10-K: NexGel Reports 31.5% Revenue Growth, Faces Going Concern Doubt

NexGel, Inc. reported a 31.5% increase in net revenues to $11.421 million for the fiscal year ended December 31, 2025, driven by consumer product sales, but continues to face substantial doubt about its ability to continue as a going concern due to recurring losses and negative cash flows.

Summary

• Net revenues increased by $2,733 thousand (31.5%) to $11,421 thousand in 2025 from $8,688 thousand in 2024, primarily due to sales growth in branded consumer products, including a partial year from the Silly George acquisition.
• Gross profit increased by $1,761 thousand to $4,509 thousand in 2025 from $2,748 thousand in 2024, with the gross profit margin improving from 31.6% to 39.5%.
• The net loss attributable to NexGel stockholders improved slightly to $(3,000) thousand in 2025 from $(3,281) thousand in 2024.
• Net cash used in operating activities significantly decreased to $(1,311) thousand in 2025 from $(3,867) thousand in 2024.
• Cash and cash equivalents at December 31, 2025, were $317 thousand, with an additional $741 thousand in restricted cash, totaling $1,058 thousand, down from $1,807 thousand in 2024.
• Working capital decreased to $1,382 thousand at December 31, 2025, from $2,644 thousand at December 31, 2024.
• Management and auditors have raised substantial doubt about the company's ability to continue as a going concern due to recurring losses and negative cash flows.
• Material weaknesses in internal control over financial reporting were identified, specifically regarding segregation of duties and journal entry approvals.
• Subsequent to year-end, on February 9, 2026, the company entered into a Securities Purchase Agreement for a convertible note facility of up to $56.667 million, with an initial Series A issuance of $1.797 million received on February 10, 2026.
• On March 6, 2026, the company entered into an Asset Purchase and Exclusive License Agreement with Celularity Inc. for up to $35.0 million, including a $15.0 million upfront payment, contingent on securing financing.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a high-risk filing. While revenue growth and gross margin improvement are positive, the persistent "going concern" doubt, declining cash, and internal control weaknesses overshadow these gains. The significant future capital raises and potential acquisitions indicate a high-growth, high-risk strategy with considerable execution uncertainty.

Positives

• Net revenues increased by 31.5% to $11,421 thousand in 2025, demonstrating strong top-line growth.
• Gross profit margin improved significantly from 31.6% in 2024 to 39.5% in 2025, indicating better cost management or product mix.
• Net loss attributable to NexGel stockholders decreased from $(3,281) thousand in 2024 to $(3,000) thousand in 2025, showing a reduction in overall losses.
• Net cash used in operating activities substantially improved, decreasing from $(3,867) thousand in 2024 to $(1,311) thousand in 2025.
• Successful spin-off of NexGelRx, retaining a 19.99% non-controlling interest and a 5% royalty on future product sales, and recognizing a gain of $162 thousand.
• Strategic expansion into branded consumer products through acquisitions like Kenkoderm (December 2023) and Silly George (May 2024).
• Formation of the CG Converting and Packaging, LLC joint venture in May 2023, expanding finished goods delivery capabilities.
• Development of new medical devices (NEXDrape, NEXDerm) with patent filings and a strategy to pursue licensing and partnering arrangements.
• Secured a $1 million advance in non-dilutive capital from STADA Arzneimittel AG through an expanded partnership.
• Subsequent to year-end, secured a convertible note facility of up to $56.667 million, with an initial $1.797 million Series A issuance, providing crucial capital.
• Subsequent to year-end, entered into an Asset Purchase and Exclusive License Agreement with Celularity Inc. for up to $35.0 million, including a $15.0 million upfront payment, signaling potential for significant business expansion.

Negatives

• The company has recurring operating losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern.
• Cash and cash equivalents significantly decreased to $317 thousand at December 31, 2025, from $1,807 thousand at December 31, 2024.
• Working capital decreased to $1,382 thousand at December 31, 2025, from $2,644 thousand at December 31, 2024.
• Material weaknesses in internal control over financial reporting were identified, indicating deficiencies in financial oversight and segregation of duties.
• Heavy reliance on Amazon and Shopify marketplaces for consumer product sales poses a risk if these relationships are disrupted.
• The absence of long-term contracts with customers in contract manufacturing or consumer products business creates uncertainty and potential periods of limited orders.
• The company operates in highly competitive industries, facing competitors with significantly greater resources, distribution networks, and brand recognition.
• Reliance on two sole manufacturers (Dow Chemical Company and BASF Corporation) for key hydrogel polymers creates supply chain risk.
• Significant additional outlays of working capital are expected before the company anticipates generating significant revenues.
• The company expects to continue incurring losses for the near-term future.
• The ability to raise future capital on acceptable terms is uncertain, and the public float is relatively small ($11.03 million as of June 30, 2025).

