NXGL 10-K & 10-Q changes, risk factors and insider trading

WhileCurrently we expect to be cash flow positive by the end of fiscal year 2025, there is no guarantee this will occur. Currently we do not have sufficient cash resources to meet our plans for the next twelve months from the issuance of the financial statements included herein. Our recurring losses from operations, negative cash flows and potential need for additional capital raise substantial doubt about our ability to continue as a going concern. If we do require additional financing to fund our operations, such funds may not be available on acceptable terms, if at all, and such availability will depend on a number of factors, some of which are outside of our control, including general capital markets conditions and investors’ view of our prospects and valuation. In addition, our ability to raise capital in the public capital markets, including through our at-the-market equity offerings, may in the future be limited by, among other things, SEC rules and regulations impacting the eligibility of smaller companies to use Form S-3 for primary offerings of securities. In general, under under the “baby shelf” rules if our public float is less than $75 million at the time we file our Annual Report on Form 10-K to to update our Form S-3 and our public float remains less than $75, we may not sell more than the equivalent of one-third of our public float float during any 12 consecutive months pursuant to the baby shelf rules. Alternative public and private transaction structures may require additional time and cost, may impose operational restrictions on us, and may not be available on attractive terms. Further, investors’ perception of our ability to continue as a going concern may make it more difficult for us to obtain financing, or necessitate that we obtain financing on terms that are more favorable to investors, and could result in the loss of confidence by investors, suppliers and employees. If we do require but are not able to acquire sufficient additional funding or alternative sources of capital to meet our working capital needs, we will have to substantially curtail or discontinue our operations.

WeWhile are in the process of designing and implementing measures to remediate the material weaknesses described above. Specifically, we expect to implement appropriate controls for accounting journal entry approvals, including the approval of our Chief Financial Officer, and to actively monitor any accounting user with elevated rights or assign another employee outside of an accounting and reporting role with elevated access. While we are designing and implementing measures to remediate the material weaknesses, we cannot predict the success of such measures or the outcome of our assessment of these measures at this time. We can give no assurance that these measures will remediate the weakness in internal control or that additional material weaknesses or significant deficiencies in our internal control over financial reporting reporting will not be identified in the future. Our failure to implement and maintain effective internal control over financial reporting could could result in errors in our financial statements that may lead to restatements of our financial statements, cause us to fail to meet our our reporting obligations, or prevent fraud. Any such failure could also lead to reputational damage and a decrease in the market price of of our stock

We manufacture high water content, electron beam cross-linked, aqueous polymer hydrogels, or gels, used for wound care, medical diagnostics, transdermal drug delivery and cosmetics. cosmetics. We specialize in custom gels by capitalizing on proprietary manufacturing technologies. We havedistribute historicallyour servedproducts as a contract manufacturer, manufacturer, supplying our gels to third parties who incorporate them into their own products. BeginningWe inalso 2020,have we created two new lines of business for the company. First, our owna line of branded consumer products sold direct to consumers.consumers Second, we expanded intoand custom and white label opportunities, which focuses on combining our gels with proprietary branded products and white label opportunities. All of our gel products are manufactured using proprietary and non-proprietary mixing, coating and cross-linking technologies. Together, these technologies enable us to produce gels that can satisfy rigid tolerance specifications with respect to a wide range of physical characteristics (e.g., thickness, water content, adherence, absorption, moisture vapor transmission rate [a measure of the passage of water vapor through a substance] and release rate) while maintaining product integrity. Additionally, we have the manufacturing ability to offer broad choices in the selection of liners onto which the gels are coated. Consequently, we and our customers are able to determine tolerances in moisture vapor transmission rate and active ingredient release rates while personalizing color and texture. In May 2023, we formed aOur joint venture with CG Laboratories, Inc. called CG Converting and Packaging, LLC, which is located in Granbury, Texas and ofin which we own a 50% interest, allowing us to expand our ability to deliver finished goods to our growing customer base.

Other includes freight charged to customers who purchase the Company’s branded consumer products through their SpotifyShopify stores.

Selling, general and administrative expenses. The following table highlights selling,Selling, general and administrative expenses byare typeas follows for the years ended December 31, 2025 and 2024 and 2023 ($ in thousands):

Selling, general and administrative expenses increased by $2,476$1,635 or 66.1%, 26.3%, to $6,224 for the year ended December 31, 2024, as compared to $3,748$7,859 for the year ended December 31, 2023.2025, as compared to $6,224 for the year ended December 31, 2024. The increase in Selling, general and and administrative expenses is primarily attributable to thean factorsincrease describedin below.compensation and benefits (including share-based benefits) of $816, advertising and marketing increases of $282, an increase in professional and consulting fees of $258, and other expense of $205.

