U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
              For the quarterly period ended       June 30, 2010
 
o
TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
              For the transition period from _________  to  _________
 
Commission File Number:    1-10526
 
UNITED-GUARDIAN, INC.  
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware 11-1719724
(State or Other Jurisdiction of  (I.R.S. Employer Identification No.)
Incorporation or Organization)  
 
230 Marcus Boulevard, Hauppauge, New York 11788
(Address of Principal Executive Offices)
 
               (631) 273-0900               
(Registrant’s Telephone Number)
 
N/A
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate  by check  mark  whether  the  registrant  (1) has filed  all  reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
  Yes x       No o
 
 
Cover Page 1 of 2
 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   o      No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 
Large accelerated filer
o
 
Non-accelerated filer
o   (Do not check if a smaller reporting company)
 
Accelerated filer
o
 
Smaller reporting company
x

Indicate  by check mark  whether  the  registrant  is a shell  company  (as defined in Rule 12b-2 of the Exchange Act.)
Yes   o       No   x


Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

4,596,439   shares of common stock, par value $.10 per share
 (as of August 1, 2010)


 
 
 
Cover Page 2 of 2
 
UNITED-GUARDIAN, INC.
INDEX TO FINANCIAL STATEMENTS

 
Page No.
   
 
   
 
   
   
   
   
   
   
   
   
 
   
   
   
   
   
   
   
   
   
 
 
Page 1 of 18
 
Part I.  FINANCIAL INFORMATION
 
Condensed Financial Statements
 
UNITED -GUARDIAN, INC.
 
STATEMENTS OF INCOME
( UNAUDITED )
 
   
SIX MONTHS ENDED
 JUNE 30,
   
THREE MONTHS ENDED
 JUNE 30,
 
   
2010
   
2009
   
2010
   
2009
 
                         
Net sales
  $ 7,311,467     $ 6,888,287     $ 3,734,552     $ 2,993,144  
                                 
Costs and expenses:
                               
Cost of sales
    2,811,946       2,819,916       1,397,379       1,273,597  
Operating expenses
    1,326,629       1,397,382       708,580       687,397  
Pension plan termination
    847,744       ---       847,744       ---  
      4,986,319       4,217,298       2,953,703       1,960,994  
             Income from operations
    2,325,148       2,670,989       780,849       1,032,150  
                                 
Other income:
                               
Investment income
    225,146       185,083       132,876       93,481  
                                 
Income from operations before income taxes
    2,550,294       2,856,072       913,725       1,125,631  
                                 
Provision for income taxes
    829,926       945,400       289,201       370,200  
                                 
Net Income
  $ 1,720,368     $ 1,910,672     $ 624,524     $ 755,431  
 
                               
Earnings per common share
(Basic and Diluted)
  $ 0.35     $ 0.39     $ 0.13     $ 0.15  
                                 
Weighted average shares – basic and diluted
    4,882,627       4,946,439       4,819,516       4.946,439  

 
See notes to condensed financial statements
 
Page 2 of 18
 
UNITED -GUARDIAN, INC.
 
BALANCE SHEETS
(UNAUDITED)

ASSETS
 
JUNE 30,
   
DECEMBER 31,
 
   
2010
   
2009
 
Current assets :
 
(UNAUDITED)
       
             
Cash and cash equivalents
  $ 1,368,922     $ 5,021,073  
Certificates of deposit
    436,467       1,014,866  
Marketable securities
    7,364,872       8,438,757  
Accounts receivable, net of allowance for doubtful
     accounts of $27,000 at June 30, 2010 and
     December 31, 2009
    2,020,888       1,364,886  
Inventories (net)
    1,317,982       1,153,134  
Prepaid expenses and other current assets
    192,841       220,815  
Deferred income taxes
    263,393       443,034  
Total current assets
    12,965,365       17,656,565  
                 
Property, plant and equipment :
               
Land
    69,000       69,000  
Factory equipment and fixtures
    3,446,740       3,302,967  
Building and improvements
    2,598,244       2,541,115  
Waste disposal plant
    133,532       133,532  
      6,247,516       6,046,614  
Less: Accumulated depreciation
    5,181,373       5,099,903  
Total property, plant and equipment, net
    1,066,143       946,711  
                 
Other assets
    137,473       113,016  
                 
TOTAL ASSETS
  $ 14,168,981     $ 18,716,292  

 
See notes to condensed financial statements
 
Page 3 of 18
 
UNITED-GUARDIAN, INC.
   
