What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-17 compared with 2026-05-14 · 89 added, 63 removed, 191 unchanged (44% of the section changed)

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You should read this discussion in conjunction with our condensed consolidated financial

statements and related notes thereto included elsewhere in this information statement.

statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

statements in this discussion regarding industry outlook, expectations regarding our future performance, liquidity and capital resources

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The financial

information discussed below and included in this information statement, however, may not necessarily reflect what the NexGel financial

condition, results of operations, or cash flows would have been had NexGel been operated as a separate, independent entity during the

years presented, or what the NexGel financial condition, results of operations, and cash flows may be in the future.

information discussed below and included in this Quarterly Report on Form 10-Q, however, may not necessarily reflect what the NexGel

financial condition, results of operations, or cash flows would have been had NexGel been operated as a separate, independent entity

during the years presented, or what the NexGel financial condition, results of operations, and cash flows may be in the future.

Forward-Looking

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under the section titled and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

in this information statement.

You should evaluate all forward-looking statements made in this information statement in the context of

these risks and uncertainties.

in this Quarterly Report on Form 10-Q.

You should evaluate all forward-looking statements made in this Quarterly Report on Form 10-Q

in the context of these risks and uncertainties.

assurance can be given that any goal or plan set forth in any forward-looking statement can or will be achieved, and readers are cautioned

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We do not undertake any obligation to update

or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this information

statement or to reflect the occurrence of unanticipated events, except as required by law.

or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this Quarterly Report

on Form 10-Q or to reflect the occurrence of unanticipated events, except as required by law.

manufacture high water content, electron beam cross-linked, aqueous polymer hydrogels, or gels, used for wound care, medical diagnostics,

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to our growing customer base.

have four distinct lines of business;

Contract Manufacturing, Custom & White Label, Consumer Branded Products, and Medical Devices/Other.

have five distinct lines of business;

Contract Manufacturing, Custom & White Label, Consumer Branded Products, Medical Devices/Other,

Manufacturing

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to look for additional potential acquisitions as part of our consumer product ‘roll-up” strategy.

products are licensed from the Celularity transaction, as disclosed in Note 1, and the acquired portfolio includes 6 established products

with over a decade of clinical use and existing reimbursement coverage We are responsible for sales, marketing and distribution.

Devices/Other

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of operations for the comparison periods identified.

of the Three Months ended March 31, 2026 and 2025 ($ in thousands)

Three Months Ended March 31,

of the Three Months ended June 30, 2026 and 2025 ($ in thousands)

Three Months Ended June 30,

Revenues, net

the three months ended March 31, 2026 revenues were $2,650 and decreased by $156, or 5.6%, when compared to $2,806 for the three months

ended March 31, 2025.

The decrease in our overall revenues was primarily due to a decline in our branded consumer products, partially

offset by an increase in Medical Device/Other revenues.

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

Three Months Ended March 31,

the three months ended June 30, 2026 revenues were $3,686 and increased by $802, or 27.8%, when compared to $2,884 for the three months

ended June 30, 2025.

The increase in our overall revenues was primarily due to

Biomaterial product revenue of $814.

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

Three Months Ended June 30,

Cost of revenues

of revenues decreased by $29, or 1.79%, to $1,589 for the three months ended March 31, 2026, as compared to $1,618 for the three months

ended March 31, 2025.

The decrease in cost of revenues is primarily aligned with decrease in sales.

gross profit was $1,061 for the three months ended March 31, 2026 compared to a gross profit of $1,188 for the three months ended March

The decrease of $127 in gross profit recorded for the three months ended March 31, 2026, as compared to March 31, 2025, was

primarily due to the decrease in consumer branded products partially offset by an increase in Medical Device/Other revenue.

was 40.0% for the three months ended March 31, 2026 compared to a gross profit of 42.3% for the three months ended March 31, 2025.

of revenues increased by $952, or 58.5%, to $2,578 for the three months ended June 30, 2026, as compared to $1,626 for the three months

ended June 30, 2025.