As of December 31, 2024,2025, we had $1,807$317 thousand of cash and cash equivalents and $741 of restricted cash compared to $2,700$1,807 thousand of cash and cash equivalents at December 31, 2023.2024. Net cash used in operating activities was $3,867$1,311 thousand and $3,236$3,867 thousand for the years ended December 31, 20242025 and 2023,2024, respectively.

Net cash used in investing activities was $775 $68 thousand and net cash provided by investing activities was $4,456$775 thousand for the yearyears ended December 31, 20242025 and 2023,2024, respectively. Net respectively,cash consistingused in investing activities for 2025 was attributable to the purchases of capital equipment while net cash used in investing activities for 2024 was attributable to the sales of marketable securities of $68 thousand, offset by purchases of capital equipment of $443 thousand thousand and the investment in the subsidiary Semmens Online of $400 thousand for the year ended December 31, 2024 while the sales of marketable securities of $5,699 thousand, offset by purchases of capital equipment of $696 thousand and the Kenkoderm acquisition of $547 thousand were for the year ended December 31, 2023.thousand.

Net cash provided by financing activities for year ended December 31, 2024 2025 was $3,749$630 thousand which iswas attributable to the proceeds from rights offering of $3,772 thousand, proceeds from non-controlling interest of $38 thousand, and proceeds from margin line of credit of $345$963 thousand, offset by principal payments of notes payments of $77$97 thousand, and change in contingent consideration of $279$177 thousand made on the operating lease liability, and $50$59 thousand of principal payment of financing lease liability. Net cash provided by financing activities for year ended December 31, 2023 was $379 thousand which is attributable to the proceeds of equipment notes payable of $315 thousand, proceeds from margin line of credit of $245 thousand, offset by principal payments of notes payments of $6 thousand and payments of $175 thousand made on the operating lease liability.

At December 31, 2024,2025, current assets totaled $5,114 $4,477 thousand and current liabilities totaled $2,470$3,095 thousand, as compared to current assets totaling $5,052$5,114 thousand and current liabilities totaling $2,549$2,470 thousand at December 31, 2023.2024. As a result, we had working capital of $2,644$1,382 thousand at December 31, 2024, 2025, compared to a working capital of $2,503 $2,644 thousand at December 31, 2023.2024. The increasedecrease in the working capital as of December 31, 20242025 is primarily attributable to the loss from operations of $3,554$3,352 thousand and proceeds from rights offering of $3,772 $963 thousand and proceeds from Stada of $1,000 thousand.

Our recent capital raise which closed on or about November 20,August 20245, 2025 provides working capital necessary to continue our strategic objectives (discussed further within Note 1314). We intend to maintain and attempt to grow our existing contract manufacturing business. We also plan to continue building and developing our catalogue of consumer products for sale to branding partners and to use our in-house capabilities to create and test market additional branded products. These products will be target marketed and sold online through social media, television and online marketplaces. Furthermore, the Company plans to develop its own proprietary medical devices and explore drug delivery programs for its technology. Additionally, the Company continues to evaluate strategic initiatives (e.g., acquisitions) and additional capital raises through debt or equity may be necessary to achieve these objectives.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2025 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. ThereExcept as set forth below, there have been no material changes during fiscal year 2026 to the risk factors that were included in the Form 10-K.

The following discussion and analysis are intended to help prospective investors understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this informationQuarterly statement.Report on Form 10-Q.

The NexGel Financial Statements, discussed below, reflect the NexGel financial condition, results of operations, and cash flows. The financial information discussed below and included in this informationQuarterly statement,Report on Form 10-Q, however, may not necessarily reflect what the NexGel financial financial condition, results of operations, or cash flows would have been had NexGel been operated as a separate, independent entity during the years presented, or what the NexGel financial condition, results of operations, and cash flows may be in the future.

There may be other factors that may cause our actual results to differ materially from the forward-looking statements, including factors disclosed under the section titled and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this informationQuarterly statement.Report on Form 10-Q. You should evaluate all forward-looking statements made in this informationQuarterly statementReport on Form 10-Q in the context of these risks and uncertainties.

No assurance can be given that any goal or plan set forth in any forward-looking statement can or will be achieved, and readers are cautioned not to place undue reliance on such statements which speak only as of the date they are made. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this informationQuarterly Report statementon Form 10-Q or to reflect the occurrence of unanticipated events, except as required by law.

We have fourfive distinct lines of business; Contract Manufacturing, Custom & White Label, Consumer Branded Products, and Medical Devices/Other.Other, and BioNx.

