DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Items 10, 11, 12, and 13 of Part III of this Annual Report on Form 10-K is incorporated by reference to our definitive Proxy Statement for the 2023 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after the fiscal year ended December 31, 2022.

UNITED-GUARDIAN, INC.

This Annual Report on Form 10-K (“Annual Report”) contains both historical and forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which provides a safe harbor for forward-looking statements by the Registrant about its expectations or beliefs concerning future events, such as financial performance, business prospects, and similar matters. The Registrant desires to take advantage of such "safe harbor" provisions and is including this statement for that express purpose. Words such as "anticipates", "believes", "expects", "intends", "future", and similar expressions identify forward-looking statements. Any such forward-looking statements in this report reflect the Registrant's views as of the date of filing of this report with the United States Securities and Exchange Commission (the “SEC”) with respect to future events and financial performance, and are subject to a variety of factors that could cause the Registrant's actual results or performance to differ materially from historical results or from the anticipated results or performance expressed or implied by such forward-looking statements. Because of such factors, there can be no assurance that the actual results or developments anticipated by the Registrant will be realized or, even if substantially realized, that they will have the anticipated results. The risks and uncertainties that may affect the Registrant's business include, but are not limited to: economic conditions, governmental regulations, technological advances, pricing and competition, acceptance by the marketplace of new products, retention of key personnel, the sufficiency of financial resources to sustain and expand the Registrant's operations, and other factors described in this report and in prior filings with the SEC. Readers should not place undue reliance on such forward-looking statements, which speak only as of the date hereof, and should be aware that except as may be otherwise legally required of the Registrant, the Registrant undertakes no obligation to publicly revise any such forward-looking statements to reflect events or circumstances that may arise after the date hereof. Past results are no guaranty of future performance.

All references in this Annual Report to “sales” or “Sales” shall mean “net sales” unless specifically identified as “gross sales.”

UNITED-GUARDIAN, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

UNITED-GUARDIAN, INC.

PART I

Item 1. Business.

(a)Introduction   

United-Guardian, Inc. ("United", "Registrant",(“Registrant” or “Company”) is a Delaware corporation that, through its Guardian Laboratories division, conducts research, product development, manufacturingmanufactures and marketing ofmarkets cosmetic ingredients, pharmaceuticals, medical products,lubricants, and proprietary specialty industrial products. The Company’sWe also conduct research and product development, primarily related to the development of new and unique cosmetic ingredients. Our research and development department also modifies, refines, and expands the uses offor existing products, with the goal of further developing the market for additional uses and markets. Itour products. The Company also develops new products using natural and environmentally friendly raw materials, which is importanta priority to many of the Company’s cosmetic customers.

United'sOur predecessor entity, United International Research, Inc. ("UIR"), was founded and incorporated in New York in 1942 by Dr. Alfred R. Globus, United'sthe Company's Chairman and Director of Research until his death on April 9, 2009. On February 10, 1982, a merger took place between UIR and Guardian Chemical Corporation ("Guardian"), an affiliate of UIR, whereby Guardian was merged into UIR and the name was changed to United-Guardian, Inc., a New York corporation. On September 14, 1987, United-Guardian, Inc. (New York) was merged with and into a newly formed Delaware corporation by the same name, United-Guardian, Inc., for the purpose of changing the domicile ofto the Company toState of Delaware.

The Company has a broad rangecornerstone of our business is our product innovation. We use our product development and formulation expertise to maintain our market position and to propel future growth. We also focus on the development of new products many of whichthat fill unmet market needs and have unique properties.

Our products are currently marketedsold into stable and some of which are still in the researchgrowing markets such as personal care, medical lubricants and development stage. Of the products being actively marketed, the two largestpharmaceutical products. Our current product lines are the Lubrajel® line ofofferings include cosmetic ingredients, and medical lubricants, which accounted for 60%pharmaceuticals and specialty industrial products. In the second quarter of 2023, we plan to discontinue the Company'smanufacturing and sale of our specialty industrial products. The decision to discontinue this product line was made based on the fact that these products represented less than 2% of our gross sales over the past several years, and the small production scale

Our product offerings are segregated into the following categories:

Our internet address is http://www.u-g.com. On this website, we make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, and any amendments to those reports. All such reports are available as soon as reasonably practicable after they are electronically filed with, or electronically furnished to, the U. S. Securities and Exchange Commission (“SEC”). These documents are also available in 2021,print to any stockholder who requests them. Information contained on our website is not part of this annual report on Form 10-K and Renacidin® Irrigation Solution (“Renacidin"), a pharmaceutical productis not incorporated by reference in this document. The SEC maintains an internet site (http://www.sec.gov) that accounted for 34% ofcontains reports, proxy and information statements and other information regarding issuers that file electronically with the Company's gross sales in 2021.SEC.

UNITED-GUARDIAN, INC.

Unless indicated otherwise, all references in this Annual Report to “sales” or “Sales” shall mean net sales. When changes are shown as percentages, the number is approximate and has been rounded from one decimal place to the nearest whole number.(b) Description of Business

(b) Description of Business

The Company manufacturesWe manufacture and marketsmarket cosmetic ingredients, pharmaceuticals, medical lubricants, and specialty industrial products. ItWe also conductsconduct research and development, primarily related to the development of new and unique cosmetic ingredients. The Company focusesWe focus on the development of products that fill unmet market needs, have unique properties, and use proprietary technology that the Companywe typically protectsprotect as trade secrets rather than with patents. Many of the Company'sour products are marketed through collaborative agreements with larger companies.

The cosmetic ingredients manufactured by the Companyus are marketed to end users through the Company'sour worldwide network of marketing partners and distributors and are currently used by many of the major manufacturers of cosmetic products. The Company ships itsWe ship our cosmetic ingredients to its marketing partnersour distributors Ex Works (EXW)(“EXW”) from itsour facility in Hauppauge, New York. Those marketing partnersdistributors in turn resell those products to their customers, who are typically the manufacturers and marketers of cosmetic and personal care products, and who in turn utilize the Company’s products in their finished products. The cosmetic ingredients are not sold on a consignment basis, so unless a product is determined to be defective, it is not returnable, except at the discretion of the Company.

The Company’sOur pharmaceutical products are sold primarily to several full-line drug wholesalers which in turn supply those products to pharmacies, physicians, and hospitals. The Company arrangesWe arrange for, and coverscover the cost of, shipping itsour pharmaceutical products, and sales of those products are final when shipped. They are returnable only under specific circumstances in accordance with pharmaceutical industry standards, such as if the products are (a) damaged when received; (b) defective; (c) too close to their expiration dates to sell; or (d) within a year after their expiration dates.

The Company operatesWe operate in one business segment. The Company’sOur products are separated into four distinct product categories: cosmetic ingredients, pharmaceuticals, medical products,lubricants, and industrial products. Each product category is marketed differently.  

The Company’sOur cosmetic ingredients are currently marketed globally by five marketing partners,distributors, of which Ashland Specialty Ingredients (“ASI”), a business segment of Ashland, Inc., is the largest. ASI manufactures and markets globally an extensive line of personal care and pharmaceutical additives and various other specialty products. The Company’sWe sell our cosmetic ingredients are sold directly to those marketing partners,distributors, which in turn resell those products to their customers for use in the formulation of one or more of the customers’ personal care and cosmetic products. The Company’sOur non-pharmaceutical medical productslubricants (referred to hereinafter as the Company’s “medical products”lubricants”) and itsour specialty industrial products are sold directly by the Company to marketers of finished products or to the contract manufacturers utilized by those marketers. The Company’s marketing efforts for itsWe market our pharmaceutical products are accomplished primarily through itsour dedicated Renacidin website and by internet advertising.Renacidin® website. The pharmaceutical products are sold to hospitals and pharmacies primarily through full-line drug wholesalers, which purchase the Company’sour products outright for resale to their customers. The CompanyWe also sellssell a small quantity of pharmaceutical products directly to hospitals and pharmacies. The Company'sOur products are sold under trademarks or trade names owned by the Company, some of which are registered with the United States Patent and Trademark Office as well as with comparable regulatory agencies in some foreign countries. The Company hasWe maintain a corporate website at www.u-g.com, and a specific website for Renacidin at www.renacidin.com.

UNITED-GUARDIAN, INC.www.renacidin.com.

IMPACT OF THE CORONAVIRUS PANDEMIC

While the coronavirus pandemic (“pandemic”) continuesAll references in this Annual Report to impact certain areas of the Company’s operations, the substantial impact the pandemic had on Company sales in 2020 significantly lessened during 2021. While the Company believes that sales of its cosmetic ingredients are still being negatively impacted, the sales situation has improved substantially, and the current impact is coming more from increased shipping costs and higher raw material costs, which may have some future impact on the Company’s profit margins in upcoming quarters. During 2021 it was more difficult to ship the Company’s products due to a shortage of truck drivers and trucks, and limited availability of shipping vessels. This created some delays in having orders picked up, even though the Company’s products were available to ship. The shortage of truck drivers and shipping vessels is expected to continue into 2022 but improve“sales” or “Sales” shall mean “net sales” unless specifically identified as the year progresses. The Company has been able to minimize the impact on customers by making them aware of longer lead times that may be necessary as a result of these issues.

Sales of the Company’s non-pharmaceutical medical products (“medical products”) had also been negatively impacted by the pandemic in 2020, but those impacts lessened as well in 2021. Sales of the Company’s pharmaceutical products were not impacted by the pandemic in 2020 or in 2021.

The pandemic has not significantly affected the ability of the Company to obtain raw materials, but it has made some of those materials more expensive and created longer lead times for some of them. The increased costs of some of these raw materials may impact the Company’s gross profit margins in the future on certain products. The Company has been able to maintain production throughout the pandemic.

As a result of the lingering effects of the coronavirus pandemic as described above, there continues to be uncertainty in regard to the future potential impact of the pandemic on the Company’s operations or financial results. While the impact on the Company’s’ sales lessened considerably in 2021, the Company believes that it is still unable to provide an accurate estimate or projection as to what the future impact of the pandemic will be on the Company’s future operations or financial results. The Company does not expect the carrying value of its assets or its liquidity to be impaired by the coronavirus pandemic.“gross sales.”

PRODUCTS

As stated above, the Company operateswe operate in one business segment, and itsour product lines are separated into four distinct product categories:

UNITED-GUARDIAN, INC.

COSMETIC INGREDIENTS

The cosmetic ingredients we manufacture are marketed and sold to the end users through our worldwide network of distributors. Our cosmetic ingredients are currently sold globally by five distributors, of which Ashland Specialty Ingredients (“ASI”), a business segment of Ashland, Inc., is the largest. ASI is the exclusive distributor of our products in the United States, Canada, Asia, South & Central America, Mexico, Europe (all regions other than France, the United Kingdom, Italy & Switzerland), Scandinavia, Africa, Australia, the Middle East and Korea.

Our other distributors are: Azelis UK Ltd in theUnited Kingdom, Sederma SAS, a subsidiary of Croda International Plc. in France, Safic-Alcan S.p.A. in Italy, and Azelis Cosmetics GmbH in Switzerland.

We ship our cosmetic ingredients to our distributors EXW from our facility in Hauppauge, New York. The distributors resell the products to their customers, who are typically major manufacturers and marketers of cosmetic and personal care products. They utilize our products in their finished products. The cosmetic ingredients are not sold on a consignment basis, so unless a product is determined to be defective, it is not returnable, except at our discretion.

