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 September 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 the latest practicable date
4,872,289
- -----------------------------------------------------------------------------
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UNITED-GUARDIAN, INC.
INDEX
Page No.
Part I. Financial Information:
Consolidated Statements of Earnings -
Three and Nine Months Ended
September 30, 1997 and 1996 2
Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996 3-4
Consolidated Statements of Cash Flows -
Nine Months Ended
September 30, 1997 and 1996 5
Consolidated Notes to Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-8
Part II. Other Information 9
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UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
--------- --------- --------- ---------
Revenue:
Sales $ 6,665,342 $ 5,794,771 $ 2,212,677 $ 1,736,030
Fees and retainers - 35,000 - 10,000
--------- --------- --------- ---------
6,665,342 5,829,771 2,212,677 1,746,030
--------- --------- --------- ---------
Costs and expenses:
Cost of sales 4,101,482 3,663,646 1,372,760 1,066,790
Operating expenses 1,491,821 1,486,573 493,201 503,534
--------- --------- --------- ---------
5,593,303 5,150,219 1,865,961 1,570,324
--------- --------- --------- ---------
Earnings from
operations 1,072,039 679,552 346,716 175,706
Other income (expense):
Interest income 22,555 9,419 11,082 5,253
Interest expense (29,140) (65,222) (3,784) (19,353)
Gain on sale of
equipment - 45,000 - 45,000
--------- ---------- --------- ---------
Earnings before
income taxes 1,065,454 668,749 354,014 206,606
Provision for income
taxes 399,800 254,300 129,470 79,000
--------- ---------- --------- ---------
Net earnings $ 665,654 $ 414,449 $ 224,544 $ 127,606
========= ========== ========= =========
Earnings per common
share $ .14 $ .09 $ .05 $ .03
========= ========== ========= =========
See notes to financial statements.
2
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UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $ 867,940 $ 826,079
Accounts receivable
(less allowance for doubtful
accounts of $24,430 at
September 30, 1997 and
$38,900 at December 31,1996) 1,219,244 859,146
Inventories 1,449,571 1,812,629
Prepaid expenses and other
current assets 174,685 199,516
Deferred income taxes 116,233 116,233
------------ -----------
Total current assets 3,827,673 3,813,603
------------ -----------
Property, plant and equipment:
Land 69,000 69,000
Factory equipment and fixtures 2,324,577 2,119,223
Building and improvements 1,795,340 1,766,174
Waste disposal plant 133,532 133,532
------------ -----------
4,322,449 4,087,929
Less: Accumulated depreciation 2,787,632 2,583,297
------------ -----------
1,534,817 1,504,632
Assets under capital leases,net 2,527 6,934
------------ -----------
1,537,344 1,511,566
------------ -----------
Other assets:
Processes and patents, net 570,058 351,835
Other 263,684 177,135
------------ -----------
833,742 528,970
------------ -----------
$ 6,198,759 $ 5,854,139
============ ===========
See notes to financial statements.
3
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UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 DECEMBER 31,1996
------------------ -----------------
LIABILITIES AND (UNAUDITED)
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 491,645 $ 222,743
Dividends payable - 238,144
Accrued expense and other 201,691 100,772
Current portion of long term
debt and capital lease
obligations 1,825 114,241
Taxes payable 64,923 155,231
------------ -----------
Total current liabilities 760,084 831,131
------------ -----------
Long-term debt - 475,000
------------ -----------
Deferred income taxes 31,618 31,618
------------ -----------
Stockholders' equity:
Common stock $.10 par value, 487,229 476,289
authorized 10,000,000 shares,
issued and outstanding
4,872,289 and 4,762,889 shares
Capital in excess of par value 3,303,453 3,089,380
Retained earnings 1,616,375 950,721
------------ -----------
Total stockholders' equity 5,407,057 4,516,390
------------ -----------
$ 6,198,759 $ 5,845,139
============ ===========
See notes to financial statements.
4
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UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
-------- --------
Cash flows provided by operating activities:
Net earnings $ 665,654 $ 414,449
Adjustments to reconcile net earnings
to net cash flows from operations:
Depreciation and amortization 296,769 224,272
Gain on sale of equipment - (45,000)
(Increase) decrease in assets:
Accounts receivable (360,098) 236,072
Inventories 363,058 52,039
Prepaid expense and other assets (61,718) (119,108)
Increase (decrease) in liabilities:
Accounts payable 268,902 (217,790)
Accrued expenses and other 10,611 99,370
--------- ---------
Net cash provided by operating activities 1,183,178 644,304
--------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment (234,520) (165,405)
Proceeds from sale of equipment - 45,000
Aquisition of processes and patents (100,000) -
--------- ---------
Net cash (used in) investing activities (334,520) (120,405)
--------- ---------
Cash flows from financing activities:
(Decrease) notes payable-bank, net - (100,000)
Principal payments on long-term debt (584,167) (225,795)
Principal payments on capital lease
obligations (3,249) (6,610)
Proceeds of stock options exercised 18,763 -
Dividends paid (238,144) -
--------- ---------
Net cash (used in) financing activities (806,797) (332,405)
--------- ---------
Net increase in cash and cash equivalents 41,861 191,494
Cash and cash equivalents at beginning
of period 826,079 307,061
--------- ---------
Cash and cash equivalents at
end of period $ 867,940 $ 498,555
========= =========
See notes to financial statements.
