Prepared remarks
A member of our team will be happy to help. Good afternoon. I will be your conference operator today. At this time, I would like to welcome everyone to NEXGEL's Shareholder Update Conference Call. I will now turn the call over to Valter Pinto, Managing Director of KCSA Strategic Communications for introductions. Please go ahead.
Thank you, operator. Good afternoon, and welcome, everyone, to NEXGEL's shareholder update conference call. I am joined today by Adam R. Levy, Chief Executive Officer. Before we begin, I would like to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to a variety of risks, uncertainties, and other factors. For a detailed discussion of some of the ongoing risks and uncertainties in the company's business, I refer you to our filings with the SEC filed periodically. The company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise, unless otherwise required by law. With that, it is my pleasure to turn the call over to Mr. Adam R. Levy. Adam, please go ahead.
Thank you, Valter, and thank you, everyone, for joining us today. On today's call, I would like to provide an overview of our first quarter 2026 financial results and bring everyone up to speed on the progress we have made on the integration of the acquisition we recently closed in mid-April. Starting with our first quarter results, revenue for the first quarter totaled $2.65 million as compared to $2.81 million for the same period last year. The business year-over-year was relatively flat, with sales from Silly George coming in lower, which were partially offset by revenue growth in both contract manufacturing and our MEDAGEL brand. During the quarter, the increase in our SG&A was due primarily to costs incurred relating to the acquisition of our BioNX division and the KISS Nail Products legal case which has since been settled. Cash and restricted cash as of 03/31/2026 was approximately $2.1 million. As of today, our cash on hand is $1.8 million. In total, we have raised $13.8 million comprised of $8.8 million received in cash, and $5 million of our convertible note delivered to Cellularity to fund the acquisition and to provide the business with working capital. The first quarter does not include any revenue from our acquisition. In the second quarter, we have already seen sales from Silly George normalize and recover, and we will begin accounting for revenue from our acquisition for about half of the second quarter. The financing for BioNX was led by Sequence LifeScience, with a $5.5 million investment that not only strengthened the financing structure of the transaction, but also aligns us with a partner that enhances our capabilities across manufacturing, product development, and distribution. Importantly, this transaction replaced a financial lender who was seeking a near-term exit with a long-term strategic partner who is focused on supporting the long-term growth and execution of our business. Brian J. Keeser and Kevin Harris, CEO and COO of Sequence LifeScience, have since joined our board of directors. Brian and Kevin bring deep industry experience, product innovation, and a strong distribution network that will help us grow and expand the potential of our new acquisition. I am very excited to have them in our corner and I am looking forward to working with them to grow the business. The BioNX portfolio includes six established regenerative biomaterial products positioning us squarely within one of the fastest growing segments of health care. These are not early-stage assets; they are commercial-stage products with more than a decade of clinical use, demonstrated real-world utility, and already have existing reimbursement pathways. These products are approved in approximately 500 hospitals across the U.S. and represent a large opportunity for BioNX in several surgical specialties as well as wound care. To lead this effort, we recently appointed Dave Hazard as Vice President of Sales for BioNX Surgical, who brings more than 13 years of sales leadership across orthopedics, spine, and biologics, and joins the company in an important stage in its commercial growth phase. He has a strong track record of building scalable sales infrastructure and establishing the kind of enterprise partnerships that drive repeatable revenue. His expertise in biologics and commercial execution will be instrumental as we continue expanding operations for our newly formed BioNX division. In addition to our existing products, we currently have three 510(k) devices in development within our pipeline. These programs represent approximately $4.6 million in invested paid-in capital and are targeted for commercialization in 2026, 2027, and 2028. Beyond the products, we have also added an experienced commercial and scientific team. This is an important aspect of the transaction as it meaningfully expands our internal capabilities and strengthens our ability to develop the markets for NEXGEL's own medical devices. This transaction will be transformative not only from a strategic standpoint, but also financially. On a pro forma basis, we anticipate it to approximately triple our annual revenue to roughly $35 million and to be immediately accretive to profitability upon closing. Taken together, the acquisition and our strategic partnership with Sequence represents a step change in NEXGEL's trajectory. We are combining a proven hydrogel platform with a portfolio of commercial regenerative products supported by a strategic manufacturing partner. This positions us to accelerate product development, broaden our commercial footprint, and pursue new opportunities within the regenerative medicine landscape. Lastly, I am excited to introduce Ian Blackman as our new CFO. Ian is a veteran financial and M&A leader who has been appointed to lead the integration of our acquisition, scale the business, and accelerate growth. Our board and senior leadership team is now the strongest it has ever been in our history. We are focused on successfully integrating these assets, driving commercial growth, and continuing to build a platform that can generate sustained long-term growth and profitability. I am looking forward to reporting on our second quarter financial results in August, where we will be able to provide more details into the integration and execution of our BioNX division. With that, I will turn the call over to the operator, and I am happy to take any questions. Operator?
Questions and answers
Thank you. If you would like to ask a question, press *1 on your keypad. To leave the queue at any time, press #2. Once again, that is *1 to ask a question. And our first question today will come from Naz Rahman with Maxim Group. Your line is now open.
Hi, everyone. Congrats on closing the deal and the progress, and thanks for taking my questions. I just have a few. Now that you have closed the BioNX transaction, how long has the field force been out there promoting the product? I realize it is only going to be a limited amount of time, but how long have they been out promoting the BioNX product? And have you seen an uptick in reception or sales of the products versus their prior run rate under the previous owner?
