Dear Stockholder:
I am pleased to report that our financial performance improved in the second quarter and first half of 2026. Second quarter net sales increased by 10% from $2,838,225 in 2025 to $3,108,267 in 2026, with net income increasing 16% from $626,826 ($0.14 per share) to $728,579 ($0.16 per share). Sales for the second quarter were driven primarily by strong sales of our Lubrajel® line of cosmetic ingredients. Net sales for the first half of the year increased by 12% from $5,319,352 in 2025 to $5,980,489 in 2026, with net income increasing by 30% from $1,187,721 ($0.26 per share) to $1,547,481 ($0.34 per share). Sales for the first half were driven by stronger sales of pharmaceuticals and cosmetic ingredients.
The increase in pharmaceutical sales was primarily the result of increased sales of Renacidin®, our most significant pharmaceutical product. Renacidin remains a strategic priority within our growth plan. Our primary focus has been on increasing the number of insurance carriers that include the product on their formularies. While that effort continues, we are expanding our initiative to increase awareness of Renacidin among healthcare practitioners. We are evaluating a range of initiatives, including advertising campaigns, educational programs, direct outreach, and employing appropriate digital platforms, to determine which approaches will provide the broadest reach and the greatest potential to impact both short-term and long-term sales. We are also exploring international markets for Renacidin. Although expansion outside the U.S. will require additional research into applicable regulatory requirements and careful planning for commercialization activities, we remain committed to positioning this product for broader global opportunities.
Sales of our cosmetic ingredients also improved during the second quarter and first half of 2026. Ashland Specialty Ingredients ("ASI"), our largest cosmetic ingredient distributor, increased its purchases by 38% in the second quarter and 40% in the first half of 2026 compared with the same periods in 2025. Last year ASI maintained higher than normal inventory levels that resulted in reduced purchases of our Lubrajel product line while that overstock situation was being corrected. Inventory levels have since normalized, and purchasing patterns have returned to levels more consistent with demand. Competition for our cosmetic ingredients, particularly in China, continues to present challenges. To compete with local Asian producers we have worked with ASI to institute several strategies, including competitive pricing where appropriate to retain existing customers, clearer differentiation of our current products, and the development of new and improved offerings to regain market share. Our marketing team has introduced two new natural grades that ASI's China team intends to include in a sales training session to be held later this year.
Cosmetic ingredients continue to be an important market for us, supported by sustained demand and long-term growth potential. To support that growth, we remain committed to developing new ingredients that address evolving customer needs. Our development team is completing work on two new products expected to launch later this year and early next year. Both products are designed to capitalize on the continuing demand for natural products, with one product developed for skincare and the other for haircare. The Company is also considering entering into possible collaborations with outside organizations that might possess unique technologies that, in combination with our products, could provide innovative solutions to meet unmet cosmetic customer needs. In addition, the research team continues to advance several other personal care products that are currently in various stages of development.
With sales increasing in both our pharmaceutical and cosmetic ingredient segments, we are also focused on assessing the global opportunities to increase the sales of our medical lubricant products. The global market for medical lubricants was estimated to be in excess of $1.5 billion in 2025, and growing at a rate of 5%-6% annually. To
support this effort, we entered into an agreement with Azelis UK Ltd., a subsidiary of the global Azelis Group, for the distribution of our medical lubricant products in the United Kingdom and Ireland, expanding access to international medical customers. Azelis has been actively pursuing opportunities for our medical products in this market, and we continue to work closely with them to better understand customer needs and identify areas for growth. In parallel, our marketing team is developing additional materials to generate customer interest and support customer engagement. These materials will be used during customer visits and trade shows to find new markets and customers for our products, strengthen brand awareness, and build and maintain stronger customer relationships. Healthcare remains a growing market, and our goal is to evaluate and identify additional applications for our Lubrajel hydrogel technology.
Sexual wellness continues to represent a market with meaningful growth potential. Consumer interest in sexual wellness products that also provide skin care benefits continues to increase, which aligns well with our Natrajel® product line. As consumer demand expands, and the category becomes more widely accepted, we expect more companies to develop new applications within this market, and our goal is to get our Natrajel products into as many of those new applications as possible. Brenntag, our distributor for sexual wellness products, remains an important partner in actively promoting the Natrajel line to customers. Our joint customer calls have provided valuable insight into market needs and the challenges customers face, helping us better understand how we can support them as they develop new products. We look forward to continuing these discussions and growing alongside our customers as this market evolves.
