NEXGEL, INC. 10-K

Item 8. Financial Statements and Supplementary Data FINANCIAL STATEMENTS - TABLE OF CONTENTS For the Years Ended December 31, 2025 and 2024 Page(s) Report of Independent Registered Public Accounting Firm (PCAOB ID: 76 ) F-2 Consolidated Financial Statements: Consolidated Balance Sheets at December 31, 2025 and 2024 F-3 Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 F-4 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2025 and 2024 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 F-6 Notes to Consolidated Financial Statements F-7 F- 1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of NexGel, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of NexGel, Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes to consolidated financial statements (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph – Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 of the financial statements, the Company expects to continue incurring operating losses and generating negative cash flows from operations for the foreseeable future. Additionally, the Company has a significant working capital deficiency, accumulated deficit and net loss for the year. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Turner, Stone & Company, L.L.P. Turner, Stone & Company, L.L.P. We have served as the Company’s auditor since 2019. Dallas, Texas March 31, 2026 F- 2 Table of Contents NEXGEL, INC CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2025 December 31, 2024 ASSETS: Current Assets: Cash $ 317 $ 1,807 Restricted cash 741 - Accounts receivable, net 673 933 Inventory 2,111 1,751 Prepaid expenses and other current assets 496 623 Total current assets 4,338 5,114 Goodwill 1,128 1,128 Intangibles, net 681 807 Property and equipment, net 1,955 2,211 Operating lease - right of use asset 2,015 1,628 Investment in NexGelRx 249 - Other assets 95 95 Total assets $ 10,461 $ 10,983 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 723 $ 761 Accounts payable – related party 566 531 Accrued expenses and other current liabilities 460 310 Deferred revenue 2 179 Current portion of note payable 99 97 Partnership accrued advance 731 - Warrant liability and contingent consideration liability - 296 Current portion of finance lease liability 65 59 Current portion of operating lease liability 310 237 Total current liabilities 2,956 2,470 Operating lease liability, net of current portion 1,883 1,538 Finance lease liability, net of current portion 242 307 Notes payable, net of current portion 489 588 Total liabilities 5,570 4,903 Commitments and Contingencies (Note 18) - - STOCKHOLDERS’ EQUITY Preferred stock, par value $ 0.001 per share, 5,000,000 shares authorized, no shares issued and outstanding - - Common stock, par value $ 0.001 per share, 25,000,000 shares authorized; 8,143,133 and 7,638,497 shares issued and outstanding as of December 31, 2025 and 2024, respectively 8 8 Additional paid-in capital 25,447 23,743 Accumulated deficit ( 20,996 ) ( 17,996 ) Total NexGel stockholders’ equity 4,459 5,755 Non-controlling interest in joint venture 432 325 Total stockholders’ equity 4,891 6,080 Total liabilities and stockholders’ equity $ 10,461 $ 10,983 The accompanying notes are an integral part of these consolidated financial statements. F- 3 Table of Contents NEXGEL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) 2025 2024 Year Ended December 31, 2025 2024 Revenues, net $ 11,421 $ 8,688 Cost of revenues 6,912 5,940 Gross profit 4,509 2,748 Operating expenses: Research and development 2 78 Selling, general and administrative 7,859 6,224 Total operating expenses 7,861 6,302 Loss from operations ( 3,352 ) ( 3,554 ) Other income (expense) Change in fair value of warrant liability, net of warrant modification expense 118 28 Realized gain on investments in marketable securities - 68 Interest expense, net ( 34 ) ( 81 ) Change in fair value of contingent consideration - ( 18 ) Gain in spin-off of NexGelRx 162 - Other expense ( 73 ) ( 4 ) Other income 286 98 Total other income (expense), net 459 91 Loss before income taxes ( 2,893 ) ( 3,463 ) Income tax expense - - Net loss ( 2,893 ) ( 3,463 ) Less: Loss attributable to non-controlling interest in joint venture ( 107 ) 182 Net loss attributable to NexGel stockholders $ ( 3,000 ) $ ( 3,281 ) Net loss per common share – basic and diluted $ ( 0.38 ) $ ( 0.50 ) Weighted average shares used in computing net loss per common share – basic and diluted 7,854,288 6,511,574 The accompanying notes are an integral part of these consolidated financial statements. F- 4 Table of Contents NEXGEL, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Years Ended December 31, 2025 and 2024 (in thousands, except share data) Shares Amount Capital Interest Deficit Equity Common Stock Additional Paid-in Non-controlling Accumulated Total Stockholders’ Shares Amount Capital Interest Deficit Equity Balance, December 31, 2023 5,741,838 $ 6 $ 19,406 $ 469 $ ( 14,715 ) $ 5,166 Stock-based compensation 90,860 - 280 - - 280 Restricted stock issuances 53,410 - 87 - - 87 Shares issued in acquisition 89,892 - 200 - - 200 Exercise of warrants 5,439 - - - - - Issuance of securities 1,657,058 2 3,770 - - 3,772 Non-controlling interest contribution - - - 38 - 38 Net loss - - - ( 182 ) ( 3,281 ) ( 3,463 ) Balance, December 31, 2024 7,638,497 $ 8 $ 23,743 $ 325 $ ( 17,996 ) $ 6,080 Common Stock Additional Paid-in Non-controlling Accumulated Total Stockholders’ Shares Amount Capital Interest Deficit Equity Balance, December 31, 2024 7,638,497 $ 8 $ 23,743 $ 325 $ ( 17,996 ) $ 6,080 Balance 7,638,497 $ 8 $ 23,743 $ 325 $ ( 17,996 ) $ 6,080 Stock-based compensation 6,825 - 475 - - 475 Restricted stock issuances 39,116 - 179 - - 179 Issuance of securities 458,695 - 963 - - 963 Warrants issued in conjunction with NexgelRx - - 87 - - 87 Net loss - - - 107 ( 3,000 ) ( 2,893 ) Balance, December 31, 2025 8,143,133 $ 8 $ 25,447 $ 432 $ ( 20,996 ) $ 4,891 Balance 8,143,133 $ 8 $ 25,447 $ 432 $ ( 20,996 ) $ 4,891 The accompanying notes are an integral part of these consolidated financial statements. F- 5 Table of Contents NEXGEL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) 2025 2024 Year Ended December 31, 2025 2024 Operating Activities Net loss $ ( 2,893 ) $ ( 3,463 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 450 436 Share-based compensation 654 367 Realized gain on investment in marketable securities - ( 68 ) Change in fair value of warrant liability ( 118 ) ( 28 ) Change in fair value of contingent consideration - 18 Amortization of right of use asset 290 227 Gain in spin-off of NexGelRx ( 162 ) - Changes in operating assets and liabilities: Accounts receivable, net 260 ( 300 ) Inventory ( 360 ) ( 432 ) Prepaid expenses and other current assets 127 ( 223 ) Accounts payable ( 38 ) 182 Accounts payable – related party 35 ( 123 ) Accrued expenses and other current liabilities 150 ( 434 ) Partnership advance 731 - Deferred revenue ( 177 ) 159 Operating lease liability ( 260 ) ( 185 ) Net Cash Used in Operating Activities ( 1,311 ) ( 3,867 ) Investing Activities Purchases of equipment ( 68 ) ( 443 ) Investment in subsidiary - ( 400 ) Proceeds from sales of marketable securities - 68 Net Cash Provided by (Used in) Investing Activities ( 68 ) ( 775 ) Financing Activities Payment of contingent consideration ( 177 ) ( 279 ) Proceeds from rights offering 963 3,772 Principal payments of notes payable ( 97 ) ( 77 ) Proceeds from non-controlling interest - 38 Principal payment of financing lease liability ( 59 ) ( 50 ) Proceeds from margin line of credit - 345 Net Cash Provided by Financing Activities 630 3,749 Net Increase (Decrease) in Cash (*) ( 749 ) ( 893 ) Cash and restricted cash  – Beginning of year 1,807 2,700 Cash and restricted cash – End of year $ 1,058 $ 1,807 (*) $ 1,490 relates to decrease in cash and $ 741 relates to increase in restricted cash Supplemental Non-cash Investing and Financing Activities Warrants issued in conjunction with investment in NexgelRx $ 87 $ 200 Additional ROU assets and operating lease liabilities from lease modification $ 677 $ - Shares issued in conjunction with asset acquisition $ - $ 200 Property and equipment financed under notes payable $ - $ 169 Property and equipment financed under financing leases $ - $ 416 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Table of Contents NEXGEL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 1. Description of Business and Basis of Presentation NexGel, Inc. (“NexGel” or the “Company”) manufactures high water content, electron beam cross-linked, aqueous polymer hydrogels, or gels, used for wound care, medical diagnostics, transdermal drug delivery and cosmetics. The Company specializes in custom gels by capitalizing on proprietary manufacturing technologies. The Company has historically served as a contract manufacturer, supplying our gels to third parties who incorporate them into their own products. Beginning in 2020, we created two new lines of business for the Company. First, we launched our own line of branded consumer products sold direct to consumers. Second, we expanded into 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, the Company and its customers are able to determine tolerances in moisture vapor transmission rate and active ingredient release rates while personalizing color and texture. NexGel was previously known as AquaMed Technologies, Inc. (“AquaMed”) before changing its name to NexGel, Inc. on November 14, 2019. On May 15, 2024, the Company purchased substantially all of the assets from Semmens Online Pty Ltd as Trustee for Semmens Business Trust (the “SG Seller”) related to the SG Seller’s eyeliner, fake eyelashes, lash serum and mascara business operating under the tradename “Silly George” (collectively, the “Silly George Business”). Basis of Presentation The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and are presented in US dollars. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and the fifty percent ( 50 %) owned JV’s (see Note 7). F- 7 Table of Contents 2. Going Concern The accompanying consolidated financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. As of December 31, 2025, the Company had a cash balance of $ 317 thousand. For the year ended December 31, 2025, the Company incurred a net loss attributable to NexGel stockholders of $ 3.0 million and had net usage of cash in operating activities of $ 1.3 million. In addition, the Company had a working capital of $ 1.4 million as of December 31, 2025. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s cash balance of $ 317 thousand as of December 31, 2025 does not include $ 741 thousand in partnership restricted cash. See Note 18 for additional information regarding partnership restricted cash. Management is exploring new product channel sales in adjacent industries, such as cosmetics, athletic products, and proprietary medical devices. The Company has increased focus on sales and developing a sales pipeline for potential customers. This customer base expansion will enable us to provide financial stability for the foreseeable future, expand our current processes, and position us for long-term shareholder value creation. 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 and online advertising and 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. We expect to continue incurring losses for the near-term. Our ability to continue to operate as a going concern in the long-term is dependent upon our ability to manage and grow our current products and to ultimately achieve profitable operations. Management may consider various options to raise capital to fund our current business activities and potential acquisitions through equity or debt offerings. There can be no assurances, however, that management will be able to obtain sufficient additional funds, if needed, or that such funds, if available, will be obtained on terms satisfactory to us. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary should we be unable to continue as a going concern. Additionally, it is reasonably possible that estimates made in the consolidated financial statements have been, or will be, materially and adversely impacted in the near term as a result of these conditions, including the recoverability of long-lived assets. 3. Significant Accounting Policies and Estimates Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions include allowances for doubtful accounts, inventory reserves, deferred taxes and related valuation allowances, share-based compensation and fair value of long-lived assets. Actual results could differ from the estimates. F- 8 Table of Contents Segment Reporting The Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 280, Segment Reporting , requires that an enterprise report selected information about reportable segments in its financial reports issued to its stockholders. The Company has two reportable segments - the NexGel segment and the CGN segment. The NexGel segment is comprised of the manufacturing of ultra-gentle, high-water-content hydrogel products for healthcare and consumer applications, which is based in Langhorne, Pennsylvania as well as the Kenkoderm acquisition, the Silly George acquisition and the Enigma JV. However, the Enigma JV was dissolved on December 23, 2024. The CGN segment is comprised of the CGN JV used for the Company’s converting and packaging business, which is based in Granbury, Texas. Cash and cash equivalents and restricted cash Cash and cash equivalents is comprised of cash in banks and highly liquid investments, including U.S. treasury bills purchased with an original maturity of three months or less as well as investments in money market funds for which the carrying amount approximates fair value, due to the short maturities of these investments. The Company also maintains restricted cash under a Partnership Agreement (see Note 18). As of December 31, 2025, restricted cash totaled $ 741 thousand, representing funds that are contractually restricted from use for general operating purposes and may be utilized only in accordance with the terms of the Partnership Agreement. Restricted cash is included in total cash, cash equivalents, and restricted cash as presented in the statement of cash flows. Accounts Receivable, net Trade accounts receivable are stated at the amount the Company expects to collect and do not bear interest. The Company evaluates the collectability of accounts receivable and records a provision to the allowance for credit losses based on factors including the length of time the receivables are past due, the customer’s payment history, the credit quality of the customer and other factors that may affect the customers’ ability to pay. Provisions to the allowances for credit losses are recorded in selling, general and administrative expenses. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered. The allowance for credit losses was $ 9 thousand and $ 5 thousand as of December 31, 2025 and 2024, respectively. Inventory and Cost of Revenues The inventory balance is stated at the lower of cost, the value determined by the first-in, first-out method, or net realizable value. The Company evaluates inventories for excess quantities, obsolescence, and shelf-life expiration. This evaluation includes an analysis of historical sales levels by product, projections of future demand, the risk of technological or competitive obsolescence for products, general market conditions, and a review of the shelf-life expiration dates for products. These factors determine when, and if, the Company adjusts the carrying value of inventory to estimated net realizable value. The Company produces proprietary branded products and white label opportunities in our manufacturing of consumer products. In our contract manufacturing, the Company builds its products based on customer orders and immediately ships the products upon completion of the production process. F- 9 Table of Contents The inventory balance is made up of raw materials, work-in-progress, and finished goods. Inventory is maintained at the Company’s warehouses, third party warehouses and at fulfilment centers owned by Amazon, Walmart and CVS. The “Cost of revenues” line item in the consolidated statements of operations is comprised of the book value of inventory sold to customers during the reporting period. When circumstances dictate that we use net realizable value as the basis for recording inventory, we base our estimates on expected future selling prices less expected disposal costs. The reserve recorded against inventories was $ 271 thousand and $ 46 thousand as of December 31, 2025 and 2024, respectively. Research and Development Our research and development activities focus on new and innovative products designed to support revenue growth. Research and development expenses consist primarily of contracted development and testing efforts associated with development of products. Research and development costs are expensed as incurred. Property and Equipment, net Property and equipment is recorded at historical cost, net of accumulated depreciation and amortization. Depreciation is provided over the assets’ useful lives on a straight-line basis. Leasehold improvements and right-of-use assets under financing lease arrangements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms. Repairs and maintenance costs are expensed as incurred. Management periodically assesses the estimated useful life over which assets are depreciated or amortized. If the analysis warrants a change in the estimated useful life of property and equipment, management will reduce the estimated useful life and depreciate or amortize the carrying value prospectively over the shorter remaining useful life. The carrying amounts of assets sold or retired and the related accumulated depreciation are eliminated in the year of disposal and any resulting gains and losses are included in the results of operations during the same year. Impairment of Long-Lived Assets The Company reviews its property and equipment and any identifiable intangibles with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Goodwill and Intangible Assets In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially recorded at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of the acquisition date or annually as of December 31, and whenever indicators of impairment exist. The fair value of intangible assets is compared with their carrying values, and an impairment loss would be recognized for the amount by which carrying amount exceeds its fair value. The Company performed the annual assessment and concluded it is more likely than not that the fair value exceeds the carrying value and no impairments were recognized in the year ended December 31, 2025 and 2024. F- 10 Table of Contents Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets are recorded at historical cost and are primarily made up of $ 45 thousand and $ 46 thousand of prepaid insurance, and $ 451 thousand and $ 577 thousand general prepaid expenses and other current assets as of December 31, 2025 and 2024, respectively. Other Assets Other assets are recorded at historical costs, and as of December 31, 2025 and 2024, the balance is primarily comprised of spare parts for manufacturing equipment. The Company maintains spare parts for either repair and maintenance, which is expensed as incurred, or replacement of capitalized equipment. Capitalized equipment spare parts are not subject to depreciation until such time that they are placed into service and the part that is being replaced is disposed. Fair Value Measurements The Company utilizes the fair value hierarchy to apply fair value measurements. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair values that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The basis for fair value measurements for each level within the hierarchy is described below: Level 1 —Quoted prices for identical assets or liabilities in active markets. Level 2 —Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 —Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable. The Company considers the carrying amounts of its financial instruments (cash, accounts receivable and accounts payable, notes payable and convertible notes payable) in the consolidated balance sheet to approximate fair value because of the short-term or highly liquid nature of these financial instruments. The following table classifies the Company’s assets and liabilities measured at fair value on a recurring basis into the fair value hierarchy as of December 31, 2025 and 2024 (in $ thousands): Schedule of Assets and Liabilities Measured at Fair Value On a Recurring Basis Into the Fair Value Hierarchy Fair value measured at December 31, 2025 Fair value at December 31, 2025 Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Investment in NexGelRx $ 249 $ - $ 249 $ - Total fair value $ 249 $ - $ 249 $ - Fair value measured at December 31, 2024 Fair value at December 31, 2024 Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Warrant liability $ 296 $ - $ - $ 296 Total fair value $ 296 $ - $ - $ 296 Warrant Liability Warrants to purchase common stock were issued in connection with equity financing raises, which occurred during 2019 through 2025. The fair values of the warrants are estimated as of the date of issuance and again at each reporting period using a Black-Scholes option valuation model. At issuance, the fair values of the warrant are recognized as an equity issuance cost within