BALANCE SHEETS
(continued)
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
   
JUNE 30,
   
DECEMBER 31,
 
   
 2010
   
 2009
 
Current liabilities:
 
(UNAUDITED)
   
 
 
             
Dividends payable 
  $ ---     $ 1,582,860  
Accounts payable 
    259,457       322,325  
Accrued expenses
    897,455       819,194  
Pension liability 
    446,270       108,892  
Income taxes payable
    35,603       87,403  
Total current liabilities 
    1,638,785       2,920,674  
                 
Deferred income taxes 
    18,251       138,007  
                 
Stockholders’ equity: 
               
Common stock $.10 par value; 10,000,000 shares
       authorized; 4,596,439 and 5,008,639
       shares issued, and 4,596,439 and 4,946,439
       shares outstanding, at June 30, 2010 and
       December 31, 2009, respectively.
    459,644       500,864  
Capital in excess of par value 
    ---       3,819,480  
Accumulated other comprehensive income (loss) 
    34,406       (345,992 )
Retained earnings 
    12,017,895       12,042,889  
Treasury stock, at cost; 62,200 shares at
       December 31, 2009
    ---       (359,630 )
Total stockholders’ equity 
    12,511,945       15,657,611  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’
     EQUITY
  $ 14,168,981     $ 18,716,292  
 
 
See notes to condensed financial statements
 
 
Page 4 of 18
 
UNITED -GUARDIAN, INC .
 
STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
SIX MONTHS ENDED
 
   
June 30,
 
   
2010
   
2009
 
Cash flows from operating activities:
           
Net income
  $ 1,720,368     $ 1,910,672  
Adjustments to reconcile net income   to net cash
  provided by operating activities:
               
               
Depreciation and amortization
    108,266       85,419  
Realized (gain) loss  on sales of marketable
  securities
    (47,909 )     498  
Realized loss on pension termination
    338,655       ---  
Reduction in allowance for bad debts
    ---       (2,616 )
Increase (decrease) in cash resulting from
  changes in operating assets and liabilities:
               
               
Accounts receivable
    (656,002 )     256,740  
Inventories
    (164,848 )     167,898  
Prepaid expenses and other current
  and non-current assets
               
    (15,319 )     (107,242 )
Deferred income taxes
    37,742       ---  
Accounts payable
    (62,868 )     (50,746 )
Accrued expenses and taxes payable
    26,461       172,038  
Pension liability
    337,378       ---  
Net cash provided by operating activities  
    1,621,924       2,432,661  
                 
Cash flows from investing activities:
               
Acquisition of property, plant and equipment
    (208,862 )     (15,304 )
Proceeds from sale  of marketable securities
    5,104,428       300,000  
Purchases of marketable securities
    (3,918,748 )     (490,841 )
Net change in certificates of deposit
    578,399       (14,376 )
Net cash used in investing activities
    (1,555,217 )     (220,521 )
                             
               
Cash flows from financing activities:
               
Acquisition of treasury stock
    (3,762,500 )     ---  
Payment of long term debt
    ---       (6,657 )
Dividends paid
    (3,066,792 )     (2,770,006 )
Net cash used in financing activities
    (6,829,292 )     (2,776,663 )
                 
Net decrease in cash and cash equivalents
    (3,652,151 )     (564,523 )
Cash and cash equivalents at beginning of period
    5,021,073       3,425,538  
Cash and cash equivalents at end of period
  $ 1,368,922     $ 2,861,015  
 
See notes to condensed financial statements
 
 
Page 5 of 18
 
UNITED -GUARDIAN, INC.
 
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 
 
1.
Nature of Business
 
United-Guardian, Inc. (the “Company”) is a Delaware corporation that, through its Guardian Laboratories Division, conducts research, product development, manufacturing and marketing of cosmetic ingredients and other personal care products, pharmaceuticals, medical and health care products and proprietary specialty industrial products.
 
2. 
Basis of Presentation
 
Interim financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation SX.  In the opinion of management, all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods have been included.  The results of operations for the three and six months ended June 30, 2010 are not necessarily indicative of results that ultimately may be achieved for any other interim period or for the year ending December 31, 2010.  The interim unaudited financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2009.
 
3.
Stock-Based Compensation
 
The Company maintains a stock-based compensation plan for its employees and directors, which is more fully described in the Company's Annual Report on Form 10-K for the year ended December 31, 2009.
 
The Company recognizes the fair value of all share-based payments to employees, including grants of employee stock options, as a compensation expense in the financial statement.
 
As of June 30, 2010, the Company had no share-based awards outstanding and exercisable and did not grant any options during the six months ended June 30, 2010.
 
As of June 30, 2010, there was no remaining unrecognized compensation cost related to the non-vested share-based compensation arrangements granted under the Company's plans.
 
The Company did not record any compensation expense during the six- and three-month periods ended June 30, 2010 and 2009.
 
The Company did not receive any proceeds from the exercise of options during the six months ended June 30, 2010 and 2009.
 
 
Page 6 of 18
 
 
4.
Recent Accounting Pronouncements
 
NEW ACCOUNTING STANDARDS ADOPTED IN FISCAL 2010
 
In February 2010, the Financial Accounting Standards Board ("FASB") amended its authoritative guidance related to subsequent events to alleviate potential conflicts with current United States Securities and Exchange Commission (“SEC”) guidance.  Effective immediately, these amendments remove the requirement that an SEC filer disclose the date through which it has evaluated subsequent events.  The adoption of this guidance did not have a material impact on the Company’s financial statements.
 
