UG 10-K & 10-Q changes, risk factors and insider trading
United Guardian Inc. · Nasdaq · Perfumes, Cosmetics & Other Toilet Preparations · CIK 101295 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
The information to be reported under this item is not required of smaller reporting companies.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Removed heading “Industrial Products”
Largest changes
“During 2025, the United States (“U.S.”) changed its long-standing trade policies and announced significant new tariffs, with certain exceptions, on virtually all imported goods. These actions triggered the negotiation of new trade agreements with certain U.S. trading partners. While these negotiations resulted in the reduction of certain recently imposed tariffs, the average U.S. tariff rate remains at its highest level since the 1930s. In response to the changes in U.S. trade policies, certain U.S. trading partners imposed retaliatory tariffs on U.S. imports. …”see in full comparison
“The Trump administration has communicated its intention to impose tariffs on many products imported from China, Canada and Mexico. Some of those tariffs went into effect on March 4, 2025. Since that time the Trump administration has increased some of those tariffs and postponed others. It has threatened to levy tariffs on additional countries, including those of the European Union. Many of the countries on which those tariffs have been levied have imposed their own retaliatory tariffs or threated to impose tariffs on goods they import from the U.S. …”see in full comparison
“While we obtain most of our raw materials and lab supplies from domestic sources, we have three suppliers that obtain their raw materials from China. These materials are not purchased by us in large quantities, and we have adequate stock on hand to cover the next six months. In addition, we have one direct raw material supplier in China; however, the raw materials we purchase from this supplier are not in large quantities and the effect of this tariff would not materially impact the pricing of our products.”see in full comparison
“Many of our products are used in the formulation of finished products that are manufactured in China and then imported back into the United States (“U.S.”) for sale. There is the possibility that the tariffs levied on these finished products could result in an increase in their price, which could potentially impact demand for these products in the U.S.”see in full comparison
“The continued supply chain instability, primarily caused by military tensions in the Middle East, continues to impact vessels’ access to the Red Sea and Suez Canal. Shipping experts say this crisis may last into the first half of 2025. We continue to work with our suppliers regarding lead times and continue to closely monitor this situation. Although we have not yet experienced any delays in receiving raw materials or an increase in shipping costs, we are aware that the situation is fluid and could impact us at any time. …”see in full comparison
Full comparison: every changed paragraph (40)
We specialize in manufacturing cosmeticcosmetic, ingredients,personal pharmaceuticals, medical lubricants,care and sexual wellness ingredients and a line of healthcare products including pharmaceuticals and medical lubricants through our Guardian Laboratories division. With a long-standing reputation for delivering high-quality specialty products, we are committed to serving diverse markets with innovative solutions.
As part of our strategic focus, we discontinued our specialty industrial products line in mid-2023 due to low sales and limited growth potential. This shift allows us to concentrate on higher-value product categories with greater market opportunities.
In OctoberJanuary 2023,2026, we tookentered into a significantnew stepdistribution toward expanding our presence in the sexual wellness market by partneringagreement with Brenntag Specialties, a global market leader in chemicals and ingredients distribution.distribution, Underfor thisthe agreement,distribution Brenntag will distributeof our new Natrajel line of sexual wellness ingredients acrossin Norththe United States, Canada, Mexico, and Souththe America.distribution Whileof weLubrajel reportedand Natrajel products in France. The new agreement provides an opportunity to grow the French market, which is known for innovation in personal care products. Although there were no sales of thissexual productwellness inproducts 2024,during 2025, we anticipateare beginningready to begin manufacturing and revenuedistribution generationof inthis 2025.new line of products.
During 2025, the United States (“U.S.”) changed its long-standing trade policies and announced significant new tariffs, with certain exceptions, on virtually all imported goods. These actions triggered the negotiation of new trade agreements with certain U.S. trading partners. While these negotiations resulted in the reduction of certain recently imposed tariffs, the average U.S. tariff rate remains at its highest level since the 1930s. In response to the changes in U.S. trade policies, certain U.S. trading partners imposed retaliatory tariffs on U.S. imports. Shifts in tariffs, trade agreements, import/export restrictions, trade sanctions, sector specific trade barriers, and other governmental trade actions, whether enacted by the U.S. or other countries, especially those instituted in the Company's significant markets or markets where its significant customers are located and the associated uncertainty of long-term trade policies, could impact the Company's sales volume, sales price and other costs. Changes in trade policies may also cause disruptions to material sourcing and availability, global supply chains and logistics and access to end markets. Additionally, changes in U.S. trade policy and associated responses from trading partners may create shifts in global market dynamics and result in continued global financial market volatility. The impact of these changes in trade policies and the resulting trade and market uncertainty could have a negative impact on the Company’s results of operations. There can be no assurance that, in the future, the U.S. or other countries or international trade bodies will not institute new tariffs or more restrictive trade policies or remedies and, as a result, the Company may face additional uncertainty and adverse impact on its business, financial condition and results of operations.
