Nexgel, Inc 10-Q for FY2021 Q3

Nexgel, Inc. (NXGL)

10-Q 2021-11-10 For: 2021-09-30

Added on April 08, 2026

About this 10-Q

Nexgel, Inc filed this 10-Q on November 10, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).

Headline figures

Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $335K; up 38.4% from $242K a year earlier
Net loss: $1.14M; compared with a net loss of $545K a year earlier
Diluted EPS: -$0.01; compared with -$0.01 a year earlier

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒

Smaller reporting company	☒	Emerging growth company	☒


PART I – FINANCIAL INFORMATION

ITEM 1.	Condensed Financial Statements (Unaudited)	3
	Condensed Balance Sheets as of September 30, 2021 and December 31, 2020	3
	Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020	4
	Condensed Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020	5
	Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	7
	Notes to Condensed Financial Statements	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	37
ITEM 4.	Controls and Procedures	37

PART II – OTHER INFORMATION

ITEM 1.	Legal Proceedings	37
ITEM 1A.	Risk Factors	37
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
ITEM 3.	Defaults Upon Senior Securities	38
ITEM 4.	Mine Safety Disclosures	38
ITEM 5.	Other Information	38
ITEM 6.	Exhibits	39

Signatures		40


	September 30,
	2021		December 31,
	(Unaudited)		2020
ASSETS:
Current Assets:
Cash	$	1,255	$	32
Accounts receivable, net		193		73
Inventory		261		233
Prepaid expenses and other current assets		101		25
Total current assets		1,810		363
Goodwill		311		311
Intangibles		37		47
Property and equipment, net		747		553
Operating lease - right of use asset		1,973		805
Other assets		63		178
Total assets	$	4,941	$	2,257

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	513	$	658
Accrued expenses and other current liabilities		77		90
Deferred Revenue		—		38
Convertible notes payable		1,162		59
Current portion of debt		7		10
Note payable – PPP		127		147
Warrant liability		316		123
Operating lease liability, current portion		207		207
Total current liabilities		2,409		1,332
Long-Term Liabilities:
Notes payable		267		256
Lease liability, long term		1,781		598
Total long-term liabilities		2,048		854
Total liabilities		4,457		2,186

Commitments and Contingencies

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, 750,000,000 shares authorized; 104,277,112 and 99,331,279 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		104		99
Additional paid-in capital		5,553		2,474
Accumulated deficit		(5,173)		(2,502)
Total stockholders' equity		484		71
Total liabilities and stockholders' equity	$	4,941	$	2,257


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


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


	Three Months Ended				Nine Months Ended
	September 30,					September 30,
	2021		2020		2021		2020
Revenues, net	$	335	$	242	$	1,018	$	573

Cost of revenues		392		269		1,113		726

Gross (loss)/profit		(57)		(27)		(95)		(153)

Operating expenses
Selling, general and administrative		553		508		1,588		1,431
Total operating expenses		553		508		1,588		1,431

Loss from operations		(610)		(535)		(1,683)		(1,584)

Other income (expense)
Interest expense		(534)		(13)		(1,052)		(5)
Loss on debt extinguishment		—		—		(25)		—
Debt discount costs		—		—		(68)		—
Forgiveness of debt		—		—		147		—
Other income		—		4		—		7
Changes in fair value of warrant liability		2		(1)		10		(1)
Total other income (expense)		(532)		(10)		(988)		1
Loss before income taxes		(1,142)		(545)		(2,671)		(1,583)
Income tax expense		—		—		—		—
Net loss	$	(1,142)	$	(545)		(2,671)		(1,583)
Net loss per common share - basic	$	(0.01)	$	(0.01)		(0.03)		(0.02)
Net loss per common share - diluted	$	(0.01)	$	(0.01)		(0.03)		(0.02)
Weighted average shares used in computing net loss per common share - basic		104,277,112		86,939,054		102,971,994		75,987,278
Weighted average shares used in computing net loss per common share – diluted		104,277,112		86,939,054		102,971,994		75,987,278


						Retained
				Additional		Earnings		Total
	Common Stock			Paid-in		(Accumulated		Stockholders'
	Shares	Amount		Capital		Deficit)		Equity (Deficit)
Balance, January 1, 2021	99,330,779	$	99	$	2,474	$	(2,502)	$	71

Stock-based compensation	—		—		69		—		69

Restricted stock vesting	—		—		21		—		21

Issuances of common stock, net of issuance costs	3,563,000		4		281		—		285

Warrants issued for debt issuance	—		—		(18)		—		(18)

Beneficial conversion and warrant features of convertible debt	—		—		1,276		—		1,276

Net loss	—		—		—		(704)		(704)

Balance, March 31, 2021	102,893,779	$	103	$	4,103	$	(3,206)	$	1,000

Stock-based compensation	—		—		74		—		74

Restricted stock vesting	1,383,333		1		20		—		21

Net loss	—		—		—		(825)		(825)

Balance, June 30, 2021	104,277,112	$	104	$	4,197	$	(4,031)	$	270

Stock-based compensation	—		—		24		—		24

Restricted stock vesting	—		—		21		—		21

Beneficial conversion and warrant features of convertible debt	—		—		1,311		—		1,311