In January 2010, the FASB issued authoritative guidance that will require entities to make new disclosures about recurring or non-recurring fair-value measurements of assets and liabilities, including 1) the amounts of significant transfers, 2) the reasons for any transfers in or out of Level 3, and 3) information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of recurring Level 3 fair value measurements.  The FASB also clarified existing fair-value measurement disclosure guidance about the level of disaggregation of assets and liabilities, and information about the valuation techniques and inputs used in estimating Level 2 and Level 3 fair-value measurements.  Except for certain detailed Level 3 disclosures, which are effective for fiscal years beginning after December 15, 2010 and interim periods within those years, the new guidance became effective for the Company’s fiscal 2010 first quarter.  The Company did not have transfers of assets and liabilities in or out of Level 1 and Level 2 fair-value measurements and does not have assets and liabilities requiring Level 3 fair-value measurements.  The adoption of this disclosure-only guidance is included in Note 5 – Investments and did not have an impact on the Company’s financial results.
 
In August 2009, the FASB issued authoritative guidance to provide clarification on measuring liabilities at fair value when quoted price in an active market is not available.  In these circumstances, a valuation technique should be applied that uses either the quote of the liability when traded as an asset, the quoted prices for similar liabilities or similar liabilities when traded as assets, or another valuation technique consistent with existing fair value measurement guidance, such as an income approach or a market approach.  The new guidance also clarifies that, when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability.  This guidance became effective for the Company’s fiscal 2010 first quarter and did not have an impact on the Company’s financial statements.
 
In June 2009, the FASB issued authoritative guidance that requires more information about transfers of financial assets, eliminates the qualifying special purpose entity (“QSPE”) concept, and changes the requirements for derecognizing financial assets and require additional disclosures.  This guidance became effective for the Company’s fiscal 2010 first quarter and did not have an impact of the Company’s financial statements.
 
In June 2009, the FASB issued authoritative guidance that amended the consolidation guidance applicable to variable interest entities.  This guidance became effective for the Company’s fiscal 2010 first quarter and did not have an impact on the Company’s financial statements.
 
5. 
Investments
 
The fair values of the Company’s marketable securities are determined in accordance with GAAP, with fair value being defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  As such, fair
 
 
Page 7 of 18
 
value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.  As a basis for considering such assumptions,  the Company utilizes the three-tier value hierarchy, as prescribed by GAAP, which prioritizes the inputs used in measuring fair value, as follows:
 
 
•  
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
 
 
•  
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
 
 
•  
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following available-for-sale securities, which comprise all the Company’s marketable securities, are re-measured to fair-value on a recurring basis and are valued using Level 1 inputs, which are quoted prices (unadjusted) for identical assets in active markets:
 
               
Unrealized
 
June 30, 2010
 
Cost
   
Fair Value
   
Gain/(Loss)
 
                   
 Available for Sale: 
                 
       U.S. Treasury and agencies 
                 
          Mature within 1 year
  $ 1,145,747     $ 1,154,133     $ 8,386  
          Mature after 1 year through 5 years
    507,126       500,628       (6,498 )
            Total US Treasury and agencies
    1,652,873       1,654,761       1,888  
       Corporate bonds
                       
           Maturities after 1 year through 5 years
    267,251       259,833       (7,418 )
       Fixed income mutual funds 
    5,145,290       5,252,633       107,343  
       Equity and other mutual funds 
    246,801       197,645       (49,156 )
    $ 7,312,215     $ 7,364,872     $ 52,657  

December 31, 2009
 
Cost
   
Fair Value
   
Unrealized
Gain/(Loss)
 
                   
 Available for Sale: 
                 
       U.S. Treasury and agencies 
                 
          Mature within 1 year
  $ 1,650,218     $ 1,659,596     $ 9,378  
          Maturities after 1 year through 5 years
    1,108,726       1,124,527       15,801  
             Total US Treasury and agencies
    2,758,944       2,784,123       25,179  
       Corporate bonds
                       
           Maturities after 1 year through 5 years
    267,251       262,846       (4,405 )
       Fixed income mutual funds 
    5,179,005       5,181,990       2,985  
       Equity and other mutual funds 
    244,786       209,798       (34,988 )
    $ 8,449,986     $ 8,438,757     $ (11,229 )
 
Proceeds from the sale and redemption of marketable securities amounted to $5,104,428 for the six months ended June 30, 2010, which included realized gains of $47,909. Proceeds, which approximated cost, from the sale and redemption of marketable securities, amounted to $300,000 for the six months ended June 30, 2009.

Investment income consisted principally of interest income from certificates of deposit, bondsand money market funds and dividend income from bond funds and mutual funds.

 
Page 8 of 18
 
Marketable securities include investments in equity mutual funds, government securities andcorporate bonds which are classified as “available-for-sale” securities and are reported at theirfair values.  Unrealized gains and losses on “available-for-sale” securities are reported as accumulated other comprehensive income (loss) in stockholders’ equity, net of the related tax effects.  Investment income is recognized when earned.  Realized gains and loses on sales of investments are determined on a specific identification   basis.
 
