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.