United Guardian Inc: Form 10-K for the period ended Dec 31, 2025

Overview

United-Guardian, Inc. (“Company”) is a Delaware corporation that, through its Guardian Laboratories division, manufactures, markets and develops specialty cosmetic, personal care and sexual wellness ingredients and a line of healthcare products including pharmaceuticals and medical lubricants. We conduct various research and development (“R&D”) activities. Our R&D department primarily develops new and unique specialty cosmetic and sexual wellness ingredients. We develop new products using natural and environmentally friendly raw materials, which is a priority for many of our cosmetic customers. The R&D department also modifies, refines, and expands the uses for existing products, with the goal of further developing the markets that our products are used in. All the products that we market, except for Renacidin®, are produced at our facility in Hauppauge, New York. Renacidin, a urological product, is manufactured for us by an outside contract manufacturer.

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

The cornerstone of our business is our product innovation. We use our product development and formulation expertise to maintain our market position and to propel future growth. We also focus on the development of new products that fill unmet market needs and have unique properties.

Our products are sold into stable and growing markets such as personal care, medical devices and healthcare. Our current product offerings include cosmetic, personal care, and sexual wellness ingredients, and a line of healthcare products including pharmaceuticals and medical lubricants.

Our website, www.u-g.com (http://www.u-g.com), contains our annual reports on Form 10-K, quarterly reports on Form 10-Q, and any amendments to those reports. All such reports are available as soon as reasonably practicable after they are electronically filed with, or electronically furnished to, the U.S. Securities and Exchange Commission (“SEC”). These documents are also available in print to any stockholder who requests them. The information contained on our website is not part of this Annual Report on Form 10-K and is not incorporated by reference in this document. The SEC maintains a website at www.sec.gov (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Business Description

We manufacture, market and develop specialty cosmetic, personal care and sexual wellness ingredients and a line of healthcare products including pharmaceuticals and medical lubricants. 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, Mexico, and the distribution of Lubrajel® and Natrajel products in France. Although there were no sales of sexual wellness products during 2025, we are ready to begin manufacturing and distribution of this new line of products into these markets.

We also conduct R&D, primarily related to the development of new and unique cosmetic, personal care and sexual wellness ingredients as well as medical lubricants. We focus on the development of products that fill unmet market needs, have unique properties, and use proprietary technology that we typically protect as trade secrets rather than with patents. Many of our products are marketed through collaborative distribution agreements with larger companies.

The cosmetic ingredients we manufacture are marketed to end users through our worldwide network of distributors and are currently used by many of the major manufacturers of cosmetic products. One of our most important product lines is our Lubrajel line of multifunctional hydrogel formulations, which are designed to provide sensory enhancement, lubrication, hydration, and texture to both personal care and medical products. In the last few years, to meet the growing demand for “green” and sustainable products, we have focused on developing and launching new products which only contain ingredients that are considered “natural.” Our Lubrajel products in the natural line have been certified to meet the Cosmetic Organic and Natural Standard (“COSMOS”). This standard is recognized globally by the cosmetic industry. We ship our cosmetic ingredients to our distributors Ex Works (“EXW”) from our facility in Hauppauge, New York. Those distributors in turn resell those products to their customers, who are typically the manufacturers and marketers of cosmetic and personal care products. The cosmetic ingredients are not sold on a consignment basis, so unless a product is determined to be defective, it is not returnable, except at our discretion.

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

We operate as a single business segment. Our current products are separated into four distinct product categories: cosmetic ingredients, pharmaceuticals, medical lubricants and sexual wellness. Each product category is marketed differently.

Our cosmetic ingredients are currently marketed globally by five distributors, of which Ashland Specialty Ingredients (“ASI”), a business segment of Ashland, Inc., is the largest. ASI manufactures, distributes and markets globally an extensive line of personal care and pharmaceutical ingredients and various other specialty products. We sell our cosmetic ingredients directly to those distributors, which in turn resell our products to their customers for use in the formulation of one or more of the customers’ personal care and cosmetic products. Our non-pharmaceutical medical lubricants are sold directly to marketers of finished medical products or to the contract manufacturers utilized by those marketers. We market our pharmaceutical products primarily through our dedicated Renacidin website. The pharmaceutical products are sold through full-line drug wholesalers, which purchase our products outright for resale to primarily, hospitals and pharmacies. We also sell a small quantity of pharmaceutical products directly to hospitals and pharmacies. Our products are sold under trademarks or trade names that we own, some of which are registered with the United States Patent and Trademark Office as well as with comparable regulatory agencies in some foreign countries. We maintain a corporate website at www.u-g.com (http://www.u-g.com), and a specific website for Renacidin at www.renacidin.com (http://www.renacidin.com). The information contained on either website is not part of this Annual Report on Form 10-K and is not incorporated by reference in this document.