6 .
Inventories - Net 
 
    June 30,     December 31,  
   
2010
   
2009
 
Inventories consist of the following: 
           
Raw materials and work in process
  $ 564,029     $ 329,562  
Finished products  
    753,953       823,572  
    $ 1,317,982     $ 1,153,134  
 
Finished product inventories at June 30, 2010 and December 31, 2009 are stated net of a reserve of $39,000 for slow moving obsolete inventory.
     
7.
Supplemental Financial Statement Information
 
For purposes of the Statements of Cash Flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.
 
Cash payments for taxes were $1,025,300 and $933,420 for the six months ended June 30, 2010 and June 30, 2009, respectively.  No payments were made for interest during these periods.
 
The Company paid $3,066,792 ($0.62 per share) and $2,770,006 ($0.56 per share) in dividends for the six months ended June 30, 2010 and June 30, 2009, respectively.
 
On May 29, 2010 the Company retired 350,000 shares of stock that it purchased from Kenneth H. Globus, the Company's President and largest stockholder.  On June 9, 2010 the Company retired the 62,200 shares of its stock which it previously held as treasury stock.
 
Research and development expenses amounted to $257,268 and $211,851 for the six months ended June 30, 2010 and June 30, 2009, respectively, and are included in operating expenses.
 
8.
Income Taxes
 
The Company’s tax provision is based on its estimated annual effective rate.  The Company continues to fully recognize its tax benefits, which are offset by a valuation allowance to the extent that it is more likely than not that the deferred tax assets will not be realized. As of June 30, 2010 and December 31, 2009 the Company did not have any unrecognized tax benefits.
 
The Company files consolidated Federal income tax returns in the U.S. with its inactive subsidiary, and separate income tax returns in New York State. The Company is subject to examination by the Internal Revenue Service  and by New York State for years 2006 through 2009.
 
 
Page 9 of 18
 
The Company's policy is to recognize interest and penalties in interest expense.
 
9.
Comprehensive Income
 
The components of comprehensive income are as follows:
 
   
Six months ended
 June 30,
   
Three months ended
 June 30
 
  
 
2010
   
2009
   
2010
   
2009
 
                         
Net income 
  $ 1,720,368     $ 1,910,672     $ 624,524     $ 755,431  
                                 
Other comprehensive income
                               
Unrealized gain on marketable
     securities during period 
                               
    63,886       146,777       23,724       141,705  
Adjustment for pension
     termination
    518,296       ---       518,296        ---  
                                 
Income tax (benefit) expense
     related to other
     comprehensive income           
                               
    (201,784 )     50,873       (187,864 )        49,115  
                                 
Other comprehensive income,
     net of tax 
                               
    380,398       95,904       354,156       92,590  
Comprehensive income 
  $ 2,100,766     $ 2,006,576     $ 978,680     $ 848,021  
 
Accumulated other comprehensive income comprises unrealized gains and losses on marketable securities and liability for pension benefit net of the related tax effect.
 
10.
Defined Benefit Pension Plan and New Defined Contribution Plan.

Defined Benefit Pension Plan : The Company previously sponsored a non-contributory defined benefit plan (“DB Plan”) for its employees.  The Company curtailed future benefit accruals to the DB Plan, which had been frozen since December 31, 2007. In March 2010, the Company received regulatory approval to terminate the DB Plan, and on July 20, 2010 the DB Plan was formally terminated. The termination resulted in the Company recognizing a one-time non-cash expense of $518,296, offset by a $179,641 tax benefit associated with recognizing unamortized actuarial losses.  In addition, the Company provided for a cash contribution of $337,378, offset by a $116,900 tax benefit, in order to fully fund the DB Plan.  The recognition of the non-cash and cash contributions resulted in a before-tax charge of $847,744, and an after-tax charge of $559,133 ($0.11 and $0.12 per share for the six- and three-month periods ended June 30, 2010, respectively).  Since the non-cash expense had previously been provided for as a charge to other comprehensive income, the net effect of the termination on stockholders’ equity was a decrease of $220,478.

Defined Contribution Plan:   As a result of the discontinuation of its DB Plan, effective January 1, 2008 the Company modified its 401(k) defined contribution plan ("DC Plan") by increasing the employer matching contribution to a maximum of 100% of the first 4% of each employee's pay.  In 2009 the Company also began making additional discretionary contributions to each employee's account based on a “pay-to-pay” safe-harbor formula that qualifies the 401(k) plan

 
Page 10 of 18
 
under current IRS regulations.  In the three-month period ended March 31, 2010 the Company had provided for a contribution of $43,750 to the DC Plan, but, as a result of the unexpected costs the Company incurred in terminating the DB Plan, the Company reversed that provision in the second quarter of 2010. Thus, the Company does not currently have any provisions for contributions to the DC Plan for FY-2010.  For the six month period ended June 30, 2009 the Company had provided for a contribution of $87,500 to the DC Plan.
 
11. 
Other Information
 
(a)    Accrued Expenses
 
    June 30,     December 31,  
   
2010
   
2009
 
             
Accrued bonuses
  $ 366,645     $ 182,000  
Accrued distribution fees
    186,595       303,493  
Other
    344,215       333,701  
    $ 897,455     $ 819,194  
 
(b)   Related Party Transactions
 
During each of the six-month periods ended June 30, 2010 and June 30, 2009, the Company paid to Henry Globus, a former officer and current director of the Company, $11,148, for consulting services in accordance with his employment termination agreement of 1988.
 