additional paid-in-capital. Fair value adjustments to the warrant liability are recognized in other income (expense) in the consolidated statements of operations. Equity Classified Warrants Warrants that meet all necessary criteria to be accounted for as equity in accordance with ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity , are presented within additional paid-in capital within the Company’s consolidated statements of changes in stockholders’ equity and consolidated balance sheets. Warrants classified as equity are initially measured at fair value using a Black-Scholes option valuation model. Subsequent changes in fair value are not recognized as long as the warrants continue to be classified as equity. Offering Costs The Company complies with the requirements of ASC 340-40 , Other Assets and Deferred Cost, with regards to offering costs. Prior to the completion of an offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will be charged to stockholders’ equity upon the completion of an offering or to expense if the offering is not completed. Revenue Recognition The Company records revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. F- 11 Table of Contents The Company currently recognizes revenue predominately from three sources: contract manufacturing, custom and white label finished goods manufacturing (“Custom and white label”), and our branded consumer products. Contract manufacturing and Custom and white label revenues are recognized at the point where the customer obtains control of the goods and the Company satisfies its performance obligation, which generally is at the time the customer receives the product. Branded consumer product revenue is derived from direct-to-consumer purchases through websites like Amazon and through our Shopify stores. Revenue is recognized upon shipment to the end customer. The Company’s customers consist of other life sciences companies and Amazon retail customers. Revenues are predominately concentrated in the United States, but with the Silly George acquisition, have expanded into Europe and Asia. Payment terms, excluding branded consumer products, vary by the type and location of customer and may differ by jurisdiction and customer but payment is generally required in a term ranging from 30 to 60 days from date of shipment. Branded consumer products are purchased and paid for by the consumer at the time the transaction is completed. Estimates for product returns, allowances and discounts are recorded as a reduction of revenue and are established at the time of sale. Returns are estimated through a comparison of historical return data and are determined for each product and adjusted for known or expected changes in the marketplace specific to each product, when appropriate. Historically, sales return provisions have not been material. Amounts accrued for sales allowances and discounts are based on estimates of amounts that are expected to be claimed on the related sales and are based on historical data. Payments for allowances and discounts have historically been immaterial. Disaggregated revenue by sales type ($ in thousands): Schedule of Disaggregated Revenue by Sales Type 2025 2024 Year Ended December 31, 2025 2024 Contract manufacturing $ 3,657 $ 2,841 Custom and white label finished goods manufacturing 27 42 Consumer branded products 7,320 5,483 Other 417 322 Total $ 11,421 $ 8,688 Contract Liabilities As of December 31, 2025 and 2024, the Company did not have any contract assets or contract liabilities from contracts with customers and there were no remaining performance obligations that the Company had not satisfied except for deferred revenue of $ 2 and $ 179 thousand at December 31, 2025 and 2024, respectively, that the Company had not satisfied as of the end of the respective period. The following table provides information about contract liabilities from contracts with our customers ($ in thousands). Schedule of Contract Liabilities From Contract With Customers 2025 2024 Year Ended December 31, 2025 2024 Deferred revenue $ 2 $ 179 Total Deferred revenue $ 2 $ 179 Significant changes in the contract liabilities balance during the period are as follows: Schedule of Contract Liabilities Balance Contract liabilities Balance, December 31, 2024 $ 179 Non-cancelable contracts with customers entered during the period - Revenue recognized related to non-cancelable contracts with customers during the period ( 177 ) Balance, December 31, 2025 $ 2 The Company has four distinct lines of business; Contract Manufacturing, Custom and White Label, Branded Consumer Products, and Medical Devices/Other. Contract Manufacturing Customers order rolls of gel (“rollstock”). The rollstock is shipped to our customers, which they package into finished goods. Historically, this has been the Company’s primary source of revenue. Custom and White Label These products often infuse various ingredients into our base gel to develop unique product offerings to satisfy market demand (e.g. aloe infused into the gel for a beauty mask). The rollstock is converted and packaged into salable units. The finished goods are shipped to the customer, who is ultimately responsible for product distribution. Frequently these products started as development deals, in which the customer paid the Company a small fee to develop a specific product. Once completed, the customer places an order for newly developed product. F- 12 Table of Contents Consumer Branded Products These products are finished goods marketed and sold directly to consumers by the Company through online and retail channels. We are responsible for sales, marketing, and distribution. The products we sell under our MedaGel brand primarily relate to healthcare over-the-counter (“OTC”) remedy solutions, such as blister and applications. In December 2023 we added a second consumer product brand when we completed the purchase of the Kenkoderm brand. The Kenkoderm skincare line was originally developed by a dermatologist to provide gentle to the skin products for consumer with psoriasis. In May 2024, we added our third consumer product brand with the purchase of the Silly George brand. Silly George is a beauty brand primarily focused on false eyelashes and other eye related products. We continue to look for additional potential acquisitions as part of our consumer product “roll-up” strategy. Medical Devices/Other Medical Devices are a hybrid business, combining elements of Custom & White Label and Consumer Branded Products. Medical Devices, which are not yet marketed, are expected to be distributed through strategic partnerships. We will manufacture and possibly convert/package the device while the strategic partner brings the product to market. Small market Medical Devices could be launched by us, but also be offered to a distributor to reach the full scale of the market. Other includes freight charged to customers who purchase the Company’s branded consumer products through their Shopify stores. Shipping and Handling Revenue and Expense Shipping and handling revenue and expense are included in our consolidated statements of operations in revenues and cost of revenues, respectively. The Company accounts for shipping activities, consisting of direct costs to ship products performed after the risk of loss passes to the customer. Shipping revenue and expense are primarily generated through the Amazon marketplace and Silly George direct customer sales. Share-based Compensation On August 28, 2019, the Company adopted the 2019 Long-Term Incentive Plan, as amended (the “2019 Plan”). See Note 15 for further details regarding the 2019 Plan. The 2019 Plan provides certain employees, contractors, and outside directors with share-based compensation in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights and other awards. The fair values of incentive stock option award grants are estimated as of the date of grant using a Black-Scholes option valuation model. Compensation expense is recognized in the consolidated statements of operations on a straight-line basis over the requisite service period, which is generally the vesting period. Income Taxes Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities at the applicable tax rates. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates. Tax benefits are recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by a tax authority and based upon the technical merits of the tax position. The tax benefit recognized in the consolidated financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement. An unrecognized tax benefit, or a portion thereof, is presented in the consolidated financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. F- 13 Table of Contents Leases We account for our leases in accordance with ASC 842, Leases. We determine whether an arrangement is an operating or financing lease at contract inception. Operating leases, requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. A number of the lease agreements contain options to renew and options to terminate the leases early. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to be exercised. The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, and unamortized lease incentives provided by lessors. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in cost of revenues and selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the year when the changes in facts and circumstances on which the variable lease payments are based occur. The Company has elected not to separate lease and non-lease components for all property leases for the purposes of calculating ROU assets and lease liabilities. Financing leases are those that transfer substantially all of the risks and rewards of ownership to the Company. At the lease commencement date, the Company recognizes a financing lease ROU asset and a corresponding lease liability measured at the present value of future lease payments. The ROU asset is subsequently amortized on a straight-line basis over the shorter of the lease term or the useful life of the underlying asset, while the lease liability is increased by interest expense and reduced by lease payments made. Interest expense on the lease liability and amortization of the ROU asset are presented separately in the consolidated statements of operations, resulting in a front-loaded expense pattern over the lease term. Financing lease ROU assets are included in property and equipment, net, and the related lease liabilities are included within current and long-term debt, as applicable. Variable Interest Entity The Company reviews each legal entity formed by parties related to the Company to determine whether or not the Company has a variable interest in the entity and whether or not the entity would meet the definition of a variable interest entity (“VIE”) in accordance with ASC Topic 810, Consolidation . In assessing whether the Company has a variable interest in the entity as a whole, the Company considers and makes judgements regarding the purpose and design of the entity, the value of the licensed assets to the entity, the value of the entity’s total assets and the significant activities of the entity. If the Company has a variable interest in the entity as a whole, the Company assesses whether or not the Company is a primary beneficiary of that VIE, based on a number of factors, including: (i) which party has the power to direct the activities that most significantly affect the VIE’s economic performance, (ii) the parties’ contractual rights and responsibilities pursuant to the collaboration agreement, and (iii) which party has the obligation to absorb losses of or the right to receive benefits from the VIE that could be significant to the VIE. If the Company determines that it is the primary beneficiary of a VIE at the onset of the collaboration, the collaboration is treated as a business combination and the Company consolidates the financial statements of the VIE into the Company’s consolidated financial statements. On a quarterly basis, the Company will evaluate whether it continues to be the primary beneficiary of the consolidated VIE. If the Company determines that it is no longer the primary beneficiary of a consolidated VIE, it deconsolidates the VIE in the period in which the determination is made. Assets and liabilities recorded as a result of consolidating the financial results of the VIE into the Company’s consolidated balance sheet do not represent additional assets that could be used to satisfy claims against the Company’s general assets or liabilities for which creditors have recourse to the Company’s general assets. Recently Issued Accounting Standards From time to time, new accounting pronouncements are issued by the FASB, or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial position or results of operations upon adoption. F- 14 Table of Contents In July 2025, the FASB issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets , which amends the guidance related to the measurement of credit losses for accounts receivable and contract assets. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company adopted this new standard during the year ended December 31, 2025 with no material impact to the financial statements. In November 2023, the FASB issued ASU 2023-07 , Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . This ASU includes amendments that expand the existing reportable segment disclosure requirements and requires disclosure of (i) significant expense categories and amounts by reportable segment as well as the segment’s profit or loss measure(s) that are regularly provided to the chief operating decision maker (the “CODM”) to allocate resources and assess performance; (ii) how the CODM uses each reported segment profit or loss measure to allocate resources and assess performance; (iii) the nature of other segment balances contributing to reported segment profit or loss that are not captured within segment revenues or expenses; and (iv) the title and position of the individual or name of the group or committee identified as the CODM. This guidance requires retrospective application to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The guidance resulted in the Company being required to include enhanced disclosures relating to its reportable segments. The Company adopted this new standard during the year ended December 31, 2024. In June 2023, the FASB issued ASU 2023-05, Business Combinations (ASC Topic 805): Joint Venture Formations , which provides guidance on accounting for joint ventures established through new entities. The update mandates the application of the acquisition method of accounting for such transactions, requiring parties to recognize and measure identifiable assets and liabilities based on fair values at the acquisition date and establishes a measurement period for adjustments. The amendments in this Update are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. The adoption of ASU 2023-05 had no material impact to the financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . This update requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The Company adopted this standard effective January 1, 2025. As the Company maintains a full valuation allowance against its deferred tax assets, the adoption did not have a material impact on the Company’s consolidated financial statements or disclosures. Accounting Pronouncements Issued But Not Yet Adopted In December 2025 , the FASB issued ASU 2025 - 12, Codification Improvements to make improvements to the Codification arising from technical corrections, unintended application of the Codification, and clarifications. For all entities, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact this new guidance will have on its financial statements and disclosures. In November 2024, the FASB issued the ASC 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-04) Disaggregation of Income Statement Expenses, which requires additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information about an entity’s expenses. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as disclosures about selling expenses. The guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted. The Company is currently evaluating the impact this new guidance will have on its financial statements and disclosures. F- 15 Table of Contents 4. Business Segments The Company’s CODM evaluates the financial performance of the Company’s segments based upon segment operating income or (loss) as the profitability measure. The Company has identified its Chief Executive Officer as the CODM. Items outside of operating income or (loss) are not reported by segment, since they are excluded from the single measure of segment profitability reviewed by the CODM. Summarized financial information concerning the Company’s reportable segments for the years ended December 31, 2025 and 2024 is presented below. Schedule of Reportable Segments For Year Ended December 31, 2025 ($ in thousands) NexGel CG Labs Total Revenues 8,613 2,808 11,421 Cost of sales 4,921 1,991 6,912 Advertising, marketing and amazon fees 2,502 - 2,502 General and administrative 4,815 542 5,357 Total Selling, general and administrative 7,317 542 7,859 Research and development 2 - 2 Operating expenses 7,319 542 7,861 Loss from operations $ ( 3,627 ) $ 275 $ ( 3,352 ) For Year Ended December 31, 2024 ($ in thousands) NexGel CG Labs Total Revenues 6,631 2,057 8,688 Cost of sales 4,209 1,731 5,940 Advertising, marketing and amazon fees 2,220 - 2,220 General and administrative 3,409 595 4,004 Total Selling, general and administrative 5,629 595 6,224 Research and development 78 - 78 Operating expenses 5,707 595 6,302 Loss from operations $ ( 3,285 ) $ ( 269 ) $ ( 3,554 ) As of December 31, 2025 ($ in thousands) NexGel CG Labs Total Total Assets $ 6,777 $ 3,684 $ 10,461 As of December 31, 2024 ($ in thousands) NexGel CG Labs Total Total Assets $ 7,721 $ 3,262 $ 10,983 F- 16 Table of Contents 5. Acquisition Silly George Acquisition On May 15, 2024, the Company entered into and closed a transaction related to an Asset Purchase Agreement dated May 15, 2024 (the “SG Purchase Agreement”) with Semmens Online Pty Ltd as Trustee for Semmens Business Trust, an Australian proprietary limited company (the “SG Seller”), whereby the Company purchased the Silly George assets (the “Silly George acquisition”). The Company believes the Silly George assets will be accretive and synergistic to its existing health and beauty customer product brands. Under the terms of the SG Purchase Agreement on May 15, 2024, the Company paid the SG Seller a cash payment of $ 400 thousand and issued $ 200 thousand in shares of the Company’s common stock based on the 10-Day VWAP (as defined in the SG Purchase Agreement), or 89,892 of shares of the Company’s common stock. Additionally, the Company will pay the Seller a cash earn-out based on 20 % of the Net Profit (as defined in the SG Purchase Agreement) related to the Silly George assets for the fiscal quarterly period beginning June 30, 2024 and ending on June 30, 2028. Per the scope exception under ASC 815, the Company has not accrued the contingent consideration. The table below shows an analysis for the Silly George acquisition ($ in thousands): Schedule of Business Acquisitions Purchase consideration at preliminary fair value: Purchase price $ 600 Consideration paid $ 600 Trademark related intangibles 600 Intangible assets acquired $ 600 The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the Silly George acquisitions been completed as of January 1, 2024 or to project potential operating results as of any future date or for any future periods ($ in thousands except share and per share amounts): Schedule of Unaudited Pro-Forma Results of Operations For the Years Ended December 31, 2025 2024 Revenues, net $ 11,421 $ 9,261 Net loss allocable to common shareholders $ ( 3,000 ) $ ( 3,245 ) Net loss per share $ ( 0.38 ) $ ( 0.50 ) Weighted average number of shares outstanding 7,854,288 6,511,574 F- 17 Table of Contents 6. Investment in NexGelRx On December 11, 2025, the Company completed the disposition of a controlling interest in its dormant subsidiary, NexgelRX, Inc. (“NexgelRX”), and retained a 19.99 % non-controlling interest through a convertible preferred stock holding, which is non-dilutive up to $ 8.0 million of third-party capital raised. NexgelRX focuses exclusively on developing and commercializing prescription drug delivery solutions utilizing the Company’s proprietary hydrogel technology. At the time of the disposition, NexgelRX raised approximately $ 1.25 million from third-party investors. In connection with the transaction, the Company granted NexgelRX a license to its technology and is entitled to receive a 5% royalty on future product sales. The Company evaluated NexgelRX under ASC 810 and concluded that it is not a variable interest entity because it has sufficient substantive equity investment at risk, including third-party equity, to finance its activities without additional subordinated financial support. The Company uses the measurement alternative for equity investments with no readily determinable fair value and the investment is reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments. The Company valued its convertible preferred stock interest at $ 249 thousand, which is reported on the Consolidated Balance Sheets and a gain on spin-off of NexGelRx for the year ended December 31, 2025. As part of the transaction, the Company issued 125,000 warrants to purchase its common stock at an exercise price of $ 4.00 per share, with a five-year term. The warrants represent approximately 10% warrant coverage relative to the Investee’s capital raise and were classified as equity under ASC 815-40. The warrants were valued at $ 87 thousand using the Black-Scholes option model , and such amount was recorded as additional paid-in capital with a corresponding decrease in the gain in spin-off of NexGelRx. 