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

Products

Our current products are segregated into the following categories:

• Cosmetic Ingredients: Cosmetic ingredients include an extensive line of multifunctional hydrogel formulations designed to offer sensory enhancement, lubrication, texture and moisturization to personal care products.
• Medical Lubricants: Medical lubricants include a line of hydrogel formulations designed to offer sensory enhancement and lubrication to medical products.
• Pharmaceutical Products: Pharmaceutical products include an FDA approved prescription drug that is used primarily to prevent and to dissolve calcifications in urethral catheters, as well as a chlorine-based topical antimicrobial.
• Sexual Wellness Ingredients: Sexual wellness ingredients include a line of hydrogel formulations designed to offer sensory enhancement, lubrication and moisturization to sexual wellness applications.

Cosmetic Ingredients – Products

• LUBRAJEL is an extensive line of multifunctional hydrogel formulations designed to mainly provide sensory enhancement, lubrication, and texture to personal care products. Most, if not all, of the Lubrajel products also offer skin hydration benefits. The Lubrajel products are primarily used in skin care products such as moisturizers, anti-aging creams, body lotions, face serums and masks, spa products and sunscreens. The Lubrajel products are also used in makeup products such as primers and foundations. Each Lubrajel product offers unique benefits for the formulation of skin care and color cosmetic products. The basic product line includes Lubrajel CG, Lubrajel DV, Lubrajel IIXD, Lubrajel MS, and Lubrajel Oil.

To address customer demand for preservative-free products, we developed and launched Lubrajel DV PF, Lubrajel IIXD PF, Lubrajel MS PF, Lubrajel Oil PF and Lubrajel PF. To address customer demand for paraben-free products, we developed and launched Lubrajel DV free, Lubrajel IIXD free, Lubrajel MS free, and Lubrajel Oil free.

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

The COSMOS line of products includes Lubrajel Natural, Lubrajel Marine, Lubrajel Oil Natural and Lubrajel Terra. All of the natural products are designed using green technology and contain natural raw materials. These products are multifunctional, Roundtable on Sustainable Palm Oil (“RSPO”) certified, Vegan, biodegradable and COSMOS approved. Each one offers a unique skin feel and improves the sensory characteristics of personal care formulations. In 2025, we created preservative free versions of the COSMOS line of products as the demand for products without preservatives has been growing with cosmetic and personal care customers.

In addition to the Lubrajel line of products, we also manufacture the following additional cosmetic ingredients, which accounted for less than 10% of total sales in 2025 and 2024:

• B-122™ is a powdered lubricant used in the manufacture of certain cosmetics, such as pressed powders, eyeliners, and rouges, as well as some industrial products. The product acts as a binder, increases water-repellency and drop strength, and lowers the coefficient of friction in the products in which it is used.
• ORCHID COMPLEX™ is an oil-based extract of fresh orchids. It is characterized by its excellent lubricity, spreadability, light feel, and emolliency. Because of its alcohol solubility it may also be used in fragrance products, such as perfumes and toiletries. Its emolliency makes it an excellent additive to shampoos, bath products and facial cleansers.
• LUBRASIL™ II SB is a special formulation of Lubrajel in which silicone oil is incorporated into a Lubrajel base using proprietary technology that enables the product to maintain much of the clarity of regular Lubrajel. The product has a silky feel and is water resistant while at the same time providing moisturization.

Sales of our cosmetic ingredients represented approximately 29% and 45% of our total sales for the years ended December 31, 2025 and 2024, respectively.

The cosmetic ingredients we manufacture are marketed and sold to formulators and producers of personal care products through our worldwide network of distributors and marketing partners. Our cosmetic ingredients are currently sold globally by five distributors, of which Ashland Specialty Ingredients (“ASI”), a business segment of Ashland, Inc., is the largest. ASI is the exclusive distributor of these products in the United States, Canada, Asia, South & Central America, Mexico, Europe (all regions other than France, the United Kingdom, Italy & Switzerland), Scandinavia, Africa, Australia, and the Middle East. ASI had been our distributor in South Korea until February 5, 2025, at which time we formally entered into a new marketing and distribution agreement with Azelis Group NV (“Azelis”) to market our products in South Korea. Azelis also markets our cosmetic ingredients in the United Kingdom and Ireland. Our other cosmetic ingredient distributors are Sederma SAS (a subsidiary of Croda International Plc.) in France, Safic-Alcan S.p.A. in Italy, and Azelis Cosmetics GmbH in Switzerland. We signed a new agreement in January of 2026 with Brenntag Specialties to sell our Lubrajel and Natrajel ingredients in France. We are currently in the process of renegotiating our marketing and distribution agreement with ASI.

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

Since our Lubrajel hydrogels are well-known and established specialties, we believe that in the event ASI or any of our other cosmetic product distributors were to cease marketing and selling our products, alternative distribution agreements could be signed with other distributors of cosmetic ingredients in the affected territory or territories. These new distributors would continue supplying products to customers currently using our products, without any significant interruption of sales. If necessary, we would also be able to sell directly to the end users of our products until a new distribution arrangement was put in place.

We believe that there is potential to continue growing the sales of our cosmetic ingredients through the development of new products, product applications, additional claim substantiations, and geographic expansion. Although we have experienced significant pricing pressure from low-cost competitors, our product innovation in the hydrogel market continues to set us apart from our competitors. We believe that we can compete effectively due to our innovation capabilities, high-quality products, reliable supply chain, and our deep technical expertise.