The continued supply chain instability, primarily caused by military tensions in the Middle East, continues to impact vessels’ access to the Red Sea and Suez Canal. Shipping experts say this crisis may last into the first half of 2025. We continue to work with our suppliers regarding lead times and continue to closely monitor this situation. Although we have not yet experienced any delays in receiving raw materials or an increase in shipping costs, we are aware that the situation is fluid and could impact us at any time. If that occurs, we may experience longer lead times and increased shipping costs for some of our raw materials, which may impact our future gross margins. As a result of this global supply chain instability, there continues to be uncertainty regarding the potential impact on our operations or financial results and we are unable to provide an accurate estimate or projection as to what the future impact will be.
The Trump administration has communicated its intention to impose tariffs on many products imported from China, Canada and Mexico. Some of those tariffs went into effect on March 4, 2025. Since that time the Trump administration has increased some of those tariffs and postponed others. It has threatened to levy tariffs on additional countries, including those of the European Union. Many of the countries on which those tariffs have been levied have imposed their own retaliatory tariffs or threated to impose tariffs on goods they import from the U.S. The tariff situation remains fluid and is subject to modification at any time. At this time, it is difficult to determine the impact of these tariffs on our business. We will continue to monitor this situation closely.
While we obtain most of our raw materials and lab supplies from domestic sources, we have three suppliers that obtain their raw materials from China. These materials are not purchased by us in large quantities, and we have adequate stock on hand to cover the next six months. In addition, we have one direct raw material supplier in China; however, the raw materials we purchase from this supplier are not in large quantities and the effect of this tariff would not materially impact the pricing of our products.
Many of our products are used in the formulation of finished products that are manufactured in China and then imported back into the United States (“U.S.”) for sale. There is the possibility that the tariffs levied on these finished products could result in an increase in their price, which could potentially impact demand for these products in the U.S.
Due to the continued uncertainty of this, any other tariffs that may be imposed, there continues to be uncertainty regarding the future impact of any additional tariffs on our operations or financial results.
Our 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 our pharmaceutical products, include chargebacks from the United States Department of Veterans Affairs (“VA”), rebates in connection with our current participation in Medicare programs,Drug Rebate Program, 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.
During 20242025 and 2023,2024, we participated in various government drug rebate programs related to the sale of Renacidin, our most important pharmaceutical product. These programs include the Veterans Affairs Federal Supply Schedule (“FSS”), and the Medicare Manufacturer Discount Program (“MDP”) (formerly the Medicare Part D Coverage Gap Discount Program (“CGDP”)). These programs require us to sell our productsproduct at a discounted price, typically given in the form of a rebate. 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.
We recognize an allowance for our trade receivables to present the net amount expected to be collected as of the balance sheet date. This allowance is based on the credit losses expected to arise over the life of the asset and are based on Current Expected Credit Losses (CECL). The timing between recognition of revenue for product sales and the receipt of payment is not significant. Our standard credit terms, which vary depending on the customer, range between 30 and 60 days.
We perform ongoing credit evaluations of our customers and adjust credit limits, as determined by a review of current credit information. We continuously monitor collection and payments from customers and maintain an allowance for credit losses based upon historical experience, anticipation of uncollectible accounts receivable and any specific customer collection issues that have been identified. While our credit losses have historically been low and within expectations, we may not experience the same credit loss rates that have historically been attained in the future. 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 our significant customers would have a significant impact on our results of operations and cash flows. When determining the reserve for credit losses, we take into consideration current and future economic conditions and the impact that these changing dynamics may have on potential future losses.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (ASU 2025-05), which allows an entity to elect a practical expedient for measuring expected credit losses on current accounts receivable and current contract assets arising from transactions accounted for as revenues from contracts with customers. This expedient allows an entity to assume that current economic conditions as of the balance sheet date do not change for the remaining life of the asset. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025 and interim periods within fiscal years beginning after December 15, 2026. As permitted, we have elected to early adopt the practical expedient as of December 31, 2025 and applied its provisions prospectively to the provision for credit losses. The adoption of ASU 2025‑05 did not have a material impact our results of operations, cash flows or financial condition.
The timing between recognition of revenue for product sales and the receipt of payment is not significant. Our standard credit terms, which vary depending on the customer, range between 30 and 60 days. We provide an allowance for credit losses related to our accounts receivable for which collection is doubtful in accordance with ASU 2016-13. In accordance with FASB ASC Topic 326, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, (“ASC 326”), we present financial assets at the net amount expected to be collected, requiring immediate recognition of estimated credit losses expected to occur over the asset’s remaining life.