We believe that in the event ASI were to cease marketing and selling our products, alternative distribution agreements could be signed with other global distributors of cosmetic ingredients. These new appointed distributors would continue supplying products to customers currently using our products, without any significant interruption of sales. We also believe that if we choose to replace one or more of our current distributors, we would be able to put in place new distribution agreements to service our customers in all the geographic areas affected. If necessary, we would also be able to sell directly to the end users of our products until a new distribution arrangement was put in place.

PRODUCTS - COSMETIC INGREDIENTS:

LUBRAJEL® is an extensive line of multifunctional water-based moisturizing and lubricating gel formulations that are used as ingredients indesigned to mainly provide sensory enhancement, lubrication, and texture to personal care products. Some of the Lubrajel products (primarily cosmetic/skincare). Inalso offer skin moisturization benefits. Many of the personalLubrajel products are biodegradable. The Lubrajel products are primarily used in skin care industry they are used primarilyproducts such as moisturizers, viscosity modifiers, and as bases for other personal careanti-aging creams, body lotions, face serums, spa products and can be foundsunscreens. The Lubrajel products are also used in makeup products such as an ingredient inprimers and foundations. Each Lubrajel product offers unique benefits for the formulation of skin creams, moisturizers, makeup,care and body lotions. Included in the many different formulations ofcolor cosmetic products. The basic product line includes Lubrajel are variations that use different types of preservatives, including the Company’s line of paraben-freeCG, Lubrajel DV, Lubrajel IIXD, Lubrajel MS, Lubrajel NP and Lubrajel Oil.

To address customer demand for preservative-free products, as well as some, like we developed and launched Lubrajel DV PF,, Lubrajel IIXD PF, Lubrajel MS PF, Lubrajel Oil PF, and Lubrajel II XD PF,PF. To address customer demand for phenoxyethanol-free products, we developed and launched Lubrajel DV free, Lubrajel IIXD free, Lubrajel MS free, Lubrajel NP Free and Lubrajel Oil free.

In the last few years, to meet the growing consumer demand for “green” and sustainable products, we have focused on developing and launching new products which only contain ingredients that are all preservative-free.considered “natural”. The Lubrajel products in the new natural line have been certified by the Cosmetic Organic and Natural Standard (“COSMOS”). This standard is recognized globally by the cosmetic industry.

LUBRAJEL NATURAL was the first product in a line of Lubrajel products for cosmetic use that are producedwas launched using only ingredients that are considered “natural”.natural. This product, as well asis a unique formulation of natural polymers and glycerin. Lubrajel Natural imparts a light and velvety skin feel, improving the additional “natural” products under development (see “Development Activities” below) are based on natural polysaccharides, which contribute moisturization, emulsion stabilization, and emolliency tosensory characteristics of personal care products, particularly creams and lotions. Ecocert, one of the global organizations authorized to certify natural and organic products, has certified that Lubrajel Natural complies with the Cosmetic Organic and Natural Standard (“COSMOS”), indicating that the product is suitable for use in natural and organic cosmetic products.

UNITED-GUARDIAN, INC.formulations, while providing a powerful skin moisturizing effect.

LUBRAJEL MARINE™ was the second product that the Companywe developed for itsour new line of “natural” cosmetic ingredients.natural products. It was formulated using naturally-derived polysaccharides,naturally derived polymers, with some of the ingredients sourced from marine vegetation. This product was developed jointly with ASI, and for that reason is being marketedsold globally on an exclusive basis by ASI. Like the original Lubrajel Natural, this product has received COSMOS certification for use in natural and organic cosmetic products. It is being actively marketed by ASI, and while sales have not attained the levels that the Company had originally hoped for, the Company is still optimistic that sales will increase as the interest in natural

UNITED-GUARDIAN, INC.

Other products in the marketplace continues.

Total sales of the Company's cosmetic ingredients increased by $2,598,128 (61%) for the year ended December 31, 2021 when compared with 2020, and accounted for approximately 49% of total Company sales in 2021 compared with 39% in 2020. The increase was due primarily to an increase in salesLubrajel Natural line of Lubrajel cosmetic ingredients to ASI, which the Company believes was due mainly due to the global economies gradually recovering from the impact of the coronavirus pandemic during 2021.

Each of the following cosmetic ingredients accounted for less than 2% of the Company’s sales in 2021, listed in descending order of sales.products are:

LUBRAJEL II XDOlL NATURAL was developed as a ”green”, low viscosity alternative. Lubrajel Oil Natural is a version of Lubrajel that was developed to be a direct replacement for oneunique formulation of the competitive products to Lubrajel. There natural film former pullulan, cellulose gum, xanthan gum and glycerin. It imparts a silky, silicone-like skin feel and a long playtime as well as moisturization. Lubrajel Oil Natural makes possible the creation of smooth, luxuriant textures without adding viscosity. Since it also has good clarity, it is an excellent choice for clear formulations.

LUBRAJEL TERRA is a paraben-free versionmultifunctional, moisturizing hydrogel with unique aesthetic qualities for natural formulations. Lubrajel Terra’s synthetic-like texture can be attributed to the novel complex of this productpolysaccharides, Konjac Mannan, derived from the Asian plant, Amorphophallus Konjac, also known as Devil’s Tongue, and Galactoarabinan, derived from the Larch tree, which are acclaimed for their outstanding moisture retaining and film forming properties, as well as cellulose gum.

In addition to the Lubrajel II XD Free,line of products, we also manufacture other cosmetic ingredients noted below: which accounted fortless than 10% of total sales in 2022:

B-122™ is a powdered lubricant used in the manufacture of certain cosmetics, such as pressed powders, eyeliners, and rouges, as well as some industrial products. The product acts as a binder, increases water-repellency and drop strength, and lowers the Company recently completedcoefficient of friction in the developmentproducts in which it is used.

ORCHID COMPLEX™ is an oil-based extract of a preservative-free versionfresh orchids. It is characterized by its excellent lubricity, spreadability, light feel, and emolliency. Because of this product, which is being marketedits alcohol solubility it may also be used in fragrance products, such as LUBRAJEL II XD PF.perfumes and toiletries. Its emolliency makes it an excellent additive to shampoos, bath products and facial cleansers.

LUBRASIL™ II SBis a special formulation of Lubrajel in which silicone oil is incorporated into a Lubrajel base using proprietary technology that enables the product to maintain much of the clarity of regular Lubrajel. The product has a silky feel and is water resistant while at the same time providing moisturization.

B-122™ is a powdered lubricant used inSales of our cosmetic ingredients represented approximately 41% of total our total sales for the manufacture of certain cosmetics, such as pressed powders, eyeliners, and rouges, as well as some industrial products. The product acts as a binder, increases water-repellency and drop strength, and lowers the coefficient of friction in the products in which they are used.year ended December 31, 2022.

KLENSOFT™We believe that there is a surfactant (a surface-active agent, such as a soap or detergent) that can be used in shampoos, shower gels, makeup removers, and other cosmetic formulations. The marketing of Klensoft had been discontinued in 2021 due to a significant increase in raw material costs which made the product difficult to market. However, there has been recent interest in this product from a previous customer, despite the higher costs, and the Company may make limited quantities of this product available in the future depending on demand.

ORCHID COMPLEX™ is an oil-soluble base for skin creams, lotions, cleansers, and other cosmetics. It is an extract of fresh orchids modified by stabilizers, and is characterized by its excellent lubricity, spreadability, light feel, and emolliency. Because of its alcohol solubility it may also be used in fragrance products, such as perfumes and toiletries. Its emolliency makes it an excellent additive to shampoos, bath products and facial cleansers. It is also a superior emollient for sunscreens, vitamin creams, toners and skin serums.

The Company believes that its ability to maintain and/or increase sales of its cosmetic ingredients will depend on (a) the ability and determination of its marketing partners, especially its largest marketing partner, ASI,potential to continue to aggressively promote the Company’s products, particularly to new customers, and to find new marketing opportunities for those products; (b) the Company's success in developing new and innovative cosmetic ingredients, including new types of water-based moisturizers and lubricants; developing new applications for existing products; and (c) the ability of the Company to compete with manufacturers of lower-cost competitors to Lubrajel that have negatively impactedgrowing the sales of the Company’s cosmetic ingredients over the past few years. In particular, the Company has experienced significant pricing pressure from competitive products being marketed by some Asian manufacturers. These lower-cost competitive products are likely to continue to negatively impact the Company’s sales and profit margins on some of its products in certain geographic areas.

UNITED-GUARDIAN, INC.

The Company believes that there is still potential to expand the sales of itsour cosmetic ingredients through new product development, modifications to make somedevelopment of its current products more competitive,new product applications, development of additional claim substantiation,substantiations, and geographic expansion. The Company believesAlthough we have experienced significant pricing pressure from low-cost competitors, we believe that its strong brand identity, reliability, and reputation for supplying quality products will be advantageous in its efforts towe can compete with these low-cost competitors because our customers value our innovation capabilities, the growing numberquality of lower-cost competitors, but that it will still be necessary to be more competitive with its product pricing in certain geographic areas in order to maintainour products, the reliability of supply and grow its market share.the outstanding technical support.

MEDICAL LUBRICANTS

Our medical lubricants are sold directly to manufacturers and marketers of finished products or to the contract manufacturers utilized by those companies. Sales of our medical lubricants are shipped EXW from our facility in Hauppauge, New York. Sales are deemed final upon shipment, and we have no obligation to repurchase or allow the return of these goods unless they are defective.

PRODUCTS – MEDICAL LUBRICANTS

Our medical lubricants are also sold under the Lubrajel brand since they are water-based gel formulations designed to mainly provide sensory enhancement and lubrication to medical products. The Lubrajel medical lubricant products are primarily used in catheters, condoms, personal lubricants and in oral care applications such as mouth washes.

UNITED-GUARDIAN, INC.

Currently, we offer six medical lubricant products for catheter lubrication, one product for the lubrication of condoms and one product for oral care. In addition, we develop and sell customized exclusive products for all these applications.

Our medical lubricants include the following:

LUBRAJEL MG was the first medical lubricant product developed by the Company. It has been used by many medical device manufacturers for lubricating urinary catheters, pre-lubricated enema tips, and other medical devices.

LUBRAJEL MGL is a medical lubricant with a lower viscosity than our standard medical lubricant, Lubrajel MG. It can be used as a general and instrument lubricant for use during physical exams. It can be applied to catheters, thermometers and other instruments to ensure ease of use and patient comfort.

LUBRAJEL RR and RCare both water-based gels used primarily as lubricants for urinary catheters. They are special grades of Lubrajel thatRR and Lubrajel RC can withstand sterilization by gamma radiation, which is one of the methods of terminally sterilizing medical and hospital products. Lubrajel RR was the originalfirst radiation resistant Lubrajel product. Lubrajel RC was developed as a lower-cost alternative to Lubrajel RR for those customers who are in more cost-sensitive markets. Sales of Lubrajel RR and Lubrajel RC decreased in 2021 compared with 2020, mostly due to a 90% decrease in sales of Lubrajel RC. The Company believes that the decrease was primarily the result of the loss of one of the Company’s larger medical product customers due to a reformulation. The combined sales of both products accounted for 4% of the Company’s sales in 2021. The Company is currently working with two companies that are evaluating this product, which may result in an increase in sales if one or both of those customers decide to proceed with purchasing this product.