Medical Lubricants– Products

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

Our medical lubricants are also sold under the Lubrajel brand since they are hydrogel formulations designed to provide sensory enhancement and lubrication to medical products. The Lubrajel medical lubricant products are primarily used in catheters, surgical instruments and in oral care applications such as mouthwashes.

Currently, we offer medical lubricant products for catheter lubrication, medical devices, condom lubrication and oral care. In addition, we develop and sell customized exclusive products for all these applications.

Our medical lubricants include Lubrajel MG, Lubrajel MGL, Lubrajel RRCG, Lubrajel RR, Lubrajel RC, Lubrajel RA, Lubrajel Fluid, Lubrajel LC, Lubrajel BA, and Lubrajel FACO.

Lubrajel MG and Lubrajel MGL are our standard medical lubricants and can be applied to catheters, thermometers and other instruments to ensure ease of use and patient comfort. Our R-line of products, Lubrajel RRCG, Lubrajel RR, Lubrajel RC and Lubrajel RA can withstand sterilization by gamma radiation, which is one of the methods of terminally sterilizing medical and hospital products. Lubrajel Fluid is designed as an alternative to traditional silicone-based lubricants. The water-based formula offers easy clean up and is non-staining. It is compatible with traditional condom release powders which are used during the manufacture of latex condoms.

Lubrajel LC, Lubrajel BA and Lubrajel FACO are hydrogel formulations developed for use in oral care applications.

Sales of medical lubricants represented approximately 20% and 17% of our total sales for the years ended December 31, 2025 and 2024, respectively.

We believe that there is potential to continue growing the sales of our medical lubricants through new product development, development of new product applications and markets, and geographic expansion. Pursuant to this goal we entered into a new agreement on February 5, 2025 with Azelis, which gave Azelis the right to market and distribute our medical lubricants in the UK and Ireland. We are working with Azelis on a marketing strategy for medical lubricants and have created marketing materials to further create opportunities to expand the types of medical products and devices to which our medical lubricants can be introduced.

Pharmaceuticals – Products

• RENACIDIN is a prescription drug approved by the FDA that is used primarily to prevent and to dissolve calcifications in urethral catheters. We maintain a specific website dedicated to this product at www.renacidin.com (http://www.renacidin.com).
• **CLORPACTIN® WCS-**90 (“Clorpactin”) is a chlorine-based drug that is marketed as a topical antimicrobial and is also used in urology. It is also a powerful disinfectant, fungicide, and deodorizer.

Our pharmaceutical products represented 51% and 39% of our total sales for the years ended December 31, 2025 and 2024, respectively.

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

We recently developed a new marketing strategy to expand the domestic sales of Renacidin. This marketing strategy includes the creation of a value proposition for insurance companies and pharmacy benefit managers (“PBM”) to increase awareness of Renacidin and seek inclusion on additional drug formularies. In February 2026 we had the product approved by two major PBMs for inclusion on their formularies. We believe that increased formulary coverage of Renacidin will enhance patient access and support long-term commercial growth of this product.

Sexual Wellness Ingredients – Products

Sexual wellness ingredients include a line of hydrogel formulations designed to offer sensory enhancement, lubrication, and moisturization for sexual wellness applications. While our Lubrajel products have had a long history in sexual wellness market as components in condoms and personal lubricants, there has been a recent emerging market in sexual wellness application such as intimate wipes and personal moisturizers. Our new Natrajel line was created specifically for that market.

The new Natrajel line of products comprises Natrajel NT, Natrajel MA, Natrajel ON and Natrajel TE. This line was designed using green technology and contains natural raw materials. All the products are RSPO certified, vegan, biodegradable and COSMOS approved. In 2025, we created a new product for the sexual wellness line in response to requests from customers for a non-glycerin version.

Although there were no sales of sexual wellness products during 2025, and we are ready to begin manufacturing and distribution of this new line of products.

Domestic Sales

For the years ended December 31, 2025 and 2024, approximately 77% and 84%, respectively, of our sales were from domestic sources, which represents sales within the United States only.

Cosmetic Ingredients – Domestic Sales

In the United States, our cosmetic ingredient products have been marketed and distributed exclusively by ASI in accordance with a marketing agreement entered into in 1996 with its predecessor company, International Specialty Products (“ISP”) and last renewed on January 1, 2022. That agreement was for the marketing of the Company’s cosmetic ingredients in North America, Central America, South America, Asia Pacific, and EMEA. The current agreement with ASI terminated on December 31, 2023, pursuant to a letter provided by us to ASI on October 10, 2023. The purpose of the termination was to renegotiate the terms and conditions of the distribution agreement between the two companies. At this time we have not finalized a new agreement, but we have made strides in the negotiation process. Our goal is to finalize the contract in the first half of 2026. but there can be no assurance we will be able to do so. We continue to work with ASI as we negotiate the new agreement by fulfilling orders, discussing marketing strategies, and continuing to engage with them on other marketing matters in a manner consistent with past practice.