During  the six-month periods ended June 30, 2010 and June 30, 2009, the Company paid to Bonamassa, Maietta and Cartelli, LLP $7,500 and $6,000, respectively, for accounting and tax services.   Lawrence Maietta, a partner in Bonamassa, Maietta and Cartelli, LLP, is a director of the Company.
 
On May 28, 2010 the Company redeemed and retired 350,000 shares of its stock from its largest shareholder and President, Kenneth H. Globus, at $10.75 per share, for a total of $3,762,500.
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
FORWARD-LOOKING STATEMENTS
 
Statements made in this Form 10-Q which are not purely historical are forward-looking statements with respect to the goals, plans, objectives, intentions, expectations, financial condition, results of operations, future performance and business of the Company. Forward-looking statements may be identified by the use of such words as “believes”, “may”, “will”, “should”, “intends”, “plans”, “estimates”, “anticipates”, or other similar expressions.
 
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) could cause actual results to differ materially from those set forth in the forward-looking statements. In addition to those specific risks and uncertainties set forth in the Company's reports currently on file with the SEC, some other factors that may affect the future results of operations of the Company are: the development of products that may be superior to those of the Company; changes in the quality or composition of the Company's products; lack of market acceptance of the Company's products; the Company's ability to
 
 
Page 11 of 18
 
develop new products; general economic or industry conditions; changes in intellectual property rights; changes in interest rates; new legislation or regulatory requirements; conditions of the securities markets; the Company's ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; and other economic, competitive, governmental, regulatory and technical factors that may affect the Company's operations, products, services and prices.
 
Accordingly, results actually achieved may differ materially from those anticipated as a result of such forward-looking statements, and those statements speak only as of the date they are made. The Company does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
 
OVERVIEW
 
The Company is a Delaware corporation that conducts research, product development, manufacturing and marketing of cosmetic ingredients, personal and health care products, pharmaceuticals, and specialty industrial products. All of the products that the Company manufactures, with the exception of its RENACIDIN IRRIGATION ® , are produced at its facility in Hauppauge, New York, and are marketed through marketing partners, distributors, wholesalers, direct advertising, mailings, and trade exhibitions. Its most important personal care product line is its LUBRAJEL ® line of water-based moisturizing and lubricating gels. It also sells two pharmaceutical products for urological uses. Those products are sold primarily through the major drug wholesalers, which in turn sell the products to pharmacies, hospitals, nursing homes and other long-term care facilities, and to government agencies, primarily the Veteran's Administration.
 
The Company’s pharmaceutical products are distributed primarily in the United States. Its personal care products are marketed worldwide by five marketing partners, of which International Specialty Products Inc. ("ISP") purchases the largest volume of products from the Company.  Approximately one-half of the Company's personal care products are sold, either directly or through the Company’s marketing partners, to end-users located outside of the United States.
 
While the Company does have competition in the marketplace for some of its products, many of its products are either unique in their field or have some unique characteristics, and therefore are not in direct competition with the products of other pharmaceutical, specialty chemical, or health care companies.  Many of the Company’s products are manufactured using patented or proprietary processes.  The Company’s research and development department is actively working on the development of new products to expand the Company's line of personal care and performance products.
 
The Company recognizes revenue when products are shipped, title and risk of loss pass to the customers, persuasive evidence of a sales arrangement exists, and collections are reasonably assured.  An allowance for returns, based on historical experience, is taken as a reduction of sales within the same period the revenue is recognized.
 
The Company has been issued many patents and trademarks and intends, whenever possible, to make efforts to obtain patents in connection with its product development program.    
 
 
Page 12 of 18
 

CRITICAL ACCOUNTING POLICIES
 
As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, the discussion and analysis of the Company’s financial condition and results of operations are based on its financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of those financial statements required the Company to make estimates and assumptions that affect the carrying value of assets, liabilities, revenues and expenses reported in those financial statements. Those estimates and assumptions can be subjective and complex, and consequently actual results could differ from those estimates and assumptions. The Company’s most critical accounting policies relate to revenue recognition, concentration of credit risk, inventory, pension costs, patents, and income taxes. Since December 31, 2009, there have been no significant changes to the assumptions and estimates related to those critical accounting policies, other than the costs related to the settlement and termination of the Company's DB Plan.
 
The following discussion and analysis covers material changes in the financial condition of the Company since the year ended December 31, 2009, and a comparison of the results of operations for the six and three months ended June 30, 2010 and June 30, 2009. This discussion and analysis should be read in conjunction with "Management's Discussion and Analysis or Plan of Operation" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2009.
 