LUBRAJEL MGFLUID is a water-based condom lubricant designed as an alternative to traditional silicone-based lubricants. The water-based formula cleans up easily with soap and water and does not stain clothing. The lubrication system employed in Lubrajel Fluid is specifically designed to be compatible with traditional condom release powders, which are used during the original formmanufacture of Lubrajel, developed as a medical lubricant in the 1970s. It is used by many medical device manufacturers for lubricating urinary catheters, pre-lubricated enema tips, and other medical devices. Sales for this product increased in 2021 compared with 2020 due to an increase in sales to one of the Company’s larger customers for this product located in China. Sales to this customer were impacted significantly in 2020 due to the pandemic, but sales levels increased as China’s economy began to emerge from the pandemic in 2021.latex condoms.

LUBRAJEL LC, LUBRAJEL BA and LUBRAJEL FA are Lubrajel formulations that were developed for use in oral care applications. Sales of these products increased in 2021 compared with 2020, primarily due to an increase in orders from the Company’s primary customers for these products, which the Company believes was due to improving conditions related to the pandemic.

LUBRAJEL FLUID is a very low viscosity form of Lubrajel that was developed to provide superior lubrication in water-soluble products. It was specifically developed, and is currently in limited use, as a replacement for silicone oils in pre-lubricated condoms. The Company has only one customer for this product, and sales of this product did not contribute significantly to the Company’s overall sales.

Sales of all the medical grades of Lubrajel decreased by 5% in 2021 compared with 2020 and accounted for approximately 14% of the Company’s gross sales in 2021 compared withlubricants represented approximately 19% in 2020. The decrease was due primarily toof our total sales for the loss one customer.year ended December 31, 2022.

UNITED-GUARDIAN, INC.We believe that there is potential to continue growing the sales of our medical lubricants through new product development, development of new product applications, and geographic expansion.

PHARMACEUTICALS

We sell our pharmaceutical products primarily to full-line drug wholesalers, which in turn supply those products to pharmacies, physicians, hospitals, long-term care facilities, the U.S. Department of Veterans Affairs, and other government agencies. We also sell a small quantity of pharmaceutical products directly to hospitals and pharmacies. We arrange for, and cover the cost of, shipping our pharmaceutical products, and sales of those products are final when shipped. The pharmaceutical products are returnable only under specific circumstances in accordance with pharmaceutical industry standards, such as if the products are (a) damaged when received; (b) defective; (c) too close to their expiration dates to sell; or (d) within a year after their expiration dates. These return policies are in conformance with standard pharmaceutical industry practice.

PRODUCTS - PHARMACEUTICALS

RENACIDIN® is a prescription drug productapproved by the FDA that is used primarily to prevent and to dissolve calcifications in urethral catheters and in the urinary bladder. It is currently marketed incatheters. We maintain a plastic 30 mL single-dose bottle. While the gross profit generated by Renacidin increased in 2021 compared with 2020, gross sales of Renacidin decreased by approximately 6% in 2021 compared with 2020, and represented approximately 34% of total Company gross sales. The decrease in gross sales was duespecific website dedicated to the Company’s decision in December 2020 to terminate its participation in the Medicaid Drug Rebate Program (MDRP) and the Section 340(B) Pricing Program (340B). The Medicaid Drug Rebate Program required the Company to pay a significant rebate to the various states where Renacidin was provided to Medicaid patients, and the 340B program required the Company to sell theirthis product at a deeply discounted price. Due to the overly burdensome nature of the Medicaid rebates and the deeply discounted pricing associated with the 340B Program, the Company terminated its participation in the MDRP and the 340B Programs, effective December 31, 2020.www.renacidin.com.

UNITED-GUARDIAN, INC.

CLORPACTIN®WCS-90 WCS-90 is ana chlorine-based drug that is marketed as a topical antimicrobial product used primarily in urology to treat infections in the urinary bladder. Itand is also used in surgery for treating a wide range of localized infections in the peritoneum (the lining of the abdominal cavity), as well as the eye, ear, nose and throat, and sinuses. The product is a powder that is mixed with water by the end user and used as a solution.urology. It is also a powerful disinfectant, fungicide, and deodorizer. In 2021

Our pharmaceutical products represented 39% of our total sales for the year ended December 31, 2022.

We believe that there is potential to grow the sales of Clorpactin increased by 16% and represented approximately 5% of the Company’s gross sales.

Sales of the Company’sour pharmaceutical products are final when shipped, and are returnable only at the discretion of the Company unless (a) they are found to be defective; (b) the product is damaged in shipping; (c) the product is too close to its expiration date to sell; or (d) the product is past its expiration date by no more than one year. These return policies are in conformance with standard pharmaceutical industry practice.through geographic expansion.

INDUSTRIAL PRODUCTS

DESELEX™ is a sequestering and chelating agent that is used primarily as a replacement for phosphates in the manufacture of detergents. It also has some use in personal care products as a chelating agent in shampoos and body washes. Sales of this product decreased by less than 1% in 2021 compared to 2020 and represented less than 1% of Company sales. In March 2022, the Companywe discontinued this product due to minimal sales and a significant increase in raw material costs.

THOROCLENS is a chlorine-based industrial cleanser manufacturedwhich we manufacture and packaged by the Companypackage for a small company in New England. Sales of this product increased in 2021, but, as with Deselex, represented less than 1% of Company sales.

DEVELOPMENT ACTIVITIES

In coordination with, and with input from, its marketing partners, the Company's research and development department develops products that are used in many different industries, including the personal care (including cosmetic), pharmaceutical, medical, health care, and specialty chemical industries. These products are in various stages of development, some currently marketable and some in the very early stages of development requiring a substantial amount of development work to bring them to market. Research is also being done on new uses for currently marketed products.

Prior to initiating research and development work on a product, the Company consults with its global marketing partners to determine the marketability of the product, including the potential market size and the most effective method of marketing the product. After that, the research and development department will determine whether the product can be successfully developed, including (a) laboratory refinements and adjustments to suit the intended uses of the product; (b) stability studies to determine the effective shelf life of the product and suitable storage and transportation conditions; and (c) laboratory efficacy tests to determine the effectiveness of the product under different conditions. If development proves feasible, the Company will then determine whether production and sales costs make it feasible to bring the product to market.

UNITED-GUARDIAN, INC.

If the initial development work is successful, and the estimated costs of further development are acceptable to the Company, further development work to bring the product to market will continue, including scaling up from laboratory production batches to pilot batches to full-scale production batches. In the case of drug products or medical devices, significant additional work would have to be done, including studies to determine safety and effectiveness, preparation of an Investigational New Drug (IND) Application, and finally the filing of an NDA. Because of the high cost of bringing new drugs or medical devices to market, as well as the Company’s limited resources, the Company does not currently have plans to develop any new drugs or medical devices, and intends to focus its research and development efforts on the development of new and innovative products for the personal care and medical (non-drug) markets.

While there can be no assurance that any particular project will result in a new marketable product or a commercially successful product, the Company believes that a number of its development projects, including those discussed below, may have commercial potential if the Company's development efforts are successful.

The Company's major research focus is on the development of new and unique cosmetic ingredients. The following are some of the projects on which the Company is currently working:

LUBRAJEL OIL PF: This product was developed as a result of the high demand for the Company’s very popular Lubrajel Oil. Unlike that product, this formulation is preservative-free, which enables formulators to use their own preservative systems without having to account for preservatives already incorporated into the product. This approach has been very successful with the Company’s Lubrajel PF, its first preservative-free product, and the Company is hopeful that a preservative-free formulation of Lubrajel Oil will also be successful. The Company has launched this product exclusively with Ashland, which launched the product globally at the end of 2020. Since the launch, Lubrajel Oil PF has seen success with many customers. The Company has seen increased orders which demonstrates how quickly customers have been able to incorporate Lubrajel Oil PF into their formulations.

LUBRAJEL II XD PF: Like Lubrajel Oil PF, this product was developed to meet the continuing market demand for preservative-free products. Current formulators are moving from conventional preservative systems to more natural methods of preservation. Eliminating the preservatives enables a formulator to choose the preservative system that is best for their final application. This product was launched by ASI in early 2021, and has already been qualified by some customers in the EMEA market. The Company received its first commercial order for this product in the first quarter of 2022.

OIL/WAX HYDRATION: The concept for this product is an anhydrous textured gel that can be added to rinse-off formulas and provide longer-lasting hydration. Like many of the Company’s other “natural” products, this product has a high natural origin content based on ISO 16128, and, like the Company’s other natural products, is intended to be certified as a “natural” ingredient. Several prototype formulas have been created and additional testing will be conducted in the coming months. Additional conversations with Ashland are scheduled to better understand the market applications, pricing, and additional testing that may be necessary to prove efficacy.

LUBRAJEL 24: The purpose of this project is to develop a “natural” product with 24-hour hydration. While the Company’s current water-based moisturizing products provide excellent hydration, the goal is to build upon that to produce a product with superior hydration that will last a full 24 hours. Three prototypes have been developed, and hydration testing has been conducted on two of the three, evaluating them against a well-known benchmark, hyaluronic acid. Testing of the remaining prototype will be conducted this winter to determine which formulations will move forward and what the next steps will be in the development process.

UNITED-GUARDIAN, INC.

LUBRAJEL OIL NATURAL: This product was developed to be an addition to the Company’s “natural” line of products. It uses vegetable feedstock and is based on polysaccharide chemistry. Modifications have been made over the past year to increase hydration and stabilize the emulsion. Like the Company’s other “natural” products, this product has been certified by Ecocert to comply with the COSMOS standards for use in natural and organic cosmetic products. The Company has initially launched this product with its marketing partner in the United Kingdom (“UK”) due to a specific interest they had in this product. The product has already been qualified for use by some customers in the UK, and the first commercial order was placed in January 2021. The Company is working with its Italian marketing partner to pursue additional markets where this product might be successful.

LUBRAJEL TERRA: This product was developed as an additional offering to the Company’s line of “natural” products. Lubrajel Terra incorporates plant polysaccharides with natural moisturizers to achieve long-lasting hydration. Like the Company’s other “natural” products, this product has been certified by Ecocert to comply with the COSMOS standards for use in natural cosmetic products. The Company launched this product with its UK marketing partner in August 2021, and has seen interest in this product for use in haircare formulations following the beard-care formulation that was promoted as part of its launch. The Company’s UK marketing partner has informed the Company that several customers have included Lubrajel Terra in their pipeline evaluations. The Company is also working with its Italian marketing partner to pursue additional markets where this product might be successful.

HAIR CARE: A new area of research for the Company will be in haircare ingredients. While the Company has typically spent more of its time developing products for the skincare market, it is putting more effort now into the development of haircare products. The Company will be working with its UK marketing partner to gain insight into this market, focusing on developing “natural” hair care ingredients. Since the Company’s current “natural” line has some overlap with the haircare market it is confident that with additional insight from its marketing partners it will be able to create products for customers that want to elevate their haircare formulations with natural ingredients. The Company intends to continue to work with its marketing partners during all of the stages of product development to ensure that our ingredients are meeting customer needs.

