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, 2002
------------------
_______ 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.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 11-1719724
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
230 Marcus Boulevard., Hauppauge, New York 11788
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(Address of Principal Executive Offices)
(631) 273-0900
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(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the Company was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
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Cover Page 1 of 2 Pages
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the Company filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after
the distribution of securities under a plan confirmed by a court.
Yes _________ No ____________
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
4,881,139
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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 Earnings - Three and
Nine Months Ended September 30, 2002 and 2001............. 2
Consolidated Balance Sheets -
September 30, 2002 and December 31, 2001................ 3-4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2002 and 2001............. 5
Consolidated Notes to Financial Statements............... 6-10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 11-13
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.......................... 14-19
1
Part I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
------ ------ ------ ------
Revenue:
Net sales $ 6,796,553 $ 7,625,049 $ 2,085,937 $ 2,201,249
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales 3,726,051 3,638,997 1,174,265 1,017,445
Selling, general and
administrative 1,698,670 1,747,294 562,921 535,456
---------- ---------- ---------- ----------
5,424,721 5,386,291 1,737,186 1,552,901
---------- ---------- ---------- ----------
Earnings from
operations 1,371,832 2,238,758 348,751 648,348
Other income (expense):
Interest expense - (38) - (1)
Investment income 144,075 186,713 44,987 54,968
Gain (loss) on sale
of assets 79 (8,859) - (8,859)
Other (49) - - -
---------- ---------- ---------- ---------
Earnings before
income taxes 1,515,937 2,416,574 393,738 694,456
Provision for income taxes 528,548 902,740 135,548 260,000
--------- --------- --------- ---------
Net earnings $ 987,389 $ 1,513,834 $ 258,190 $ 434,456
========= ========= ========= =========
Earnings per common share
(basic and diluted) $ 0.20 $ 0.31 $ 0.05 $ 0.09
========= ========= ========= =========
Basic weighted average
shares 4,877,478 4,867,465 4,881,139 4,870,029
========= ========= ========= =========
Diluted weighted
average shares 4,889,870 4,887,602 4,888,794 4,884,338
========= ========= ========= =========
See notes to financial statements.
2
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2002 2001
------------ -------------
ASSETS (UNAUDITED) (DERIVED FROM AUDITED
FINANCIAL STATEMENTS)
Current assets:
Cash and cash equivalents $ 2,789,940 $ 1,599,857
Temporary investments 4,033,100 4,365,114
Marketable securities 870,254 944,348
Accounts receivable, net of
allowance for doubtful accounts
of $62,964 at September 30, 2002 and
$63,100, at December 31, 2001,
respectively 779,770 844,388
Inventories 1,204,885 1,185,535
Prepaid expenses and other
current assets 317,139 327,924
Deferred income taxes 307,445 279,824
----------- -----------
Total current assets 10,302,533 9,546,990
----------- -----------
Property, plant and equipment:
Land 69,000 69,000
Factory equipment and fixtures 2,720,085 2,698,088
Building and improvements 2,034,304 2,019,136
Waste disposal plant 133,532 133,532
----------- -----------
4,956,921 4,919,756
Less: Accumulated depreciation 3,828,312 3,721,343
----------- -----------
1,128,609 1,198,413
----------- -----------
Other assets:
Processes and patents, net of
accumulated amortization of
$981,243 and $946,647 at
September 30, 2002 and December 31,
2001, respectively 554 35,150
Other 700 1,000
----------- -----------
1,254 36,150
----------- -----------
$ 11,432,396 $ 10,781,553
=========== ===========
See notes to financial statements.