Domestic sales of cosmetic ingredients accounted for approximately 22% of total sales in 2025, compared with 41% in 2024. Sales to our largest distributor, ASI, accounted for approximately 22% of total sales in 2025 and 41% of sales in 2024.

Medical Lubricants – Domestic Sales

We sell our medical lubricants directly to manufacturers and marketers of finished medical products or to the contract manufacturers utilized by those companies. Domestic sales of medical lubricants accounted for approximately 3% of our total sales in 2025 and 4% of total sales in 2024. Although all shipments of medical lubricants to U.S. locations are considered domestic sales, a percentage of those shipments are subsequently shipped by some customers to foreign manufacturing facilities, which then produce finished products that could be marketed globally.

Pharmaceuticals – Domestic Sales

Our pharmaceutical products are marketed only in the United States and are sold primarily through full-line drug wholesalers. Sales of those products accounted for approximately 51% of sales in 2025, compared with approximately 39% in 2024.

During 2025 and 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 product 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.

Sexual Wellness – Domestic Sales

Sexual wellness ingredients include a line of hydrogel formulations designed to offer sensory enhancement, lubrication, and moisturization to sexual wellness applications. Although we did not manufacture or have any sales of these products during 2025, we are ready to begin manufacturing and distribution of this new line of products in 2026.

Foreign Sales

For the years ended December 31, 2025 and 2024, approximately 23% and 16%, respectively, of our sales revenue was from foreign sources, and was derived from (a) sales of our cosmetic ingredients to foreign distributors, which accounted for approximately 6% and 3% of sales for each of the years ended December 31, 2025 and 2024, respectively, and (b) sales of medical lubricants directly to certain customers in foreign countries, which accounted for approximately 17% and 13% of our sales revenue for the years ended December 31, 2025 and 2024, respectively.

Because all shipments to our largest distributor, ASI, are delivered to ASI’s warehouses in the U.S., all sales to ASI are considered domestic sales, even though a significant percentage of ASI’s sales of our products are to customers in foreign countries. Based on sales information provided by ASI, 77% of ASI’s sales of our products in 2025 were to customers in foreign countries, compared with 79% in 2024. ASI’s largest foreign market in both 2025 and 2024 was China, which accounted for approximately 41% of ASI’s sales of our products in 2025 and 43% in 2024.

Since sales of our products are in U.S. Dollars, our selling prices are generally not affected by fluctuations in foreign currency exchange rates, except to the extent that a stronger dollar compared with foreign currencies can make our products less competitive in foreign markets, sometimes requiring adjustments to our prices in order to be more competitive. We continue to 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.

ISO 9001:2015 and EFfCI Certifications

On July 23, 2018, we were certified by DQS Inc. to be in compliance with the latest ISO standard, ISO 9001:2015, indicating that we have implemented and maintain a quality management system. DQS performs tri-annual certification audits and annual surveillance audits to ensure our continuous commitment to the quality management system.

Our current ISO 9001:2015 certification is valid through July 22, 2027. We have been in continuous compliance with ISO standards since November 1998. Between November 1998 and December 2003, we were registered under the ISO 9002 standard. From December 2003 to December 2009, we were registered under the ISO 9001:2000 standard. From December 2009 to July 2018, we were registered under the ISO 9001:2008 standard.

On November 10, 2025 we were certified by DQS Inc. to be in compliance with the requirements of the EFfCI GMP (“Good Manufacturing Practices”) Standards for Cosmetic Ingredients, Revision 2017. While we have always followed current GMPs at our facility it was an important step to become certified by a third-party. We will continue to follow current GMP standards and provide high quality products to our current and future customers.

Competition

We primarily compete in the specialty ingredients space. The participants in this space offer a broad range of product lines designed to meet specific customer needs. Competition is largely based on product performance, price, quality, service, product availability, security of supply, and responsiveness of product development in cooperation with customers. Many key competitors are significantly larger than us and have greater financial resources, leading to greater operating and financial flexibility.

To improve our competitive position, we are strengthening our core capabilities and investing in product development, especially in naturally derived products. We will continue to provide high-quality products, technical expertise and be a reliable supplier to our distributors and customers.

While we have some competition for our medical lubricants, the medical device market is relatively stable since most medical devices require regulatory approval. Our pharmaceutical products, specifically Renacidin, does not have direct competition as it is the only FDA approved drug for its purpose.

Intellectual Property

In recent years, we have elected to rely more on trade secret protection to protect our intellectual property for proprietary product formulations and manufacturing methods. We will file for patent protection in situations where we believe that relying on trade secret protection alone would not provide sufficient protection.

We own the Lubrajel®, Renacidin®, Clorpactin®, Excellence Through Innovation®, and Natrajel® trademarks.

Raw Materials

We purchase a predominant amount of our raw materials from multiple sources in the United States and believe that raw material supplies will be available in quantities sufficient to meet demand in 2026. Although some of those raw materials may be manufactured overseas, all but one of our suppliers are located within the United States.

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 any tariffs enacted would not materially impact the pricing of our products.