Risks

• Our ability to continue as a going concern is uncertain due to inadequate capital and recurring losses.
• We may be unable to raise sufficient capital to execute our business plan.
• Failure to comply with current good manufacturing practices (cGMP) could lead to regulatory actions.
• Loss or retirement of key executives could impair our operations.
• Significant additional outlays of working capital are required before we expect to generate significant revenues, and the timing of such revenues is uncertain.
• Adverse economic and geopolitical conditions, including the current conflict in Ukraine, could negatively impact our business.
• Intense competition in our markets could make it difficult to achieve profitability.
• Loss of a key customer or supplier could severely disrupt our operations.
• Entry of new competitors could erode our market share.
• Adverse federal, state, and local government regulation could increase compliance costs or restrict operations.
• Technological obsolescence of our manufacturing process and equipment is a risk.
• Technical problems with our research and products could hinder development and market acceptance.
• Risks associated with mergers and acquisitions include implementation costs and potential failure to achieve expected gains.
• Price increases for supplies and components could negatively impact our cost of revenues.
• Our ability to carry out business plans may be hindered by various factors.
• Future success depends on market acceptance of our existing and future products by the medical community, healthcare providers, and end-users.
• Suppliers may fail to deliver components and raw materials according to schedules, prices, quality, and volumes.
• Heavy reliance on Amazon and Shopify marketplaces for consumer product sales means disruptions to these platforms could materially adversely affect our business.
• The absence of contracts with customers in our contract manufacturing or consumer products business could result in periods of no or limited orders.
• Failure to compete successfully in the consumer product business sector could materially harm our business.
• Failure to appropriately respond to changing consumer trends, preferences, and demand for new products could negatively impact our business.
• Inability to further penetrate existing markets could negatively impact sales and operating results.
• We are subject to extensive governmental regulations, including FDA, environmental, and healthcare fraud and abuse laws, with potential for significant penalties for non-compliance.
• Failure to protect our intellectual property in the future could negatively affect our ability to compete.
• Limited sales, marketing, and distribution capabilities may hinder product commercialization.
• Exposure to product liability claims is inherent in the testing, manufacturing, and marketing of our products.
• Reliance upon two sole manufacturers (Dow Chemical Company and BASF Corporation) for key hydrogel ingredients poses a supply risk.
• Changes in accounting standards and subjective assumptions, estimates, and judgments by management could significantly affect our financial results.
• Our ability to pursue strategic partnerships may impact our ability to compete or achieve growth objectives.
• An active trading market for our common stock may not develop or be sustained, and our stock price may fluctuate significantly.
• Failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of our common stock and warrants.
• We cannot assure you that we will pay dividends on our common stock, and our indebtedness may limit our ability to do so.
• The interests of our principal stockholders, officers, and directors (collectively owning approximately 16.3% of our stock) may not coincide with those of other stockholders.
• Material weaknesses in our internal control over financial reporting, if not remediated, could adversely affect our business, reputation, and stock price.
• If securities or industry analysts do not publish research or publish negative reports about our business, our share price and trading volume could decline.
• Future sales or potential sales of our common stock in the public market could cause our share price to decline.
• Issuance of additional securities in the future upon conversion or exercise of outstanding securities would result in dilution to our stockholders.
• As an emerging growth company and a smaller reporting company, we may elect to comply with reduced public company reporting requirements, which could make our common stock less attractive to investors.
• We will incur costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.
• Provisions in our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws and of Delaware law may prevent or delay an acquisition of our company.
• Our Amended and Restated Bylaws include a forum selection clause, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us.
• There is no assurance that our cybersecurity risk management program and processes will be fully implemented, complied with, or effective in protecting our systems and information.

Future Outlook

Management expects to continue incurring losses for the near-term future, with the long-term ability to operate as a going concern dependent on managing and growing current products and achieving profitable operations. The company plans to maintain and grow its contract manufacturing business, expand its branded consumer product catalog through in-house development and online sales, and develop proprietary medical devices for licensing and partnering. Strategic initiatives, including potential acquisitions and additional capital raises through debt or equity, are being evaluated to achieve these objectives.

Management Comments

• "Management is exploring new product channel sales in consumer products, such as cosmetics, athletic products, and proprietary medical devices."
• "The 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."
• "Our recent capital raise which closed on or about August 5, 2025 provides working capital necessary to continue our strategic objectives."
• "We intend to maintain and attempt to grow our existing contract manufacturing business."
• "We also plan to continue building and developing our catalogue of consumer products for sale to branding partners and to use our in-house capabilities to create and test market additional branded products."
• "These products will be target marketed and sold online through social media, television and online marketplaces."
• "Furthermore, the Company plans to develop its own proprietary medical devices and explore drug delivery programs for its technology."
• "Additionally, the Company continues to evaluate strategic initiatives (e.g., acquisitions) and additional capital raises through debt or equity may be necessary to achieve these objectives."
• "We expect to continue incurring losses for the near-term future."
• "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."

