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, 2005
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_______ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to ___________
Commission File Number 1-10526
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UNITED-GUARDIAN, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 11-1719724
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
230 Marcus Boulevard., Hauppauge, New York 11788
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(Address of Principal Executive Offices)
(631) 273-0900
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(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Company was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
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Cover Page 1 of 2 Pages
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the Company filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes _________ No ____________
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of July 27, 2005:
4,938,139
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Cover Page 2 of 2 Pages
UNITED-GUARDIAN, INC.
INDEX
Page No.
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Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Income -
Six Months Ended June 30, 2005 and 2004................ 2
Consolidated Balance Sheets -
June 30, 2005 and December 31, 2004.................... 3-4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2005 and 2004................ 5
Consolidated Notes to Financial Statements.............. 6-10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 10-13
Item 3 - Controls and Procedures................................... 14
Part II. OTHER INFORMATION
Item 1 - Legal Proceedings.......................................... 14
Item 2 - Changes in Securities and Use of Proceeds.................. 14
Item 3 - Defaults Upon Senior Securities............................ 14
Item 4 - Submission of Matters to a Vote of Security Holders........ 14
Item 5 - Other Information.......................................... 14
Item 6 - Exhibits and Reports On Form 8-K........................... 14
Signatures............................................................. 15
1
Part I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
2005 2004 2005 2004
------ ------ ------ ------
Revenue:
Net sales $ 6,647,572 $ 5,990,071 $ 2,767,455 $ 3,022,968
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales 3,041,560 2,598,815 1,272,793 1,325,555
Operating expenses 1,325,339 1,347,487 656,646 701,636
---------- ---------- ---------- ----------
4,366,899 3,946,302 1,929,439 2,027,191
---------- ---------- ---------- ----------
Income from operations 2,280,673 2,043,769 838,016 995,777
Other income (expense):
Investment income 161,291 106,412 94,952 49,320
Loss on sale of marketable securities (114,231) - - -
Other (48) (17) - -
--------- ---------- --------- ----------
Income before income taxes 2,327,685 2,150,164 932,968 1,045,097
Provision for income taxes 860,900 768,000 321,900 372,800
--------- --------- --------- ---------
Net income $ 1,466,785 $ 1,382,164 $ 611,068 $ 672,297
======== ========= ======== =========
Earnings per common share
(basic and diluted) $ 0.30 $ 0.28 $ 0.12 $ 0.14
========= ========= ========= =========
Weighted average shares - basic 4,932,761 4,926,753 4,932,981 4,929,539
========= ========= ========= =========
Weighted average shares -diluted 4,940,239 4,937,206 4,940,204 4,937,759
========= ========= ========= =========
See consolidated notes to financial statements
2
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30 DECEMBER 31,
2005 2004
------------ -------------
ASSETS (UNAUDITED) (DERIVED FROM AUDITED
FINANCIAL STATEMENTS)
Current assets:
Cash and cash equivalents $ 2,191,186 $ 3,735,945
Temporary investments 698,052 402,288
Marketable securities 7,085,053 6,251,764
Accounts receivable, net of
allowance for doubtful accounts
of $33,971 and $45,000 at
June 30, 2005 and December 31,
2004, respectively 1,481,111 918,085
Inventories (net) 1,039,641 1,375,880
Prepaid expenses and other
current assets 328,942 515,425
Deferred income taxes 196,417 223,617
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Total current assets 13,020,402 13,423,004
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Property, plant and equipment:
Land 69,000 69,000
Factory equipment and fixtures 3,033,217 2,975,305
Building and improvements 2,117,144 2,089,547
Waste disposal plant 133,532 133,532
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5,352,893 5,267,384
Less: Accumulated depreciation 4,370,237 4,269,713