5
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UNITED-GUARDIAN, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as
of September 30, 1997 and the results of operations for the three and
nine months ended September 30, 1997 and 1996 and cash flows for the nine
months ended September 30, 1997 and 1996.The accounting policies followed
by the Company are set forth in the Company's financial statements
included in the December 31, 1996 Annual Report.
2. The results of operations for the three and nine months ended
September 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 $32,283 and $66,610 for the nine
months ended September 30, 1997 and 1996 respectively.
Cash payments for taxes were $490,108 and $173,183 for the nine
months ended September 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 $835,571 (14.3%) for the nine months ended
September 30, 1997 as compared to the comparable period in 1996. The
Guardian Laboratories division ("Guardian") had a sales increase of
$1,149,332 (27.2%) while the Eastern Chemical subsidiary ("Eastern") had
a sales decrease of $278,761 (17.7%).
For the three month period ended September 30, 1997, revenue
increased $466,647 (26.7%) over the comparable period in 1996. Sales of
Guardian increased $558,834 (46%) while sales of Eastern decreased
$82,187 (15.7%).
The Guardian sales increases were mainly due to the realization of
benefits of new distributor arrangements entered into by the Company over
the past few years, as well as a significant increase in the sales of two
of the Company's products that had not had significant sales previously
and some sales of new products introduced by the Company recently. The
Eastern decreases were mainly due to normal fluctuations in the
purchasing patterns of customers from month to month.
Revenue from fees and retainers was $35,000 and $10,000 for the nine
and three month periods ended September 30, 1996 respectively. There were
no fees and retainers for the comparable periods in 1997.
Cost of Sales
-------------
As a percentage of sales, cost of sales decreased from 63.2% for the
nine months ended September 30, 1996 to 61.5% in the comparable period in
1997. The decrease was mainly due to the absorption of plant fixed costs
by higher revenue in 1997 as compared to 1996.
Cost of sales, as a percentage of sales, increased from 61.4% for
the three month period ended September 30, 1996 to 62% for the comparable
period in 1997.
7
<PAGE>
Operating expenses
------------------
Operating Expenses increased $5,248 (.4%) in the nine months ended
September 30, 1997 when compared to the comparable period in 1996. For
the three months ended September 30, 1997 there was a decrease of $10,333
(2.1%) over the comparable period in 1996.
Interest Expense
----------------
Interest Expense decreased $36,082 (55.3%) in the nine months ended
September 30, 1997 when compared to the comparable period in 1996 and
$15,569 (80.4%) in the three month period ended September 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 $13,136 (139.5%) for the nine months ended
September 30, 1997 when compared to the comparable period in 1996 and
$5,829 (111%) for the three months ended September 30, 1997 when compared
to the comparable period in 1996. These increases are primarily due to an
increase in short term invested balances.
Gain on Sale of Equipment. The Company realized a gain on sale of
equipment amounting to $45,000 during the nine and three month periods
ended September 30, 1996. No gains were realized during the comparable
nine and three month periods in 1997.
FINANCIAL CONDITION
Working capital was $2,982,472 at December 31, 1996 and $3,067,589
at September 30, 1997. The current ratio increased from 4.6 to 1 at
December 31, 1996 to 5.0 to 1 at September 30, 1997. The Company believes
that its working capital is and will continue to be sufficient to support
its operating requirements.
8
<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: October 30, 1997
9
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<CIK> 0000101295
<NAME> UNITED-GUARDIAN, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 867,940
<SECURITIES> 0
<RECEIVABLES> 1,219,244
<ALLOWANCES> 24,430
<INVENTORY> 1,449,571
<CURRENT-ASSETS> 3,827,673
<PP&E> 4,322,449
<DEPRECIATION> 2,787,632
<TOTAL-ASSETS> 6,198,759
<CURRENT-LIABILITIES> 760,084
<BONDS> 0
0
0
<COMMON> 487,229
<OTHER-SE> 4,919,828
<TOTAL-LIABILITY-AND-EQUITY> 6,198,759
<SALES> 6,665,342
<TOTAL-REVENUES> 6,665,342
<CGS> 4,101,482
<TOTAL-COSTS> 4,101,482
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,140
<INCOME-PRETAX> 1,065,454
<INCOME-TAX> 399,800
<INCOME-CONTINUING> 665,654
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 665,654
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
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