The principal raw materials we use consist of common industrial organic and inorganic chemicals. We have three major raw material vendors that together accounted for approximately 82% of our raw material purchases in 2025 and 83% in 2024.

Inventories, Returns, and Allowances

We believe it is important to maintain moderate inventory levels of some of our finished goods in order to fulfill purchase orders in a timely manner. Historically, maintaining sufficient inventory levels, and adequate allowances for have not been a significant factor in our business.

Backlog

We do not currently have any significant backlog of orders.

Seasonality

Due to the nature of our business and the types of products that we market, we are not subject to any significant seasonal fluctuations in sales.

Customers

Our cosmetic ingredients are currently marketed and sold globally by five distributors. Those distributors, in turn, market and distribute those products to their customers. Although we depend on these distributors for the marketing and distribution of our cosmetic ingredients, we believe that if any of our distributors were to decide not to sell our products, or if we chose to replace one or more of those distributors, we would be able to put new marketing agreements in place to service our customers in all the geographic areas affected. If necessary, we would also be able to sell directly to the end users of our products until such time as a new distributor is put in place.

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

Research and Development

Our R&D team’s main focus is to develop new products and product-line extensions. The product development activities are focused on developing products for identified customers and unmet market needs. We frequently collaborate with customers to develop the desired product to meet their specific needs. The R&D team also provides technical support services to assist our customers with application development and co-development. In addition, the R&D team provides ongoing technical assistance and know-how to quality assurance and manufacturing personnel to ensure consistent standards for our products and to deliver environmentally responsible products that exceed customer expectations.

Our research and development expenses in 2025 were $463,644 compared with $456,779 in 2024. We expect our research and development expenses in 2026 to be higher than those in 2025 in order to support innovation and growth initiatives. Any additional increase in R&D expenses will also depend on whether capital investments are required in order to continue development work on, or to manufacture, any of the new products under development.

We require all employees and consultants who may receive confidential and proprietary information to agree in writing to keep such information confidential.

Government Regulation

Regulation by governmental authorities in the United States and other countries is a significant factor in the manufacturing and marketing of many of our products. Some of the products we develop and sell in the United States may be subject to approval from federal regulatory agencies, such as the U.S. Food & Drug Administration (“FDA”), as well as state regulatory agencies. Some products sold outside the United States may require approval from foreign regulatory agencies.

Our operations and many of our products are subject to chemical control laws. These laws include regulation of chemical substances and inventories under and the Registration, Evaluation and Authorization of Chemicals (“REACH”) regulation in Europe, Right to Know laws under the Global Harmonized System (“GHS”) for hazard communication, and the regulation of chemicals used in the manufacture of pharmaceuticals and personal care products and contact food under the Food, Drug and Cosmetics Act in the United States. We are an FDA Drug Establishment registered site.

We are required to comply with all pertinent current Good Manufacturing Practices of the FDA for medical devices and drugs our products may be subject to. Accordingly, the regulations to which we and certain of our products may be subject, and any changes with respect thereto, may materially affect our ability to produce and market new products.

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

Portions of our operating expenses are directly attributable to complying with federal, state, and local environmental statutes and regulations. In 2025 and 2024, we incurred approximately $43,000 and $24,000, respectively, in federal, state, and local environmental law compliance expenses. There was no material financial or other impact on our results of operations as a result of compliance with environmental laws.

Health and Safety

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

Environmental and Corporate Social Responsibility

Sustainability

We have a proactive mindset for sustainability. We are committed to sustainable growth and minimizing our impact on the local community and the environment. We are committed to measuring and monitoring our impact on the environment and, where appropriate, making improvements. We comply in all material respects with all federal, state and local environmental regulations.

We have created a sustainability committee that reviews our Scope 1 and Scope 2 emissions to determine ways in which we can reduce our impact on the environment. We recently installed an energy efficient roof to lower our energy consumption. We have established goals to lower our energy emissions and recycle water used in our manufacturing process. We have also joined initiatives for core raw materials, such as the Roundtable on Sustainable Palm Oil (“RSPO”), to ensure that we support suppliers in protecting the environment and the people in it. We are committed to using green chemistry principles to produce biodegradable, natural, and safe products with renewable feedstocks.

Solid Waste

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

Water Discharge

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

ECOVADIS

We joined EcoVadis in 2020 as part of our commitment to Corporate Social Responsibility (“CSR”). EcoVadis is a global leader in guiding, measuring, and improving corporate environmental and social responsibility and sustainability performance. Periodically we reassess our EcoVadis progress and in 2025 we scored higher than we had previously scored. While still in the top 15% of companies evaluated, we scored in the 93rd percentile. The newest evaluation reviewed policies, measurement and reporting in three main categories; environmental, labor and human rights and ethics.

