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, 2024

☐	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 nonaccelerated 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 13, 2024, the registrant had 6,227,624 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, 2024 and December 31, 2023	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	6
	Notes to Condensed Consolidated Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	34
ITEM 4.	Controls and Procedures	34

	PART II – OTHER INFORMATION
ITEM 1.	Legal Proceedings	34
ITEM 1A.	Risk Factors	34
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
ITEM 3.	Defaults Upon Senior Securities	35
ITEM 4.	Mine Safety Disclosures	35
ITEM 5.	Other Information	35
ITEM 6.	Exhibits	36

Signatures		37

	March 31, 2024			December 31, 2023
ASSETS:
Current Assets:
Cash	$	2,419		$	2,700
Accounts receivable, net		739			633
Inventory		1,369			1,319
Prepaid expenses and other current assets		336			400
Total current assets		4,863			5,052
Goodwill		1,128			1,128
Intangibles, net		302			326
Property and equipment, net		2,194			1,499
Operating lease - right of use asset		1,803			1,855
Other assets		95			95
Total assets	$	10,385		$	9,955

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	1,053		$	1,233
Accrued expenses and other current liabilities		111			398
Deferred revenue		250			20
Current portion of note payable		87			80
Warrant liability		255			146
Contingent consideration liability		439			439
Financing lease liability, current portion		55			-
Operating lease liabilities, current portion		233			233
Total current liabilities		2,483			2,549
Operating lease liabilities, net of current portion		1,682			1,727
Financing lease liability, net of current portion		352			-
Notes payable, net of current portion		663			513
Total liabilities		5,180			4,789

Commitments and Contingencies (Note 16)		-			-
STOCKHOLDERS’ EQUITY
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; 6,227,624 and 5,741,838 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		6			6
Additional paid-in capital		20,350			19,406
Accumulated deficit		(15,568	)		(14,715	)
Total NexGel stockholders’ equity		4,788			4,697
Non-controlling interest in joint venture		417			469
Total stockholders’ equity		5,205			5,166
Total liabilities and stockholders’ equity	$	10,385		$	9,955

	2024			2023
	Three months ended
	March 31,
	2024			2023
Revenues, net	$	1,266		$	620

Cost of revenues		989			677

Gross margin (loss)		277			(57	)

Operating expenses
Research and development		2			29
Selling, general and administrative		1,146			797
Total operating expenses		1,148			826

Loss from operations		(871	)		(883	)

Other income (expense)
Interest income (expense), net		(15	)		(1	)
Changes in fair value of warrant liability and warrant modification expense		(53	)		66
Gain on investment in marketable securities		34			7
Other income		—			4
Total other income (expense), net		(34	)		76
Loss before income taxes		(905	)		(807	)
Income tax expense		—			—
Net loss		(905	)		(807	)
Less: Income (loss) attributable to non-controlling interest in joint venture		(52	)		7
Net loss attributable to NexGel stockholders	$	(853	)	$	(814	)
Net loss per common share - basic	$	(0.14	)	$	(0.15	)
Net loss per common share - diluted	$	(0.14	)	$	(0.15	)
Weighted average shares used in computing net loss per common share - basic		5,982,062			5,586,326
Weighted average shares used in computing net loss per common share – diluted		5,982,062			5,586,326

	Shares		Amount		Capital			Interest			Deficit			Equity
	Common Stock				Additional Paid-in			Non- controlling			Accumulated			Total Stockholders’
	Shares		Amount		Capital			Interest			Deficit			Equity
Balance, January 1, 2024		5,741,838	$	6	$	19,406		$	469		$	(14,715	)	$	5,166

Share-based compensation and restricted stock vesting		—		—		54			—			—			54

Rights offering proceeds, net of expenses		485,786		—		946			—			—			946

Issuance of placement agent warrants in conjunction with the rights offering		—		—		(56	)		—			—			(56	)

Net loss		—		—		—			(52	)		(853	)		(905	)

Balance, March 31, 2024		6,227,624	$	6	$	20,350		$	417		$	(15,568	)	$	5,205

	2024			2023
	Three Months Ended March 31,
	2024			2023
Operating Activities
Net loss	$	(853	)	$	(814	)
Adjustments to reconcile net loss to net cash used in operating activities:
Income (loss) attributable to non-controlling interest in joint venture		(52	)		7
Depreciation and amortization		62			31
Share-based compensation and restricted stock vesting		54			24
Gain on investment in marketable securities		(34	)		7
Changes in fair value of warrant liability		53			(66	)
Amortization of right of use asset		52			49

Changes in operating assets and liabilities:
Accounts receivable		(106	)		(158	)
Inventory		(50	)		(466	)
Prepaid expenses and other assets		64			11
Accounts payable		(180	)		722
Accrued expenses and other current liabilities		(287	)		(18	)
Deferred revenue		230			—
Operating lease liability		(45	)		(38	)
Net Cash Used in Operating Activities		(1,092	)		(709	)

Investing Activities
Proceeds from sales of marketable securities		34			485
Capital expenditures		(152	)		(88	)
Net Cash Provided by (Used in) Investing Activities		(118	)		397

Financing Activities
Proceeds from rights offering, net of expenses		946			—
Principal payment on financing lease liability		(9	)		—
Principal payments of notes payable		(8	)		(2	)
Net Cash Provided by (Used in) Financing Activities		929			(2	)
Net Decrease in Cash		(281	)		(314	)
Cash – Beginning of period		2,700			1,101
Cash – End of period	$	2,419		$	787
Supplemental Disclosure of Cash Flows Information
Cash paid during the year for:
Interest	$	10		$	—
Taxes	$	—		$	—

Supplemental Non-cash Investing and Financing activities
Property and equipment financed under notes payable	$	165		$	—
Property and equipment financed under financing leases	$	416		$	—
Property and equipment contributed as capital investment to JV	$	—		$	500
ROU asset and operating lease liabilities recognized upon consolidation of JV	$	—		$	334

	NexGel			CGN JV			Total
Revenue
Contract Manufacturing	$	190		$	448		$	638
Custom and White Label Finished Goods		31			-			31
Branded Consumer Products		580			-			580
Other income		12			5			17
Total revenue		813			453			1,266

Cost of sales		642			347			989
Operating expenses		987			161			1,148
Loss from operations	$	(816	)	$	(55	)	$	(871	)

SEC Form 10-Q filed by NexGel Inc