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982,656 997,671
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Other assets 258 700
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$ 14,003,316 $ 14,421,375
=========== ===========
See consolidated notes to financial statements
3
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2005 2004
--------------- ------------
LIABILITIES AND (UNAUDITED) (DERIVED FROM AUDITED
STOCKHOLDERS' EQUITY FINANCIAL STATEMENTS)
Current liabilities:
Dividends payable $ - $ 887,677
Accounts payable 201,366 172,320
Accrued expenses 526,221 395,167
Taxes payable 24,228 -
--------- ---------
Total current liabilities 751,815 1,455,164
--------- ---------
Deferred income taxes 10,000 10,000
--------- ---------
Stockholders' equity:
Common stock $.10 par value,
authorized, 10,000,000 shares;
4,996,339 and 4,994,739 shares
issued, respectively, and
4,934,139 and 4,932,539
shares outstanding, respectively 499,634 499,474
Capital in excess of par value 3,762,648 3,756,943
Accumulated other comprehensive loss (40,955) (86,730)
Retained earnings 9,379,804 9,146,154
Treasury stock, at cost; 62,200 shares (359,630) (359,630)
--------- ---------
Total stockholders' equity 13,241,501 12,956,211
--------- ---------
$ 14,003,316 $ 14,421,375
========== ==========
See consolidated notes to financial statements
4
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
------------
2005 2004
------- -------
Cash flows provided by operating activities:
Net income $ 1,466,785 $ 1,382,164
Adjustments to reconcile net earnings
to net cash flows from operations:
Depreciation and amortization 100,524 103,180
Realized loss on sale of marketable securities 116,855 -
Provision for doubtful accounts (11,029) -
Provision for inventory obsolescence - (91,000)
(Increase) decrease in assets:
Accounts receivable (551,997) (308,427)
Inventories 336,239 (294,667)
Prepaid expenses and other current
and non-current assets 186,925 7,445
Increase (decrease) in liabilities:
Accounts payable 29,046 165,972
Accrued expenses and taxes payable 155,282 148,572
---------- ----------
Net cash provided by operating activities 1,828,630 1,113,239
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Cash flows from investing activities:
Acquisition of property, plant and equipment (85,509) (99,024)
Net change in temporary investments (295,764) 98,743
Proceeds from sale of marketable securities 3,465,351 1,175,677
Purchase of marketable securities (4,342,520) (1,247,013)
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Net cash used in investing activities (1,258,442) (71,617)
---------- ----------
Cash flows from financing activities:
Proceeds from exercise of stock options 5,865 24,183
Dividends paid (2,120,812) (737,736)
---------- ----------
Net cash used in financing activities (2,114,947) (713,553)
---------- ----------
Net (decrease) increase in cash and cash
equivalents (1,544,759) 328,069
Cash and cash equivalents at beginning of period 3,735,945 2,710,029
---------- ----------
Cash and cash equivalents at end of period $ 2,191,186 $ 3,038,098
========== ==========
See consolidated notes to financial statements
5
UNITED-GUARDIAN, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of June 30, 2005
and the results of operations and cash flows for the six months ended June 30,
2005 and 2004. The accounting policies followed by the Company are set forth in
the Company's financial statements included in its December 31, 2004 Annual
Report to Shareholders.
2. The results of operations for the six months ended June 30, 2005 and
2004 are not necessarily indicative of the results to be expected for the full
year.
3. Stock-Based Compensation: In 2004 the Company approved a new stock
option plan ("2004 Stock Option Plan"). The 1993 Employee Incentive Stock Option
Plan ("EISOP") and the Non-Statutory ("NSSOPD") expired in 2003. No grants were
issued during the six months ended June 30, 2005 or June 30, 2004.
4. Inventories - Net
Inventories consist of the following: June 30, December 31,
2005 2004
---------- ----------
Raw materials and work in process $ 339,933 $ 332,798
Finished products and fine chemicals 699,708 1,043,082
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$1,039,641 $1,375,880
========== ==========
At June 30, 2005 and December 31, 2004, the Company has reserved $128,000
for slow moving and obsolete inventory.
5. For purposes of the Statement of Cash Flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents.
Cash payments for taxes were $585,674 and $712,432 for the six months ended
June 30, 2005 and 2004, respectively.
6. Comprehensive Income (Loss)
The components of comprehensive income (loss) are as follows:
6
Six months ended June 30, Three months ended June 30,
2005 2004 2005 2004
------ ------ ------ ------
Net income $1,466,785 $1,382,164 $ 611,068 $ 672,297
---------- ---------- ---------- ----------
Other comprehensive income (loss):
Unrealized (loss) gain on marketable
securities during period ...................... (43,880) (78,136) 55,313 (93,311)
Less: reclassification adjustment for
losses included in net income ................. 116,855 -- - --
---------- ---------- ---------- ----------
Other comprehensive income before tax ........... 72,975 (78,136) 55,313 (93,311)
Income tax benefit (expense) related to other
comprehensive income ........................... 27,200 (29,200) 20,600 (34,930)
---------- ---------- ---------- ----------
Other comprehensive income (loss), net of tax....... 45,775 (48,936) 34,713 (58,381)
---------- ---------- ---------- ----------
Comprehensive income net of tax .................... $1,512,560 $1,333,228 $ 645,781 $ 613,916
========== ========== ========== ==========
Accumulated other comprehensive income (loss) is comprised of unrealized
gains and losses on marketable securities, net of the related tax effect.
7. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share at June 30, 2005 and 2004.
Six months ended Three months ended
June 30, June 30,
2005 2004 2005 2004
------ ------ ------ ------
Numerator:
Net income $1,466,785 $1,382,164 $ 611,068 $ 672,297
======= ========= ======= =======
Denominator:
Denominator for basic earnings
per share (weighted average
shares) 4,932,761 4,926,753 4,932,981 4,929,539
Effect of dilutive securities:
Employee stock options 7,478 10,453 7,223 8,220
--------- ---------- --------- ----------
Denominator for diluted earnings
per share (adjusted weighted-average
shares) and assumed conversions 4,940,239 4,937,206 4,940,204 4,937,759
========= ========= ========= =========
Basic and diluted earnings per share $ 0.30 $ 0.28 $ 0.12 $ 0.14
========= ========= ========= =========
8. The Company has the following two reportable business segments: Guardian
Laboratories and Eastern Chemical. The Guardian segment conducts research,
development and manufacturing of cosmetic ingredients, personal and health care
7
products, pharmaceuticals and specialty industrial products. The Eastern segment
distributes fine chemicals, solutions, dyes and reagents.
The accounting policies used to develop segment information correspond to
those described in the summary of significant accounting policies as set forth
in the Annual Report for the year ended December 31, 2004. Segment earnings or
loss is based on earnings or loss from operations before income taxes. The
reportable segments are distinct business units operating in different
industries. They are separately managed, with separate marketing and
distribution systems. The following information about the two segments is for
the three and six month periods ended June 30, 2005 and 2004.
Six months ended June 30,
2005 2004
------------------------------------ ------------------------------------
GUARDIAN EASTERN TOTAL GUARDIAN EASTERN TOTAL
------------ ------------ ----------- ------------ ------------ -----------
Revenues from external customers $ 6,054,390 $ 593,182 $ 6,647,572 $ 5,422,334 $ 567,737 $ 5,990,071
Depreciation and amortization 44,750 - 44,750 49,767 - 49,767
Segment income (loss) before
income taxes* 2,327,899 31,953 2,359,852 2,165,996 (46,054) 2,119,942
Segment assets 2,648,972 354,204 3,003,176 3,134,561 551,755 3,686,316
Capital expenditure 27,916 - 27,916 92,221 - 92,221
Reconciliation to Consolidated Amounts
Income before income taxes
----------------------------
Total earnings for reportable segments $ 2,359,852 $ 2,119,942
Other (loss) income, net 47,012 106,395
Corporate headquarters expense (79,179) (76,173)
---------- ----------
Consolidated earnings before income taxes $ 2,327,685 $ 2,150,164
========== ==========
Assets
------
Total assets for reportable segments $ 3,003,176 $ 3,686,316
Corporate headquarters 11,000,140 11,272,847
---------- ----------
Total consolidated assets $14,003,316 $14,959,163
========== ==========
Three months ended June 30,
2005 2004
------------------------------------ ------------------------------------
GUARDIAN EASTERN TOTAL GUARDIAN EASTERN TOTAL
------------ ------------ ----------- ------------ ------------ -----------
Revenues from external customers $ 2,486,642 $ 280,813 $ 2,767,455 $ 2,727,102 $ 295,866 $ 3,022,968
Depreciation and amortization 23,415 - 23,415 23,921 - 23,921
Segment income (loss) before
income taxes* 857,842 19,679 877,521 1,062,065 (28,654) 1,033,411
8
Reconciliation to Consolidated Amounts
Income before income taxes
----------------------------
Total earnings for reportable segments $ 877,521 $ 1,033,411
Other income, net 94,952 49,320
Corporate headquarters expense (39,505) (37,634)
---------- ----------
Consolidated earnings before income taxes $ 932,968 $ 1,045,097
========== ==========
Other Significant items
-----------------------
Six months ended June 30,
2005 2004
------------------------------------------ -------------------------------------------
Segment Consolidated Segment Consolidated
Totals Corporate Totals Totals Corporate Totals
------------ ------------ ------------- ------------- ------------ -------------
Expenditures for assets $ 27,916 $ 57,593 $ 85,509 $ 92,221 $ 6,803 $ 99,024
Depreciation and amortization 44,750 55,774 100,524 49,767 53,413 103,180
Geographic Information
----------------------
2005 2004
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Revenues Long-Lived Revenues Long-Lived
Assets Assets
----------- ------------- ----------- -------------
United States $ 3,391,534 $ 982,656 $ 2,936,424 $ 1,022,160
France 781,473 753,847
Other countries 2,474,565 2,299,800
----------- ------------- ----------- -------------
$ 6,647,572 $ 982,656 $ 5,990,071 $ 1,022,160
=========== ============= =========== =============
Major Customers
---------------
Customer A (Guardian)** $ 2,313,604 $ 2,527,401
Customer B (Guardian)** 665,793 627,476
All other customers 3,668,175 2,835,194
----------- -----------
$ 6,647,572 $ 5,990,071
=========== ===========
9
* The Company has revised the estimated overhead allocated to the Eastern
Chemical subsidiary due to reductions in personnel and inventory and an overall
downsizing of the Eastern operation. This has resulted in a reduction in the
amount of overhead allocated to Eastern and a commensurate increase in the
amount of overhead being absorbed by the Guardian division. This has also
resulted in an increase in the overhead rate for the Guardian division.
If the current allocation had been used for the Eastern subsidiary in June
2004, Eastern would have had earnings from operations of $18,483 and $5,308 for
the six and three months ended June 30, 2004, respectively.
** At June 30, 2005 Customers A and B had balances approximating 49% and
15% of accounts receivable respectively. At June 30, 2004 Customers A and B had
balances approximating 40% and 14% of accounts receivable respectively.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FORWARD LOOKING STATEMENTS
Statements made in this Form 10-QSB which are not purely historical are
forward-looking statements with respect to the goals, plans, objectives,
intentions, expectations, financial condition, results of operations, future
performance and business of the Company. Forward-looking statements may be
identified by the use of such words as "believes," "may," "will," "should,"
"intends," "plans," "estimates," or "anticipates" or other similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and
important factors (many of which are beyond our control) could cause actual
results to differ materially from those set forth in the forward-looking
statements. In addition to those specific risks and uncertainties set forth in
the Company's reports currently on file with the SEC, some other factors that
may affect the future results of operations of the Company are: the development
of products that may be superior to those of the Company; changes in the quality
or composition of the Company's products; lack of market acceptance of the
Company's products; the Company's ability to develop new products; general
economic or industry conditions; intellectual property rights; changes in
interest rates; new legislation or regulatory requirements; conditions of the
securities markets; the Company's ability to raise capital; changes in
accounting principals, policies or guidelines; financial or political
instability; acts of war or terrorism; and other economic, competitive,
governmental, regulatory and technical factors that may affect the Company's
operations, products, services and prices.
Accordingly, results actually achieved may differ materially from those
anticipated as a result of such forward-looking statements, and those statements
speak only as of the date they are made. The Company does not undertake, and
specifically disclaims, any obligation to update any forward-looking statements
to reflect events or circumstances occurring after the date of such statements.
10
OVERVIEW
The Company is a Delaware corporation that operates in two business
segments. Its Guardian Laboratories Division ("Guardian") conducts research,
product development, manufacturing and marketing of cosmetic ingredients,
personal and health care products, pharmaceuticals, and specialty industrial
products. The products manufactured by Guardian are marketed through marketing
partners, distributors, direct advertising, mailings, and trade exhibitions. Its
most important personal care product line is its LUBRAJEL(R) line of water based
moisturizing and lubricating gels. It also sells two pharmaceutical products,
which are distributed primarily through drug wholesalers and surgical supply
houses. There are also indirect sales to the Veteran's Administration and other
government agencies, and to some hospitals and physicians.