RESULTS OF OPERATIONS
 
Sales
 
Net sales for the six-month period ended June 30, 2010 increased $423,180 (6.1%) as compared with the corresponding period in 2009, and net sales for the three-month period ended June 30, 2010 increased $741,408 (24.8%) as compared with the comparable period ended June 30, 2009. The changes in net sales for both the six- and three-month periods ended June 30, 2010 were principally attributable to changes in sales of the following product lines:
 
(a)  
Pharmaceuticals:   Pharmaceutical sales for the six months ended June 30, 2010 decreased $276,026 (16.4%) compared with the same period in 2009, and pharmaceutical sales for the three months ended June 30, 2010 decreased $389,286 (38.4%) when compared with the three months ended June 30, 2009.  This was the result of a price increase that was implemented on May 1, 2009, which caused a significant increase in sales in April 2009 as customers purchased additional inventory in anticipation of the price increase. The Company implemented a price increase on April 1, 2010, but the increase in sales prior to the effective date of the 2010 increase was much smaller than it was in 2009. Since the annual unit sales volume of these products is relatively stable from year-to-year, the Company estimates that the dollar value of pharmaceutical sales in calendar 2010 will increase as a result of the price increase that occurred in April 2010.
 
(b)  
Personal care products : For the six months ended June 30, 2010, the Company’s sales of personal care products increased by $899,965 (24.7%) when compared with the six months ended June 30, 2009. For the three months ended June 30, 2010, the Company’s sales of personal care products increased by $1,032,348 (77.0%) when compared with the three months ended June 30, 2009. These increases were primarily the result of sales increases in 2010 to the Company’s two largest marketing partners, ISP and Sederma. Sales to ISP increased by $435,422 (15.5%) and $637,837 (61.5%) for the six- and three-month periods,
 
 
Page 13 of 18
 
 
 
respectively, ended June 30, 2010, compared with the comparable periods in 2009. Sales to Sederma increased by $448,374 (164.1%) and $322,763 (571.8%) for the six- and three-month periods, respectively, ended June 30, 2010, compared with the comparable periods in 2009.
 
(c)  
Medical (non-pharmaceutical) products:   Sales of the Company’s medical products decreased by $412,680 (24.2%) and $94,241 (13.0%) for the six- and three-month periods, respectively, ended June 30, 2010, when compared with the corresponding periods ended June 30, 2009.  These changes are primarily due to one of the Company’s customers that concentrated all of its 2009 purchases into the first six months of 2009 prior to moving its production facility in late 2009. That customer's purchases are expected to be made in a more orderly manner over the entire year in 2010, resulting in higher sales of these products in the second half of 2010 when compared with the second half of 2009.
 
In addition to the above changes in sales, net sales allowances decreased $176,474 (94.6%) and $161,573 (152.6%) for the three and six month periods, respectively, ended June 30, 2010, when compared with the corresponding periods in 2009. The decreases were primarily due to decreases in allowances for distribution fees.
 
Cost of Sales
 
Cost of sales as a percentage of sales decreased to 38.5% for the six months ended June 30, 2010 from 40.9% for the comparable period in 2009.  For the three months ended June 30, 2010, cost of sales as a percentage of sales decreased to 37.4% from 42.6% for the comparable period in 2009.   The decreases in cost of sales were primarily due to a decrease in the cost of the Company's most significant raw material, as well as an increase in sales of some of the Company's higher-margin products and a decrease in sales of one of its lower-margin products in the first six months of 2010 compared with the same period in 2009.
 
Operating Expenses
 
Operating expenses consist of selling, general and administrative expenses. Operating expenses decreased $70,753 (5.1%) for the six-month period ended June 30, 2010 and increased $21,183 (3.1%) for the three-month period ended June 30, 2010 compared with the comparable periods in 2009. The decrease for the six-month period ended June 30, 2010 was primarily attributable to decreases in payroll and payroll related expenses, while the increase for the three-month period ended June 30, 2010 was primarily due to increases in professional and consulting fees.
 
Defined Benefit Pension Plan Termination
 
On July 20, 2010, the Company terminated its DB Plan.  The termination resulted in the Company recognizing a one-time non-cash expense of $518,296, offset by a $179,641 tax benefit associated with recognizing unamortized actuarial losses.  In addition, the Company provided for a cash contribution of $337,378, offset by a $116,900 tax benefit, in order to fully fund the DB Plan.  The recognition of the non-cash and cash contributions resulted in a before-tax charge of $847,744, and an after-tax charge of $559,133 ($0.11 and $0.12 per share for the six- and three-month periods ended June 30, 2010, respectively).  Since the non-cash expense had previously been provided for as a charge to other comprehensive income, the net effect of the termination on stockholders’ equity was a decrease of $220,478.

 
Page 14 of 18
 
 
Other Income
 
Investment income increased $40,063 (21.6%) and $39,395 (42.1%) for the six and three months, respectively, ended June 30, 2010, when compared with the comparable periods in 2009. These increases were mainly attributable to capital gains realized on the sale of marketable securities in 2010.
 
Provision for Income Taxes
 
The provision for income taxes decreased by $115,474 (12.2%) and $80,999 (21.9%) for the six and three months ended June 30, 2010, respectively, when compared with the comparable periods in 2009. These decreases were primarily due to decreases in income before taxes of $305,778 (10.7%) and $211,906 (18.8%) for the six and three months, respectively,  ended June 30, 2010 compared with the comparable periods in 2009.
 