As part of the reassessment, it was determined that we were strong in the following three areas:

1. Environmental:

Policies

• Environmental policy on energy consumption and GHGs
• Standard policy on majority of environmental issues
• Environmental policy on water

Measures

• Wastewater quality assessment
• Internal sorting and disposal of waste according to waste streams
• Actions or training to raise employee awareness on waste reduction and sorting
• Actions of labeling, sorting, handling and transporting hazardous substances
• Environmental emergency measure in place
• Specialized treatment and safe disposal of hazardous substances
• Training employees to safely handle and manage hazardous substances

Reporting

• Reporting on total gross Scope1 GHG emissions
• Standard reporting on environmental issues
• Reporting on total energy consumption
• Environmental reporting on materials, chemicals and waste
• Environmental reporting on energy consumption and GHGs

2. Labor and Human Rights:

Policies

• Labor and human rights policy on employee health and safety
• Standard policy on a majority of labor or human rights issues
• Labor and human rights policy on diversity, equity and inclusion

Measures

• Grievance mechanism on discrimination and/or harassment issues
• Compensation for extra or atypical working hours
• Health care coverage of employees in place

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• Family Friendly programs (FFPs) implemented (e.g. parental or care leaves, childcare services or allowances)
• Equipment safety inspections or audits
• Provision of skills development training
• Regular assessment of individual performance
• Actions to promote internal mobility
• Provision of protective equipment to impacted employees
• Training of employees on health and safety risks and best working practices
• Actions to manage working hours and overtime

Reporting

• Standard reporting on labor and human rights issues
• Labor and human rights reporting on employee health and safety

3. Ethics:

Policies

• Exceptional policy on ethics issues
• Disciplinary sanctions to deal with policy violations
• Policies on corruption
• Policy on information security

Measures

• Incident response procedure (IRP) to manage breaches of confidential information
• Awareness training to prevent information security breaches

As part of our goal to continuously improve sustainability, our sustainability committee will be implementing the following initiatives:

1) An overarching sustainability procedure will be created to include KPIs for key metrics.

2) A review of our water usage during the manufacturing process with the aim of reducing water consumption.

3) An updated training program that includes topics in leadership, management and compliance.

Employees

Human Capital Management

We currently have twenty-five employees, three of whom serve in an executive capacity, one in marketing, sixteen in research, quality control and manufacturing, two in maintenance and construction, and three in office and administrative support services. Of the total number of employees, twenty-three are employed full-time.

Compensation and Benefits

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

Employee Engagement

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

Talent Management

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

We continue to augment the capabilities of our people, processes, and technologies to address our cybersecurity risks. Our cybersecurity risks, and the controls designed to mitigate those risks, are integrated into our overall risk management governance and are reviewed yearly by our Board of Directors.

We take steps to protect our data and third-party data we receive through the implementation of technological and organizational measures designed to reduce the risk from cybersecurity threats, including data theft or destruction.

We have undertaken a program of annual enterprise-wide cybersecurity risk assessments and have implemented policies, procedures, and programs designed to help manage the risks to which we are exposed in our business. As part of our risk management process, we have implemented a risk-based approach to identify and assess the cybersecurity threats that could affect our business and information systems, as well as the systems of third parties on whom we rely, such as any cloud hosting partners. Our cybersecurity program is designed to assess, identify, and manage material risks and vulnerabilities to our security posture, including prioritizing and remediating cybersecurity risks.

Our program includes, among other things:

• Incorporation of cybersecurity in our overall enterprise risk management processes, including periodic risk assessments and tools used to track and monitor risks.
• Regular reviews of cybersecurity risks and mitigation efforts.
• Use of software and hardware tools and services to help safeguard our systems, information, and data.
• Assessments designed to help identify cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment.
• An employee information security training program to educate employees on various cybersecurity risks and mitigation strategies.
• Policies and processes governing our third-party security risks.

Risk Management and Strategy

We have implemented a set of comprehensive cybersecurity and data protection policies and procedures. Risks from cybersecurity threats are regularly evaluated as a part of our broader risk management activities and as a fundamental component of our internal control system. Our employees receive ongoing cybersecurity awareness training, including specific topics related to social engineering and email fraud. We utilize an outsourced information technology firm and consultants with significant expertise in cybersecurity. We invest in advanced technologies for continuous cybersecurity monitoring across our information technology environment which are designed to prevent, detect, and minimize cybersecurity attacks, as well as alert management of such attacks.

Our Information Technology General Controls are firmly established based on the National Institute of Standards and Technology (“NIST”) cybersecurity framework and cover areas such as risk management, data backup, and disaster recovery. We have utilized an outsourced information technology consultant to reduce and monitor security threats and vulnerabilities. As part of our gap analysis, identified vulnerabilities have been, and will continue to be, promptly addressed with our senior business leadership and our Board of Directors.

Governance

Our Board of Directors is responsible for overseeing our cybersecurity risk management and strategy. Our President regularly meets with and provides periodic briefings to our Board of Directors regarding our cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, cybersecurity systems testing, activities of third parties, and the like.

We own our principal office, manufacturing, and research and development facility consisting of a 50,000 square foot facility on a 2.7-acre parcel located at 230 Marcus Boulevard, Hauppauge, New York 11788. Approximately 30,000 square feet of the facility is manufacturing space, 15,000 square feet is warehouse space, and 5,000 square feet is office and laboratory space. We believe that the property is adequate for our immediately foreseeable needs. The property is presently unencumbered and we believe the property is adequately insured.