The increase in cost of revenues is primarily aligned with the increase in sales from the new Biomaterial products,

combined with increased freight and royalty costs.

gross profit was $1,109 for the three months ended June 30, 2026 compared to a gross profit of $1,258 for the three months ended June

The decrease of $149 in gross profit recorded for the three months ended June 30, 2026, as compared to June 30, 2025, was primarily

due to the initial Biomaterial product sales at lower margin combined with higher inventory write off, freight and royalty costs.

profit was 30.1% for the three months ended June 30, 2026 compared to a gross profit of 43.6% for the three months ended June 30, 2025.

general and administrative expenses .

Selling, general and administrative expenses are as follows for the three months ended March

Selling, general and administrative expenses are as follows for the three months ended June

30, 2026 and 2025 ($ in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Selling, general and administrative expenses

general and administrative expenses increased by $55, or 2.8%, to $2,019 for the three months ended March 31, 2026, as compared to $1,964

for the three months ended March 31, 2025.

general and administrative expenses increased by $1,700 or 89.8%, to $3,594 for the three months ended June 30, 2026, as compared to

$1,894 for the three months ended June 30, 2025.

The increase in Selling, general and administrative expenses is primarily attributable

to $657 in costs related to establishing and running the BioNX Surgical division to sell Biomaterial products, along with $756 in amortization

of the intangible asset related to the Celularity license agreement.

and development expenses

and development expenses were $20 and $0 for the three months ended June 30, 2026 and June 30, 2025.

Research and development expenses

are related to research costs incurred for potential products for existing or new customers.

of the Six Months ended June 30, 2026 and 2025 ($ in thousands)

Six Months Ended June 30,

Revenues, net

the six months ended June 30, 2026 revenues were $6,336 and increased by $646, or 11.4%, when compared to $5,690 for the six months ended

June 30, 2025.

The increase in our overall revenues was primarily due to $814 in sales of Biomaterial products, offset by a $289 decline

in Consumer Branded products.

of revenues are as follows for the six months ended June 30, 2026 and 2025 ($ in thousands):

Six Months Ended June 30,

Cost of revenues

of revenues increased by $922, or 28.4%, to $4,166 for the six months ended June 30, 2026, as compared to $3,244 for the six months ended

June 30, 2025.

The increase in cost of revenues is primarily aligned with increase in sales combined with increased inventory write off,

freight and royalty costs

gross profit was $2,170 for the six months ended June 30, 2026 compared to a gross profit of $2,446 for the six months ended June 30,

The decrease of $276 in gross profit recorded for the six months ended June 30, 2026, as compared to June 30, 2025 was primarily

due to the initial Biomaterial product sales at lower margin combined with higher inventory write off, freight and royalty costs.

profit was 34.2% for the six months ended June 30, 2026 compared to a gross profit of 43.0% for the six months ended June 30, 2025.

general and administrative expenses .

Selling, general and administrative expenses are as follows for the six months ended June 30,

2026 and 2025 ($ in thousands):

Six Months Ended June 30,

Selling, general and administrative expenses

general and administrative expenses increased by $1,755, or 45.5%, to $5,613 for the six months ended June 30, 2026, as compared to $3,858

for the six months ended June 30, 2025.

The increase in Selling, general and administrative expenses is primarily attributable to $657

an increase in increase in professional and consulting fees of $59, partially offset by a decrease in advertising and marketing expenses

in costs related to establishing and running the BioNX Surgical division to sell Biomaterial products, along with $756 in amortization

of the intangible asset related to the Celularity license agreement.

and development expenses

and development expenses decreased by $1 to $0 for the three months ended March 31, 2026 from $1 for the three months ended March 31,

and development expenses increased by $19 to $20 for the six months ended June 30, 2026 from $1 for the six months ended June 30, 2025.

Research and development expenses are related to research costs incurred for potential products for existing or new customers.

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Cash and cash equivalent at end of quarter

of March 31, 2026, we had $2,122 of cash and cash equivalents, compared to $1,058 of cash and cash equivalents at December 31, 2025.