Industry Context

StockSavvy.ai notes that NexGel operates in the specialized hydrogel market, which has high barriers to entry due to proprietary electron beam technology, with only one other known competitor using this method for high-performance hydrogels. The company's expansion into branded consumer products (e.g., Medagel, Kenkoderm, Silly George) and medical devices places it in highly competitive sectors against established players like Johnson & Johnson, Pfizer Consumer Healthcare, and Procter & Gamble, who possess significantly greater resources and distribution networks. The strategy of developing medical devices for licensing rather than direct commercialization is a common approach for smaller companies to mitigate the high costs and regulatory hurdles of market entry, leveraging their core technology while seeking partners with established market access.

Comparison to Industry Standards

• NexGel is one of only two manufacturers known to use electron beam technology for high-performance hydrogels for wound care, cosmetic, and drug delivery industries, with the other not directly competing in the outside consumer market, suggesting a niche competitive advantage in contract manufacturing.
• In consumer products and medical devices, NexGel faces competition from industry leaders such as Johnson & Johnson, Pfizer Consumer Healthcare, and Procter & Gamble, which possess significantly greater resources, more developed sales and distribution channels, greater name recognition, and larger established customer bases.
• The company's manufacturing facility operates at approximately 15% to 20% capacity, with an estimated full capacity of 1.4 billion square inches of product annually, indicating substantial unused capacity for rapid expansion to meet increased demand.

Corporate Governance

Legal Proceedings

• The company is not currently aware of any material legal proceedings or claims that would materially affect its financial position, results of operations, or cash flows.
• There are no material proceedings in which any directors, officers, affiliates, or 5%+ shareholders are adverse parties or have a material adverse interest.

Related Party Transactions

• Outstanding balances due to C.G. Laboratories, Inc. (a 50% JV partner) of $456 thousand as of December 31, 2025, primarily for contract manufacturing, packaging, and other services.
• Outstanding balance due to the CEO of CG Labs of $17 thousand as of December 31, 2025.
• Outstanding balance due to Achieving Consulting Excellence, LLC (a company owned by the Company's Chief Financial Officer) of $93 thousand as of December 31, 2025, for consulting services.

Stakeholder Impact

• Shareholders face potential significant dilution from future capital raises (convertible notes, warrants, stock options) and the proposed increase in authorized common stock.
• Shareholders are exposed to risks of stock price volatility and potential delisting if Nasdaq requirements are not met, and uncertainty regarding future dividends.
• The interests of principal stockholders, officers, and directors (collectively owning approximately 16.3% of stock) may not always align with those of other stockholders.
• Employees are not represented by a labor union, and relations are considered good, with a focus on attracting and retaining high-performing personnel.
• Customers may experience disruptions if key suppliers fail or if relationships with major distribution platforms like Amazon and Shopify are impacted.
• Creditors face increased risk due to the company's recurring operating losses, negative cash flows, and the 'going concern' warning, although new convertible notes are senior secured.
• Suppliers face potential risks if the company's financial instability impacts its ability to meet payment obligations, especially given reliance on sole suppliers for key ingredients.

Next Steps

• Implement appropriate controls for accounting journal entry approvals, including CFO approval, to remediate material weaknesses in internal control.
• Actively monitor or assign elevated access to an employee outside of accounting and reporting for super user access to financial reporting systems to address segregation of duties.
• Maintain and grow the existing contract manufacturing business.
• Continue building and developing the catalog of consumer products for sale to branding partners.
• Use in-house capabilities to create and test market additional branded products, sold online through social media, television, and online marketplaces.
• Develop proprietary medical devices and explore drug delivery programs for technology.
• Identify and pursue licensing and partnering arrangements with third parties for medical device commercialization, rather than direct commercialization.
• Evaluate strategic initiatives, such as acquisitions, to support growth.
• Potentially raise additional capital through debt or equity offerings to fund business activities and acquisitions.
• File a 510(k) premarket submission with the FDA for NEXDrape and NEXDerm.
• Consummate the Approved Acquisition by April 15, 2026, to trigger the Investor's requirement to purchase Series B Convertible Notes.
• Seek stockholder approval for redomestication to Nevada, one or more reserve stock splits up to an aggregate ratio of 250 shares-to-1 share, and an increase of authorized common stock from 25,000,000 to 250,000,000 shares.

Key Dates

Recommendation

Despite revenue growth and gross margin improvement, the company faces severe financial instability, evidenced by recurring operating losses, negative cash flows, and a "going concern" warning from its auditors. The significant decrease in cash and working capital, coupled with identified material weaknesses in internal controls, indicates fundamental operational and financial risks. While recent and planned capital raises and acquisitions aim to address liquidity and growth, they also introduce substantial dilution risk and execution uncertainty. The highly competitive markets and reliance on key suppliers further compound the risk profile. A seasoned investor would likely view the current financial health and governance issues as outweighing the growth prospects, suggesting a "sell" recommendation due to the high speculative nature and significant downside potential.

Keywords

Hydrogel, Wound Care, Transdermal Drug Delivery, Cosmetics, Contract Manufacturing, Consumer Products, Medical Devices, Going Concern, SEC Filing, 10-K, Financial Results, Nasdaq, Capital Raise, Internal Controls, Silly George, Kenkoderm, NEXDrape, NEXDerm, Intellectual Property