Sales increaseddecreased by approximately 12%,13%, from $10,885,154 in 2023 to $12,181,971 in 2024.2024 to $10,545,468 in 2025. The increasedecrease in sales was primarily due to ana increasedecrease in sales of our cosmetic ingredient products, specifically ana increasedecrease of 51%54% in sales to our largest distributor, ASI, in 20242025 compared with 2023.2024. In addition, salesSales of our pharmaceutical products increased by 15% in 2025 compared to 2024, due to increased orders from our largest pharmaceutical distributors. Sales of medical lubricants increased by 16%,4%, primarily due to increased orders placed by ourtwo largestlarge customercustomers in China.
Sales of our cosmetic ingredients increaseddecreased by approximately 32%,45%, from $4,132,334 in 2023 to $5,438,262 in 2024.2024 to $3,006,522 in 2025. The increasedecrease was primarily due to ana increasedecrease in sales to ASI. Based on information provided to the Company by ASI, the reasonsreason for the increasedecrease during 20242025 was due to increaseda combination of decreased demand for our products in ChinaAsia, duecombined towith regainingASI marketdealing sharewith atan certainoverstocking key accounts.issue. This increasedecrease was partially offset by an increase in sales to our other fourthree distributors, whose sales decreasedincreased by a net of approximately 49%,62%, whilecombined with an increase in sales of approximately 13% from two of our small direct cosmetic ingredient customers increased by approximately 19%. This decrease was primarily due to reformulations.customers.
We continue to experience global competition from Asian and European companies that manufacture and sell products that are competitive with our products. These competitive products are usually sold at a lower price than our products; however, they may not compare favorably to the level of performance and quality of our products. We work closely with our network of distributors to price our products as competitively as possible and, when appropriate, to offer additional volume discounts and more aggressive pricing to maintain and increase sales and expand our customer base. We expect that this competitive environment will continue in 20252026 and we plan to enhance our competitive position by strengthening our core capabilities and investing in new products,product development, especially in the area of naturally derived products. We will continue to providprovide high-quality products, technical expertise, and the reliability our customers have come to expect from us.
Because there are fees, rebates, and allowances associated with sales of our two pharmaceutical products, Renacidin and Clorpactin, discussion of our pharmaceutical sales includes references to both gross sales (before fees, rebates and allowances) and net sales (after fees, rebates and allowances). Gross sales of our two pharmaceutical products, Renacidin and Clorpactin, together decreasedincreased by approximately 5%,11%, from $5,894,220 in 2023 to $5,602,259 in 2024.2024 to $6,225,905 in 2025. Gross sales of Renacidin decreasedincreased by approximately 4%,14%, from $5,127,069 in 2023 to $4,897,331 in 2024,2024 to $5,582,668 in 2025, and gross sales of Clorpactin decreased by 8%9% from $767,151 in 2023 to $704,928 in 2024.2024 to $643,237 in 2025.
The primary reason for the decreaseincrease in Renacidin sales was due to increases in sales to all of our major pharmaceutical wholesalers in 2025 compared to 2024. This was mainly due to our contract manufacturer temporarily ceasing manufacturing during the latter part of 2023 and the beginning of 2024. During this time, we were unable to fill complete orders of Renacidin and were allocating product to all of our pharmaceutical distributors. We resumed filling orders in full towards the end of March 2024.
Net sales of our pharmaceutical products decreasedincreased by approximately 5%15% in 20242025 compared with the same period in 2023.2024. The decreaseincrease in net sales was due to aan decreaseincrease in gross sales as discussed above, combined with a commensurate decrease in certain pharmaceutical-related rebates and allowances. The decrease in pharmaceutical-related rebates and allowances in 20242025 was primarily due to a decrease in VA Chargebacks and Medicare rebates.rebates due to the new MDP Program phase-in as discussed under “Revenue Recognition” combined with a decrease in the reserve for outdated material returns.
Sales of our medical lubricants increased by approximately 16%4% in 2024,2025, from $1,750,632 in 2023 to $2,028,564 in 2024.2024 to $2,111,104 in 2025. The increase in sales was driven by increased demand from onetwo of our larger contract manufacturer customers located in China.
There were no sales of our sexual wellness ingredients in 2025. Our distributor has been actively marketing these ingredients to customers in the sexual wellness market; however, it takes time for customers to adopt new ingredients into their product formulations. As the sexual wellness market is an emerging market, especially for new innovative products, we are well positioned to be at the forefront. Being at the forefront presents opportunities to provide education and assistance to our customers as they determine how to bring their products to market, and we are continuously learning and developing new marketing tools to aid our customers.