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

You should read the following discussion and analysis in conjunction with our financial statements and related notes contained elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors discussed in this report and those discussed in other documents we file with the SEC. In light of these risks, uncertainties and assumptions, readers are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements represent beliefs and assumptions as of the date of this report. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Past performance does not guarantee future results.

Executive Level Overview

We specialize in manufacturing cosmetic, personal 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.

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, 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 were no sales of sexual wellness products during 2025, we are ready to begin manufacturing and distribution of this new line of products.

With a refined product portfolio and strategic partnerships, we are well-positioned for future growth, leveraging our expertise in specialty ingredients to capitalize on emerging market opportunities.

Impact of Global Supply Chain Instability, Inflation and Tariffs

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.

Critical Accounting Policies

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

Marketable Securities

Our marketable securities include investments in equity mutual funds, Certificates of Deposit and U.S. Treasury Bills with original maturities of greater than three months. Our marketable equity securities are reported at fair value with the related unrealized and realized gains and losses included in net income. Certificates of Deposit and U.S. Treasury Bills with original maturities of more than 3 months are recorded at amortized cost. Realized gains or losses on mutual funds are determined on a specific identification basis. We evaluate our investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value had been below cost basis, the financial condition of the issuer, and our ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery of market value. We record an impairment charge to the extent that the cost of the available-for-sale securities exceeds the estimated fair value of the securities and the decline in value is determined to be other-than-temporary. During 2025 and 2024, we did not record an impairment charge regarding our investment in marketable securities because management believes, based on an evaluation of the circumstances, that any decline in fair value below the cost of certain of our marketable securities is temporary.

Revenue Recognition

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

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 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 2025 and 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 product 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.

On January 1, 2025, the Centers for Medicare & Medicaid Services (“CMS”) implemented a new Medicare Part D Manufacturer Discount Program (“Discount Program”), which replaced the prior CGDP. The new Discount Program eliminates the coverage gap benefit phase, introduces pharmaceutical manufacturer discounts in the initial and catastrophic coverage phases, and lowers the cap on enrollee out-of-pocket costs. Under the new Discount Program, additional rebates are expected to be owed by pharmaceutical manufacturers due to the restructuring of the benefit periods and removal of the cap that was in place that limited the drug manufacturer’s liability. The overall financial impact of this new program will vary depending on the products being reimbursed but it is expected to increase Medicare Part D rebates for drug manufacturers.

On January 31, 2024, we were notified by CMS that we qualified as a “specified small manufacturer” and would be entitled to a multi-year phase-in period during which we would pay a lower percentage discount on drugs dispensed to beneficiaries. Based on our “specified small manufacturer” designation, it appears, based on our current level of sales through the Medicare Part D Program, we would have reduced rebate liabilities in years 2025 and 2026, with rebates gradually increasing each year after, until they reach their full phase-in by 2031. By the end of the phase in period in 2031, these rebate liabilities are expected to significantly exceed the liabilities we have recorded under the CGDP in previous years.

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

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

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

We have distribution agreements with certain distributors of our pharmaceutical products that entitle those distributors to distribution and services-related fees. We record distribution fees, and estimates of distribution fees, as offsets to revenue.

Accounting for Financial Instruments - Credit Losses

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.

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.

As of December 31, 2025 and December 31, 2024, the allowance for credit losses on accounts receivable was $17,169 and $14,342, respectively. Prompt-pay discounts are offered to some customers; however, due to the uncertainty of the customers taking the discounts, the discounts are recorded when they are taken.

Inventory Valuation Allowance

In conjunction with our ongoing analysis of inventory valuation, management constantly monitors projected demand on a product-by-product basis. Based on these projections, management evaluates the levels of write-downs required for inventory on hand and inventory on order from contract manufacturers. Although we believe that we have been reasonably successful in identifying write-downs in a timely manner, sudden changes in buying patterns from customers, either due to a shift in product interest and/or a complete pullback from their expected order levels, may result in the recognition of larger-than-anticipated write-downs. We have performed an evaluation of our inventory on hand as of December 31, 2025 and December 31, 2024, and believe the reserves are adequate to cover any slow-moving or obsolete inventory.

Results of Operations

Sales

Sales decreased by approximately 13%, from $12,181,971 in 2024 to $10,545,468 in 2025. The decrease in sales was primarily due to a decrease in sales of our cosmetic ingredient products, specifically a decrease of 54% in sales to our largest distributor, ASI, in 2025 compared with 2024. Sales 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 4%, primarily due to increased orders placed by two large customers in China.

Cosmetic Ingredients

Sales of our cosmetic ingredients decreased by approximately 45%, from $5,438,262 in 2024 to $3,006,522 in 2025. The decrease was primarily due to a decrease in sales to ASI. Based on information provided to the Company by ASI, the reason for the decrease during 2025 was due to a combination of decreased demand for our products in Asia, combined with ASI dealing with an overstocking issue. This decrease was partially offset by an increase in sales to our other three distributors, whose sales increased by a net of approximately 62%, combined with an increase in sales of approximately 13% from two of our small direct cosmetic ingredient 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 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.