Comparison of the Three Months ended MarchJune 31,30, 2026 and 2025 ($ in thousands)

For the three months ended MarchJune 31,30, 2026 revenues were $2,650$3,686 and decreasedincreased by $156,$802, or 5.6%,27.8%, when compared to $2,806$2,884 for the three months ended MarchJune 31,30, 2025. The decreaseincrease in our overall revenues was primarily due to anew Biomaterial declineproduct inrevenue ourof branded consumer products, partially offset by an increase in Medical Device/Other revenues.$814.

Cost of revenues are as follows for the three months ended MarchJune 31,30, 2026 and 2025 ($ in thousands):

Cost of revenues decreasedincreased by $29,$952, or 1.79%,58.5%, to $1,589$2,578 for the three months ended MarchJune 31,30, 2026, as compared to $1,618$1,626 for the three months ended MarchJune 31,30, 2025. The decreaseincrease in cost of revenues is primarily aligned with decreasethe increase in sales.sales from the new Biomaterial products, combined with increased freight and royalty costs.

Our gross profit was $1,061$1,109 for the three months ended MarchJune 31,30, 2026 compared to a gross profit of $1,188$1,258 for the three months ended MarchJune 31,30, 2025. The decrease of $127$149 in gross profit recorded for the three months ended MarchJune 31,30, 2026, as compared to MarchJune 31,30, 2025, was primarily primarily due to the decreaseinitial inBiomaterial consumerproduct brandedsales productsat partiallylower offsetmargin bycombined anwith increasehigher ininventory Medicalwrite Device/Otheroff, revenue.freight and royalty costs. Gross profit profit was 40.0%30.1% for the three months ended MarchJune 31,30, 2026 compared to a gross profit of 42.3%43.6% for the three months ended MarchJune 31,30, 2025.

Selling, general and administrative expenses. Selling, general and administrative expenses are as follows for the three months ended MarchJune 31,30, 2026 and 2025 ($ in thousands):

Selling, general and administrative expenses increased by $55,$1,700 or 2.8%,89.8%, to $2,019$3,594 for the three months ended MarchJune 31,30, 2026, as compared to $1,894 $1,964 for the three months ended MarchJune 31,30, 2025. The increase in Selling, general and administrative expenses is primarily attributable to to an increase$657 in increasecosts related to establishing and running the BioNX Surgical division to sell Biomaterial products, along with $756 in professional and consulting fees of $59, partially offset by a decrease in advertising and marketing expensesamortization of $6.the intangible asset related to the Celularity license agreement.

Research and development expenses decreasedwere by$20 $1 toand $0 for the three months ended MarchJune 31,30, 2026 fromand $1June for30, the three months ended March 31, 2025. Research and development expenses are related to research costs incurred for potential products for existing or new customers.

As of MarchJune 31,30, 2026, we had $2,122$1,706 of cash and cash equivalents, compared to $1,058 of cash and cash equivalents at December 31, 2025. Net Net cash used in operating activities was $504$2,701 and $400$807 for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

Net cash provided by financing activities for MarchJune 31,30, 2026 was $1,577$9,936 and was attributable to the proceeds from convertible notes payable of of $1,618$10,203 offset by principal payments of notes payable and principal payments of financing lease liabilities of $41.$85 and debt financing costs of $182. Net cash used in financing activities for the threesix months ended MarchJune 31,30, 2025 was $215$255 and wasis attributable to $37 of the principal payments of notes payable of $48 and principal payments of financing lease liabilities of $29 and payment of contingent consideration of $178.

At MarchJune 31,30, 2026, current assets totaled $5,638$6,170 and current liabilities totaled $3,314,$14,440 as compared to current assets totaling $4,338 and and current liabilities totaling $2,956 at December 31, 2025. As a result, we had negative working capital of $2,324$8,270 at MarchJune 31,30, 2026, compared to a working capital of $1,382 at December 31, 2025. The increasedecrease in the working capital as of MarchJune 31,30, 2026 is primarily attributable to the loss from operations of $958$3,463, an increase in non-cash derivative liability of $8,665 and proceeds from issuance of convertible debtdebt, exclusive of Celularity financing, of $1,618.

As of MarchJune 31,30, 2026, we had no off-balance sheet arrangements in the nature of guarantee contracts, retained or contingent interests in assets transferred to entities (or similar arrangements serving as credit, liquidity or market risk support to entities for any such assets), or obligations (including contingent obligations) arising out of variable interests in entities providing financing, liquidity, market risk or credit risk support to us, or that engage in leasing, hedging or research and development services with us.