Net loss	—		—		—		(1,142)		(1,142)

Balance, September 30, 2021	104,277,112	$	104	$	5,553	$	(5,173)	$	484


	Nine Months Ended September 30,
	2021		2020
Operating Activities
Net loss	$	(2,671)	$	(1,583)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		206		70
Share-based compensation		229		187
Changes in fair value of warrant liability		(10)		1
Amortization of deferred financing costs		1,058		—
Loss on extinguishment of debt		25		—
Change in ROU asset and operating lease liability		16		—
Forgiveness of debt		(147)		—
Beneficial conversion feature in excess of face value		52		—

Changes in operating assets and liabilities:
Accounts receivable		(121)		(16)
Inventory		(28)		(23)
Prepaid expenses and other assets		39		8
Accounts payable		(145)		(88)
Accrued expenses and other liabilities		(21)		66
Deferred revenue		(38)		—
Net Cash Used in Operating Activities		(1,556)		(1,378)

Investing Activities
Capital expenditures		(390)		(152)
Net Cash Used in Investing Activities		(390)		(152)

Financing Activities
Issuance of common stock, net of issuance costs		285		1,015
Proceeds from notes payable		15		411
Proceeds from notes payable (PPP)		127		—
Proceeds from convertible notes		2,957		—
Payment of financing costs		(115)		—
Principal payment on convertible notes		(100)		—
Net Cash Provided by Financing Activities		3,169		1,426
Net Increase in Cash		1,223		(104)
Cash – Beginning of period		32		261
Cash – End of period	$	1,255	$	157
Supplemental Disclosure of Cash Flows Information
Cash paid during the year for:
Interest		—		—
Taxes		—		—

Supplemental Non-cash Investing and Financing activities
Fair value of beneficial conversion and warrant features of Convertible Notes Payable	$	2,587	$	—
Original issue discounts recognized on Convertible Notes Payable	$	653	$	—
Warrants issued for debt and equity financing costs	$	203	$	—
Operating lease, ROU assets and liabilities	$	2,050	$	—
Common shares issued for acquisition	$	—	$	375
Inventory acquired from acquisition	$	—	$	21
Accounts payable acquired from acquisition	$	—	$	13


		Expected Life
Acquired intangible Asset	Amortization Basis	(years)
Technology-Related	Straight-line basis	3
Marketing-Related	Straight-line basis	4


Provisional Purchase Consideration at preliminary fair value:
Purchase price	$	375
Amount of consideration	$	375

Assets acquired and liabilities assumed at preliminary fair value
Inventories		21
Product/Technology related intangibles		31
Marketing related intangibles		8
Customer related intangibles		17
Accounts payable and accrued expenses		(13)
Other liabilities		—
Net tangible assets acquired	$	64

Total net assets acquired	$	64
Consideration paid		375
Goodwill	$	311


	For the Nine Months Ended
	September 30,
	2021		2020
Revenues, net	$	1,018	$	590
Net loss allocable to common shareholders	$	(2,672)	$	(1,535)
Net loss per share	$	(0.03)	$	(0.02)
Weighted average number of shares outstanding		102,971,994		83,799,778


	Operating
	Lease
Maturity of Lease Liability	Liability
2021 (remainder of year)	$	52
2022		207
2023		207
2024		207
2025		207
Thereafter		1,428
Total undiscounted operating lease payments	$	2,308
Less: Imputed interest		(320)
Present value of operating lease liability	$	1,988
Weighted average remaining lease term		9.3 years
Weighted average discount rate		3.0	%


	September 30,
	2021
Cash paid for amounts included in the measurement of lease liability:
Operating cash flows from operating lease	$	155
Change in right-of-use asset/liability due to lease amendments	$	1,275


	Nine Months Ended
	September 30,
	2021		2020
Contract manufacturing	$	559	$	573
Custom and white label finished goods manufacturing		194		—
Nexgel branded consumer products		265		—

Total	$	1,018	$	573


	Useful Life	September 30,		December 31,
	(Years)	2021		2020
Machinery and equipment	3 - 10	$	940	$	2,894
Office furniture and equipment	3 - 10		50		49
Leasehold improvements	6		228		228
Construction in progress	N/A		—		461
			1,218		3,632
Less: accumulated depreciation and amortization			(471)		(3,079)
Property and equipment, net		$	747	$	553


	September 30,		December 31,
	2021		2020
Product/Technology Related
Identifiable intangible assets, gross	$	31	$	31
Accumulated amortization		(14)		(6)
Product/Technology Related identifiable intangible assets, net		17		25
Marketing Related
Customer related intangible asset, gross		17		17
Tradename related intangible asset, gross		7		7
Accumulated amortization		(4)		(2)
Marketing related identifiable intangible assets, net		20		22
Total Identifiable intangible assets, net	$	37	$	47


	Awards		Awards
	Reserved for		Available for
	Issuance	Awards Issued	Grant
2019 Plan	20,000,000	16,722,616	3,277,384