Pharmaceuticals

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 increased by approximately 11%, from $5,602,259 in 2024 to $6,225,905 in 2025. Gross sales of Renacidin increased by approximately 14%, from $4,897,331 in 2024 to $5,582,668 in 2025, and gross sales of Clorpactin decreased by 9% from $704,928 in 2024 to $643,237 in 2025.

The primary reason for the increase 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 increased by approximately 15% in 2025 compared with the same period in 2024. The increase in net sales was due to an increase in gross sales as discussed above, combined with a decrease in certain pharmaceutical-related rebates and allowances. The decrease in pharmaceutical-related rebates and allowances in 2025 was primarily due to a decrease in Medicare 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.

Medical Lubricants

Sales of our medical lubricants increased by approximately 4% in 2025, from $2,028,564 in 2024 to $2,111,104 in 2025. The increase in sales was driven by increased demand from two of our larger customers located in China.

Sexual Wellness Ingredients

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.

Gross Profit on Sales

Gross profit on sales was 49% in 2025 compared with 53% in 2024. The decrease in gross profit was primarily due to two factors. The first was a decrease in sales of our cosmetic ingredients in 2025 compared to 2024, as these products carry a higher profit margin than our pharmaceutical products. During 2025, cosmetic ingredient sales represented approximately 29% of the company’s total sales, compared to 45% in 2024. The second factor was due to higher per unit overhead costs in 2025 due to decreased production of those cosmetic ingredients, which was caused by lower demand for some of our cosmetic ingredients.

Operating Expenses

Operating expenses increased by approximately 3%, from $2,356,819 in 2024 to $2,434,148 in 2025. The increase was mainly attributable to the following: 1) increases in payroll and payroll related expenses; and 2) an increase in consulting fees in connection with a study relating to Renacidin, our most important pharmaceutical product. In connection with our growth initiatives, we anticipate that operating expenses will increase modestly in 2026.

Research and Development Expenses

Research and development expenses increased by approximately 2%, from $456,779 in 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 2026.

Investment Income

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.

Net Gain on Marketable Securities

For the year ended December 31, 2025, we recorded net gains on our marketable securities portfolio of $34,359 compared with net gains of $26,989 in 2024. These increased gains were due to normal market fluctuations. The Company’s management and Board of Directors continue to closely monitor the Company's investment portfolio and have made, and will continue to make, any changes they believe may be necessary or appropriate to minimize the future impact of global market volatility on the Company’s financial position.

Provision for Income Taxes

The provision for income taxes decreased from $857,582 in 2024 to $537,277 in 2025. This decrease was due to a decrease in income before taxes. Our effective income tax rate was 20.3% in 2025 and 20.9% in 2024.

Liquidity and Capital Resources

Working capital decreased from $10,751,082 at December 31, 2024 to $10,532,076 at December 31, 2025. The decrease in working capital was mainly due to a decrease in cash and cash equivalents and marketable securities. The current ratio increased from 6.6 to 1 at December 31, 2024 to 7.3 to 1 at December 31, 2025. The increase in the current ratio was due mainly due to a decrease in accrued expenses.

Accounts receivable (net of allowance for credit losses) increased from $1,428,455 at December 31, 2024 to $1,586,889 at December 31, 2025. The increase in accounts receivable was due to an increase in sales during the fourth quarter of 2025. The receivables turnover, or “Days Sales Outstanding,” for 2025 was 52 days, compared with 45 days in 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 increased from $14,342 in 2024 to $17,169 in 2025, and we believe that the net balance of our accounts receivable as of December 31, 2025 was, and continues to be, fully collectible.

We generated cash from operations of $1,966,819 in 2025 compared with $3,466,251 in 2024. The decrease in 2025 was primarily due to a decrease in net income combined with increases in accounts receivable and prepaid income 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 of $7,077,395 for the year ended December 31, 2024. This shift was primarily due an increase in the purchase of longer-term investments in 2024 that were 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 $2,766,720 and $2,756,323 for the years ended December 31, 2025 and 2024, respectively. The increase was due to a payment made in the second quarter of 2025 in the amount of $10,290, which represented dividends in arrears to shareholders who had either converted their Guardian Chemical shares to United-Guardian, Inc. shares, or whose shares had been escheated.

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

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

New Accounting Pronouncements

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

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the design, operation, and effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of December 31, 2025. On the basis of that evaluation, management concluded that our disclosure controls and procedures are designed to be, and are, effective at providing reasonable assurance that the information required to be disclosed in reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

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

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control system is designed to provide reasonable assurance to management and to our Board of Directors regarding the preparation and fair presentation of published financial statements. Under the supervision and with the participation of management, including our Principal Executive Officer and Principal Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO 2013”). Based on management’s evaluation under the framework in Internal Control—Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, 2025.

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

(c) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting in the fourth quarter of 2025 that materially affected, or would be reasonably likely to materially affect, our internal control over financial reporting.

(d) Limitations of the Effectiveness of Internal Controls

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