So, three parts. I will try to go through them in order. We were not able to really do a lot pre-closing just because we had not closed and it was not our asset. There is a little bit of a lag in terms of getting the sales force re-engaged and going out there. We have our own contracts that have to be approved by legal. We have to do our own training because of various rules like Sunshine Laws. So we are really now just getting the contracts back and the sales team is going out there. That is why I framed it as half a quarter. As of May 15, we are really getting out there and starting to ramp sales, getting back the contracts, changing all the vendors, and calling all the hospitals to change the account name from Cellularity to BioNX. All of these are small tasks that happen in a matter of a few weeks, but they do need to get done before you can really ramp. We are excited for what May and June are going to look like. We are really just getting started.
Understood. That is fair. On the tripling of your revenue that you communicated, does that assume at this point that the non-BioNX businesses stay flat, or are you assuming any growth there? It seems like that non-BioNX business is basically flat at this point.
Yeah. We do not expect it to stay flat. Silly George had an uncharacteristically bad fourth quarter and a kind of a mediocre first quarter year over year, down a little bit. We see already a recovery in April on that product line. So we think there will be some growth, but we were modest in that projection. We have very little growth built in for that particular segment.
Got it. And one last question, if I may. With all the additional sales reps and the R&D team, how much do you expect operating expenses to be on a normalized basis? How much do you expect it to increase annually or on a quarterly basis?
So we have added headcount, and our CFO Ian is on the call as well. Ian, correct me if I am mistaken, but why don't I ask you what we think the operating overhead will be?
Yeah. It will be an approximate monthly run rate of $500,000 all in — salaries, marketing, commissions, and so on.
Got it. That was helpful. Thanks for taking my questions. Thank you.
And once again, if you would like to ask a question, please press *1 on your keypad now. We will take our next question from Ves Mahalow, a private investor. Your line is now open.
Thank you for taking my questions, Adam. Good morning.
Hi, Ves. Good talking to you again.
I wanted to ask you about the offering. Is it still open? You just filed an 8-K for another $1 million. Are you still conducting this offering? Is it still open for additional investors? And do you intend to file an 8-K and a press release stating when it is completely closed?
Yes. We do, and it is pretty much closed. There are a couple of smaller investors, particularly board members, that are coming in at the end. The million we filed includes a board member who has joined. This was mostly existing investors and a couple of small, long-term friends of the company. We will be wrapping that up in the next day or two, and then we will make an announcement in an 8-K in the early part of next week.
Okay. I just want to alert you that there are about 350,000 shares sold short. I think that is a wet blanket on the stock. The sooner it closes, provided you have got all the money necessary, the better. Just my personal opinion.
Understood.
The next question, I want to go back to the legacy business. Could you comment a little bit more on how all this growth in the product lines just disappeared? We had STADA, we had iRhythm, you announced in an 8-K, obviously Silly George. We were growing 100% year-over-year for quite a few quarters, and now you are saying basically it is flat. Could you expand on this a little bit more? Why is this happening?
Sure. Let me be clear: it is flat, and in my projections I am being very conservative and built in a modest maybe 10% growth in that segment. We hope to do a lot better. What happened: Silly George had an exceptionally bad fourth quarter. The new lip gloss product did not perform as we expected and was very slow. There was also a general downturn given the competition in the category at that time. We have repositioned some things and added a new tweezers product that is doing extremely well. We are seeing growth return in April and a more normalized revenue stream. The STADA products are growing nicely — we released the second product in January but it did not really get to market until mid-February due to some Amazon stickering issues. The tropoelastin products have shipped from Germany and we should be receiving those and listing them on Amazon in the next 60 days. There are lots of areas for growth, but because these are consumer products we are being conservative in our estimates since sometimes products do not work out as expected. So it is primarily a conservative estimate rather than a structural decline.
And how's the iRhythm relationship going? Is that ramping up? It was supposed to be a $3.4 million a year business, I think.
iRhythm has ordered a few times, but it has not been as big as we initially thought it might be. Some of that could be timing and initial order patterns. We are the gel pad supplier that they use, and I expect that their sales will increase over the course of the year. So far, they have been a steady but not a huge customer.
On previous calls, you mentioned you thought there were an additional $300,000 to $400,000 deals in the funnel similar to the iRhythm one. Is that still the case?
Right now, it is more like $200,000 in the funnel. There are still accounts in the funnel, but development and release of these products often have 510(k) clearance associated, so it is hard to pinpoint the exact quarter they will ramp. We are expecting growth and more products. Partially offsetting the disappointing Silly George performance was growth in contract manufacturing and MEDAGEL products, which includes the STADA products. That growth is still there and we expect it to continue in 2026.
What happened with the laser hair removal product? I did not see anything publicly about that.
We did not issue a press release because everything has been overshadowed by what we're doing right now, but I can tell you the study was published and the results were strong. I have not done a press release on it yet, but the study showed a 90% reduction in plume, secondary endpoints showed reduced pain, and about 70% efficacy. Innovative Optics sponsored and paid for that study. They work with large laser manufacturers and are using that study to market the product. The study was published about three weeks ago, so they are just getting started with their marketing efforts. They buy goods from us at a transfer price, so their marketing success will determine broader uptake.
Thanks, Adam, for the answers. One final comment: now that the company has been transformed in size and hopefully will be profitable starting in Q3 and later, most investors would expect the company to be more communicative going forward with product launches, market developments, and revenue updates early in the quarter. August is in the dark days of summer; it would be great to get some sort of an update on the integration and revenues prior to the August results. Thank you very much again for all the work you and the team have done at NEXGEL.
Thank you, Ves.
Thank you. As a reminder, ladies and gentlemen, it is star and 1 if you would like to ask a question. I am showing no further questions at this time. I will now turn the meeting back to our presenters for any additional or closing remarks.
No, I think we are fine. Thank you, operator.
Thank you. This will bring us to the end of today's Q&A session as well as NEXGEL's Shareholder Update Conference Call. We appreciate your time and participation. You may now disconnect.