3
UNITED-GUARDIAN, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2002 2001
--------------- ------------
LIABILITIES AND (UNAUDITED) (DERIVED FROM AUDITED
STOCKHOLDERS' EQUITY FINANCIAL STATEMENTS)
Current liabilities:
Dividends payable $ - $ 487,044
Accounts payable 340,663 213,728
Accrued expenses 372,145 344,304
--------- ---------
Total current liabilities 712,808 1,045,076
--------- ---------
Deferred income taxes 10,000 10,000
--------- ---------
Stockholders' equity:
Common stock $.10 par value,
authorized, 10,000,000 shares;
issued, 4,943,339 and 4,932,639
shares, respectively; outstanding
4,881,139 and 4,870,439 shares,
respectively 494,334 493,264
Capital in excess of par value 3,527,423 3,492,518
Accumulated other comprehensive
loss (64,277) (24,024)
Retained earnings 7,111,738 6,124,349
Treasury stock, at cost; 62,200
shares (359,630) (359,630)
--------- ---------
Total stockholders' equity 10,709,588 9,726,477
--------- ---------
$ 11,432,396 $ 10,781,553
========== ==========
See notes to financial statements.
4
UNITED-GUARDIAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
September 30,
------------
2002 2001
------- -------
Cash flows provided by operating activities:
Net earnings $ 987,389 $ 1,513,834
Adjustments to reconcile net earnings
to net cash flows from operations:
Depreciation and amortization 192,320 204,776
Provision for doubtful accounts - (600)
Amortization of bond premium 9,144 -
Net (gain) loss on sale of equipment (79) 8,859
(Increase) decrease in assets:
Accounts receivable 64,618 41,360
Inventories (19,350) 205,538
Prepaid expenses and other current
and non-current assets 11,085 (63,326)
Increase (decrease) in liabilities:
Accounts payable 126 935 39,552
Accrued expenses and taxes payable 27,841 18,684
-------- --------
Net cash provided by operating activities 1,399,903 1,968,677
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (102,341) (131,369)
Proceeds from sale of equipment 14,500 9,200
Net change in temporary investments 332,014 (2,066,214)
Purchase of marketable securities (2,924) (660,300)
Proceeds from sale of marketable securities - 50,000
-------- --------
Net cash provided by (used in)
investing activities 241,249 (2,798,683)
-------- --------
Cash flows from financing activities:
Principal payments on long-term debt - (6,036)
Proceeds from exercise of stock options 35,975 94,251
Dividends paid (487,044) (486,114)
-------- --------
Net cash used in financing activities (451,069) (397,899)
-------- --------
Net increase (decrease) in cash and cash
equivalents 1,190,083 (1,227,905)
Cash and cash equivalents at beginning of period 1,599,857 2,226,812
--------- ---------
Cash and cash equivalents at end of period $ 2,789,940 $ 998,907
========= =========
See notes to financial statements.
5
UNITED-GUARDIAN, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of September 30,
2002 and December 31, 2001 and the results of operations and cash flows for the
three and nine months ended September 30, 2002 and 2001. The accounting policies
followed by the Company are set forth in the Company's financial statements
included in its December 31, 2001 Annual Report to Shareholders.
2. The results of operations for the three and nine months ended September
30, 2002 and 2001 are not necessarily indicative of the results to be expected
for the full year.
3. Inventories
Inventories consist of the following: September 30, December 31,
2002 2001
---------- ----------
Raw materials and work in process $ 272,683 $ 245 849
Finished products and fine chemicals 932,202 939,686
---------- ----------
$1,204,885 $1,185,535
========== ==========
4. 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 $513,779 and $1,078,271 for the nine months
ended September 30, 2002 and 2001, respectively.
5. Comprehensive Income (Loss)
The components of comprehensive income (loss) are as follows:
6
Nine months ended September 30, Three months ended September 30,
2002 2001 2002 2001
------ ------ ------ ------
Net income $987,389 $1,513,834 $258,190 $434,456
------- ------- ------- -------
Other comprehensive loss
Unrealized loss on
marketable securities (67,874) (52,482) (35,022) (36,505)
------- ------- ------- -------
Net unrealized gain loss (67,874) (52,482) (35,022) (36,505)
------- ------- ------- -------
Income tax benefit on
comprehensive loss (27,621) (19,576) (13,064) (13,623)
------- ------- ------- -------
Other comprehensive income loss (40,253) (32,906) (21,958) (22,882)
------- ------- ------- -------
Comprehensive income $947,136 $1,480,928 $236,232 $411,574
======= ========= ======= =======
Accumulated other comprehensive income (loss) is comprised of
unrealized gains and losses on marketable securities, net of the related tax
effect.
6. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share at September 30, 2002 and 2001.
Nine months ended Three months ended
September 30, September 30,
2002 2001 2002 2001
------ ------ ------ ------
Numerator:
Net income $ 987,389 $1,513,834 $ 258,190 $ 434,456
======= ======= ======= =======
Denominator:
Denominator for basic earnings
per share (weighted average
shares) 4,877,478 4,867,465 4,881,139 4,870,029
Effect of dilutive securities:
Employee stock options 12,392 20,137 7,655 14,309
--------- --------- --------- ---------
Denominator for diluted earnings
per share (adjusted weighted-average
shares) and assumed conversions 4,889,870 4,887,602 4,888,794 4,884,338
========= ========= ========= =========
Basic and diluted earnings per share $ 0.20 $ 0.31 $ 0.05 $ 0.09
========= ========= ========= =========
7
Options to purchase 8,500 and 2,833 shares of the Company's common stock
have been excluded from the computation of diluted earnings per share in the
three and nine months ended September 30, 2002, respectively, as their inclusion
would be antidilutive.
7. The Company has the following two reportable business segments: Guardian
Laboratories and Eastern Chemical. The Guardian segment conducts research,
development and manufacturing of pharmaceuticals, medical devices, cosmetics,
products and proprietary specialty chemical products. The Eastern segment
distributes fine chemicals, solutions, dyes and reagents.
The accounting policies used to develop segment information correspond to
those described in the summary of significant accounting policies as set forth
in the Annual Report for the year ended December 31, 2001 . 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 nine and three month periods ended September 30, 2002 and 2001.
Nine months ended September 30,
2002 2001
------------------------------------ ------------------------------------
GUARDIAN EASTERN TOTAL GUARDIAN EASTERN TOTAL
------------ ------------ ----------- ------------ ------------ -----------
Revenues from external customers $ 5,859,785 $ 936,768 $ 6,796,553 $ 6,556,466 $ 1,068,583 $ 7,625,049
Depreciation and amortization 105,186 - 105,186 117,079 - 117,079
Segment earnings (loss) before
income taxes 1,550,911 (51,638) 1,499,273 2,337,639 25,343 2,362,982
Segment assets 2,125,281 665,859 2,791,140 2,147,797 463,304 2,611,101
Expenditures for segment assets 34,819 - 34,819 30,506 - 30,506
Reconciliation to Consolidated Amounts
Earnings before income taxes
----------------------------
Total earnings for reportable segments $ 1,499,273 $ 2,362,982
Other earnings 144,105 177,816
Corporate headquarters expense (127,441) (124,224)
---------- ----------
Consolidated earnings before income
taxes $ 1,515,937 $ 2,416,574
========== ==========
Assets
------
Total assets for reportable segments $ 2,791,140 $ 2,611,101
Corporate headquarters 8,641,256 7,772,929
---------- ----------
Total consolidated assets $11,432,396 $10,384,030
========== ==========
8
Three months ended September 30,
2002 2001
------------------------------------ ------------------------------------
GUARDIAN EASTERN TOTAL GUARDIAN EASTERN TOTAL
------------ ------------ ----------- ------------ ------------ -----------
Revenues from external customers $ 1,773,778 $ 312,159 $ 2,085,937 $ 1,866,397 $ 334,852 $ 2,201,249
Segment earnings (loss) before
income taxes 420,141 (24,475) 395,666 675,409 13,594 689,003
Earnings before income taxes
----------------------------
Total earnings for reportable segments $ 395,666 $ 689,003
Other earnings 44,987 46,108
Corporate headquarters expense (46,915) (40,655)
---------- ---------
Consolidated earnings before income
taxes $ 393,738 $ 694,456
========== =========
Other significant items
-----------------------
Nine Months ended September 30,
2002 2001
------------------------------------------ -------------------------------------------
Segment Consolidated Segment Consolidated
Totals Corporate Totals Totals Corporate Totals
------------ ------------ ------------- ------------- ------------ -------------
Interest expense $ - $ - $ - $ - $ 38 $ 38
Expenditures for assets 34,819 67,522 102,341 30,506 100,863 131,369
Depreciation and amortization 105,186 87,134 192,320 117,079 87,697 204,776
Geographic Information
----------------------
2002 2001
--------------------------- ---------------------------
Revenues Long-Lived Revenues Long-Lived
Assets Assets
----------- ------------- ----------- -------------
United States $ 4,075,260 $ 1,129,163 $ 3,939,862 $ 1,263,064
France 893,559 981,620
Other countries 1,827,734 2,703,567
----------- ------------- ----------- -------------
$ 6,796,553 $ 1,129,163 $ 7,625,049 $ 1,263,064
=========== ============= =========== =============
9
Major Customers
---------------
Customer A (Guardian) $ 2,013,715 $ 2,805,913
Customer B (Guardian) 696,215 -
All other customers 4,086,623 4,819,136
----------- -----------
$ 6,796,553 $ 7,625,049
=========== ===========
8. Impact of Recently Issued Accounting Pronouncements
In April 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 145, "Rescission of
SFAS Statements No. 4, 44, and 64, Amendment of SFAS No. 13, and Technical
Corrections." This statement eliminates the current requirements that gains and
losses on debt extinguishment must be classified as extraordinary items in the
income statement. Instead, such gains and losses will be classified as
extraordinary items only if they are deemed to be unusual and infrequent, in
accordance with the current GAAP criteria for extraordinary classifications. In
addition, SFAS No. 145 eliminates an inconsistency in lease accounting by
requiring that modifications of capital leases that result in reclassification
as operating leases be accounted for consistent with sales leaseback accounting
rules. The statement also contains other nonsubstantive corrections to
authoritative accounting literature. The rescission of SFAS No. 4 is effective
in fiscal years beginning after May 15, 2002. The amendment and technical
corrections of SFAS No. 13 are effective for transactions occurring after May
15, 2002. All other provisions of SFAS No. 145 are effective for financial
statements issued on or after May 15, 2002. Management believes that the
adoption of SFAS No. 145 will not have a material impact on its results of
operations or financial position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses accounting for
restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, principally Emerging Issues Task Force Issue No. 94-3. SFAS No. 146
requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. SFAS No. 146 also
establishes that the liability should initially be measured and recorded at fair
value. Accordingly SFAS No. 146 may affect the timing of recognizing future
restructuring costs as well as the amount recognized. SFAS No. 146 is effective
for exit or disposal activities that are initiated after December 31, 2002.
Management believes that the adoption of SFAS No. 146 will not have a material
impact on its results of operations or financial position.
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FORWARD LOOKING STATEMENTS
The statements contained in this report that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. Forward-looking statements are made based upon
management's current expectations and beliefs concerning future developments and
their potential effects upon the Company. There can be no assurance that future
developments affecting the Company will be those anticipated by management.
Actual results may differ materially from those included in the forward-looking
statements.
OVERVIEW
The Company is a Delaware corporation that operates in two business
segments. Its Guardian Laboratories Division ("Guardian") conducts research,
product development, manufacturing and marketing of cosmetic ingredients,
personal and health care products, pharmaceuticals, and specialty industrial
products. The products manufactured by Guardian are marketed through marketing
partners, distributors, direct advertising, mailings, and trade exhibitions. Its
most important personal care product line is its LUBRAJEL(R) line of water based
moisturizing and lubricating gels. It also sells two pharmaceutical products,
which are distributed primarily through drug wholesalers and surgical supply
houses. There are also indirect sales to the Veteran's Administration and other
government agencies, and to some hospitals and physicians.
While the Company does have competition in the marketplace for some of its
products, many of its products or processes are either unique in their field or
have some unique characteristics, and therefore are not in direct competition
with the products or processes of other pharmaceutical, chemical, or health care
companies. Guardian's research and development department is actively working on
the development of new products to expand the Company's personal care line.