LUBRAJEL DV PF and LUBRAJEL MS PF: The Company developed two additional products for its growing line of preservative-free products. The preservative-free offerings enable formulators to use their own preservative systems without having to account for preservatives already incorporated into the products. Both products will be launched with its UK marketing partnersBeginning in the second quarter of 2022.2023, we will discontinue the manufacturing and sale of this product.

It should be emphasized that someFOREIGN SALES

For the years ended December 31, 2022 and 2021, approximately 25% and 20%, respectively, of our sales revenue was from foreign sources, and was derived from (a) sales of our cosmetic ingredients to foreign distributors, which accounted for approximately 9% of sales in both 2022 and 2021, and (b) sales of medical lubricants directly to certain customers in foreign countries, which accounted for approximately 16% and 11% of our sales revenue for the projects listed aboveyears ended December 31, 2022 and 2021, respectively.

Because all shipments to our largest distributor, ASI, are delivered to ASI’s warehouses in the very early stagesU.S., all sales to ASI are considered domestic sales, even though a significant percentage of researchASI’s sales of our products are to customers in foreign countries. Based on sales information provided by ASI, 66% of ASI’s sales of our products in 2022 were to customers in foreign countries, compared with 74% in 2021. ASI’s largest foreign market in both 2022 and development,2021 was China, which accounted for approximately 38% of ASI’s sales of our products in 2022 and there can be no guarantee that any particular development project will result42% in a marketable product or in significant sales if it is marketed.   2021.

The Company’s research and development expensesSince sales of our products are denominated in 2021 were $478,642U.S. Dollars, our selling prices are generally not affected by fluctuations in foreign currency exchange rates, except to the extent that a stronger dollar compared with $451,208foreign currencies can make our products less competitive in 2020. The Company expects its research and development expenses in 2022foreign markets, sometimes requiring adjustments to be comparable to those of 2021. Any additional increase in development and/or production costs will depend on whether capital investments are requiredour prices in order to continue development work on, or to manufacture, anybe more competitive. The strengthening of the newU.S. dollar in 2022, which reached its highest level in 20 years, made our products under development.

The Company requires all employeesless competitive and consultants who may receive confidential and proprietary information to agree in writing to keep such information confidential.

UNITED-GUARDIAN, INC.

TRADEMARKS AND PATENTS

The Company strongly believes in protecting its intellectual property. In the past, the Company filed for patent protection in connection with many of its products and processes, and over the years was issued at least 32 patents, all of which are now expired. However, under current patent law the filing of a patent now provides detailed proprietary information that can be used by companiesthey became pricier in other countries where enforcement would be difficult and expensive, such as in China. As a result, the Company decided in recent years to generally forego patent protection and rely instead on trade secret protection to protect its intellectual property, including its proprietary product formulations and manufacturing methods. The Company willcountries. We continue to consider filing patent applications in situations where it believes that relying on trade secrets would not provide sufficient protection.

The various trademarkswork closely with our network of distributors to price our products as competitively as possible and, trade names owned or used by the Company in its business are of varying importancewhen appropriate, to the Company. The most significant trademarks are Lubrajel®, Renacidin®,offer additional volume discounts and Clorpactin®.more aggressive pricing to maintain and increase sales and expand our customer base.

DOMESTIC SALES

For the years ended December 31, 2022 and 2021, approximately 75% and 80%, respectively, of our sales were from domestic sources.

COSMETIC INGREDIENTS:

In the United States, the Company'sour cosmetic ingredient products are marketed and distributed exclusively by ASI in accordance with a marketing agreement entered into in 1996 with its predecessor company, International Specialty Products (“ISP”). That agreement was for the marketing of the Company’s cosmetic ingredients in North, Central, and South America. Since that time, this initial agreement has been modified and expanded multiple times (see “Marketing Agreements” below), most recently in 2019 when Korea was added to ASI’s marketing territory. ASI also has the exclusive right to market globally four of the Company’s products: products globally: Lubrajel Marine, which was the second product in the Company’sour Lubrajel Natural line of products; Lubrajel BA, an oral care product which was specifically developed for ASI in 2012 but which, to date, has not had significant sales;2012; and two of the Company’sour preservative-free products, Lubrajel Oil PF and Lubrajel II XD PF. ASI also has a non-exclusive right to sell certain of the Company's other industrial and medical products. The current agreement with ASI automatically renewed on January 1, 2022 and will automatically renew again on January 1, 2024 unless either party chooses to terminate, which can be done by giving 60 days’ notice prior to the then expiration date.

Revenue from domestic sales of all Company products accounted for approximately 80% of the Company’s total sales in both 2021 and 2020.

UNITED-GUARDIAN, INC.

Domestic sales of cosmetic ingredients accounted for approximately 41%32% of total Company sales in 2021,2022, compared with 30%41% in 2020.2021. Sales to the Company’sour largest marketing partner,distributor, ASI, accounted for approximately 40%32% of total Company sales in 20212022 and 29%42% of sales in 2020. It should be noted, however, that while all sales to ASI are considered domestic sales because all shipments to ASI are delivered to ASI in the U.S., a significant percentage of ASI’s purchases from the Company are ultimately sold to foreign customers. Based on sales information provided to the Company by ASI, 74% of ASI’s sales in 2021 were to customers in foreign countries, compared with 68% in 2020.2021.

PHARMACEUTICALS:

The Company’sOur pharmaceutical products are marketed only in the United States and are sold primarily through full-line drug wholesalers. Sales of those products accounted for approximately 34%39% of Company sales in 2021,2022, compared with approximately 41%34% in 2020.2021.

During 2022 and 2021, and 2020, the Companywe participated in various government drug rebate programs related to the sale of Renacidin®, itsour most important pharmaceutical product. These programs include the Veterans Affairs Federal Supply Schedule (FSS)(“FSS”), and the Medicare Part D Coverage Gap Discount Program (CGDP)(“CGDP”). These programs require the Companyus to sell itsour product at a discounted price. In addition, during 2020, the Company participatedprice, typically given in the Medicaid Drug Rebate Program (MDRP), which required the Company to payform of a significant rebate to the various states where Renacidin was provided to Medicaid patients, as well as the Section 340B Drug Pricing Program (340B), which required the Company to sell their product at a deeply discounted price. Due to the overly burdensome nature of these Medicaid rebates on the Company, and the deeply discounted pricing associated with the 340B Program, the Company terminated its participation in the MDRP and the 340B Programs, effective December 31, 2020. The Company will, however, continue to participate in the other government discount and rebate programs, specifically the Veterans Affairs FSS Program and the Medicare Part D Coverage Gap Program (CGDP).

UNITED-GUARDIAN, INC.

The Company’srebate. Our sales, as reported, are net of these rebates, some of which are estimated and are recorded in the same period that the revenue is recognized.

MEDICAL PRODUCTSLUBRICANTS:

The Company’s non-pharmaceuticalWe sell our medical products, such as its catheter lubricants and oral care products, are sold by the Company directly to the end users or to contract manufacturers utilized by the end users. These products are also available for sale on a non-exclusive basis through its marketing partners if they choose to market those products. Domestic sales of the Company’s medical productslubricants accounted for approximately 4%3% of the Company’sour total sales in 2021,2022, compared with 8%4% in 2020.2021. Although all shipments of medical productslubricants to U.S. locations are considered domestic sales, a percentage of those shipments are subsequently shipped by some customers to foreign manufacturing facilities, which then produce finished products that could be marketed globally.globally.

INDUSTRIAL PRODUCTS:

Domestic sales of the Company’sour specialty industrial products accounted for less than 2% of Companyour sales in both 20212022 and 2020.2021. These products are sold directly to end-user customers or their contract manufacturers, who incorporate these products into their finished products. We will discontinue manufacturing and distribution of these products in the second quarter of 2023. because sales of these products represent less than 2% of total sales, and the small production scale.

FOREIGN SALESISO 9001:2015 CERTIFICATION

In both 2021On July 23, 2018, we were certified by DQS Inc. to be in compliance with the latest ISO standard, ISO 9001:2015, indicating that our documented procedures and 2020, approximately 20%overall operations had attained the high level of the Company’s sales revenue was from foreign sources, and was derived from (a) sales of its cosmetic ingredientsquality needed to the Company’s foreign marketing partners, which accounted for approximately 9% of Company sales in 2021 and 2020 and (b) sales of some of the Company’s medical products directly to certain customers in foreign countries, which accounted for approximately 11% of Company sales in both 2021 and 2020.comply with this current ISO certification level.

Because all shipmentsOur current ISO 9001:2015 certification is valid through July 22, 2024. We have been in continuous compliance with ISO standards since November 1998. Between November 1998 and December 2003, we were registered under the ISO 9002 standard. From December 2003 to December 2009, we were registered under the Company’s largest marketing partner, ASI, are deliveredISO 9001:2000 standard. From December 2009 to ASI’s warehouses inJuly 2018, we were registered under the U.S., all sales to ASI are included in “Domestic Sales”, even though a significant percentage of ASI’s sales of the Company’s products are to customers in foreign countries. Based on sales information provided to the Company by ASI, 74% of ASI’s sales of the Company’s products in 2021 were to customers in foreign countries, compared with 68% in 2020. ASI’s largest foreign market in both 2021 and 2020 was China, which accounted for approximately 41% of ASI’s sales of Company products in 2021 and 34% in 2020.

Since the Company sells its products in U.S. Dollars, the Company’s selling prices are generally not affected by fluctuations in foreign currency exchange rates, except to the extent that a stronger dollar compared with foreign currencies can make the Company’s products less competitive in foreign markets, sometimes requiring the Company to adjust its prices in order to be more competitive. As a result of the weakened dollar in the second half of 2020 and the first half of 2021 , the Company’s products became more competitive in Europe, but in the second half of 2021 the dollar strengthened against the Euro, which again made the Company’s products less competitive. Current indications are that it is likely that the dollar will continue its current strength against the Euro for most if not all of 2022.ISO 9001:2008 standard.

UNITED-GUARDIAN, INC.

SALES AND MARKETINGCOMPETITION

The Company markets its products through marketing partners and distributors, promotion on the Company’s websites, and by internet advertising, and has some direct sales to customers as well. The cosmetic ingredients are sold outright (not on consignment) to the Company’s marketing partners, which in turn market and resell the products to cosmetic and other personal care product manufacturers for useWe primarily compete in the formulationspecialty ingredients/products space. The participants in this space offer a broad range of one or moreproduct lines designed to meet specific customer needs. Competition is largely based on product performance, price, quality, service, product availability, security of theirsupply, and responsiveness of product development in cooperation with customers. Many key competitors are significantly larger than us and have greater financial resources, leading to greater operating and financial flexibility.

To improve our competitive position, we are strengthening our core capabilities and investing in product development, especially in naturally derived products. The pharmaceuticalWe will also continue providing high-quality products, are sold in the United States primarilyexcellent technical service and continue to drug wholesalers, which in turn distribute and resell those products to drug stores, hospitals, physicians, long-term care facilities, the U.S. Department of Veterans Affairs, and other government agencies. The medical and specialty industrial products are sold by the Company directly to the end users of those products. The industrial products are older products that have limited marketability but are still being sold to some long-time customers. They are not actively marketed but are available for sale to any new customers.be a reliable supplier.