There were no sales of our sexual wellness ingredients in 2024, since we only began our marketing efforts for those products in mid-2023. Customers need to qualify new ingredients and perform product development testing prior to launching a new product. It is not unusual for this process to take a year or more and inherently it will require additional time for new ingredients to generate sales. Our distributor for these products has informed us of the possibility of orders being placed in mid-2025.
Industrial Products
There were no sales of our industrial products during 2024 due to this product line being discontinued after the second quarter of 2023.
Gross profit on sales was 53%49% in 20242025 compared with 50%53% in 2023.2024. The increasedecrease in gross profit was primarily due to two factors. The first was ana increasedecrease in sales of our cosmetic ingredients of 32% in 20242025 compared to 2023,2024, whichas these products carry a higher profit margin than our pharmaceutical products,products. combinedDuring with2025, cosmetic ingredient sales represented approximately 29% of the factcompany’s thattotal sales, compared to 45% in 2024, the percentage of cosmetic product sales as a percentage of total sales increased to approximately 45%, compared with 38% in 2023.2024. The second factor was lowerdue to higher per unit overhead costs in 2025 due to increaseddecreased production,production of those cosmetic ingredients, which was caused by higherlower demand for some of our products.cosmetic ingredients.
Operating expenses increased by approximately 13%,3%, from $2,078,564 in 2023 to $2,356,819 in 2024.2024 to $2,434,148 in 2025. The increase was mainly attributable to the following: 1) increases in salespayroll and marketingpayroll related expenses; incurred in connection with the hiring of our new Marketing Director;and 2) an increase in payrollconsulting and payroll-related expenses; and 3) an increasefees in feesconnection paidwith a study relating to Renacidin, our Boardmost ofimportant Directors.pharmaceutical product. In connection with our growth initiatives, we anticipate that operating expenses will increase modestly in 2025.2026.
Research and development expenses decreasedincreased by approximately 2%, from $463,992 in 2023 to $456,779 in 2024.2024 to $463,644 in 2025. In connection with the Company’s growth initiatives, we expect our research and development expenses to increase modestly during 2025.2026.
Investment income decreased by approximately 16%, from $434,679 in 2024 to $365,308 in 2025. The decrease was primarily due to a decrease in interest income from investments in U. S. Treasury Bills due to lower interest rates in 2025 compared to 2024, combined with a decrease in the average amount invested during 2025 compared to 2024 due to less cash provided by operations in 2025.
Investment income increased by approximately 42%, from $306,651 in 2023 to $434,679 in 2024. The increase was primarily due to an increase in interest income from investments in longer term U.S. Treasury Bills and Certificates of Deposit in 2024 compared to 2023. In addition, during 2024 we held more funds in money market accounts which yielded higher interest income compared to 2023. During the second half of 2023, we repositioned our marketable securities portfolio, liquidating most of our equity and fixed income mutual funds. The proceeds from these sales were used to purchase U.S. Treasury Bills and Certificates of Deposit to take advantage of the increase in interest rates.
For the year ended December 31, 2024,2025, we recorded net gains on our marketable securities portfolio of $26,989$34,359 compared with net gains of $81,095$26,989 in 2023.2024. WeThese repositionedincreased ourgains marketablewere securities portfolio in the second half of 2023due to takenormal advantagemarket offluctuations. theThe increaseCompany’s inmanagement interest rates. Management, as well as the Investment Committee of theand Board of Directors,Directors continue to closely monitor ourthe Company's investment portfolio and have made, and will makecontinue to make, any adjustmentschanges they believe may be necessary or appropriate in order to minimize the future impact of global market volatility on ourthe Company’s financial performance due to volatility of the global financial markets.position.
The provision for income taxes increaseddecreased from $669,408 in 2023 to $857,582 in 2024.2024 to $537,277 in 2025. This increasedecrease was due to ana increasedecrease in income before taxes. Our effective income tax rate was 20.3% in 2025 and 20.9% in 2024 and 20.6% in 2023.2024.
Working capital increaseddecreased from $10,718,457 at December 31, 2023 to $10,751,082 at December 31, 2024.2024 to $10,532,076 at December 31, 2025. The increasedecrease in working capital was mainly due to ana increasedecrease in cash and cash equivalents,equivalents and marketable securities and inventories.securities. The current ratio decreasedincreased from 8.0 to 1 at December 31, 2023 to 6.6 to 1 at December 31, 2024.2024 to 7.3 to 1 at December 31, 2025. The decreaseincrease in the current ratio was due mainly due to ana increasedecrease in accountsaccrued payable.expenses.
Accounts receivable (net of allowance for credit losses) asincreased offrom $1,428,455 at December 31, 2024 decreased from $1,566,839 in 2023 to $1,428,455$1,586,889 inat 2024.December 31, 2025. The decreaseincrease in accounts receivable was due to aan decreaseincrease in sales during the fourth quarter of 2024.2025. The receivables turnover, or “Days Sales Outstanding,” for 2024,2025 was 4552 days, compared with 5045 days in 2023.2024. The receivables turnover increased in 2025 primarily due to one of our larger pharmaceutical distributors transitioning to electronic payments, which resulted in extended payment terms. The allowance for credit losses on accounts receivable decreasedincreased from $16,672 in 2023 to $14,342 in 2024,2024 to $17,169 in 2025, and we believe that the net balance of our accounts receivable as of December 31, 20242025 was, and continues to be, fully collectible.
We generated cash from operations of $3,466,251$1,966,819 in 20242025 compared with $3,144,480$3,466,251 in 2023.2024. The increasedecrease in 20242025 was primarily due to ana increasedecrease in net income,income offsetcombined bywith increases in inventoriesaccounts receivable and deferredprepaid income taxes.taxes and a decrease in accrued expenses.
Net cash provided by investing activities was $175,343 for the year ended December 31, 2025, compared with net cash used in investing activities wasof $7,077,395 for the year ended December 31, 2024,2024. compared with net cash provided by investing activities of $4,277,577 for the year ended December 31, 2023. TheThis shift was primarily due an increase in the purchase of longer-term investments in 2024 that arewere classified as marketable securities. During 2023, most of the of our marketable securities consisted of U.S. Treasury Bills and Certificates of Deposit that had maturities of less than three months and were included in cash and cash equivalents. During 2024, we changed our investment strategy to longer term fixed income investments due to the anticipated decrease in interest rates.
Net cash used in financing activities was $2,756,323$2,766,720 and $459,387$2,756,323 for the years ended December 31, 20242025 and 2023,2024, respectively. The increase was due to thea payment made in the second quarter of higher2025 in the amount of $10,290, which represented dividends in 2024arrears comparedto withshareholders 2023.who Duringhad 2024,either weconverted paidtheir dividendsGuardian ofChemical $0.60shares perto shareUnited-Guardian, comparedInc. withshares, $0.10or perwhose shareshares inhad 2023.been escheated.
In connection with an upgrade to our building sprinkler system, costs of approximately $181,000 have been incurred as of December 31, 2024. The project is substantially complete and is expected to be fully complete by the end of the first quarter of 2025, with additional planned expenditures of $14,000.
During the fourth quarter of 2024, the Company replaced the roof on a portion of its facility in Hauppauge, New York at a cost of approximately $237,000.
What changed in the latest 10-Q
Risk Factors
The information to be reported under this item is not required of smaller reporting companies.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Pharmaceuticals:”
New heading “Cosmetic and Sexual Wellness ingredients:”
New heading “Medical lubricants:”
New heading “OFF BALANCE-SHEET ARRANGEMENTS”
Largest changes
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. Thesee in full comparisonCompany’sCompanylong-termintendsliquiditytopositionutilizewillitsbeavailabledependentcash and assets primarily for its continued organic growth and potential future strategic transactions, as well as to mitigate the potential impact of inflation onitstheabilityCompany'sto generate sufficient cash flow from profitable operations.business.
“We continue to experience global competition from Asian and European companies that manufacture and sell products that are competitive with our products. These competitive products are usually sold at a lower price than our products; however, they may not compare favorably to the level of performance and quality of our products. We work closely with our network of distributors to price our products as competitively as possible and, when appropriate, to offer additional volume discounts and more aggressive pricing to maintain and increase sales and expand our customer base. …”see in full comparison
Full comparison: every changed paragraph (51)
EXECUTIVE LEVEL OVERVIEW
In January 2026, we entered into a new distribution agreement with Brenntag Specialties, a global market leader in chemicals and ingredients distribution, for the distribution of our new Natrajel® line of sexual wellness ingredients in the United States, Canada, and Mexico, and the distribution of Lubrajel® and Natrajel products in France. The new agreement provides an opportunity to grow the French market, which is known for innovation in personal care products. Although there have been no sales of our new sexual wellness products yet, the sexual wellness segment is expected to grow at a higher compound annual growth rate (“CAGR”) than other segments such as skin care, personal care and cosmetics. We are ready to begin manufacturing and distribution of this new line of products once orders are received.
In the second quarter of 2026, there was a nominal amount of sales of our sexual wellness products. Although sales of this product line are just beginning to commence, we are optimistic as to the potential this market offers. The sexual wellness segment is expected to grow at a higher compound annual growth rate (“CAGR”) than other segments such as skin care, personal care and cosmetics.
In 2025, we launched an insurance payer outreach program with the goal of having Renacidin, our most important pharmaceutical product, included on additional drug formularies. As a result of this effort, we have received approval from two major Pharmacy Benefit Managers (“PBM’s”) for inclusion on their formularies beginning in 2026. WeOne of these PBM’s began including Renacidin on its formulary effective June 1, 2026, and the other on July 1, 2026. While we will continue our insurance payer outreach as we move through 20262026, andwe will also introduce a new outreach program with the focus on increasing awareness among healthcare professionals to grow the market for Renacidin.
As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, the discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in conformity with US GAAP. The preparation of those financial statements required us 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,consequently actual results could differ from those estimates and assumptions. Our most critical accounting policies relate to revenue recognition, concentration of credit risk, investments, inventory, and income taxes. Since December 31, 2025, there have been no significant changes to the assumptions and estimates related to those critical accounting policies.
The following discussion and analysis cover material changes in our financial condition since the year ended December 31, 2025, and a comparison of the results of operations for the three months ended March 31, 2026 and March 31, 2025. This discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
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The following discussion and analysis cover material changes in our financial condition since the year ended December 31, 2025, and a comparison of the results of operations for the three and six months ended June 30, 2026 and June 30, 2025. This discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2025. All references in this quarterly report to “sales” or “Sales” shall mean Net Sales unless specified otherwise.
In accordance with ASU-2016-13, we recognize an allowance for credit losses for financial assets carried at amortized cost to present the net amount expected to be collected as of the balance sheet date. Such allowance is based on the credit losses expected to arise over the life of the asset.
All references in this quarterly report to “sales” or “Sales” shall mean Net Sales unless specified otherwise.
Net sales for the second quarter of 2026 increased by $270,042 (10%) when compared with the same period in 2025. Net sales for the first half of 2026 increased by $661,137 (12%) as compared with the corresponding period in 2025. The increase in sales for the second quarter of 2026 and the first half of 2026 was attributable to changes in sales of the following product lines:
Pharmaceuticals:
Because there are fees, rebates and allowances associated with sales of our two pharmaceutical products, Renacidin and Clorpactin® WCS-90, discussion of pharmaceutical sales includes references to both gross sales (before fees, rebates, and allowances) and net sales (after fees, rebates, and allowances).
Gross sales of our pharmaceutical products for the three-month period ended June 30, 2026 increased by $4,904 (less than 1%) compared with the corresponding period in 2025. The increase in gross sales was primarily due to an increase of $22,821 (1%) in gross sales of Renacidin combined with a decrease of $17,917 (11%) in gross sales of the Company’s other pharmaceutical product, Clorpactin WCS-90. The decrease in Clorpactin WCS-90 sales was due to the timing of customer orders.
For the six-month period ended June 30, 2026, gross pharmaceutical sales increased by $331,107 (11%) compared with the corresponding period in 2025. This increase was primarily due to an increase in gross sales of Renacidin of $312,752 (10%) combined with an increase in gross sales of Clorpactin WCS-90 of $18,355 (6%).
Net sales of our pharmaceutical products for the three- and six-month periods ended June 30, 2026 saw a similar pattern, with net sales increasing by $16,663 (1%) and $292,173 (11%), respectively.
With the benefits from our insurance payer outreach program starting to take shape, we are hopeful that the new formulary wins combined with the focus on increasing awareness of Renacidin among healthcare professionals, will create increased demand for Renacidin in the future.
Typically, any differences between the change in net sales compared with the change in gross sales for these products is due to a combination of the change in gross sales of those products combined with changes in pharmaceutical sales allowances related to these products. Typically, these allowances have a direct relationship to the sales of the Company’s pharmaceutical products.
Cosmetic and Sexual Wellness ingredients:
(a) Second quarter sales: For the second quarter of 2026, sales of our cosmetic and sexual wellness ingredients increased by $390,150 (44%) when compared with the second quarter of 2025. The increase was due primarily to a net increase of $286,282 (38%) in sales to our largest cosmetic distributor, ASI, when compared with the second quarter of 2025. This increase was primarily due to ASI resuming regular purchases of the Company’s products after experiencing an overstock situation in 2025.
Net sales for the first quarter of 2026 increased by $391,095 (approximately 16%) as compared with the first quarter of 2025. The increase in sales for the first quarter of 2026 were principally due to a significant increase in sales of our pharmaceutical products coupled with a strong increase in sales of our Lubrajel line of cosmetic ingredients. The changes in our sales by product line are as follows:
The increase in sales was primarily due to a continued increase in gross sales of Renacidin, which increased from $1,232,396 in the first quarter of 2025 to $1,522,326 (approximately 24%) in the first quarter of 2026. The increase in gross sales of Renacidin was combined with an increase in sales of Clorpactin, which increased from $135,583 in the first quarter of 2025 to $171,856 in the first quarter of 2026, an increase of approximately 27%.