The Company has been issued many patents and trademarks, and intends
whenever possible to make efforts to obtain patents in connection with its
product development program.
The Company's Eastern Chemical subsidiary distributes an extensive line of
fine organic chemicals, research chemicals, test solutions, indicators, dyes and
reagents. Eastern's products are marketed through advertising in trade
publications and direct mailings and are sold to both to distributors and
directly to users for use in a wide variety of applications. Since the Company's
business activities and marketing efforts over the past several years have
focused increasingly on the Guardian division, which the Company believes has
greater growth potential, the Company is in the process of reducing Eastern's
inventory levels in order to make the subsidiary more marketable in the event
the Company decides to sell the Eastern operation at some future date.
11
Products manufactured by the Company are marketed worldwide through its
extensive marketing and distribution arrangements. Approximately half of the
Company's sales are to foreign customers.
The following discussion and analysis covers material changes in the
financial condition of the Company since year end December 31, 2001, and a
comparison of the results of operations for the three months and nine months
ended September 30, 2002 to the same period in 2001. 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, 2001.
RESULTS OF OPERATIONS
Gross revenue from operations
-----------------------------
For the nine month period ended September 30, 2002 net sales decreased
$828,496 (10.9%) versus the comparable period in 2001. The Guardian Laboratories
division ("Guardian") had a sales decrease of $696,681 (10.6%) while the Eastern
Chemical subsidiary ("Eastern") had a sales decrease of $131,815 (12.3%).
For the three month period ended September 30, 2002 revenue decreased
$115,312 (5.2%) over the comparable period in 2001. Guardian sales decreased
$92,619 (5.0%), while Eastern sales decreased $22,693 (6.8%).
The decrease in Guardian's sales for the three and nine month periods is
due to a decline in demand for Guardian's products that the Company believes is
primarily a result of the weak economic conditions in the United States and
overseas. It is anticipated that sales will increase as the world economies
improve and demand increases for the products it sells. The Company also
anticipates that it will begin marketing two new products by the end of the
current fiscal year, and is hopeful that these new products will bring increased
revenue in the coming years.
The decline in Eastern's sales is believed to be due mainly to normal
fluctuations in the purchasing patterns of its customers, but may also be
partially attributable to some loss of business due to an inability to provide
some products as a result of the ongoing program to reduce Eastern's on-hand
inventory. The Company does not anticipate any significant increase or decrease
in Eastern's sales in the near future.
Cost of sales
-------------
Cost of sales as a percentage of sales increased to 54.8% for the nine
months ended September 30, 2002 from 47.7% for the comparable period ended
September 30, 2001. For the three month period ended September 30, 2002 compared
to the three month period ended September 30, 2001 the cost of sales as a
percentage of sales increased to 56.3% from 46.2%. This increase is mainly due
to the absorption of fixed costs by a lower sales volume in the three and nine
month periods in 2002 as compared to the same periods in the prior year.
12
Operating Expenses
------------------
Operating expenses decreased $48,624 (2.8%) for the nine months ended
September 30, 2002 compared to the comparable period in 2001. For the three
month period ended September 30, 2002 operating expenses increased $27,465
(5.1%) over the comparable period in 2001. The decrease was primarily due to
decreases in consulting fees, payroll and payroll related costs for the nine
month period ended September 30, 2002 as compared to the prior year. The
increase for the three month period ended September 30, 2002 is primarily due to
an increase in payroll and payroll related costs compared to the prior year.
Investment income
---------------
Investment income decreased $42,638 (22.8%) for the nine months ended
September 30, 2002 as compared to the comparable period in 2001, and $9,981
(18.2%) for the three months ended September 30, 2002 when compared to the
comparable period in 2001. These decreases were attributable to a decline in
interest rates.
Provision for income taxes
--------------------------
The provision for income taxes decreased $374,192 (41.5%) for the nine
months ended September 30, 2002 when compared to the comparable period in 2001,
and $124,452 (47.9%) for the three months ended September 30, 2001 when compared
to the comparable period in 2001. The decrease is due to decreased earnings
before taxes of $900,637 for the nine months ended September 30, 2002 and
$300,718 for the three months ended September 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from $8,501,914 at December 31, 2001 to
$9,589,725 at September 30, 2002. The current ratio increased from 9.1 to 1 at
December 31, 2001 to 14.5 to 1 at September 30, 2002. The Company has no
commitments for any further significant capital expenditures during the
remainder of 2002, and believes that its working capital is and will continue to
be sufficient to support its operating requirements.
Cash flows provided by operating activities decreased $568,774 (28.9%) for
the nine months ended September 30, 2002 as compared to the comparable period in
2001. This decrease is mainly due to a decrease in net earnings for the nine
months ended September 30, 2002.
Cash flows used in investing activities decreased $3,039,932 (108.6%) in
the nine months ended September 30, 2002 as compared to the comparable period
in 2001. This decrease is mainly due a decline in additional temporary
investments.
Cash flows used in financing activities increased $53,170 (13.4%) in the
nine months ended September 30, 2002 when compared to the comparable period in
2001. This increase is mainly due to a decrease in proceeds from stock options
exercised during the nine month period ended September 30, 2002 when compared to
2001.
13
Item 3. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Within 90 days prior to the filing of this Quarterly Report on Form 10-QSB
the Company's principal executive officer and principal financial officer
evaluated the effectiveness of the design and operation of Company's disclosure
controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934 (the "Exchange Act")) and concluded that the
Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is accumulated and communicated to the Company's
management, including its officers, as appropriate to allow timely decisions
regarding required disclosure, and are effective to ensure that such information
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.
Changes in Internal Controls
The Company's principal executive officer and principal financial officer
have also concluded there were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
While the Company has claims arise from time to time in the ordinary course
of its business, the settlement of such claims in the past has not had a
material adverse effect on the Company's financial position and results of
operations. While the company does have one claim pending at the present time,
it does not believe that the settlement of that claim will have a material
adverse effect on the Company's financial position and results of operations.
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
99.1 Certification of Alfred R. Globus, Chairman and Chief
Executive Officer of the Company, pursuant to
18 U.S.C. Section 1350
14
99.2 Certification of Kenneth H. Globus, President and Chief
Financial Officer of the Company, pursuant to
18 U.S.C. Section 1350
b. Reports on Form 8-K
There was one report filed on Form 8-K during the three month period
ended September 30, 2002 pertaining to the filing of CEO and CFO
certifications pursuant to the Sarbanes-Oxley Act.
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: October 31, 2002
SECTION 302 CERTIFICATIONS
I, Alfred R. Globus, Chief Executive Officer of United-Guardian, Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of United-Guardian,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
15
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: October 31, 2002 /s/ Alfred R. Globus
--------------------------------
Alfred R. Globus
Chief Executive Officer
16
I, Kenneth H. Globus, President and Chief Financial Officer of
United-Guardian, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of United-Guardian,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
17
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: October 31, 2002 /s/ Kenneth H. Globus
--------------------------------
Kenneth H. Globus
President and Chief Financial Officer
18
EXHIBIT 99.1
------------
UNITED-GUARDIAN, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of United-Guardian, Inc. (the
"Registrant") on Form 10-QSB for the period ending September 30, 2002, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Alfred R. Globus, Chief Executive Officer of the Registrant, hereby certify,
pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the
Company.
October 31, 2002 /s/ Alfred R. Globus
---------------------------
Alfred R. Globus
Chief Executive Officer
EXHIBIT 99.2
------------
UNITED-GUARDIAN, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of United-Guardian, Inc. (the
"Registrant") on Form 10-QSB for the period ending September 30, 2002, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Kenneth H. Globus, President and Chief Financial Officer of the Registrant,
hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the
Company.
October 31, 2002 /s/ Kenneth H. Globus
---------------------------
Kenneth H. Globus
President and Chief Financial Officer
19