FIRST QUARTER 1997 STOCKHOLDER LETTER
Dear Stockholder:
Our first quarter of 1997 was another profitable one for us, with
earnings increasing by 27% over the same quarter last year. Net earnings
after taxes was $138,473 ($.03 per share) compared with $108,868 ($.02
per share) for the comparable quarter last year. While sales were
essentially the same as the first quarter of last year due to the timing
of some large orders that just missed being included in this quarter, we
expect to see our sales growth resume in the next quarter. In fact, sales
for the month of April, the first month of our second quarter, set a new
record for the company, so the second quarter has already gotten off to
an excellent start.
The first quarter also saw our financial strength continue to grow, with
our current ratio increasing from 4.6:1 at the end of 1996 to a very
strong 7.9:1 at the end of the first quarter of 1997. We expect this
trend to continue as revenue increases allow us to pay down what little
debt we have while still retaining sufficient capital to be able to fund
the plant and production improvements that we expect to make over the
next few years as sales continue to increase.
Our efforts to bring some new products to market are continuing, with the
projects with QVC and Feline Health Products being the most likely to
come to fruition soon. While we originally expected our DermaSure
protective hand lotion to appear on QVC before mid-year, our efforts to
finalize an arrangement with them have been complicated by their desire
to put the product out not under our "DermaSure" label but instead under
their own trademark. While we do not object to this, it would mean
producing a large quantity of product that we could only sell through
QVC, so we have been very cautious in proceeding without the proper
protections in place for us. Also, we have been discussing this product
with two other interested marketing organizations, and we want to be sure
to protect our ability to do this at the same time we are working with
QVC, since their market segments are different.
Since these negotiations involve not only QVC but also Creative
Technologies and the agent they used to bring the product to QVC, it has
taken a lot longer to finalize than we had expected. However, we are
optimistic that we will be able to reach a satisfactory agreement with
QVC and that the product will be on the air soon. Since we have an eight
week lead time to produce the new product once we reach an agreement with
QVC, we do not expect the product to air until the fall.
Our project to develop a new animal health care product in conjunction
with Feline Health Products is proceeding nicely, with the testing of the
product at Cornell University having been completed very successfully. We
are now working with them on production issues, and they are proceeding
with developing their marketing plans. We are very excited about this
project, and I hope soon to be able to disclose to you exactly what the
product is.
Interest in our Confetti Dermal Essentials continues to be very high, and
we expect our first significant commercial orders to begin in the third
quarter. There is a high level of interest among many of the major
cosmetic companies, and we continue to believe that this is going to be
an excellent revenue producer for us over the next few years.
We recently finalized an agreement to obtain the full marketing rights to
Sonarite, a product to reduce snoring on which we have been working for
many years. The majority interest in this product had been held by a
group of investors who had originally funded this project, and we have
now completed an agreement to buy out their interests. This product has
recently received considerable interest from the medical community as a
result of the work done by Dr. Michael Fitzpatrick of the Royal
University Hospital Sleep Disorder Center at the University of
Saskatchewan, Canada. He has been testing the product for the treatment
of sleep apnea, a condition that affects millions of people and is
life-threatening to some. Dr. Fitzpatrick presented a paper describing
his success with this product at the annual meeting of the American
Thoracic Society, and it received a very positive response. He is also
planning to present his paper at the annual meeting of the American Sleep
Disorders Association in June. We are continuing to work with him, and
hope to attract a joint venture partner to assist us in further testing
and hopefully in the eventual marketing of the product. We are already
discussing this product with a company that presently has a different
type of anti-snoring product on the market, and they have expressed
interest in doing some comparative and synergistic testing with the
product.
We continue to be very pleased with our marketing arrangements with
International Specialty Products, and have seen a significant increase in
their purchases from us so far this year. We are working closely with
them to explore new opportunities for our products, and are very
optimistic that our arrangement with them will prove to be very
beneficial to our company over the next few years.
As soon as we are able to finalize our arrangement with QVC and we
receive a definite airing date for the DermSure I will post that
information in the "What's New" section of our Internet site
("www.u-g.com"). We all look forward, as I am sure you do, to seeing this
product on the air.
Sincerely,
UNITED-GUARDIAN, INC.
/s/ Dr. Alfred R. Globus
Chairman and CEO