With the first half of the year behind us, we are pleased with the progress we have achieved to date. We continue to believe that strengthening each of our market segments will create additional opportunities for growth, and we remain committed to pursuing initiatives that keep growth at the forefront of our strategy. We look forward to building on our current momentum and continuing to make progress on our initiatives throughout the remainder of 2026.
Sincerely,
UNITED-GUARDIAN, INC.Donna Vigilante President
UNITED-GUARDIAN, INC.
STATEMENTS OF INCOME
(unaudited)
THREE MONTHS ENDED JUNE 30, | SIX MONTHS ENDED JUNE 30, | |||
2026 | 2025 | 2026 | 2025 | |
Net sales | $ 3,108,267 | $ 2,838,225 | $ 5,980,489 | $ 5,319,352 |
Costs and expenses: | ||||
Cost of sales | 1,562,465 | 1,340,854 | 3,010,254 | 2,463,930 |
Operating expenses | 667,282 | 694,050 | 1,334,245 | 1,326,785 |
Research and development expense | 124,395 | 107,868 | 239,416 | 222,262 |
Total costs and expenses | 2,354,142 | 2,142,772 | 4,583,915 | 4,012,977 |
Income from operations | 754,125 | 695,453 | 1,396,574 | 1,306,375 |
Other income: | ||||
Investment income | 70,445 | 70,573 | 140,259 | 155,260 |
Net gain on marketable securities | 48,365 | 24,576 | 66,107 | 36,926 |
Settlement income | 36,360 | --- | 339,493 | --- |
Gain on sale of asset | 8,310 | --- | 8,310 | --- |
Total other income | 163,480 | 95,149 | 554,169 | 192,186 |
Income before provision for income taxes | 917,605 | 790,602 | 1,950,743 | 1,498,561 |
Provision for income taxes | 189,026 | 163,776 | 403,262 | 310,840 |
Net income | $ 728,579 | $ 626,826 | $ 1,547,481 | $ 1,187,721 |
Earnings per common share (basic and diluted) | $ 0.16 | $ 0.14 | $ 0.34 | $ 0.26 |
Weighted average shares (basic and diluted) | 4,594,319 | 4,594,319 | 4,594,319 | 4,594,319 |
BALANCE SHEETS
JUNE 30, | DECEMBER 31, | |
2026 (unaudited) | 2025 (audited) | |
Current assets: | ||
Cash and cash equivalents | $ 2,390,738 | $ 1,251,097 |
Marketable securities | 7,203,057 | 7,322,646 |
Accounts receivable, net of allowance for credit losses of $21,270 at June 30, 2026 and $17,169 at December 31, 2025 | 1,690,819 | 1,586,889 |
Inventories, net | 1,179,450 | 1,507,763 |
Prepaid expenses and other current assets | 210,884 | 207,839 |
Prepaid income taxes | 39,819 | 325,163 |
Total current assets | 12,714,767 | 12,201,3G7 |
Net property, plant, and equipment: | ||
Land | 69,000 | 69,000 |
Factory equipment and fixtures | 4,778,413 | 4,786,309 |
Building and improvements | 3,365,326 | 3,352,276 |
Total property, plant, and equipment | 8,212,73G | 8,207,585 |
Less: Accumulated depreciation | 7,334,927 | 7,300,403 |
Total property, plant, and equipment, net | 877,812 | G07,182 |
TOTAL ASSETS | $ 13,5G2,57G | $ 13,108,57G |
BALANCE SHEETS
(continued)
LIABILITIES AND STOCKHOLDERS' EǪUITY | JUNE 30, | DECEMBER 31, |
2026 (unaudited) | 2025 (audited) | |
Current liabilities: | ||
Accounts payable | $ 499,754 | $ 480,791 |
Accrued expenses and other current liabilities | 1,219,333 | 1,164,948 |
Deferred revenue | 8,135 | 12,177 |
Dividends payable | 10,093 | 11,405 |
Total current liabilities | 1,737,315 | 1,66G,321 |
Deferred income taxes, net | 224,351 | 207,246 |
Total liabilities | $ 1,G61,666 | $ 1,876,567 |
Commitments and contingencies | ||
Stockholders' equity: Common stock $.10 par value; 10,000,000 shares authorized; 4,594,319 shares issued and outstanding at June 30, 2026 and December 31, 2025 | 459,432 | 459,432 |
Retained earnings 11,171,481 10,772,580
Total stockholders' equity 11,630,G13 11,232,012
TOTAL LIABILITIES AND
STOCKHOLDERS' EǪUITY $ 13,5G2,57G $ 13,108,57G
* More detailed financial information can be found in the company's Form 10-Ǫ for the second quarter of 2026, which can be found on the company's web site at https://www.u-g.com.