Net cash used in operating activities was $504 and $400 for the three months ended March 31, 2026 and 2025, respectively.

cash used in investing activities was $9 and $0 for the three months ended March 31, 2026 and 2025, respectively.

cash provided by financing activities for March 31, 2026 was $1,577 and was attributable to the proceeds from convertible notes payable

of $1,618 offset by principal payments of notes payable and principal payments of financing lease liabilities of $41.

Net cash used in

financing activities for the three months ended March 31, 2025 was $215 and was attributable to $37 of principal payments of notes payable

and principal payments of financing lease liabilities and payment of contingent consideration of $178 .

March 31, 2026, current assets totaled $5,638 and current liabilities totaled $3,314, as compared to current assets totaling $4,338 and

current liabilities totaling $2,956 at December 31, 2025.

As a result, we had working capital of $2,324 at March 31, 2026, compared to

a working capital of $1,382 at December 31, 2025.

The increase in the working capital as of March 31, 2026 is primarily attributable

to the loss from operations of $958 and proceeds from issuance of convertible debt of $1,618.

of June 30, 2026, we had $1,706 of cash and cash equivalents, compared to $1,058 of cash and cash equivalents at December 31, 2025.

cash used in operating activities was $2,701 and $807 for the six months ended June 30, 2026 and 2025, respectively.

cash used in investing activities was $6,587 and $20 for the six months ended June 30, 2026 and 2025, respectively.

The increase was

primarily due to the $6,502 cash payment for the acquisition of an exclusive license and related assets from Celularity, as well as $85

of capital expenditures, compared to $20 in the prior-year period.

cash provided by financing activities for June 30, 2026 was $9,936 and was attributable to the proceeds from notes payable of

$10,203 offset by principal payments of notes payable and principal payments of financing lease liabilities of $85 and debt

financing costs of $182.

Net cash used in financing activities for the six months ended June 30, 2025 was $255 is attributable to

the principal payments of notes payable of $48 and principal payments of financing lease liabilities of $29 and payment of

contingent consideration of $178.

June 30, 2026, current assets totaled $6,170 and current liabilities totaled $14,440 as compared to current assets totaling $4,338

and current liabilities totaling $2,956 at December 31, 2025.

As a result, we had negative working capital of $8,270 at June 30, 2026,

compared to a working capital of $1,382 at December 31, 2025.

The decrease in the working capital as of June 30, 2026 is

primarily attributable to the loss from operations of $3,463, an increase in non-cash derivative liability of $8,665 and proceeds from issuance of convertible debt, exclusive of Celularity

financing, of $1,618.

have never declared or paid any cash dividends on our common stock.

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business prospects and other factors our Board of Directors may deem relevant.

is exploring new product channel sales in consumer products, such as cosmetics, athletic products, and proprietary medical devices.

Company has increased its 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.

recent capital raise which closed on or about August 5, 2025 provides working capital necessary to continue our strategic objectives

(discussed further within Note 2).

We intend to maintain and attempt to grow our existing contract manufacturing business.

to continue building and developing our catalogue of consumer products for sale to branding partners and to use our in-house capabilities

to create and test market additional branded products.

These products will be target marketed and sold online through social media, television

and online marketplaces.

Furthermore, the Company plans to develop its own proprietary medical devices and explore drug delivery programs

for its technology.

Additionally, the Company continues to evaluate strategic initiatives (e.g., acquisitions) and additional capital

raises through debt or equity may be necessary to achieve these objectives.

expect to continue incurring losses for the near-term future.

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Balance Sheet Arrangements

of March 31, 2026, we had no off-balance sheet arrangements in the nature of guarantee contracts, retained or contingent interests in

of June 30, 2026, we had no off-balance sheet arrangements in the nature of guarantee contracts, retained or contingent interests in

assets transferred to entities (or similar arrangements serving as credit, liquidity or market risk support to entities for any such

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

a smaller reporting company, we are not required to provide the information required by this Item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis