issuance of 100,000
shares of restricted Company Common stock. The "Sonarite" technology,
which has been shown in clinical tests to reduce the incidence and
severity of sleep apnea and snoring, was developed by the Company for a
group of investors who agreed to sell the technology back to the Company.
The total cost, $306,250, is reflected within patents and processes in
the accompanying consolidated balance sheet, and will be amortized over
the technology's estimated useful life of 5 years.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Gross revenue from operations
-----------------------------
Revenue increased $368,924 (9%) For the six months ended
June 30, 1997 compared to the comparable period in 1996. The Guardian
Laboratories division ("Guardian") had a sales increase of $590,498
(19.7%) while the Eastern Chemical subsidiary ("Eastern") had a sales
decrease of $196,574 (18.7%).
For the three month period ended June 30, 1997, revenue
increased $403,722 (18.7%) over the comparable period in 1996. Sales of
Guardian increased $576,970 (37.7%) while sales of Eastern decreased
$148,248 (25%).
The Guardian sales increases were mainly due to increased
sales of Guardian's cosmetic products, the marketing of which has been
significantly expanded as a result of new distribution arrangements that
the company has put in place over the past few years. The Eastern
decreases were mainly due to normal fluctuations in purchasing patterns
of customers.
Cost of sales
-------------
As a percentage of sales, cost of sales decreased from 64%
for the six months ended June 30, 1996 to 61.3% in the comparable period
in 1997.
Cost of sales, as a percentage of sales, decreased from
63.5% for the three month period ended June 30, 1996 to 60.1% for the
comparable period in 1997. The decreases are mainly due to the absorption
of plant fixed costs by higher revenue in 1997 as compared to 1996.
Operating expenses
------------------
Operating expenses increased $15,581 (1.6%) in the six
months ended June 30, 1997 when compared to the comparable period in
1996. For the three months ended June 30, 1997 there was an increase of
$33,077 (6.7%) over the comparable period in 1996. These increases were
primarily due to increases in payroll and payroll related costs.
Interest expense
----------------
Interest expense decreased $20,513 (44.7%) in the six
months ended June 30, 1997 when compared to the comparable period in 1996
and $11,987 (51.4%) in the three month period ended June 30, 1997 over
the comparable period in 1996. These decreases were mainly due to a lower
average balance of bank loans outstanding.
Interest income
---------------
Interest Income increased $7,307 (175.4%) for the six
months ended June 30, 1997 when compared to the comparable period in 1996
and $4,323 (191.5%) for the three months ended June 30, 1997 when
compared to the comparable period in 1996. These increases are primarily
due to an increase in short term invested balances.
FINANCIAL CONDITION
Working capital was $2,982,472 at December 31, 1996 and
$2,917,266 at June 30, 1997. The current ratio increased from 4.6 to 1 at
December 31, 1996 to 5.3 to 1 at June 30, 1997. The Company has no
commitments for any further significant capital expenditures during the
remainder of 1997, and believes that its working capital is and will
continue to be sufficient to support its operating requirements.
7
<PAGE>
PART II - OTHER INFORMATION
Item 6 (b) Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
No reports have been filed on Form 8-K during this
quarter.
UNITED-GUARDIAN, INC.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNITED-GUARDIAN, INC.
(Registrant)
By: Alfred R. Globus
Chief Executive Officer and
Chief Financial Officer
Date: August 5, 1997
8
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<CIK> 0000101295
<NAME> UNITED-GUARDIAN, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 827,622
<SECURITIES> 0
<RECEIVABLES> 1,002,339
<ALLOWANCES> 24,625
<INVENTORY> 1,434,919
<CURRENT-ASSETS> 3,600,737
<PP&E> 4,218,187
<DEPRECIATION> 2,716,842
<TOTAL-ASSETS> 5,975,506
<CURRENT-LIABILITIES> 683,471
<BONDS> 96,667
0
0
<COMMON> 486,289
<OTHER-SE> 4,677,461
<TOTAL-LIABILITY-AND-EQUITY> 5,975,506
<SALES> 4,452,665
<TOTAL-REVENUES> 4,452,665
<CGS> 2,728,722
<TOTAL-COSTS> 2,728,722
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,356
<INCOME-PRETAX> 711,440
<INCOME-TAX> 270,330
<INCOME-CONTINUING> 441,110
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 441,110
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
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