7. Variable interest entities Interest in Joint Venture – CGN On March 1, 2023, the Company acquired a 50 % interest in the CGN JV (see Note 1). The CGN JV is owned 50 % by the Company and 50 % by CG Labs. CG Labs contributed its existing converting and packaging division to the CGN JV, including, but not limited to, its facilities, equipment, employees, and customers. The Company will contribute $ 500 thousand to the CGN JV, on a schedule to be determined, to be used for equipment and facility upgrades as well as general corporate purposes for the CGN JV. The CGN JV is considered to be a VIE and we have consolidated the CGN JV, because we believe we are the primary beneficiary and we meet the power and the economics criteria. Interest in Joint Venture – Enigma On January 6, 2023, the Company acquired a 50 % interest in a newly formed joint venture (the “Enigma JV”) to pursue branded consumer product retail opportunities and the development of new patch products. The Enigma JV agreement was effective January 6, 2023. As a result of this transaction, the Company owned 50 % of the Enigma JV, with the remaining 50 % held by Moiety. However, the Enigma JV was dissolved on December 23, 2024. As of December 31, 2024, the Company had contributed $ 20 thousand and the non-controlling interest portion of Enigma JV had contributed $ 37 thousand. F- 18 Table of Contents The Enigma JV was considered to be a VIE and was consolidated because we believed we were the primary beneficiary and we met the power and the economics criteria. The following table presents the assets and liabilities of the CGN JV included in the consolidated balance sheet as of December 31, 2025 and 2024. The assets and liabilities presented below include only the third-party assets and liabilities of the consolidated VIE and excludes any intercompany balances, which were eliminated upon consolidation. Schedule of Consolidated Variable Interest Entities December 31, 2025 December 31, 2024 ASSETS: Current Assets: Cash $ 94 $ 26 Accounts receivable, net 519 764 Inventory 841 646 Prepaid expenses and other current assets 11 45 Total current assets 1,465 1,481 Intangibles, net 32 122 Property and equipment, net 1,314 1,421 Operating lease - right of use asset 873 283 Total assets $ 3,684 $ 3,307 LIABILITIES Current Liabilities: Accounts payable $ 87 $ 912 Accounts payable – related party 477 528 Accounts payable 477 528 Accrued expenses and other current liabilities 1 51 Deferred revenue - 179 Current portion of note payable 93 85 Finance lease liability, short term 65 59 Operating lease liability, current portion 84 30 Total current liabilities 807 1,844 Operating lease liability, net of current portion 790 260 Finance lease liability, long term 242 307 Notes payable, net of current portion 228 320 Total liabilities $ 2,067 $ 2,731 The amounts above represent the assets and liabilities of the VIE described above, for which we are the primary beneficiary. The assets of the CGN JV consolidated VIE can only be used to settle the obligations of the VIE. All of the liabilities are non-recourse to us as of December 31, 2025 and December 31, 2024. 8. Operating Leases The Company has an operating lease for a commercial manufacturing facility and administrative offices located in Langhorne, Pennsylvania that runs through January 2031. There are two options that can extend the lease term for five years each. The exercise of the lease options to renew is solely at the Company’s discretion. The Company also has a sublease for office and manufacturing space in Granbury, Texas that runs through February 2028. The Company modified the lease agreement through July 2035. The following table presents information about the amount and timing of the liability arising from the Company’s operating lease as of December 31, 2025 ($ in thousands): Schedule of Future Minimum Operating Lease Payments Maturity of Lease Liability Operating Lease Liability 2026 $ 363 2027 374 2028 381 2029 388 2030 395 Thereafter 481 Total undiscounted operating lease payments $ 2,382 Less: Imputed interest ( 189 ) Present value of operating lease liability $ 2,193 Weighted average remaining lease term 6.9 years Weighted average discount rate 2.6 % F- 19 Table of Contents Total operating lease expense for the years ended December 31, 2025, and 2024, was $ 314 thousand and $ 287 thousand, respectively, and is recorded in cost of goods sold and selling, general, and administrative expenses in the accompanying consolidated statements of operations. The weighted average discount rate was 2.6 % and 3.0 % and the weighted average remaining lease term was 6.9 years and 6.4 years at December 31, 2025 and 2024, respectively. Supplemental cash flows information related to operating leases was as follows: Schedule of Supplemental Cash Flows Information Related to Operating Leases December 31, December 31, 2025 2024 Cash paid for amounts included in the measurement of lease liability ($ in thousands): Operating cash flows from operating leases $ 262 $ 245 ROU assets obtained in exchange for lease liabilities $ 677 $ - 9. Financing Lease In February 2024, the CGN JV entered into a lease agreement for certain equipment under separate non-cancelable equipment loan and security agreements. The agreement matures in January 2030. The agreements require monthly payments of principal and interest through maturity and are secured by the assets under the lease. As of December 31, 2025, $ 419 thousand is included in the property and equipment on the balance sheet. The weighted average interest rate was 9.1 % and 9.1 % and the weighted average remaining lease term was 4.1 years and 5.1 years at December 31, 2025 and 2024, respectively. The following table presents information about the amount and timing of the liability arising from the Company’s financing lease as of December 31, 2025 ($ in thousands): Schedule of Future Minimum Financing Lease Payments Maturity of Lease Liability Financing Lease Liability 2026 $ 91 2027 90 2028 90 2029 90 2030 8 Total undiscounted financing lease payments ` 369 Less: Imputed interest ( 62 ) Present value of financing lease liability $ 307 Weighted average remaining lease term 4.1 years Weighted average discount rate 9.1 % Supplemental cash flows information related to financing lease was as follows: Schedule of Supplemental Cash Flows Information Related to Financing Lease December 31, December 31, 2025 2024 Cash paid for amounts included in the measurement of lease liability ($ in thousands): Operating cash flows from financing lease $ 90 $ 83 10. Inventory Inventory consists of the following ($ in thousands): Schedule of Inventory December 31, December 31, 2025 2024 Raw materials $ 1,374 $ 769 Work-in-progress 47 25 Finished goods 961 1,003 Inventory, gross 2,382 1,797 Less: Inventory reserve for excess and slow moving inventory ( 271 ) ( 46 ) Total $ 2,111 $ 1,751 Inventory is maintained at the Company’s warehouses and at fulfillment centers owned by Amazon, Walmart and Borderless. The Company builds its contract manufacturing products based on customer orders and immediately ships the products upon completion of the production process. F- 20 Table of Contents 11. Property and Equipment, Net Property and equipment consist of the following ($ in thousands): Schedule of Property and Equipment Useful Life December 31, December 31, (Years) 2025 2024 Machinery and equipment 3 - 10 $ 2,161 $ 2,118 Office furniture and equipment 3 - 10 197 187 Leasehold improvements 6 419 419 Construction in progress N/A 547 532 Property and equipment, gross 3,324 3,256 Less: accumulated depreciation and amortization ( 1,369 ) ( 1,045 ) Property and equipment, net $ 1,955 $ 2,211 Depreciation expense for the years ended December 31, 2025 and 2024 was $ 324 thousand and $ 319 thousand, respectively. 12. Intangible Assets The following provides a breakdown of identifiable intangible assets as of December 31, 2025 and 2024 ($ in thousands): Schedule of Breakdown of Identifiable Intangible Assets December 31, December 31, 2025 2024 Product/Technology Related Identifiable intangible assets, gross $ 325 $ 325 Accumulated amortization ( 289 ) ( 191 ) Product/technology related identifiable intangible assets, net 36 134 Marketing Related Customer related intangible asset, gross 17 17 Tradename related intangible asset, gross 713 713 Accumulated amortization ( 85 ) ( 57 ) Marketing related identifiable intangible assets, net 645 673 Total identifiable intangible assets, net $ 681 $ 807 In connection with the May 15, 2024 acquisition of Silly George, the Company identified intangible assets of $ 600 thousand representing trademark related intangibles with indefinite lives. Intangible assets with indefinite lives are tested for impairment within one year of the acquisition date or annually as of December 31, and whenever indicators of impairment exist. The intangible assets with definite lives are being amortized on a straight-line basis over their weighted average estimated useful life of 1.5 years and amortization expense amounted to $ 126 and $ 119 thousand for the nine months ended December 31, 2025 and 2024, respectively. As of December 31, 2025, the estimated annual amortization expense for each of the next five fiscal years is as follows ($ in thousands): Schedule of Estimated Annual Amortization Expense 2026 $ 63 2027 13 2028 2 2029 2 2030 1 Subtotal 81 Indefinite lived intangible assets (subject to impairment analysis) 600 Total $ 681 F- 21 Table of Contents 13. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following ($ in thousands): Schedule of Accrued Expenses and Other Current Liabilities December 31, December 31, 2025 2024 Salaries, benefits, and incentive compensation $ 126 $ 242 Other 334 68 Total accrued expenses and other current liabilities $ 460 $ 310 14. Common Stock At December 31, 2025, the Company has reserved common stock for issuance in relation to the following: Schedule of Reserved Common Stock For Issued Securities in Relation Share-based compensation plan 907,111 Warrants to purchase common stock 5,142,940 Restricted stock units 60,456 The Company’s issuance of common stock and warrant for the two years ended December 31, 2025 are as follows: Schedule of issuance of common stock and warrant Placement Agent Financing Closing Date Shares Issued Warrants Issued Warrants Exericise Price Total Proceeds Warrants Exercise Price August 5, 2025 413,043 206,521 $ 4.25 $ 949,999 33,044 $ 4.25 July 31, 2025 45,652 22,286 $ 4.25 $ 105,000 - - November 20, 2024 727,272 363,636 $ 4.25 $ 1,999,998 58,182 $ 4.25 August 23, 2024 444,000 222,000 $ 4.25 $ 1,110,000 33,360 $ 4.25 March 1, 2024 485,782 242,891 $ 4.00 $ 1,025,000 27,725 $ 4.00 Generally, the Company enters into subscription agreements with investors for the sale of its common stock, accompanied with the issuance warrants to acquire common stock. Subject to certain ownership limitations, each of the warrants will become exercisable on the respective closing date and will expire after five years . The warrants may only be exercised on a cashless basis if there is no registration statement registering, or the prospectus contained in the registration statement is not available for the issuance or resale of shares of common stock underlying the warrants to or by the holder. The holder of a warrant is prohibited from exercising any such warrants to the extent that such exercise would result in the number of shares of common stock beneficially owned by such holder and its affiliates exceeding 4.99 % of the total number of shares of common stock outstanding immediately after giving effect to the exercise, which percentage may be increased or decreased at the holder’s election not to exceed 9.99 %. The gross proceeds to the Company from the common stock issuances were intended to be used for working capital and for general corporate purposes. The Company retained Alere Financial Partners, LLC (a division of Cova Capital Partners, LLC) (“Alere”) to act as the placement agent for August 5, 2025, November 20, 2024, August 23, 2024, and March 1, 2024 common stock issuances. The Company pays Alere a cash fee ranging from 3 % to 6 % of the gross proceeds received, based on the individual deal and whether the issuances are made to insiders or outsiders of the Company. Additionally, the Company granted Alere warrants exercisable for a period of five years from the closing date for each of the issuances. 15. Share-based Compensation The 2019 Plan provides for the granting of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights (“SARs”), restricted stock units, performance awards, dividend equivalent rights and other awards, which may be granted singly, in combination, or in tandem, and which may be paid in cash, shares of common stock of the Company or a combination of cash and shares of common stock of the Company. Effective as of May 26, 2020, May 3, 2021, and March 23, 2023 respectively, the Board approved an increase of the number of authorized shares of common stock reserved under the 2019 Plan from 57,143 shares of common stock to 485,715 , from 485,715 shares of common stock to 571,429 shares of common stock, and from 571,429 shares of common stock to 785,715 , all of which may be delivered pursuant to incentive stock options. On December 31, 2024, the Board approved an additional 780,000 shares of common stock to be reserved under the 2019 Plan, bringing the total number of shares underlying the Plan to 1,651,429 of which 793,735 shares have already been awarded or exercised. The Company’s stockholders approved the 780,000 share increase at the Company’s 2025 Annual Meeting of Stockholders held on June 17, 2025. Subject to adjustments pursuant to the 2019 Plan, the maximum number of shares of common stock with respect to which stock options or SARs may be granted to an executive officer during any calendar year is 14,286 shares of common stock. F- 22 Table of Contents The following table contains information about the 2019 Plan as of December 31, 2025: Schedule of Information about Incentive Plan Awards Awards Reserved for Awards Awards Available for Issuance Issued Exercised Grant 2019 Plan (1) 1,651,429 1,132,774 173,915 518,655 Awards issued in excess of 2019 Plan (2) - 100,821 92,113 - (1) Includes incentive stock options and restricted stock units discussed below. (2) Includes shares of restricted common stock granted outside of the 2019 Plan to our Chief Executive Officer, Adam Levy. Stock-Options The following table summarizes the Company’s incentive stock option activity for the two years ended December 31, 2025: Schedule of Incentive Stock Option Activity Weighted Weighted Average Average Contractual Number of Exercise Term in Options Price Years Outstanding at January 1, 2024 560,650 $ 2.35 7.95 Granted 172,000 2.68 10.00 Exercised ( 90,860 ) 1.01 — Forfeited — — — Cancelled ( 39,107 ) 1.01 — Expired ( 14,286 ) 5.25 — Outstanding at December 31, 2024 588,397 2.67 7.81 Granted 400,000 3.26 8.13 Exercised ( 6,825 ) 2.04 — Forfeited — — — Cancelled ( 60,175 ) 2.01 — Expired ( 14,286 ) 5.25 — Outstanding at December 31, 2025 907,111 $ 2.94 7.03 Exercisable at December 31, 2025 515,863 $ 2.38 6.90 F- 23 Table of Contents As of December 31, 2025 and 2024, vested outstanding stock options had $ 88 thousand and $ 1,151 thousand of intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock, respectively. As of December 31, 2025 and 2024, there were $ 609 thousand and $ 179 of unrecognized share-based compensation related to unvested stock options, which the Company expects to recognize over the next 36 months excluding options fully contingent upon certain sales-based milestones being achieved within 18 to 36 months of commercial release. The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. The following assumptions were used to calculate share-based compensation expense for year ended December 31, 2025 and 2024: Schedule of Assumptions used in Share-based Compensation 2025 2024 Volatility 76.26 - 108.75 % 277.56 - 279.29 % Risk-free interest rate 3.83 - 4.38 % 3.44 - 3.67 % Dividend yield 0.0 % 0.0 % Expected term 5.00 - 5.5 years 5.00 years The Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Accordingly, the Company has elected to use the “simplified method” to estimate the expected term of its share-based awards. The simplified method computes the expected term as the sum of the award’s vesting term plus the original contractual term divided by two. The Company estimated the expected volatility input for the Black-Scholes model using the historical volatility of its own publicly traded common stock over a period commensurate with the expected term of the option. The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. Restricted stock awards The following table summarizes the Company’s restricted stock awards activity for the year ended December 31, 2025: Schedule of Restricted Stock Units Granted Number of Weighted Average Grant Date Units Fair Value Outstanding at December 31, 2023 64,562 $ 1.82 Granted 57,972 2.46 Exercised and converted to common shares ( 62,910 ) 2.08 Forfeited ( 3,750 ) 2.30 Outstanding at December 31, 2024 55,874 2.16 Granted 45,198 3.57 Exercised and converted to common shares ( 39,116 ) 3.39 Forfeited ( 1,500 ) 2.72 Outstanding at December 31, 2025 60,456 $ 2.41 Exercisable at December 31, 2025 24,962 $ 2.62 F- 24 Table of Contents Compensation expense will be recognized ratably over the total vesting schedule. The Company will periodically adjust the cumulative compensation expense for forfeited awards. The Company recognizes the reversal of any previously recognized compensation expense on forfeited awards in the period the awards are forfeited. As of December 31, 2025, there was $ 38 thousand unrecognized share-based compensation related to unvested RSUs, which the Company expects to recognize through December 2027. Share-based compensation of $ 654 thousand and $ 367 thousand has been recorded for the year ended December 31, 2025 and 2024, respectively. Warrants The following table shows a summary of common stock warrants for the years ended December 31, 2025 and 2024. Schedule of Common Stock Warrants Weighted Weighted Average Average Number of Exercise Contractual Warrants Price Term in Years Outstanding at December 31, 2023 3,442,904 5.41 2.87 Warrants – 2021 IPO (1) 387,750 5.50 2.99 Outstanding at January 1, 2024 (corrected) 3,830,654 5.42 2.88 Granted 947,792 4.18 5.00 Exercised ( 5,439 ) 2.80 — Forfeited — — — Cancelled ( 7,802 ) 2.80 — Expired — — — Outstanding at December 31, 2024 4,765,205 5.18 2.42 Granted 387,392 4.17 5.00 Exercised — — — Forfeited — — — Cancelled ( 9,657 ) 2.80 — Expired — — — Outstanding at December 31, 2025 5,142,940 $ 5.11 1.93 Exercisable at December 31, 2025 5,142,940 $ 5.11 1.93 (1) The warrants outstanding have been corrected to reflect 387,750 additional warrants related to the December 27, 2021 unit offering not previously included in the prior year warrant schedule. As of December 31, 2025, vested outstanding warrants had no intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock. As of December 31, 2024, vested outstanding stock options had $ 300 thousand intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock. 16. Notes Payable CGN Segment The CGN JV has entered into a $ 231 thousand promissory note agreement for certain equipment. The equipment was installed in December 2023. The promissory note has a term of five years beginning on March 13, 2024. The promissory note accrues interest at 8 % and requires interest only payments through March 13, 2024 and monthly payments of $ 4 thousand thereafter. The principal balance amounted to $ 156 thousand and $ 198 thousand as of December 31, 2025 and 2024, respectively. F- 25 Table of Contents The CGN JV has entered into a $ 237 thousand promissory note agreement for certain equipment. The funding advances of $ 153 thousand and $ 84 thousand have been issued in February 2024 and December 2023, respectively. The promissory note has a term of five years beginning on March 13, 2024. The promissory note accrues interest at 8 % and requires interest only payments through March 13, 2024 and monthly payments of $ 5 thousand thereafter. The principal balance amounted to $ 163 thousand and $ 207 thousand as of December 31, 2025 and 2024, respectively. NexGel Segment The Company has entered into a $ 13 thousand promissory note agreement for certain leasehold improvements. The leasehold improvements were installed in February 2024. The promissory note has a term of two years beginning on February 11, 2024. The promissory note accrues interest at 0 % and requires monthly payments of less than $ 1 thousand. The outstanding principal balance was $ 1 thousand and $ 8 thousand as of December 31, 2025 and 2024, respectively. Economic Injury Disaster Loan On May 28, 2020, the Company entered into the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), the principal amount of the EIDL Loan is up to $ 260,500 , with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75 % per annum. Installment payments, including principal and interest, are due monthly beginning May 28, 2021 (twelve months from the date of the SBA Note) in the amount of $ 1,270 . The balance of principal and interest is payable thirty years from the date of the SBA Note. In connection therewith, the Company received an $ 8 thousand advance, which does not have to be repaid. On March 26, 2021, the SBA announced that all EIDL loans issued in 2020 will start repayment 24 months from the date of the SBA Note. The SBA has since extended the repayment start to 30 months from the date of the SBA Note. The Company made its first payment in December 2022. The balances of the principal and accrued interest amounted to $ 267 thousand and $ 272 thousand as of December 31, 2025 and 2024, respectively. The future annual principal amounts and accrued interest to be paid as of December 31, 2025 are as follows: Schedule of Debt Instruments Amount For the year ending December 31 ($ in thousands): 2026 $ 99 2027 106 2028 114 2029 24 2030 6 Thereafter 239 Total $ 588 Less: current portion of notes payable 99 Long-term portion of notes payable $ 489 17.  