The Company's effective income tax rate was approximately 33.0% for all periods presented.
 
LIQUIDITY AND CAPITAL RESOURCES
 
Working capital decreased by $3,409,311 to $11,326,580 at June 30, 2010 from $14,735,891 at December 31, 2009.  The decrease in working capital was primarily due to the acquisition by the Company of 350,000 shares of Company stock from the Company's largest shareholder. The current ratio increased to 7.9 to 1 at June 30, 2010 from 6.0 to 1 at December 31, 2009. The increase in the current ratio was primarily due to the effect of a decrease in dividends payable, partially offset by other changes in working capital items.
 
During the six-month period ended June 30, 2010, the average period of time that an account receivable was outstanding was approximately 42 days. The average period of time that an account receivable was outstanding during the six-month period ended June 30, 2009 was 34 days.
 
The Company believes that its working capital is and will continue to be sufficient to support its operating requirements for at least the next twelve months.  The Company does not expect to incur any significant capital expenditures for the remainder of 2010.
 
The Company generated cash from operations of $1,621,924 and $2,432,661 for the six months ended June 30, 2010 and June 30, 2009, respectively. The decrease was primarily due to increases in accounts receivable and inventory partially offset by an increase in the pension liability.
 
Cash provided by investing activities for the six-month period ended June 30, 2010 was $1,555,217, while cash used in investing activities was $220,521 for the six-month period ended June 30, 2009. This increase was primarily due to the redemption of marketable securities and certificates of deposit.
 
Cash used in financing activities was $6,829,292 and $2,776,663 for the six months ended June 30, 2010 and June 30, 2009, respectively.  This increase was mainly due to the acquisition of treasury stock.

The Company expects to continue to use its cash to make dividend payments, to purchase marketable securities, and to take advantage of other opportunities that are in the best interest of the Company, should they arise.

 
Page 15 of 18
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
Please see Note 4 to the Financial Statements for a description of recent accounting pronouncements, including the expected dates of adoption and the anticipated impact on the financial statements.
 
OFF-BALANCE-SHEET ARRANGEMENTS
 
The Company has no off-balance-sheet transactions that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
 
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
 
The information to be reported under this item is not required of smaller reporting companies.
 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .
 
The information to be reported under this item is not required of smaller reporting companies.
 
Item 4T.
CONTROLS AND PROCEDURES
 
(a)  
DISCLOSURE CONTROLS AND PROCEDURES
 
The Company’s management, including its Principal Executive Officer and Principal Financial Officer, has evaluated the design, operation, and effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”).  There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.  Based upon the evaluation performed by the Company’s management, including its Principal Executive Officer and Principal Financial Officer, it was determined that, as of the end of the period covered by this quarterly report, the Company’s disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in the 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 the Company’s management, including its Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding disclosures.
 
(b)  
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
 
The Company's Principal Executive Officer and Principal Financial Officer have determined that, during the period covered by this quarterly report, there were no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.  They have also concluded that there were no significant changes in the Company’s internal controls after the date of the evaluation.
 
 
Page 16 of 18
 
PART II - OTHER INFORMATION
 
LEGAL PROCEEDINGS
 
NONE
 
ITEM 1A.
RISK FACTORS
 
The information to be reported under this item is not required of smaller reporting companies.
 
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF  PROCEEDS .
 
NONE
 
DEFAULTS UPON SENIOR SECURITIES
 
NONE
 
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
NONE
 
OTHER INFORMATION
 
By letter agreement dated May 5, 2010 the Company and ISP agreed to extend the Company's distribution agreement with ISP until December 11, 2011.  The agreement provides for automatic two-year extensions of the distribution agreement unless either party terminates upon 60 days notice.  A copy of that letter agreement is filed herewith as Exhibit  10.1
 
EXHIBITS
 
10.1
Letter agreement dated May 5, 2010 between the Company and ISP
   
10.2
Stock Purchase Agreement dated May 17, 2010 between the Company and Kenneth H. Globus.  Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated May 17, 2010 and filed with the United States Securities and Exchange Commission on May 18, 2010.
   
31.1     
Certification of Kenneth H. Globus, President and principal executive officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
31.2     
Certification of Robert S. Rubinger, Chief Financial Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
32.1     
Certification of Kenneth H. Globus, President and principal executive officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2     
Certification of Robert S. Rubinger, Chief Financial Officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
Page 17 of 18
 
SIGNATURES

 
 In accordance with the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 

 
UNITED-GUARDIAN, INC.
(Registrant)


By:  /S/  KENNETH H. GLOBUS
Kenneth H. Globus
President 


By: /S/  ROBERT S. RUBINGER
Robert S. Rubinger
Chief Financial Officer

Date:  August 9, 2010
 
 
 Page 18 of 18
EXHIBIT 10.1


ISP TECHNOLOGIES Inc.
Hwy 146 & Attwater Ave. PO Box 2141 Texas City Tx 77592-2141
(409) 945 3411