MARKETING AGREEMENTSINTELLECTUAL PROPERTY

The Company has a written marketing agreement only with ASI. All other marketing arrangements are subjectIn recent years. we have elected to cancellation at any time by either the Company or the marketing partner. The marketing agreement with ASI gives it exclusive foreign marketing rights with the exception of the following territories,rely on trade secret protection to protect our intellectual property for proprietary product formulations and manufacturing methods. We will file for patent protection in situations where the Company's other marketing partners have exclusive marketing rights: the United Kingdom (by The Azelis Group); France (by Sederma SAS, a subsidiary of Croda International Plc.); Italy (by Safic-Alcan); and Switzerland (by Azelis Cosmetics GmbH.).we believe that relying on trade secret protection alone would not provide sufficient protection.

That agreement set forth provisions under which ASI would marketWe own the Lubrajel®, Renacidin®, and distribute the Company's cosmetic ingredients, as well as some medical and specialty industrial products, in certain parts of Europe, Asia, Australia, and Africa. In 1996, the parties entered into another agreement, which extended ASI’s distribution rights to the United States, Canada, Mexico, and Central and South America, and in December 2019 the marketing rights in Korea were transferred to ASI from the Company’s previous distributor for Korea. In July 2000, December 2002, December 2005, May 2010, November 2012, and November 2013 the parties entered into additional agreements that modified, extended, and consolidated the 1994 and 1996 agreements, and provided for automatic two-year renewals of ASI’s marketing rights unless either party terminated the arrangement upon 60 days’ notice. The agreement automatically renewed on January 1, 2012, 2014, 2016, 2018, 2020, and 2022 for additional two-year terms. The current contract ends on December 31, 2023.

The Company believes that in the event ASI were to cease marketing the Company's products alternative arrangements could be made with one of the other global marketers of cosmetic ingredients to continue to supply products to customers currently using the Company's products, without any significant interruption of sales.Clorpactin®trademarks.

RAW MATERIALS

We purchase raw materials from multiple sources in the United States and believe that raw material supplies will be available in quantities sufficient to meet demand in 2023. Although some of those raw materials may be manufactured overseas, all of our suppliers are located within the United States. All of our products were impacted, to varying degrees, by the volatility of raw material costs during 2022, and these conditions are likely to continue in 2023.

The principal raw materials used by the Companywe use consist of common industrial organic and inorganic chemicals. Most of these materials are available in ample supply from numerous sources. The Company hasWe have six major raw material vendors that together accounted for approximately 94%90% of theour raw material purchases by the Company in 20212022 and 88%94% in 2020.

UNITED-GUARDIAN, INC.2021.

INVENTORIES, RETURNS, and ALLOWANCES

ItWe believe it is important for the Company to maintain moderate inventory levels of certain of itsour finished goods in order to fulfill purchase orders in a timely manner. Historically, sufficient inventory levels, returns, and allowances have not been a significant factor in the Company'sour business.

BACKLOG

The CompanyWe do not currently does not have any significant backlog of orders.

SEASONALITY

Due to the nature of the Company'sour business and the types of products it markets, it isthat we market, we are not subject to any significant seasonal fluctuations in sales.

CUSTOMERS

The Company’sOur cosmetic ingredients are currently marketed and sold globally by five marketing partners.distributors. Those marketing partnersdistributors, in turn, market and distribute those products to their customers. Although the Company dependswe depend on those marketing partnersthese distributors for the marketing and distribution of itsour cosmetic ingredients, it is confidentwe believe that if any of its marketing partnersour distributors were to decide not to sell the Company’sour products, or if the Companywe chose to replace one or more of those marketing partners, itdistributors, we would be able to put in place new marketing agreements in place to service itsour customers in all the geographic areas affected. If necessary, the Companywe would also be able to sell directly to the end users of itsour products until such time as a new marketing partnerdistributor is put in place.

The Company’s

UNITED-GUARDIAN, INC.

Our pharmaceutical products are sold to, and distributed by, full-line drug wholesalers throughout the United States. ItsOur medical and specialty industrial products are sold directly by the Companyus to the end users of those products or, in some cases, to contract manufacturers used by some of those end users.

COMPETITIONRESEARCH AND DEVELOPMENT

Our research and development (“R&D”) team’s main focus is to develop new products and product-line extensions. The Company has someproduct development activities are focused on developing products or processesfor identified customers and market needs. We frequently collaborate with customers to develop the desired product to meet their specific needs. The R&D team also provides technical support services to assist our customers with application development and co-development. In addition, the R&D team provides ongoing technical assistance and know-how to quality assurance and manufacturing personnel to ensure consistent standards for our products and to deliver environmentally responsible products that are either proprietary or have some unique characteristics. Its Lubrajel line of products is well known globallyexceed customer expectations.

Our research and has a long-standing reputation for high quality. The Company believes that these characteristics will be advantageous to the Companydevelopment expenses in its continuing efforts to compete effectively2022 were $490,770 compared with other companies marketing similar products. The pharmaceutical, health care,$478,642 in 2021. We expect our research and cosmetic industries are all highly competitive, and during 2021 the Company experienced a high level of competition for its cosmetic ingredients bothdevelopment expenses in the U.S. and in foreign markets. In 2021 the value of the U.S. dollar gradually strengthened relative to some other foreign currencies, in particular the Euro, which made the Company’s products a little less competitive in those markets than it had been when the dollar was not as strong. Regardless of the changes in the currency situation, the Company believes that there will continue2023 to be significant competition for its products, especially from Asian competitors, and it may sometimes be necessary for the Company to lower its prices, and reduce its profit margins,higher than those of 2022 in order to remain competitive. The Company intendssupport innovation and growth. Any additional increase in R&D expenses will also depend on whether capital investments are required in order to continue development work on, or to work closely with its marketing partners to remain as competitive as possible.manufacture, any of the new products under development.

The Company is aware that there are other domesticWe require all employees and foreign companies that are engagedconsultants who may receive confidential and proprietary information to agree in the same or similar areas of research as those in which the Company is engaged, some of which have substantially greater financial, research, manpower, marketing and distribution resources than the Company. In addition, there are many large, integrated and established companies that have greater capacity than the Companywriting to develop and to commercialize the types of products upon which the Company's research and development programs are based. The Company intends to continue to focus its research efforts on the development of new and innovative products for which there is not the same level of competition as there is for some of the Company’s older products. The Company is optimistic that its development of unique products, including products made exclusively with natural ingredients, will enable it to continue to compete in a market in which competition has become more of a factor than it had been in the past.

UNITED-GUARDIAN, INC.

ISO 9001:2015 REGISTRATION

On July 23, 2018, the Company was certified by Underwriters Laboratories, Inc. to be in compliance with the latest ISO standard, ISO 9001:2015, indicating that the Company's documented procedures and overall operations had attained the high level of quality needed to comply with this current ISO certification level. From October 2009 to July 2018, the Company had been registered under the ISO 9001:2008 standard; from December 2003 to October 2009, the Company had been registered under the ISO 9001:2000 standard; and between November 1998 and December 2003 the Company had been registered under the ISO 9002 standard. The Company’s current ISO 9001:2015 certification is valid through July 22, 2024. The Company has been in continuous compliance with ISO standards since November 1998.keep such information confidential.

GOVERNMENT REGULATION

Regulation by governmental authorities in the United States and other countries is a significant factor in the manufacturing and marketing of many of the Company'sour products. The Company and manySome of the Company's products are subject to certain government regulations. Some products developedwe develop and sold by the Companysell in the United States may require approval from federal regulatory agencies, such as the U.S. Food & Drug Administration (“FDA”), as well as state regulatory agencies. Some products developed and sold by the Company outside the United States may require approval from foreign regulatory agencies. Although the Company does not currently market any medical devices, if it were

Our operations and many of our products are subject to do so a 510(k) pre-market notification to the FDA would be required to demonstrate that the device is at least as safechemical control laws. These laws include regulation of chemical substances and effective as a legally marketed device. The Company would then need to receive clearance from the FDA prior to marketing the device. While the Company does not have any plans to develop new pharmaceutical products, if it decided to do so any new drug product would require clinical evaluationinventories under an Investigational New Drug Application, and the subsequent submissionRegistration, Evaluation and Authorization of Chemicals (“REACH”) regulation in Europe, Right to Know laws under the Global Harmonized System (“GHS”) for hazard communication, and the regulation of chemicals used in the manufacture of pharmaceuticals and personal care products and contact food under the Food, Drug and Cosmetics Act in the United States. We are an FDA of a New Drug Application.Establishment registered site.

The Company isWe are required to comply with all pertinent current Good Manufacturing Practices of the FDA for medical devices and drugs.drugs our products may be subject to. Accordingly, the regulations to which the Companywe and certain of itsour products may be subject, and any changes with respect thereto, may materially affect the Company'sour ability to produce and market new products developed by the Company.products..

The Company'sOur present and future activities are, and will likely continue to be, subject to varying degrees of additional regulation under the Occupational Safety and Health Act, Environmental Protection Act, import, export and customs regulations, and other present and possible future foreign, federal, state and local regulations.

Portions of the Company'sour operating expenses are directly attributable to complying with federal, state, and local environmental statutes and regulations. In 2022 and 2021, and 2020, the Companywe incurred approximately $32,000$39,000 and $13,000$32,000, respectively, in federal, state, and local environmental law compliance expenses. There was no material financial or other impact on the Companyour results of operations as a result of compliance with environmental laws.

UNITED-GUARDIAN, INC.

ENVIRONMENTAL, SOCIAL, and CORPORATE GOVERNANCEEMPLOYEES HEALTH AND SAFETY

AsWe value all of our employees, suppliers, customers and distributors as well as the broader environment in which we all live and work. We are committed to protecting the safety, health and security of our employees and that of the environment in which we operate. We are further committed and have implemented strict policies against anti-discrimination, anti-harassment and anti-bulling, and will not compromise employee health and safety or the environment for profit.

ENVIRONMENTAL AND CORPORATE SOCIAL RESPONSIBILITY

We have a manufacturer with global sales, the Company isproactive mindset for sustainability. We are committed to sustainable growth and lowering itsminimizing our impact on the local community. It iscommunity and the environment. We are committed to measuring and monitoring itsour impact on the environment and, continually improving. The Company complieswhere appropriate, making improvements. We comply in all material respects with all federal/state/federal, state and local environmental regulations, and hasregulations.

We have recently initiatedestablished a carbon footprint monitoring program andprogram. In 2023, we will be setting goals in order to lower itsminimize our impact on the environment during the coming years. The Company hasenvironment. We have also joined initiatives for core raw materials, such as RSPO,the Roundtable on Sustainable Palm Oil (“RSPO”), to ensure that it supportswe support suppliers in protecting the environment and the people in it. It isWe are committed to using green chemistry principles to produce biodegradable, natural, and safe products with renewable feedstocks.

UNITED-GUARDIAN, INC.SOLID WASTE

AsWe do not produce hazardous waste. We comply with U.S. Environmental Protection Agency (“EPA”) and Department of Transportation’s (“DOT”) regulations for the disposal of the solid waste.

WATER

We comply in all material respects with all laws and regulations on water discharge.