While the Company does have competition in the marketplace for some of its
products, many of its products or processes are either unique in their field or
have some unique characteristics, and therefore are not in direct competition
with the products or processes of other pharmaceutical, chemical, or health care
companies. Guardian's research and development department is actively working on
the development of new products to expand the Company's personal care line.
The Company has been issued many patents and trademarks, and intends
whenever possible to make efforts to obtain patents in connection with its
product development program.
The Company's Eastern Chemical subsidiary ("Eastern") distributes a line of
fine organic chemicals, research chemicals, test solutions, indicators, dyes and
reagents. Eastern's products are marketed through advertising in trade
publications and direct mailings. Since the Company's business activities and
marketing efforts over the past several years have focused increasingly on the
Guardian division, the Company has reduced Eastern's inventory levels in order
to make it more marketable in the event the Company decides to sell it at some
future date. This has resulted in some reduction in sales as compared to
previous years. Sales of this division have also declined as a result of
increased competition from new and existing competitors.
Products manufactured by Guardian are marketed worldwide through the
Company's extensive marketing and distribution arrangements. Approximately half
of Guardian's sales are to foreign customers.
The following discussion and analysis covers material changes in the
financial condition of the Company since year end December 31, 2004, and a
comparison of the results of operations for the six month period ended June 30,
2005 and June 30, 2004. This discussion and analysis should be read in
conjunction with "Management's Discussion and Analysis or Plan of Operation"
included in the Company's Form 10-KSB for the year ended December 31, 2004.
RESULTS OF OPERATIONS
Gross revenue from operations
-----------------------------
For the six month period ended June 30, 2005, net sales increased $657,501
(11.0%) versus the comparable period in 2004. Guardian had a sales increase of
$632,056 (11.7%) and Eastern had a sales increase of $25,445 (4.5%).
11
For the three month period ended June 30, 2005, net sales decreased
$255,513 (8.5%) versus the comparable period in 2004. Guardian had a sales
decrease of $240,460 (8.8%) and Eastern had a sales decrease of $15,053 (5.1%)
The increase in Guardian's sales for the six month period ended June 30,
2005 is believed to be due to (a) an unusually high number of shipments taking
place in January that resulted from some customers requesting that their orders
not be shipped until after the first of the year, and (b) normal fluctuations in
the purchasing patterns of its customers. The increase in Eastern's sales is
believed to be due to normal fluctuations in the purchasing patterns of its
customers. The decrease in Guardian's sales for the three month period ended
June 30, 2005 is believed to be due to (a) an increase in sales of the company's
pharmaceutical products in the first quarter that resulted from a price increase
that went into effect on March 1st, causing some customers to take in extra
inventory in the first quarter that would otherwise have been purchased in the
second quarter, and (b) normal fluctuations in the purchasing patterns of its
customers. The decrease in Eastern's sales for the three months ended June 30,
2005 is believed to be due to normal fluctuations in the purchasing patterns of
it's customers.
Cost of sales
-------------
Cost of sales as a percentage of sales increased to 45.8% for the six
months ended June 30, 2005 from 43.4% for the comparable period ended June 30,
2004. For the three months ended June 30, 2005 compared to the three months
ended June 30, 2004 cost of sales as a percentage of sales increased to 46% from
43.8%. These increases are mainly due to (a) increases in standard overhead
rates; (b) increases in fixed overhead costs, (primarily payroll and payroll
related costs); and (c) a higher than normal sales volume of a product with
higher costs in anticipation of a March 1st price increase for that product.
Operating Expenses
------------------
Operating expenses decreased $22,148 (1.6%) for the six months ended June
30, 2005 compared to the comparable period in 2004. For the three month period
ended June 30, 2005 operating expenses decreased $44,990 (6.4%). These decreases
are mainly due to the higher standard overhead allocation to manufacturing.
Investment income
---------------
Investment income decreased $59,352 (55.8%) for the six months ended June
30, 2005 as compared to the comparable period in 2004. This decrease mainly was
attributable to the net effect of an increase in income from securities of
$54,879 and the sale of a portfolio of marketable securities, primarily bonds,
the bulk of which had been managed for the Company by Merrill Lynch. The sale of
this portfolio resulted in a realized loss of approximately $116,000, of which
approximately $105,000 had previously been recorded in the equity section of the
balance sheet as an "accumulated other comprehensive loss". Approximately
$108,000 of the above loss was due to the sale of the bond portfolio managed by
12
Merrill Lynch, which, over the 18 months the company held it, had realized
interest income net of broker fees of approximately $154,000. Investment income
is recorded net of brokerage fees.
For the three months ended June 30, 2005 investment income increased
$45,632 (92.5%), which was mainly attributable to increased interest rates and
an increase in market value of some of the investments held by the company.
Provision for income taxes
--------------------------
The provision for income taxes increased $92,900 (12.1%) for the six months
ended June 30, 2005 when compared to the comparable period in 2004. This
increase was due to (a) increased earnings before taxes of $177,521, and (b)the
adding back of the approximately $116,000 loss on sale of the Merrill Lynch bond
portfolio, which is not currently deductible. Income taxes decreased $50,900
(13.7%) for the three months ended June 30, 2005 compared to comparable period
in 2004. This decrease is mainly due to a decrease in income before taxes of
$112,129.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from $11,967,840 at December 31, 2004 to
$12,268,587 at June 30, 2005. The current ratio increased from 9.2 to 1 at
December 31, 2004 to 17.3 to 1 at June 30, 2005. The increase in current ratio
was primarily due to the net effect of a decrease in dividends payable and
inventories, along with increases in accounts receivable and accrued expenses.
The Company has no commitments for any further significant capital expenditures
during the remainder of 2005, and believes that its working capital is and will
continue to be sufficient to support its operating requirements.
The company generated cash from operations of $1,828,630 and $1,113,239 for
the six months ended June 30, 2005 and June 30, 2004 respectively. The increase
was primarily due to the net effect decreases in inventory, prepaid expenses and
dividends payable offset by increases in accounts receivable and accounts
payable.
During the six month period ended June 30, 2005, $1,258,442 was used in
investment activities, as compared to $71,617 for the six months ended June 30,
2004. The change is mainly due to the net effect of the sale (primarily bonds)
and purchases (primarily bond funds) of marketable securities.
Cash used in financing activities was $2,114,947 and $713,553 for the six
months ended June 30, 2005 and June 30, 2004 respectively. The increase was due
primarily to an increase in dividends paid during the six months ended June 30,
2005.
Item 3. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Within 90 days prior to the filing of this Quarterly Report on Form 10-QSB
the Company's principal executive officer and principal financial officer
13
evaluated the effectiveness of the design and operation of Company's disclosure
controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934 (the "Exchange Act")) and concluded that the
Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is accumulated and communicated to the Company's
management, including its officers, as appropriate to allow timely decisions
regarding required disclosure, and are effective to ensure that such information
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.
(b) Changes in Internal Controls
The Company's principal executive officer and principal financial officer
have also concluded there were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS: NONE
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS: NONE
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES: NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: NONE
ITEM 5 - OTHER INFORMATION: NONE
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
31.1 Certification of Alfred R. Globus, Chairman and Chief
Executive Officer of the Company, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Kenneth H. Globus, President and Chief
Financial Officer of the Company, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Alfred R. Globus, Chairman and Chief Executive
Officer of the Company, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Kenneth H. Globus, President and Chief Financial
Officer of the Company, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
b. Reports on Form 8-K
There were two reports on Form 8-K filed during the fiscal quarter ended
June 30, 2005. One was filed on May 9, 2005 and related to the issuance of an
earnings release by the Company on May 6, 2005. The other was filed on May 20,
2005 and related to the payment of a cash dividend to stockholders.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED-GUARDIAN, INC.
(Registrant)
By: /s/ Alfred R. Globus
--------------------
Alfred R. Globus
Chief Executive Officer
By: /s/ Kenneth H. Globus
---------------------
Kenneth H. Globus
Chief Financial Officer
Date: August 5, 2005
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