Warrant Liability The Company issued approximately 265,000 warrants in 2019, 2020 and 2021 as equity issuance consideration, in connection with equity offerings of the Company’s common stock. The warrants entitle the holder to purchase one share of our common stock at an exercise price equal to $ 0.49 to $ 5.25 per share at any time on or after their issuance date and on or prior to the close of business three to five years after the issuance date (the “Termination Date”). The Company determined that these warrants are free standing financial instruments that are legally detachable and separately exercisable from the common stock included in the public share offering. Management also determined that the warrants required classification as a liability pursuant to ASC 815, Derivatives and Hedging . In accordance with the accounting guidance, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income (expense) in the consolidated statements of operations. F- 26 Table of Contents The warrants outstanding and fair values at each of the respective valuation dates are summarized below: Schedule of Warrant Liability Warrant Liability Warrants Outstanding Fair Value per Share Fair Value Fair value as of 12/31/2023 71,019 $ 2.05 $ 146 Exercise of warrants ( 13,242 ) ( 12 ) Change in fair value of warrant liability — ( 16 ) Fair value as of 12/31/2024 57,777 $ 2.04 $ 118 Change in fair value of warrant liability — ( 118 ) Fair value as of 12/31/2025 57,777 $ 0.02 $ — The following assumptions were used to calculate the warrant liability as of December 31, 2025 and 2024, respectively: Schedule of Assumptions Used in Warrant Liability 2025 2024 Exercise price $ 2.80 to $ 5.25 $ 2.80 to $ 5.25 Share price $ 1.57 - $ 2.98 $ 2.16 - $ 4.46 Volatility 52.78 % - 84.02 % 92.34 % - 283.32 % Risk-free interest rate 3.48 % - 4.41 % 3.66 % - 5.09 % Dividend yield 0.0 % 0.0 % Expected term 0.09 to 1.43 years 0.073 to 2.43 years The warrant liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair value includes various assumptions about future activities and the Company’s stock prices and historical volatility of guideline public companies as inputs. 18. Commitments and Contingencies Partnership Advance On July 14, 2025, the Company expanded its partnership with STADA Arzneimittel AG (“STADA”), a European leader in consumer health. The expansion included a $ 1 million advance from STADA to the Company in non-dilutive capital to support product launches and marketing efforts under the Master Distribution Agreement between the parties and relates to the planned launch of digestive enzyme formulas and solutions targeting scars and stretch marks. As of December 31, 2025, the Company maintained $ 741 thousand of the advance in partnership restricted cash related to the advance with $ 731 thousand also classified as a current liability under partnership accrued advance The advance is subject to contractual restrictions on use and will be applied against eligible project costs as incurred in accordance with the terms of the Master Distribution Agreement, as amended. Litigation The Company may be subject to legal proceedings and claims that arise in the ordinary course of business. Management is not currently aware of any matters that will or may have a material effect on the financial position, results of operations, or cash flows of the Company. 19. Concentrations of Risk For the years ended December 31, 2025 and 2024, the Company had no revenue from customers that approximated 10% of total revenue. The Company had one customer with accounts receivable balances that was 50 % of total accounts receivable as of December 31, 2025. The Company had three customers with accounts receivable balances that were 50 %, 10 % and 22 % of the total accounts receivable as of December 31, 2024. The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, and marketable securities. Cash balances are maintained principally at major U.S. financial institutions and are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to regulatory limits. As of December 31, 2025, there is no balance exceeding such limit. The Company has not experienced any credit losses associated with its cash balances in the past. The Company invests its cash equivalents in U.S. treasury bills with original maturities of three months or less. Marketable securities are comprised of U.S. treasury bills with original maturities greater than three months. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash, cash equivalents, and marketable securities and performs periodic evaluations of the credit standing of such institutions. F- 27 Table of Contents 20. Related Party Transactions Accounts payable – related party As of December 31, 2025, and 2024, the Company had outstanding balances of $ 456 thousand and $ 494 thousand, respectively, due to C.G. Laboratories, Inc., a related party. Additionally, as of December 31, 2025 and 2024, the Company had an outstanding balance of $ 17 thousand and $ 37 thousand due to the CEO of CG Labs. These balances primarily relate to transactions for contract manufacturing, packaging, and other services provided by CG Laboratories, Inc. As of December 31, 2025, the Company had outstanding balances due to Achieving Consulting Excellence, LLC, a company owned by the Company’s Chief Financial Officer, of $ 93 thousand related to consulting services. 21. Income Taxes The Company has established a full valuation allowance for its deferred tax assets based on management’s belief that it is more likely than not that the related deferred tax assets will be realized. For the years ended December 31, 2025 and 2024, there was no income tax expense or benefit. At December 31, 2025 and 2024, the Company had no recorded tax liabilities for uncertain tax positions. The Company does not expect any significant changes to the estimate amount of liabilities associated with uncertain tax positions in the next 12 months. The income tax (benefit) provision consists of the following ($ in thousands): Schedule of Income Tax (Benefit) Provision For The Years Ended December 31, 2025 2024 Federal: Current $ ( 425 ) $ ( 640 ) Deferred 425 640 State and local: Current ( 104 ) ( 161 ) Deferred 104 161 Income tax provision $ — $ — F- 28 Table of Contents For the years ended December 31, 2025 and 2024, the expected tax benefit based on the statutory rate reconciled with the actual benefit is as follows: Schedule of Effective Income Tax Rate Reconciliation For The Years Ended December 31, 2025 2024 U.S. federal statutory rate $ ( 608 ) 21.0 % $ ( 727 ) 21.0 % State tax rate, net of federal benefit ( 153 ) 5.3 % ( 184 ) 5.3 % Permanent differences: Non-deductible expenses 78 ( 2.7 )% 111 ( 3.2 )% Timing differences 151 ( 5.2 )% ( 1 ) — % Change in valuation allowance 532 ( 18.4 )% 801 ( 23.1 )% Income tax provision $ — — % $ — — % For the years ended December 31, 2025 and 2024, differences between the expected tax expense based on the federal statutory rate and the actual tax expense is primarily attributable to the net losses incurred and the corresponding increase to the valuation allowance. As of December 31, 2025 and 2024, the Company’s deferred tax assets consisted of the effects of temporary differences attributable to the following ($ in thousands): Schedule of Deferred Tax Assets and Liabilities As of December 31, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 6,193 $ 5,661 Other 12 7 Total deferred tax assets 6,205 5,668 Valuation allowance ( 6,205 ) ( 5,668 ) Deferred tax assets, net of valuation allowance $ — $ — As of December 31, 2025 and 2024, the Company has approximately $ 23.6 million and $ 21.5 million of federal NOL carryovers, respectively, which begin to expire in 2029 through 2037. Similarly, the subsidiary’s Pennsylvania state returns reported state NOL carryovers of approximately $ 23.6 million and $ 21.5 million, as of December 31, 2025 and 2024, respectively. However, these loss carryforwards on a separate company basis may be subject to limitations on the amounts that may be utilized pursuant to Internal Revenue Code section 382 and applicable state law. Section 382 imposes significant limitations on the utilization of net operating losses after certain changes of corporate ownership. The Company will need to determine the amount of loss carryforwards that may be utilized in the future as necessary. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of the deferred tax assets is dependent upon the future generation of taxable income during the years in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance against net deferred tax assets at December 31, 2025 and 2024 because management has determined that it is more likely than not that these deferred tax assets will not be realized. The Company is subject to taxation in the U.S. and various states. Based on the history of net operating losses all jurisdictions and tax years are open for examination until the operating losses are utilized or the statute of limitations expires. As of December 31, 2025 and 2024, the Company does not have any significant uncertain tax positions. F- 29 Table of Contents 22. Subsequent Events In accordance with ASC 855, Subsequent Events , the Company evaluated subsequent events after December 31, 2025, through the date these Consolidated Financial Statements were issued and has no transactions or events requiring disclosure except as disclosed below. Securities Purchase Agreement On February 9, 2026, the Company entered into a Securities Purchase Agreement with a certain institutional investor (the “Investor”) named therein (the “Purchase Agreement”) providing for the purchase by the Investor of a 10 % original issue discount (OID) convertible note facility in up to the aggregate original principal amount of $ 56,667,667 (the “Convertible Note Facility”), providing for the purchase by the Investor, in one or more closings, of (i) series A senior secured convertible notes up to an aggregate original principal amount of up to $ 1,797,381 (the “Series A Convertible Notes,” and the shares of common stock, par value $ 0.001 per share (“Common Stock”) issuable pursuant to the terms of the Series A Convertible Notes (the “Series A Conversion Shares”) in a registered direct pursuant to a currently effective shelf registration statement on Form S-3 (File No. 333-264282), which has been declared effective by the SEC on June 7, 2023 and (ii) series B senior secured convertible notes up to an aggregate original principal amount of up to $ 54,869,286 (or such other amount as the Company and the Investor shall mutually agree in writing) (the “Series B Convertible Notes,” together with the Series A Convertible Notes, the “Convertible Notes”) and the shares of common stock issuable pursuant to the terms of the Series B Convertible Notes (the “Series B Conversion Shares”, and collectively with the Series A Conversion Shares, the “Conversion Shares”)), in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) of Regulation D as promulgated by the SEC under the Securities Act. The Series A Convertible Notes were issued on February 10, 2026, and the Company received gross proceeds of $ 1,797,381 before deducting expenses, which proceeds shall be subject to the terms of a deposit account control agreement. The Company is required to use the net proceeds from the offering of the Series A Convertible Notes primarily for an approved future acquisition as further described in the Purchase Agreement (the “Approved Acquisition”). The Company agreed not to use the net proceeds for certain purposes, including satisfaction of other indebtedness (except as specifically permitted), redemption or repurchase of securities (except as permitted), or settlement of outstanding litigation. If the Company consummates the Approved Acquisition no later than April 15, 2026, subject to certain other conditions, the Investor will be required to purchase Series B Convertible Notes in up to an aggregate original principal amount of $ 14,869,286 at an additional closing pursuant to the Purchase Agreement, all of which proceeds will be used for the Approved Acquisition, except for certain expenses payable on behalf of the Investor. The Purchase Agreement contains representations and warranties of the Company typical for transactions of this type, including representations and warranties relating to organization and authorization, issuance and validity of the securities, compliance with securities laws and effectiveness of the registration statement, absence of conflicts, SEC filings and financial statements, capitalization, absence of litigation, and other customary matters. The Purchase Agreement also contains representations and warranties of the Investor, including that each Investor is a qualified institutional investor or institutional accredited investor acquiring the securities for investment purposes. The Purchase Agreement also contains customary affirmative and negative covenants, including covenants relating to filing and maintenance of registration statements, listing of securities, reservation of shares, restrictions on issuance of competing securities during specified periods, and participation rights in certain subsequent financings. The Purchase Agreement also obligates the Company to indemnify the Investor and its affiliates for certain losses resulting from any breach of representations, warranties or covenants in the transaction documents, or any third-party claims arising out of the execution or performance of the transaction documents or the Investor’s status as investors in the Company. F- 30 Table of Contents Palladium Capital Group the “Placement Agent”) acted as the Company’s placement agent with respect to the Convertible Notes. The Company agreed to pay to the a cash fee equal to 7 % of the aggregate gross proceeds raised from the Convertible Notes at the time and if the Company consummates the Approved Acquisition; provided , however , the Placement Agent has agreed to convert 25% of this cash fee into a form of convertible promissory note to be agreed to between the Company and the Placement Agent. Additionally and at the time and if we consummate the Approved Acquisition, the Company agreed to issue to Placement Agent warrants to purchase that number of shares of Common Stock of the equal to 7 % of the aggregate number of shares of Common Stock (or Common Stock equivalent, if applicable) sold in the offering (the “Placement Agent Warrants”). The Placement Agent Warrants will (x) provide for cashless exercise, (y) have an exercise price equal to the offering price per share in at closing and (z) expire on the five (5) year anniversary from issuance. Convertible Notes Pursuant to the Purchase Agreement, the Company will issue the two series of convertible notes in this offering: (i) Series A Convertible Notes issued in a registered direct offering pursuant to the Company’s effective shelf registration statement on Form S-3 and a related prospectus supplement and (ii) Series B Convertible Notes to be issued, in one or more closings, in a private placement pursuant to Section 4(a)(2) of the Securities Act, and Regulation D promulgated thereunder The Convertible Notes are issued pursuant to substantially identical forms, with certain provisions applicable only to one series or the other. Specifically, the Series A Convertible Notes, and the Series A Conversion Shares were registered at issuance under the prospectus supplement and the Series B Conversion Shares will be freely transferable by the holders, while the Series B Convertible Notes will be issued in a private placement and accordingly the Series B Conversion Shares are subject to transfer restrictions under applicable securities laws. The Company entered into a Registration Rights Agreement (as defined below) with the Investor, pursuant to which the Company is obligated to file a registration statement registering the Series B Conversion Shares and maintain its effectiveness in accordance with the terms of such agreement. Certain provisions in the forms of Convertible Notes, such as events of default relating to registration statement effectiveness and obligations to deliver unlegended shares, apply only to the Series B Convertible Notes. Except as otherwise specified, references to the “Convertible Notes” in this Annual Report on Form 10-K apply to both the Series A Convertible Notes and the Series B Convertible Notes, and the description of the terms of the Convertible Notes set forth below applies equally to both series unless otherwise indicated. The Convertible Notes bear interest at a rate of 10 % per annum (increasing to 18 % per annum upon the occurrence and during the continuance of an Event of Default), with interest payable monthly on the first Trading Day of each calendar month commencing May 1, 2026. Each Convertible Note will mature on the two (2) year anniversary of the applicable issuance date, subject to adjustment if certain conditions with respect to the Approved Acquisition are not met. F- 31 Table of Contents The Series A Convertible Notes are convertible into shares of Common Stock at a fixed Conversion Price of $ 1.244 per share, subject to adjustment as provided in the Series A Convertible Notes. The holder may elect to convert the Convertible Notes at an Alternate Conversion Price, subject to certain conditions, which provides for conversion at a discounted price based on recent trading VWAP. The Alternate Optional Conversion Price is equal to the lower of (i) the Conversion Price or (ii) the greater of (x) the Floor Price (as defined below) or (y) 95% of the average VWAP during the ten (10) consecutive Trading Day period ending on the trading day immediately preceding delivery of the conversion notice. The Alternate Event of Default Conversion Price is equal to the lower of (i) the Conversion Price or (ii) the greater of (x) the Floor Price or (y) 80% of the average VWAP during the ten (10) consecutive trading day period ending on the trading day immediately preceding delivery of the conversion notice. The Floor Price is $ 0.2488 per share, subject to adjustment. Pursuant to the Purchase Agreement, the issuance of the Series B Convertible Notes at the Company’s option shall be subject to and conditioned on the Company receiving the required stockholder approval for the following matters: (i) the redomestication of the Company to the State of Nevada, (ii) the approval of one or more reserve stock splits over the next twelve (12) months up to an aggregate ratio of 250 shares-to-1 share, (iii) approval of the increase of the authorized shares of Common Stock of the Company from 25,000,000 to 250,000,000 , and (iv) the approval of the issuance of all of the Securities in compliance with the rules and regulations of Nasdaq Capital Markets. Asset Purchase and Exclusive License Agreement On March 6, 2026, the Company entered into an Asset Purchase and Exclusive License Agreement (the “License Agreement”) with Celularity Inc., a Delaware corporation (the “Licensor”), whereby the Licensor agreed to grant to the Company an exclusive license to its commercial-stage biomaterials portfolio and certain development-stage programs as more fully described in the Agreement and the Licensor agreed to sell to the Company assets related to the portfolio (collectively, the “Business”). Pursuant to the License Agreement, consideration for the Business will consist of up to $ 35.0 million in cash, subject to certain adjustments, which will include (i) a $ 15.0 million upfront payment and (ii) an additional $ 20.0 million in potential milestone payments based on net sales targets related to the Business. Each party’s obligation to consummate the transaction is subject to customary conditions as set out in the Agreement, including the Company’s receipt of financing in an amount sufficient to pay the initial $15.0 million upfront payment. In addition, the Agreement contains customary termination rights of the parties. The Agreement contains customary representations, warranties, covenants, indemnifications, and agreements. Among other ancillary agreements, the Agreement contemplates that the parties will enter into a contract manufacturing agreement and sublease agreement related to the Business. F- 32 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.