Commensurate with the increase in gross sales of our pharmaceutical products, we experienced an increase in pharmaceutical-related sales allowances of $49,337 (approximately 25%), compared with the same period in 2025. The increase in sales allowances was primarily due to an increase in VA chargebacks and distribution fees.
We continue to experience global competition from Asian and European companies that manufacture and sell products that are competitive with our products. These competitive products are usually sold at a lower price than our products; however, they may not compare favorably to the level of performance and quality of our products. We work closely with our network of distributors to price our products as competitively as possible and, when appropriate, to offer additional volume discounts and more aggressive pricing to maintain and increase sales and expand our customer base. We expect that this competitive environment will continue in 2026 and we plan to enhance our competitive position by strengthening our core capabilities and investing in new product development, especially in the area of naturally-derived products. We will continue to provide high-quality products, technical expertise, and the reliability our customers have come to expect from us.
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Second quarter sales to the Company’s four other distributors, as well as two direct customers, increased by a net of $103,868 (77%) compared with the second quarter of 2025. The increase was attributable to sales increases of $122,216 (161%) to the Company’s distributors in the U.K. and France and two direct customers. These increases were partially offset by a decrease in sales of $18,348 (31%) to the Company’s distributors in Switzerland, Korea and Italy.
(b) Six-month sales: For the first half of 2026 sales of our cosmetic and sexual wellness ingredients increased by $536,417 (34%) when compared with the corresponding period in 2025. This increase was primarily due to a net increase in sales to ASI of $489,381 (40%) when compared with the first half of 2025. The increase in sales during the first half of 2026 was primarily due to same reason discussed above regarding ASI returning to normal ordering patterns after dealing with an overstock situation during 2025.
Six-month sales to the Company’s four other distributors, as well as two direct customers, increased by a net of $47,036 (12%), compared with the same period in 2025. Sales to the Company’s distributors in the United Kingdom, Korea, France and Switzerland increased by $94,619 (30%), while sales to the Company’s distributor in Italy and two direct customers decreased by a combined $47,583 (69%).
Medical lubricants:
For the three-month period ended June 30, 2026, sales of our medical lubricants decreased by $136,771 (28%) compared with the same period in 2025. The decrease in sales for the three-month period was primarily due to a decrease in orders from the Company’s largest customer in India. For the six-month period ended June 30, 2026, sales of our medical lubricants decreased by $167,453 (15%) compared with the same period in 2025. The decrease in sales for the six-month period was primarily due to the same reason above, and was related to reduced orders from our largest customer in India.
Cost of sales as a percentage of net sales increased slightly to 50% in the second quarter of 2026 from 47% in the second quarter of 2025. For the first six months of 2026, cost of sales as a percentage of sales increased to 50% compared with 46% for the first six months of 2025. The increase in both periods was primarily due to the units sold in 2026 carrying an increased overhead cost resulting from lower unit production levels in 2025. As a result, these units carried a higher overhead cost, and when these units were sold in the current year the cost of sales increased.
Cost of sales as a percentage of net sales for the first quarter of 2026 increased to 50%, compared with 45% for the first quarter of 2025. This increase was due to the larger ratio of our pharmaceutical products sales in the first quarter of 2026 compared to 2025. The pharmaceutical products carry higher tolling unit costs relative to our cosmetic and medical products produced in house at lower unit costs.
Operating expenses, consisting of selling,selling general,and general and administrative expenses, increaseddecreased by $34,228$26,768 (approximately 5%4%) for the firstthree-months quarterended ofJune 202630, 2026, compared with the firstsame quarterperiod ofin 2025. For the six-month period ended June 30, 2026, operating expenses increased by $7,460 (less than 1%), compared with the same period in 2025. The increasedecrease in the three-month period was mainlyprimarily due to increasesdecreases in sales &and marketing expensestravel, consulting fees, and payrollthe andCompany’s payroll401K relatedPlan expenses.discretionary contribution.
Research and development expenses increased by $16,527 (15%) for the three-month period ended June 30, 2026, and $17,154 (8%) for the six-month period ended June 30, 2026, compared with the same periods in 2025. The increase in both periods was primarily due to increases in payroll and payroll-related expenses.
R&D expenses increased by $627 (less than 1%) for the first quarter of 2026 compared with the first quarter of 2025.
