UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number: 001-41173

NexGel, Inc.

(Exact name of registrant as specified in its charter)

Delaware		26-4042544
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

2150 Cabot Blvd West, Suite B Langhorne, PA		19047
(Address of principal executive office)		(Zip Code)

Registrant’s telephone number, including area code: (215) 702-8550

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	NXGL	The Nasdaq Capital Market LLC
Warrants to Purchase Common Stock	NXGLW	The Nasdaq Capital Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company ☒		Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ◻ No ☒

As of May 15, 2023, the registrant had 5,614,028 shares of common stock outstanding.

nEXGEL, INC.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022	6
	Notes to Condensed Consolidated Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	30
ITEM 4.	Controls and Procedures	30

	PART II – OTHER INFORMATION
ITEM 1.	Legal Proceedings	30
ITEM 1A.	Risk Factors	30
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
ITEM 3.	Defaults Upon Senior Securities	30
ITEM 4.	Mine Safety Disclosures	30
ITEM 5.	Other Information	30
ITEM 6.	Exhibits	31

Signatures		31

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NEXGEL, INC

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2023 AND DECEMBER 31, 2022

(Unaudited)

(in thousands, except share and per share data)

	March 31, 2023			December 31, 2022
ASSETS:
Current Assets:
Cash	$	787		$	1,101
Marketable securities		5,016			5,508
Accounts receivable, net		380			222
Inventory		968			502
Prepaid expenses and other current assets		129			172
Total current assets		7,280			7,505
Goodwill		311			311
Intangibles, net		16			20
Property and equipment, net		1,282			721
Operating lease - right of use asset		2,022			1,737
Other assets		95			63
Total assets	$	11,006		$	10,357

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	987		$	265
Accrued expenses and other current liabilities		112			130
Notes payable, current portion		15			15
Warrant liability		176			242
Operating lease liability, current portion		232			207
Total current liabilities		1,522			859
Operating lease liability, net of current portion		1,864			1,593
Notes payable, net of current portion		266			268
Total liabilities		3,652			2,720

Commitments and Contingencies (Note 15)		-			-

Preferred stock, par value $0.001 per share, 5,000,000 shares authorized, no shares issued and outstanding		-			-
Common stock, par value $0.001 per share, 25,000,000 shares authorized; 5,614,028 and 5,577,916 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		6			6
Additional paid-in capital		19,213			19,189
Accumulated deficit		(12,372	)		(11,558	)
Total NexGel stockholders’ equity		6,847			7,637
Non-controlling interest in joint venture		507			-
Total stockholders’ equity		7,354			7,637
Total liabilities and stockholders’ equity	$	11,006		$	10,357

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

NEXGEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(Unaudited)

(in thousands, except share and per share data)

cash flows	2023			2022
	Three months ended
	March 31,
	2023			2022
Revenues, net	$	620		$	396

Cost of revenues		677			418

Gross loss		(57	)		(22	)

Operating expenses
Research and development		29			24
Selling, general and administrative		797			766
Total operating expenses		826			790

Loss from operations		(883	)		(812)

Other income (expense)
Interest income (expense), net		(1)			(744)
Loss on debt extinguishment		-			(150)
Changes in fair value of warrant liability and warrant modification expense		66			(130)
Gain on investment in marketable securities		7
Other income		4			-
Total other income (expense), net		76			(1,024)
Loss before income taxes		(807	)		(1,836)
Income tax expense		—			—
Net loss		(807	)		(1,836	)
Less: Income attributable to non-controlling interest in joint venture		7			—
Net loss attributable to NexGel stockholders	$	(814	)	$	(1,836	)
Net loss per common share - basic	$	(0.15	)	$	(0.33	)
Net loss per common share - diluted	$	(0.15	)	$	(0.33	)
Weighted average shares used in computing net loss per common share - basic		5,586,326			5,572,234
Weighted average shares used in computing net loss per common share – diluted		5,586,326			5,572,234

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

NEXGEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(Unaudited)

(in thousands, except share data)

equity	Shares		Amount		Capital		Interest		(Accumulated			(Deficit)
	Common Stock				Additional Paid-in		Non- controlling		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Interest		Deficit			Equity
Balance, January 1, 2023		5,577,916	$	6		$ 19,189	$	-	$	(11,558	)	$	7,637

Restricted stock vesting		5,682		—		24		—		—			24

Exercise of warrants		30,430		—		—		—		—			—

Non-controlling interest in JV		—		—		—		500		—			500

Net income (loss)		—		—		—		7		(814)			(807)

Balance, March 31, 2023		5,614,028	$	6	$	19,213	$	507	$	(12,372	)	$	7,354
Balance		5,614,028	$	6	$	19,213	$	507	$	(12,372	)	$	7,354

equity	Shares		Amount		Capital			Interest	Deficit)		(Deficit)
	Common Stock				Additional Paid-in			Non- controlling	Accumulated		Total Stockholders’
	Shares		Amount		Capital			Interest	Deficit		Equity
Balance, January 1, 2022		5,572,234	$	6	$	18,891	$	—	$	(6,812)	$	12,085
Balance		5,572,234	$	6	$	18,891	$	—	$	(6,812)	$	12,085

Stock-based compensation		—		—		55		—		—		55

Net loss		—		—		—		—		(1,836)		(1,836)
Net income (loss)		—		—		—		—		(1,836)		(1,836)

Balance, March 31, 2022		5,572,234	$	6	$	18,946	$	—	$	(8,648)	$	10,304
Balance		5,572,234	$	6	$	18,946	$	—	$	(8,648)	$	10,304

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

NEXGEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(Unaudited)

(in thousands)

Cash flows	2023			2022
	Three Months Ended March 31,
	2023			2022
Operating Activities
Net loss	$	(814	)	$	(1,836	)
Adjustments to reconcile net loss to net cash used in operating activities:
Income attributable to non-controlling interest in joint venture		7			-
Depreciation and amortization		31			28
Changes in ROU asset and operating lease liability		11			10
Share-based compensation		24			55
Gain on investment in marketable securities		7			-
Changes in fair value of warrant liability and warrant modification		(66	)		130
Amortization of deferred financing costs		-			741
Loss on extinguishment of debt		-			150

Changes in operating assets and liabilities:
Accounts receivable		(158	)		77
Inventory		(466	)		11
Prepaid expenses and other assets

SEC Form 10-Q filed by NexGel Inc