Share-based compensation plan		20,000,000
Warrants to purchase common stock		31,398,167



		Weighted		Weighted
		Average		Average
	Number of	Exercise		Contractual
	Options	Price		Term in Years
Outstanding at January 1, 2020	1,000,000	$	0.053525	9.6
Granted	12,705,949	$	0.0291	10.0
Exercised	—		—	—
Forfeited	—		—	—
Cancelled	—		—	—
Expired	—		—	—
Outstanding at December 31, 2020	13,705,949	$	0.027736	9.32

Granted	3,166,667	$	0.113158	10.0
Exercised	—		—	—
Forfeited	(1,000,000)		0.04	—
Cancelled	(150,000)		0.01	—
Expired	—		—	—
Outstanding at September 30, 2021	15,722,616	$	0.045783	8.78
Exercisable at September 30, 2021	10,322,616	$	0.031274	8.63


Volatility	171.12%- 183.48	%
Risk-free interest rate	0.46% - 0.86	%
Dividend yield	0.0	%
Expected term	5.0 – 5.75	years


																	Future
																	Estimated
			Warrant										Time to		Calculated		Quarterly
	Exercise		Expiration				Interest Rate			Volatility			Maturity		fair value		Dividend
Black -Scholes Assumptions	Price		Date		Stock Price ⁽⁸⁾		(annual) ⁽⁹⁾			(annual) ⁽¹⁰⁾			(Years)		per share		per share⁽¹¹⁾
September 2, 2021⁽¹⁾	$	0.15		September 2, 2024	$	0.10		0.78	%		182.74	%		5.0	$	0.0095	$	—
March 11, 2021⁽²⁾	$	0.125 – 0.15		March 11, 2024	$	0.10		0.17	%		172.54	%		5.0	$	0.0093 - 0.0094	$	—
February 3, 2021⁽³⁾	$	0.08		February 3, 2024	$	0.08		0.18	%		171.71	%		3.0	$	0.0690703	$	—
December 24, 2020⁽⁴⁾	$	0.08		December 24, 2020	$	0.08		0.17	%		172.54	%		3.0	$	0.0692188	$	—
March 18, 2020⁽⁵⁾	$	0.04		March 18, 2020	$	0.04		0.66	%		137.41	%		3.0	$	0.0307299	$	—
September 10, 2019⁽⁶⁾	$	0.014		September 10, 2022	$	0.014		1.61	%		139.84	%		3.0	$	0.01091	$	—
November 6, 2019⁽⁷⁾	$	0.014		November 6, 2022	$	0.014		1.60	%		138.48	%		3.0	$	0.01095	$	—


	Warrants	Fair Value
Warrant Liability	Outstanding	per Share		Fair Value
Fair Value as of period ending 12/31/19	5,250,000	$	0.01086	$	56

Fair Value at initial measurement date	1,805,000	$	0.03616	$	65
Change in fair value of warrant liability					2
Fair Value as of period ending 12/31/20	7,055,000			$	123
Fair Value at initial measurement dates	2,230,667	$	0.08933	$	203
Change in fair value of warrant liability					(10)
Fair Value as of period ending 9/30/2021	9,285,667			$	316


Exhibit No.		Description
3.1		Certificate of Incorporation of AquaMed Technologies, Inc. (incorporated by reference to Exhibit 3.1 to Form S-1, filed with the SEC on January 9, 2019).
3.2		Certificate of Amendment to Certificate of Incorporation of AquaMed Technologies, Inc. (incorporated by reference to Exhibit 3.2 to Form S-1, filed with the SEC on January 9, 2019).
3.3		Amended and Restated Certificate of Incorporation of AquaMed Technologies, Inc. (incorporated by reference to Exhibit 3.3 to Amendment No. 1 to Form S-1, filed with the SEC on March 11, 2019).
3.4		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of AquaMed Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on November 14, 2019)
3.5		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of NexGel, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on May 29, 2020)
3.6		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of NexGel, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on August 2, 2021)
3.7		Amended and Restated Bylaws of AquaMed Technologies, Inc. (incorporated by reference to Exhibit 3.5 to Amendment No. 1 to Form S-1, filed with the SEC on March 11, 2019).
10.1		Second Amendment to the Senior Secured Promissory Note, Warrants, and Securities Purchase Agreement (March 11, 2021) dated October 28, 2021 by and between NexGel. Inc. and Auctus Fund, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the SEC on November 3, 2021).
10.2		Executive Employment Agreement, dated November 4, 2021 by and between NexGel. Inc. and Adam Levy (incorporated by reference to Exhibit 10.22 to Form S-1 filed with the SEC on November 9, 2021).
31.1*		Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		The following materials from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter June 30, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language), (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Stockholders’ Equity, (iv) Statements of Cash Flows, and (v) Notes to the Financial Statements.
104*		Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit).


	NEXGEL, INC.

Date: November 10, 2021	By:	/s/ Adam Levy
	Name:	Adam Levy
	Title:	Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Adam E. Drapczuk III
	Name:	Adam E. Drapczuk III
	Title:	Chief Financial Officer
		(Principal Financial Officer)