 
May 5, 2010



United-Guardian, Inc.
230 Marcus Boulevard
Hauppauge, New York 11788

Attention: 
Mr. Kenneth H. Globus, Esq., President

Gentlemen:

This letter agreement, when accepted and agreed to by United-Guardian, Inc. (“UGI”) and ISP Technologies Inc. (“ISP”), shall constitute an amendment to the Exclusive Distributor Agreement between UGI and ISP dated July 5, 2000, as amended December 16, 2002 and December 20, 2005, pursuant to which ISP acts as UGI’s (i) exclusive distributor in certain markets and territories and (ii) non-exclusive distributor for certain other markets and territories, for certain of UGI’s specialty chemical products (collectively, the “Agreement”), as more particularly set forth therein.

In consideration of the premises set forth herein, and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, UGI and ISP hereby agree to amend the Agreement as follows.

1.            Section 3.1 of the Agreement is hereby deleted in its entirety and the following substituted:

3.1           The initial term of this Agreement shall be deemed to have commenced as of January 1, 2000 and shall continue through and including December 31, 2011, and indefinitely thereafter for successive two (2) year renewal terms unless earlier terminated as provided herein or terminated by either party by written notice given at least sixty (60) days prior to the end of said initial term or any renewal term.

It is understood and agreed the terms “entire term” (Section 2.1) and “term” (Sections 4.2, 6.5 and 14.1) encompass both the initial and any renewal terms of this Agreement.
 
 
 
 
2.            Section 3.2 of the Agreement is hereby deleted in its entirety.

3.            Section 3.4(a) of the Agreement is hereby amended by deleting the phrase “and the purchase targets set forth in Section 3.2 above, shall be reduced by the parties to reflect such transfer or sale”.

4.            Section 4.1(a) of the Agreement is hereby deleted in its entirety and the following substituted:

(a)           UGI shall have the right to increase the price of a PRODUCT in any calendar year but such increase shall not exceed five percent (5%) of the price last in effect hereunder for that PRODUCT at the end of the previous calendar year.  The parties will discuss in advance and take into consideration market conditions prior to the time any price increase is scheduled to take effect, but this will not affect UGI’s unilateral right to implement the price increase specified herein.  This Section 4.1(a) is subject to any additional price increases that may be implemented by UGI in accordance with Section 4.1(b).  In the event UGI does implement a price increase for any PRODUCT it shall give ISP at least sixty (60) days prior written notice of the same.  All prices are FOB Hauppauge, New York.

5.            Article XIX of the Agreement is hereby amended by deleting the last sentence thereof.

This amendment shall be deemed retroactively effective as of December 31, 2008.

Except as specifically amended hereby, the Agreement shall remain in full force and effect.




{remainder of page intentionally left blank}
 
 
 
 
Please confirm UGI’s acceptance of, and agreement to be bound by, the foregoing by signing below where indicated and return one duplicate original of this letter agreement to the undersigned.
 
 
Yours very truly,

ISP TECHNOLOGIES INC.


By: /s/ Catherine Joy

Name: Catherine Joy

Title: Vice President

ACCEPTED AND AGREED TO:

UNITED-GUARDIAN, INC.


By: /s/ Ken Globus

Name: Ken Globus

Title: President
EXHIBIT 31.1

SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Kenneth H. Globus, certify that:
 
1.
I have reviewed this Quarterly Report of United-Guardian, Inc. on Form 10-Q for the three-month period ended June 30, 2010;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
a.  
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b.  
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 
c.  
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d.  
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. 
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 
a.  
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b.  
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:  August 9, 2010                                                                                     By:   /s/ Kenneth H. Globus
Kenneth H. Globus
President and Principal Executive Officer
EXHIBIT 31.2

SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Robert S. Rubinger, certify that:
 
1.
I have reviewed this Quarterly Report of United-Guardian, Inc. on Form 10-Q for the three-month period ended June 30, 2010;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
a.  
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b.  
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 
c.  
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d.  
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. 
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 
a.  
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b.  
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:  August 9, 2010                                                                                                By:   /s/ Robert S. Rubinger
Robert S. Rubinger
Chief Financial Officer
EXHIBIT 32.1


CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002


     In connection with the quarterly report of United-Guardian, Inc. (the "Company") on Form 10-Q for the three-month period ended June 30, 2010, as filed with the Securities and Exchange Commission (the "Report"), I, Kenneth H. Globus,  President of the Company, hereby certify, pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(i) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of the dates presented and results of operations of the Company for the periods presented.


Date:  August 9, 2010                                                                               By: /s/ Kenneth H. Globus
Kenneth H. Globus
EXHIBIT 32.2


CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002


     In connection with the quarterly report of United-Guardian, Inc. (the "Company") on Form 10-Q for the three-month period ended June 30, 2010, as filed with the Securities and Exchange Commission (the "Report"), I, Robert S. Rubinger, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(i) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of the dates presented and results of operations of the Company for the periods presented.


Date:  August 10, 2010                                                                          By: /s/ Robert S. Rubinger
 Robert S. Rubinger