Operations and Capacity - The company operates a manufacturing facility of 13,500 square feet, currently at 15% to 20% capacity, with the potential to produce approximately 1.4 billion square inches of product annually at full capacity[18]. - The company maintains a policy of sufficient inventory of raw materials to prevent production disruptions, despite some components being sourced from sole suppliers[32]. - The company has a major customer accounting for approximately 20% of its revenue for the year ended December 31, 2023, with a long-standing relationship of over 15 years[35]. - The company has formed a joint venture with CG Laboratories, Inc., allowing for expanded delivery of finished goods to its customer base[15]. - The company has established a joint venture with CG Laboratories, Inc., named CG Converting and Packaging, LLC, which is located in Granbury, Texas, and allows for expanded delivery of finished goods to customers[117]. Product Development and Innovation - The company has developed the NEXDrape, a surgical drape designed for patients with impaired skin, and has filed for a patent under the Patent Cooperation Treaty[23]. - The NEXDrape aims to provide benefits such as no skin irritation and the ability to deliver antiseptic agents, addressing a significant and growing market[24]. - The company is also developing NEXDerm, an adhesive tape for securing medical devices, which is designed to be gentle on the skin and easy to remove[25]. - The company is pursuing custom and white label opportunities, allowing other brands to incorporate its hydrogel products into their offerings[21]. - The company has launched a new consumer product brand, Kenkoderm, in December 2023, and a third brand, Silly George, in May 2024, as part of its consumer product 'roll-up' strategy[121]. Financial Performance - Revenues for the year ended December 31, 2024, were $8,688 thousand, an increase of $4,599 thousand or 112.5% compared to $4,089 thousand in 2023, driven by sales growth in branded consumer products[125]. - Gross profit for 2024 was $2,748 thousand, up $2,374 thousand from $374 thousand in 2023, resulting in a gross profit margin of approximately 31.6% compared to 9.1% in the prior year[126]. - Total cost of revenues increased by $2,225 thousand or 59.9% to $5,940 thousand in 2024, primarily due to sales of branded consumer products[127]. - Selling, general and administrative expenses rose by $2,476 thousand or 66.1% to $6,224 thousand in 2024, largely due to increased advertising and marketing expenses[128]. - The net loss attributable to NexGel stockholders for 2024 was $3,281,000, slightly higher than the loss of $3,157,000 in 2023[170]. Cash Flow and Capital Management - Net cash used in operating activities was $3,867 thousand in 2024, compared to $3,236 thousand in 2023[139]. - Cash and cash equivalents at the end of 2024 were $1,807 thousand, down from $2,700 thousand at the end of 2023[139]. - The company expects to continue incurring losses in the near term, with future capital raises potentially necessary to fund acquisitions and growth initiatives[146]. - The company has entered into subscription agreements for the sale of units at $5.50 per unit, aiming to raise approximately $2.0 million for working capital and corporate purposes[185]. Regulatory and Compliance - The company is currently registered as a device manufacturer and distributor with the FDA and plans to register as a drug facility when required, ensuring compliance with regulatory standards[40]. - The company is subject to various environmental regulations and has made significant investments to comply, although future costs remain unpredictable[41]. - The company is subject to extensive governmental regulations, which can lead to fines, product recalls, and delays in new product approvals[67]. Market and Competition - The company faces intense competition in the hydrogel manufacturing industry, which may lead to pricing pressure and challenges in achieving market acceptance[60]. - The company recognizes the importance of market acceptance for its products, which is crucial for future success and financial performance[53]. - The company relies heavily on Amazon and Shopify for sales and distribution, indicating a significant dependency on these platforms for consumer product revenue[57]. Internal Controls and Governance - The company has identified material weaknesses in its internal control over financial reporting, which could lead to misstatements in financial statements[85]. - The company is in the process of designing and implementing measures to remediate identified material weaknesses in internal controls[86]. - The company has a history of operating losses and may struggle to raise needed capital, raising doubts about its ability to continue as a going concern[74]. Employee and Organizational Structure - As of December 31, 2024, the company had 19 full-time employees, with 14 involved in manufacturing and regulatory matters, highlighting a strong operational workforce[45]. - The company is committed to developing a high-performance culture and talent management strategy to support its strategic goals[46]. Intellectual Property and Strategic Partnerships - The company aims to protect its intellectual property through patents and trademarks, but enforcement may be difficult and costly[70]. - The company is seeking to enter into strategic partnerships to expand its business, but may face challenges in identifying and completing these partnerships[77].
NexGel(NXGL) - 2024 Q4 - Annual Report