ECOVADIS

We joined EcoVadis as part of the Company’sour commitment to corporate social responsibilityCorporate Social Responsibility (“CSR"CSR”) it joined. EcoVadis is a global leader in guiding, measuring, and improving corporate environmental and social responsibility and sustainability performance. The EcoVadis assessment measured 21 key issues centered around the environment, labor & human rights, ethics, and sustainable procurement. In its latest evaluation the Companywe scored in the top 15% of companies evaluated.

As part of the assessment, it was determined that the Company waswe were strong in the following four areas:

UNITED-GUARDIAN, INC.

a) Disciplinary sanctions to deal with policy violations

b) Policy on information security

c) Polices on corruption

d) Whistleblower procedure to report ethics issues

a) Roundtable on Sustainable Palm Oil (RSPO) Supply Chain Certification

b) Formal assessment of supplier’s progress with regards to REACH requirements

c) No use of tin, tantalum, tungsten, gold, and/or their derivatives

Areas that required continual improvements were reviewed, and programs and policies were implemented as follows:

UNITED-GUARDIAN, INC.

HEALTH & SAFETYHUMAN CAPITAL MANAGEMENT

The Company values its employees, partners, and the planet, and is committed to protecting the safety, health, and security of its employees and that of the environments in which it operates. It is firm in its policy that it will not compromise employee health and safety or the environment for profit or production. It is passionate about health and safety and prides itself on its strategy of prevention through proactive risk elimination and reduction. The coronavirus pandemic introduced a number of unprecedented challenges, but the Company implemented policies and protocols as needed to help prevent the spread of the disease in its facilities, while continuing to operate as an essential business to serve its customers. Such policies and protocols included physical distancing, mandating face coverings, restricting visitation, and educating employees about the disease, its prevention, and vaccines.

EMPLOYEES

The Company presently hasWe currently have 24 employees, 4 of whom serve in an executive capacity, 1615 in research, quality control and manufacturing, 23 in maintenance and construction, and 2 in office and administrative support services. Of the total number of employees, 2223 are full time.

COMPETITIVE PAY AND BENEFITS

We are committed to paying our employees in a fair and equitable manner, regardless of race, gender or country of origin. We believe employees should be compensated equitably based on performance, skills, and experience. We offers a competitive benefits program to support employees through all life stages.

INCLUSION AND DIVERSITY

We focus significant resources on developing and retaining diverse talent and are committed to actively creating a collaborative environment of innovation that leverages the talents of a diverse workforce to drive sustainable growth and create value for our shareholders, customers, employees, and the community in which we operate.

UNITED-GUARDIAN, INC.

TALENT MANAGEMENT

The talent management process includes a well-established performance management process that seeks to provide employees ongoing feedback to enhance their performance in support of business objectives.

Item 1A. Risk Factors.

The information to be reported under this item is not required of smaller reporting companies.

Item 1B. Unresolved Staff Comments.

The information to be reported under this item is not required of smaller reporting companies.None.

Item 2. Properties.Properties

The Company maintains itsWe own our principal office, manufacturing, and factory,research and conducts its research, atdevelopment facility consisting of a 50,000 square foot facility on a 2.7-acre parcel located at 230 Marcus Boulevard, Hauppauge, New York 11788, which the Company owns.11788. Of the 50,000 square feet, approximately 30,000 square feet is manufacturing space, 15,000 square feet is warehouse space, and 5,000 square feet is office and laboratory space. The Company hasWe have fully developed the 2.7 acres, and fully utilizesutilize the building occupying the land. The Company believesWe believe that the aforementioned property is adequate for itsour immediately foreseeable needs. The property is presently unencumbered and in the Company’s opinion, is adequately insured.

Item 3. Legal Proceedings.Proceedings

None.

UNITED-GUARDIAN, INC.From time to time, we are subject to ordinary routine litigation and claims incidental to our business. We are not currently involved in any legal proceedings that we believe are material.

Item 4. Mine Safety Disclosures.Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

TheOur Common Stock of the Company hasis currently traded on the NASDAQ Global Market, since March 16, 2009, under the symbol "UG" (“Common Stock”). From December 1, 2008 through March 13, 2009, following the merger of the American Stock Exchange with the New York Stock Exchange, the Company's Common Stock was traded on the NYSE Amex Stock Exchange under the same symbol. Prior to December 1, 2008, its Common Stock traded on the American Stock Exchange under the same symbol.“UG”

Holders of Record

As of March 1, 2022,2023, there were 385371 holders of record of Common Stock.

Cash Dividends

On May 10, 2022, our Board of Directors declared a semi-annual cash dividend of $0.37 per share, which was paid on June 1, 2022 to all stockholders of record as of May 23, 2022. On November 15, 2022, our Board of Directors declared a semi-annual cash dividend of $0.31 per share, which was paid on December 7, 2022 to all stockholders of record as of November 28, 2022.

On May 18, 2021, the Company’sour Board of Directors declared a semi-annual cash dividend of $0.48 per share, which was paid on June 7, 2021 to all stockholders of record as of May 31, 2021. On November 16, 2021, the Company’sour Board of Directors declared a semi-annual cash dividend of $0.65 per share, which was paid on December 7, 2021 to all stockholders of record as of November 29, 2021.

On May 20, 2020, the Company’s Board of Directors declared a semi-annual cash dividend of $0.42 per share, which was paid on June 17, 2020 to all stockholders of record as of June 3, 2020. On November 18, 2020, the Company’s Board of Directors declared a semi-annual cash dividend of $0.36 per share which was paid on December 8, 2020 to all stockholders of record as of December 1, 2020.

UNITED-GUARDIAN, INC.

Item 6. [RESERVED]

Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations.Operations

Impact of the Coronavirus Pandemic, Global Supply Chain Instability and Inflation

While the coronavirus pandemic (“pandemic”) continues to impact certain areas of the Company’sour operations, the substantial impact the pandemic had on Company sales in 2020 significantly lessened in 2021. While the Company believes that sales of its cosmetic ingredients are still being negatively impacted, the sales situation has improved substantially, and the current impact on our financial performance is coming moreprimarily from increased shipping costs and1) higher raw material costs and increased shipping costs, which may have some futurehad an impact on the Company’sour gross profit margins during 2022, and 2) a decrease in cosmetic ingredient sales in China due to China’s zero-COVID mandate that was in effect for a substantial part of 2022.

The pandemic did not significantly affect our ability to obtain raw materials, but due to supply chain instability, we have experienced longer lead times and higher prices for many of our raw materials. The increased raw material prices had an impact on our gross profit margins in 2022 and may continue to have an impact on gross profit margins in upcoming quarters. It has also experienced delays in shipping orders dueIn response to a shortagerising raw material prices, we have instituted price increases on many of truck drivers and trucks, and limited availability of shipping vessels. The shortage of truck drivers and shipping vessels is expectedour products, which will help to continue in 2022 but improve as the year progresses. The Company has been able to minimizereduce the impact on customers by making them aware of longer lead times that may be necessary asour gross margins in the future.

As a result of these issues.

UNITED-GUARDIAN, INC.

Salesthe lingering effects of the Company’s non-pharmaceutical medical products (“medical products”) had also been negatively impacted by thecoronavirus pandemic in 2020, but those impacts have lessened as well in 2021. Sales of the Company’s pharmaceutical products were not impacted by the pandemic in 2020 or in 2021.

The pandemic has not significantly affected the ability of the Company to obtain raw materials, but it has made some of those materials more expensive, which could impact the Company’s gross profit margins in the future. The Company has been able to maintain production throughout the pandemic.

Theredescribed above, combined with global supply chain instability, there continues to be uncertainty regarding the futurepotential impact of the pandemic on the Company’sour operations or financial results. While the impact on the Company’s’ sales lessened considerably in 2021, the Company isWe believe that we are still unable to provide an accurate estimate or projection as to what the future impact of the pandemic will be on the Company’sour future operations or financial results. The Company does not expect the carrying value of its assets or its liquidity to be impaired by the pandemic.

Another result of the pandemic has been a significant increase in inflation during 2021. While it is unknown whether inflation will continue to increase or will begin to decreasemitigate during 2022,2023, continued inflation is likely to result in further increases in raw material costs, shipping costs, and internal labor costs, which could impact the Company’sour future profit margins.results of operations.

Critical Accounting Policies

The Company’sOur financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“US GAAP”). Preparation of financial statements requires the Companyus to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. The Company uses itsWe use our historical experience and other relevant factors when developing itsour estimates and assumptions, which are continually evaluated. Note A, Nature of Business and Summary of Significant Accounting Policies, of the Notes to Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report includes a discussion of the Company’sour significant accounting policies. The following accounting policies are those that the Company considerswe consider critical to an understanding of the financial statements because their application places the most significant demands on the Company’smanagement’s judgment. The Company’sOur financial results might have been different if other assumptions had been used or other conditions had prevailed.

Marketable Securities

The Company’sOur marketable securities include investments in equity and fixed income mutual funds. The Company’sOur marketable equity securities are reported at fair value with the related unrealized and realized gains and losses included in net income. Realized gains or losses on mutual funds are determined on a specific identification basis. The Company evaluates itsWe evaluate our investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value had been below cost basis, the financial condition of the issuer and the Company’sour ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery of market value. The Company recordsWe record an impairment charge to the extent that the cost of the available-for-sale securities exceeds the estimated fair value of the securities and the decline in value is determined to be other-than-temporary. During 2022 and 2021, and 2020, the Companywe did not record an impairment charge regarding itsour investment in marketable securities because our management believes, based on itsan evaluation of the circumstances, that the decline in fair value below the cost of certain of the Company’sour marketable securities is temporary.

UNITED-GUARDIAN, INC.

Revenue Recognition

The Company recordsWe record revenue in accordance with ASC Topic 606 “Revenue from Contracts with Customers.” Under this guidance, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company’sOur principal source of revenue is product sales.

The Company’sOur sales, as reported, are subject to a variety of deductions, some of which are estimated. These deductions are recorded in the same period in which the revenue is recognized. Such deductions, primarily related to the sale of the Company’sour pharmaceutical products, include chargebacks from the United States Department of Veterans Affairs (‘(“VA”), rebates in connection with the Company’sour current participation in Medicare programs and its past participation in Medicaid programs, distribution fees, discounts, and outdated product returns. These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on sales for a reporting period. All references to “sales” or “Sales” shall mean “net sales” unless specifically identified as “gross sales.”

During 2022 and 2021, and 2020, the Companywe participated in various government drug rebate programs related to the sale of Renacidin®, itsour most important pharmaceutical product. These programs include the Veterans Affairs Federal Supply Schedule (FSS)(“FSS”), and the Medicare Part D Coverage Gap Discount Program (CGDP)(“CGDP”). These programs require the Companyus to sell its productour products at a discounted price. In addition, during 2020, the Company also participatedprice, typically in the Medicaid Drug Rebate Program (MDRP), which required the Company to payform of a significant rebate to the various states where Renacidin was provided to Medicaid patients, as well as the Section 340B Drug Pricing Program (340B), which required the Company to sell their product at a deeply discounted price. Due to the overly burdensome nature of these Medicaid rebates on the Company, and the deeply discounted pricing associated with the 340B Program, the Company terminated its participation in the MDRP and the 340B Programs, effective December 31, 2020. The Company has continued to participate in the other government discount and rebate programs, specifically the Veterans Affairs FSS Program and the Medicare Part D Coverage Gap Program (CGDP). The Company’srebate. Our sales, as reported, are net of these rebates, some of which are estimated and are recorded in the same period that the revenue is recognized.