Investment income decreased by $14,873$128 (approximatelyless 18%than 1%) and $15,001 (10%), respectively, for the firstthree-and quartersix-month periods of 2026 compared with the firstsame quarterperiods ofin 2025. The decrease was primarily due to a decreasedecreases in interest incomerates from U.S. Treasury Bills during the first quarter ofin 2026 compared with the same period into 2025. This was the result of lower interest rates compared with the same period in 2025.
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The net gain on marketable securities increased fromby $12,350$23,789 and $29,181, respectively, for the quarterthree-and six-month periods ended MarchJune 31,30, 2025,2026, compared to $17,742 for the quartersame endedperiods Marchin 31,2025. 2026.These Theincreases increase was primarilywere due to 1) increases in the market value of these securities based on market conditions, and 2) the recognition onof a gain fromon the sale of equity mutual funds in the first quarter of 2026, compared to a loss on those sales in the samefirst periodquarter inof 2025. OurThe Company’s management team and Board of Directors continueare continuing to closely monitor our investment portfolio and have made and will continue to make any changes they believe may be necessary or appropriate to minimize the future impact on our financial position that the volatility of the global financial markets may have.
Included in net income for the three- and six-month periods ended June 30, 2026, is a monetary considerationsettlement agreedpaid uponto withus by the contract manufacturer (“CM”) of our pharmaceutical product Renacidin. The settlement relates to the unexpected shutdown of the CM’s facility during the latter part of 2023 and in the beginning of 2024. During this time, we were unable to fill complete orders of Renacidin. On October 27, 2023, we notified the CM of our intention to file a claim for damages in connection with the CM’s breach of our supply contract with the CM, and we requested compensation for the loss of sales during the shutdown period. The settlement, which was agreed upon by both parties, callscalled for the CM to supply us with a specified volume of product at no cost. The majority of the product covered by this agreement was received at our facility in March of 2026 and was valued at $303,133. During the second quarter of 2026, we expect to receive the remaining product covered by the settlement,agreement whichwas isreceived and was valued at approximately$36,360. $35,000.As of the date of this report, the CM has fulfilled their full obligation under the agreement, and there are no additional monies owed to the Company.
The Company's effective income tax rate was approximately 21% for the first half and second quarter of both 2026 and 20252025. andThe Company’s tax rate is expected to remain at 21% for the current fiscal year.
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Working capital decreased by $187,320 to $10,344,756 at March 31, 2026, downincreased from $10,532,076 at December 31, 2025.2025 to $10,977,452 at June 30, 2026, an increase of $445,376. The current ratio increasedremained tothe 8.1 to 1same at March 31, 2026, up from 7.3 to 1 at both June 30, 2026 and December 31, 2025. The decreaseincrease in working capital was primarily due to aan decreaseincrease in cash and cash equivalents. The increase in the current ratio was primarily due to a decrease in accounts payable.
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’sCompany long-termintends liquidityto positionutilize willits beavailable dependentcash and assets primarily for its continued organic growth and potential future strategic transactions, as well as to mitigate the potential impact of inflation on itsthe abilityCompany's to generate sufficient cash flow from profitable operations.business.
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.
The Company generated cash from operations of $604,536$2,124,531 and $322,080$625,323 for the threefirst monthshalf ended March 31,of 2026 and 2025, respectively. The increase was primarily due primarily to an increase in net income.income, combined with decreases in inventories and prepaid income taxes.
CashNet cash provided by investing activities was $165,002 and $ 885,686, respectively, for the threefirst monthshalf ended March 31,of 2026 and 2025 was $30,113 and $679,370, respectively.2025. The decrease was due primarily to ansome increaseproceeds infrom purchasesthe sale of marketable securities infrom the first quarterhalf of 20262025 comparednot tobeing reinvested. For the samesix-month period ended June 30, 2026, these proceeds were primarily reinvested in 2025U.S. dueTreasury to decreased cash requirements.Bills.
Net cash used in financing activities was $1,149,892 and $1,607,893$1,618,183 for the quartersfirst endedhalf March 31,of 2026 and 2025, respectively. The decrease in cash used in financing activities was primarily due to the payment of lower dividends in the first quarterhalf of 2026 compared to the same period in 2025. We declared dividends of $0.25 per share in the first quarterhalf of 2026, compared to $0.35 per share in the first quarterhalf of 2025.
WeThe expectCompany expects to continue to use ourits cash to make dividend payments, purchase marketable securities, and take advantage of growth opportunities that may arise that are in the best interest of the Company and its shareholders.
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OFF BALANCE-SHEET ARRANGEMENTS
The Company has no off-balance sheet transactions that have, or are reasonably likely to have, a current or future impact on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
UG insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding UG (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 166,766 | $1.2M | 0.0% | Reduced 5% |