As long as a valid purchase order has been received and future collection of the sale amount is reasonably assured, the Company recognizeswe recognize revenue from sales of itsour products when those products are shipped, which is when the Company’sour performance obligation is satisfied. The Company’sOur cosmetic products are shipped “Ex-Works” from the Company’sour facility in Hauppauge, NY, and the risk of loss and responsibility for the shipment passes to the customer upon shipment. Sales of the Company’s non-pharmaceuticalour medical lubricant products are deemed final upon shipment, and there iswe have no obligation on the part of the Company to repurchase or allow the return of these goods unless they are defective. Sales of the Company’sour pharmaceutical products are final upon shipment unless (a) they are found to be defective; (b) the product is damaged in shipping; (c) the product is too close to its expiration date for the customer to sell; or (d) the product is expired but is not more than one year after its expiration date. These return policies are in conformance with standard pharmaceutical industry practice. The Company estimatesWe estimate an allowance for outdated material returns based on previous years’ historical returns of itsour pharmaceutical products.

The Company doesWe do not make sales on consignment, and the collection of the proceeds of the sale of any of the Company’s products is not contingent upon the customer being able to sell the goods to a third party.

UNITED-GUARDIAN, INC.

Any allowances for returns are taken as a reduction of sales within the same period the revenue is recognized. Such allowances are determined based on historical experience under ASC Topic 606-10-32-8. The Company hasWe have not experienced significant fluctuations between estimated allowances and actual activity.

The timing between recognition of revenue for product sales and the receipt of payment is not significant. During 2020, the Company experienced minor delays in receiving payments from certain customers that were impacted by the pandemic; however, the negative impact of those delayed payments was not significant. The Company’sOur standard credit terms, which vary depending on the customer, range between 30 and 60 days. The Company uses itsWe use our judgment on a case-by-case basis to determine itsour ability to collect outstanding receivables and providesprovide allowances for any receivables for which collection has become doubtful. As of December 31, 20212022 and December 31, 2020,2021, the allowance for doubtful accounts receivable was $20,252$20,063 and $14,017,$20,252, respectively. Prompt-pay discounts are offered to some customers; however, due to the uncertainty of the customers taking the discounts, the discounts are recorded when they are taken.

The Company hasWe have distribution agreements with certain distributors of itsour pharmaceutical products that entitle those distributors to distribution and services-related fees. The Company recordsWe record distribution fees, and estimates of distribution fees, as offsets to revenue.

UNITED-GUARDIAN, INC.

Accounts Receivable Allowance

The Company performsWe perform ongoing credit evaluations of the Company’sour customers and adjustsadjust credit limits, as determined by a review of current credit information. The CompanyWe continuously monitorsmonitor collection and payments from customers and maintainsmaintain an allowance for doubtful accounts based upon historical experience, the Company’s anticipation of uncollectible accounts receivable and any specific customer collection issues that have been identified. While the Company’sour credit losses have historically been low and within expectations, the Companywe may not continue to experience the same credit loss rates that have historically been attained. The receivables are highly concentrated in a relatively small number of customers. Therefore, a significant change in the liquidity, financial position, or willingness to pay timely, or at all, of any one of the Company’sour significant customers would have a significant impact on the Company’sour results of operations and cash flows. As mentioned above, the Company has not experienced significant issues with the collection of its accounts receivable balances due to the COVID-19 pandemic.

Inventory Valuation Allowance

In conjunction with the Company’sour ongoing analysis of inventory valuation, management constantly monitors projected demand on a product-by-product basis. Based on these projections, management evaluates the levels of write-downs required for inventory on hand and inventory on order from contract manufacturers. Although the Company believeswe believe that it haswe have been reasonably successful in identifying write-downs in a timely manner, sudden changes in buying patterns from customers, either due to a shift in product interest and/or a complete pull back from their expected order levels, may result in the recognition of larger-than-anticipated write-downs. The Company hasWe have performed an evaluation of itsour inventory on hand as of the date of this reportDecember 31, 2022, and believesbelieve the reserve is adequate to cover any slow-moving or obsolete inventory. The Company doesWe do not believe the value of itsour finished products, work in process or raw material inventories have been adversely affected by the coronavirus pandemic.

UNITED-GUARDIAN, INC.current inflationary environment.

Results of OperationsRESULTS OF OPERATIONS

Year ended December 31, 2021 compared with the year ended December 31, 2020:

Sales

Sales increased 27%decreased by approximately 9%, from $10,986,081 in 2020 to $13,929,629 in 2021.2021 to $12,698,503 in 2022. The increasedecrease in sales was primarily due primarily to increasesa decrease in sales of the Company’sour cosmetic ingredient products, and non-pharmaceutical medical products as global economies began recovering from the coronavirus pandemic during 2021.

The increasespecifically a decrease of 28% in sales was the result of the following specific changesto our largest distributor, ASI, in sales in the different product categories:2022 compared with 2021.

Sales of the Company'sour cosmetic ingredients increaseddecreased by 61%approximately 25%, from $4,274,586 in 2020 to $6,872,714 in 2021.2021, to $5,167,909 in 2022. The increase was attributable primarily to an increase in sales of the Company’s Lubrajel line of products to ASI, the Company’s largest marketing partner, whose purchases increased by 74% in 2021. Aggregate sales to the Company’s four other marketing partners increased by 22% from $992,951 in 2020 to $1,210,046 in 2021. That increase was primarily attributable to Company’s marketing partner in the United Kingdom (“UK”), whose sales increased by 42%, from $445,402 in 2020 to $631,589 in 2021. These increases were offset by a small decrease in sales of the Company’s cosmetic ingredients was caused by the following factors: 1) supply chain issues faced by certain contract manufactures caused them to overstock products in 2021 in order to avoid not being able to obtain products in 2022, which resulted in a reduction of purchases of these products by certain contract manufacturers in 2022, and 2) lower demand in Asia, especially in China, due to China’s zero-COVID mandate that was in place for much of 2022. Sales to our other four distributors decreased by a net of approximately 11%, and sales to four otherof our small direct cosmetic ingredient customers of the Company.decreased by approximately 54%.

The Company believes that the increase in sales of the Company’s cosmetic ingredients to ASI was the result of global pandemic conditions improving. However, until the global crisis passes it is likely that there willWe continue to be a negative impact on the Company’s sales of its cosmetic ingredients, as well as, to a lesser extent, its non-pharmaceutical medical products.

Although a significant percentage of ASI’s purchases from the Company are sold to foreign customers, all sales to ASI are considered U.S. sales for financial reporting purposes, since all shipments to ASI are shipped to ASI’s warehouses in the U.S. A certain percentage of those products are subsequently shipped by ASI to its foreign customers. Based on sales information provided to the Company by ASI, 74% of ASI’s sales in 2021 were to customers in foreign countries, compared to 68% in 2020. ASI’s largest foreign market in both 2021 and 2020 was China, which accounted for approximately 41% of ASI’s sales in 2021 and 34% of sales in 2020.

There continues to beexperience global competition from Asian and European competitors sellingcompanies that manufacture and sell products that are competitive with thoseour products. These competitive products are usually sold byat a lower price than our products; however they may not compare favorably to the Companylevel of performance and which are marketed at lower prices than those produced by the Company. quality of our products.

The strengthening of the U.S. dollar relative to the Euro in the second half of 20212022, which reached its highest level in 20 years, made the Company’sour products a little less competitive, thanas they had beenbecame more expensive in the first half of 2021, when the dollar had been weaker relative to the Euro. The Company continuesother countries. We continue to work closely with its marketing partnersour network of distributors to price itsour products as competitively as possible and, when appropriate, to offer additional volume discounts and more aggressive pricing in order to maintain and increase sales and bringexpand our customer base.

UNITED-GUARDIAN, INC.

We expect that this competitive environment will continue in 2023 and we plan to enhance our competitive position by strengthening our core capabilities and investing in new customers. However,products, especially in the Company expectsarea of naturally-derived products. We will also continue providing high-quality products, excellent technical support, and the European marketreliability our customers have come to remain very competitive based on the continuing competitionexpect from lower-cost competitors, and for that reason it is concentrating its R&D efforts on developing new and unique products that these other companies do not have. The Company expects to introduce several such products during 2022.us.

.

Because there are fees, rebates, and allowances associated with sales of the Company’sour two pharmaceutical products, Renacidin and Clorpactin, discussion of the Company’sour pharmaceutical sales includes references to both gross sales (before fees, rebates and allowances) and net sales (after fees, rebates and allowances). Gross sales of the Company’sour two pharmaceutical products, Renacidin and Clorpactin, together decreasedincreased by 4%3%, from $5,959,705 in 2020 to $5,748,244 in 2021. 2021 to $5,929,216 in 2022. Gross sales of Renacidin decreasedincreased by 6%3%, from $5,347,827 in 2020 to $5,041,460 in 2021 whileto $5,181,190 in 2022, and gross sales of Clorpactin increased by 16%6% from $611,878$706,784 in 20202021 to $706,784$748,026 in 2022.

Net sales of our pharmaceutical products increased by approximately 4% in 2022 compared with the same period in 2021. The decreaseincrease in Renacidinnet sales was primarily due the Company terminating its participation in the Medicaid Drug Rebate Program on December 31, 2020.

UNITED-GUARDIAN, INC.

The decrease in gross sales was partially offset by a decrease in pharmaceutical related fees, rebates and allowances of $427,733 (30%). The decreases in these fees, rebates and allowances were primarily the result of the Company’s termination of its participation in the Medicaid Drug Rebate Program at the end of 2020. Due to the overly burdensome naturecombination of the Medicaid rebates that the Company had to pay under this program, the Company determined that it was no longer profitable for the Company to continue to participate. Accordingly, on October 30, 2020 the Company informed the Centers for Medicare & Medicaid Services (CMS) of its intention to terminate its Medicaid Drug Rebate Agreement and its participation in the Medicaid Program, effective December 31, 2020. As the Company had anticipated, the discontinuation of its participation in this program resulted in the loss of some Renacidin sales, but that loss was more than offset by the elimination of the rebate payments, which resulted in1) an increase in gross profit from Renacidin sales. Althoughsales of both of our pharmaceutical products, and 2) a decrease in certain pharmaceutical-related rebates and allowances. The decrease in pharmaceutical-related rebates and allowances in 2022 was primarily due to a decrease in rebates on sales of our products to the Company will no longer be incurring Medicaid-related rebate costs, it will continue to incur costs related to other allowances, including Medicare rebates, distribution fees, chargebacks on VA sales, and outdated materiala reduction in sales returns.

Sales of the Company’s medical products increased by 6%, from $2,052,961 in 2020 to $2,171,204 in 2021. Despite losing one of its major medical product customers in 2020, medical product sales rebounded in 2021 with increases in orders from two of the Company’s larger medical customers located in China and India. The Company believes that the increases in those orders were due to improving economic conditions in those countries.

Sales of the Company's industrial products, as well as other miscellaneous products,our medical lubricants increased by 8%,approximately 14% in 2022, from $139,482$2,171,204 in 20202021 to $150,387$2,470,163 in 2021.2022. The increase was primarily due to an increase in sales to twowas driven by higher demand from one of the Company’s industrial productour larger contract manufacturer customers which are located in areasChina, whose operations had been negatively impactedsales doubled in 2022 compared to 2021.

Sales of our industrial products decreased by 22% in 2022 compared with 2021. We plan on discontinuing the Coronavirus pandemic, resultingmanufacturing and sales of specialty industrial products in a decrease in their orders in 2020.          the second quarter of 2023. These products sales represent less than 2% of total sales.

Gross Profit on Sales

Gross profit on sales was 53% in 2022 compared with 59% in 2021 compared with 56% in 2020.2021. The increasedecrease in gross profit was due to two main factors: 1) increaseda decrease in sales of the Company’s Lubrajel line ofour cosmetic ingredients in 2022 compared to 2021. These products in 2021, which carry a higher profit margin than our pharmaceutical products. In 2022, our pharmaceutical sales as a percentage of gross sales was 43% compared to 38% in 2021; 2) increased raw material and shipping costs in 2022 compared with 2021; 3) the Company’s pharmaceutical products,recording of $206,621 in rebates payable to one of our marketing partners during 2022; and 2)4) the significant reductionrecording of a one-time Employee Retention Credit (“ERC”) in sales allowances related to the Company’s pharmaceutical productsamount of approximately $105,000 in 2021, helped to increase the gross profit on those products in 2021 compared with 2020.which reduced cost of sales during that period.

Operating Expenses

Operating expenses increased by approximately 7%, from $2,026,368 in 2020 to $2,035,970 in 2021.2021 to $2,174,127 in 2022. The increase was mainly attributable to the following factors: 1) increases in fees paid to the independent members of our Board of Directors during 2022 for special projects; 2) an increase in consultingpayroll and professional fees. The Company anticipatespayroll related expenses, insurance expense and utilities; and 3) the recording of a one-time ERC in the amount of approximately $31,000 in 2021, which reduced operating expenses for that period. We anticipate that operating expenses will remain relatively consistent for 2022.2023.

UNITED-GUARDIAN, INC.

Research and Development Expenses

Research and development expenses increased by approximately 3%, from $451,208 in 2020 to $478,642 in 2021.2021 to $490,770 in 2022. The increase was primarily related to an increase in payroll and payroll related expenses.expenses combined with the recording of an ERC during 2021 in the amount of $28,000 which reduced R&D expenses for that period.

Investment Income

Investment income increased by approximately 1%, from $226,245 in 2020 to $233,857 in 2021.2021 to $236,695 in 2022. The increase was due to an increase in dividend income from both stock and bond mutual funds. In early 2020, the Company began to shift its investment strategy from lower-yielding U.S. Treasury Bills towards short and intermediate-term bond funds that were yielding higher returns.

Net (loss) gainloss on Marketable Securities

The net (loss) gainloss on marketable securities decreasedincreased from a net gain of $298,585 in 2020 to a net loss of $23,018 in 2021.2021 to a net loss of $1,046,245 in 2022. The decreaseincreased loss was primarily due to 1) the Company recognizing higherrecognition of increased unrealized losses during 2022 due primarily to rising interest rates combined with the downward trajectory of the financial markets during 2022. Our portfolio of marketable securities is predominantly invested in fixed income mutual funds. When interest rates began to rise during the year, the value of these funds declined; and 2) increased realized losses on those same fixed income mutual funds that were sold during the year. During 2021, we recognized realized gains on sales of mutual funds$111,917 from the sale of marketable securities, while in 2020, which totaled $415,595, compared to2022, we recorded $364,074 in realized losses from the realized gains on salessale of mutual funds in 2021 of $111,917.marketable securities.

Provision for Income Taxes

The provision for income taxes increaseddecreased from $856,022 in 2020 to $1,219,383 in 2021.2021 to $658,168 in 2022. This increasedecrease was due to an increasea decrease in income before taxes. The Company’sOur effective income tax rate was 20.4% in 2022 and 20.7% in 2021 and 20.6% in 2020.2021.

Liquidity and Capital Resources

Working capital decreased from $9,832,326 at December 31, 2020 to $9,245,629 at December 31, 2021.2021 to $8,596,939 at December 31, 2022. The current ratio decreasedincreased from 8.0 to 1 at December 31, 2020 to 5.0 to 1 at December 31, 2021.2021 to 7.3 to 1 at December 31, 2022. The decrease in working capital was mainly due to an increasea decrease in dividends paid during 2021, combined with increases inmarketable securities and accounts payable, accrued expenses and deferred revenue.receivable.

Accounts receivable (net of allowance for doubtful accounts) as of December 31, 2021 increased2022 decreased from $1,387,698 in 2020 to $1,813,346 in 2021.2021 to $1,427,576 in 2022. The increasedecrease in accounts receivable was due to the increasea decrease in sales during the Company experienced during 2021 due to global economies recovering from the coronavirus pandemic, especially in thethird and fourth quarter of 2021.2022. The receivables turnover, or “Days Sales Outstanding”, for 2021,2022, was 4247 days, compared with 5842 days in 2020.2021. The decreaseincrease in Days Sales Outstanding was indicativeprimarily due to an increase in the sales of our medical lubricant products in 2022. These products are primarily sold to customers located overseas and the improvement in customers’ ability to more efficiently process paymentspayment terms for these customers is typically 60 days, as economies recovered from the pandemic during 2021. During 2020, the Company experienced minor delays in receiving payments from somecompared with 30-45 days for our domestic customers. The Company’s allowance for doubtful accounts receivable increaseddecreased from $14,017 in 2020 to $20,252 in 2021 to $20,063 in 2022, and the Company believeswe believe that the net balance of itsour accounts receivable as of December 31, 20212022 was, and continues to be, fully collectible.

The CompanyWe generated cash from operations of $2,525,169 in 2022 compared with $5,313,277 in 2021 compared with $3,594,2402021. The decrease in 2020. The increase in 20212022 was primarily due to an increasea decrease in net income in 20212022 compared with 2020,2021, combined with an increasedecreases in accounts payable, accrued expenses and deferred revenue.

Net cash used inprovided by investing activities was $468,676$897,562 for the year ended December 31, 2020 compared with2022. Net cash used in investing activities was $183,475 for the year ended December 31, 2021. This decreaseThe increase in net cash used inprovided by investing activities was mainly due to decreased purchasesan increase in net proceeds from the sale of marketable securities duringcombined with a decrease in acquisitions of property, plant and equipment in 2022 compared with 2021.

UNITED-GUARDIAN, INC.

Net cash used in financing activities was $3,123,492 and $5,190,033 and $3,582,481 duringfor the years ended December 31, 20212022 and 2020,2021, respectively. The increasedecrease was due to the payment of higherlower dividends in 20212022 compared with 2020.2021. During 2022, we paid dividends of $0.68 per share compared with $1.13 per share in 2021.

The Company believesWe believe that itsour working capital is sufficient to support itsour operating requirements for the next fiscal year. The Company'sOur long-term liquidity position will be dependent upon itsour ability to generate sufficient cash flow from profitable operations., and we expect to continue to use our cash to make dividend payments, purchase marketable securities, and to take advantage of other opportunities that may arise that are in the best interest of our Company and our shareholders.

The Company has no material commitments for future capital expenditures and no material cash requirementsWe expect to incur costs of immediate concern.approximately $100,000 in the first six months of 2023 in connection with an upgrade to our building sprinkler system.

The Company hasWe have no off-balance-sheet transactions that have, or are reasonably likely to have, a current or future effect on the Company’sour financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

New Accounting Pronouncements

See Note "A"“A” to the financial statements regarding new accounting pronouncements, which note is incorporated herein by reference.

Item 7A.Quantitative and Qualitative Disclosures about Market Risk.

The information to be reported under this item is not required of smaller reporting companies.

Item 8. Financial Statements and Supplementary Data.

Annexed hereto starting on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

The Company’sOur management, with the participation of the Company’sour Principal Executive Officer and Principal Financial Officer, has evaluated the design, operation, and effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of December 31, 2021.2022. On the basis of that evaluation, management concluded that the Company’sour disclosure controls and procedures are designed to be, and are, effective at providing reasonable assurance that the information required to be disclosed in reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management, including itsour Principal Executive Officer and Principal Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

UNITED-GUARDIAN, INC.

(b) Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’sOur internal control system is designed to provide reasonable assurance to management and to the Company’sour Board of Directors regarding the preparation and fair presentation of published financial statements. Under the supervision and with the participation of management, including the Company’sour Principal Executive Officer and Principal Financial Officer, management conducted an evaluation of the effectiveness of the Company’sour internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013)(“COSO 2013”). Based on management’s evaluation under the framework in Internal Control—Integrated Framework, management concluded that the Company’sour internal control over financial reporting was effective as of December 31, 2021.2022.

This Annual Report does not include an attestation report of the Company’sour registered public accounting firm regarding internal control over financial reporting. Since the Company iswe are a non-accelerated filer, management’s report is not subject to attestation by the Company'sour registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002. As a result, this Annual Report contains only management’s report on internal controls.

(c)Changes in Internal Control over Financial Reporting

UNITED-GUARDIAN, INC.

There were no changes in the Company’sour internal control over financial reporting in the fourth quarter of 20212022 that materially affected, or would be reasonably likely to materially affect, the Company’sour internal control over financial reporting.

(d)

(d)

Limitations of the Effectiveness of Internal Controls

The effectiveness of the Company’sour system of disclosure controls and procedures and internal control over financial reporting is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating the control system, the assumptions used in identifying the likelihood of future events, and the inability to eliminate fraud and misconduct completely. As a result, there can be no assurance that the Company’sour disclosure controls and procedures and internal control over financial reporting will detect all errors or fraud. However, the Company’sour control systems have been designed to provide reasonable assurance of achieving their objectives, and the Company’sour Principal Executive Officer and Principal Financial Officer have concluded that the Company’sour disclosure controls and procedures and internal control over financial reporting are effective at the reasonable assurance level.

Item 9B. Other Information.

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

UNITED-GUARDIAN, INC.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated by reference to the section entitled “Directors and Executive Officers” to be contained in the Company’s 2023 Proxy Statement.

EXECUTIVE OFFICERSCODE OF ETHICS

Set forthWe have adopted a Code of Business Conduct and Ethics that applies to all of our officers, directors, and employees serving in any capacity, including the table immediately below areChief Executive Officer and/or President, Chief Financial Officer, and Principal Accounting Officer. A copy of our Code of Business Conduct and Ethics is available on our website at http://www.u-g.com/corporate. If applicable, we intend to satisfy the namesdisclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of our Code of Business Conduct and ages of each ofEthics applicable to the executive officers of the CompanyChief Executive Officer, Chief Financial Officer, and their principal occupations for at least the past five years.

DIRECTORS

Six directors are to be elected at the next annual meeting of stockholders of the Company (which has not been scheduled as of the date ofPrincipal Accounting Officer by posting this Annual Reportinformation on Form 10-K). Directors serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Set forth in the table below are the names of all persons who are currently directors of the Company, the principal occupation or employment of each such person for at least the past five years, his present position(s) with the Company, his qualifications to serve as a director, other board memberships of public companies, and the year he was first elected a director.our website.

UNITED-GUARDIAN, INC.