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: June 30, 2022

☐	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: 001-36278

NexGel, Inc.

(Exact name of registrant as specified in its charter)

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)

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 August 10, 2022, the registrant had 5,572,234 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 June 30, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	6
	Notes to Condensed Consolidated Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	25
ITEM 4.	Controls and Procedures	25

PART II – OTHER INFORMATION

ITEM 1.	Legal Proceedings	25
ITEM 1A.	Risk Factors	25
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
ITEM 3.	Defaults Upon Senior Securities	25
ITEM 4.	Mine Safety Disclosures	25
ITEM 5.	Other Information	25
ITEM 6.	Exhibits	26

Signatures		27

	June 30,			December 31,
	2022			2021
ASSETS:
Current Assets:
Cash and cash equivalents	$	4,420		$	13,350
Marketable securities		5,371			-
Accounts receivable, net		300			209
Inventory		381			291
Prepaid expenses and other current assets		313			77
Total current assets		10,785			13,927
Goodwill		311			311
Intangibles, net		26			33
Property and equipment, net		704			723
Operating lease - right of use asset		1,832			1,926
Other assets		113			63
Total assets	$	13,771		$	16,983

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	522		$	254
Accrued expenses and other current liabilities		85			62
Convertible notes payable		1,240			2,037
Note payable, current portion		18			10
Warrant liability		419			318
Operating lease liability, current portion		207			207
Total current liabilities		2,491			2,888
Long-Term Liabilities:
Operating lease liability, net of current portion		1,669			1,744
Notes payable, net of current portion		263			266
Total long-term liabilities		1,932			2,010
Total liabilities		4,423			4,898

Commitments and Contingencies (Note 14)		-			-

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; 5,572,234 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		6			6
Additional paid-in capital		19,025			18,891
Accumulated deficit		(9,683	)		(6,812	)
Total stockholders’ equity		9,348			12,085
Total liabilities and stockholders’ equity	$	13,771		$	16,983

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

Stock-based compensation		-		-		55		-			55

Net loss		-		-		-		(1,836	)		(1,836	)

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

Stock-based compensation		-		-		54		-			54

Restricted stock vesting		-		-		25		-			25

Net loss		-		-		-		(1,035	)		(1,035	)

Balance, June 30, 2022		5,572,234	$	6	$	19,025	$	(9,683	)	$	9,348

	Common Stock				Additional Paid-in			Retained Earnings (Accumulated			Total Stockholders’
	Shares		Amount		Capital			Deficit)			Equity (Deficit)
Balance, January 1, 2021		2,838,047	$	3	$	2,570		$	(2,502	)	$	71

Stock-based compensation		-		-		69			-			69

Restricted stock vesting		-		-		21			-			21

Issuances of common stock, net of issuance costs		101,800		-		285			-			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		2,939,847	$	3	$	4,203		$	(3,206	)	$	1,000

Stock-based compensation		-		-		74			-			74

Restricted stock vesting		39,324		-		21			-			21

Net loss		-		-		-			(826	)		(826	)

Balance, June 30, 2021		2,979,171	$	3	$	4,298		$	(4,032	)	$	269

	2022			2021
	Six Months Ended June 30,
	2022			2021
Operating Activities
Net loss	$	(2,871	)	$	(1,529	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		57			56
Changes in ROU asset and operating lease liability		19			6
Share-based compensation		134			185
Changes in fair value of warrant liability		101			(8	)
Amortization of deferred financing costs		1,086			528
Loss on extinguishment of debt		150			24
Forgiveness of debt		-			(148	)
Beneficial conversion feature in excess of face value		-			51

Changes in operating assets and liabilities:
Accounts receivable		(91	)		(146	)
Inventory		(90	)		7
Prepaid expenses and other assets		(286	)		61
Accounts payable		268			(67	)
Accrued expenses and other liabilities		28			(15	)
Deferred revenue		-			(38	)

Net Cash Used in Operating Activities		(1,495	)		(1,033	)

Investing Activities
Investment in marketable securities		(5,371	)		-
Capital expenditures		(31	)		(267	)
Net Cash Used in Investing Activities		(5,402	)		(267	)

Financing Activities
Issuance of common stock, net of issuance costs		-			285
Proceeds from notes payable		-			15
Principle payment of notes payable		(2,033	)		(15	)
Proceeds from notes payable (PPP)		-			128
Proceeds from convertible notes		-			1,337
Principal payment on convertible notes		-			(100	)
Net Cash Provided by (Used In) Financing Activities		(2,033	)		1,650
Net Increase (Decrease) in Cash and Cash Equivalents		(8,930	)		350
Cash and Cash Equivalents – Beginning of period		13,350			32
Cash and Cash Equivalents – End of period	$	4,420		$	382
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	$	-		$	1,276
Original issue discounts recognized on Convertible Notes Payable	$	-		$	343
Warrants issued for debt and equity financing costs	$	-		$	130

	June 30, 2022
Marketable Securities
Cash equivalents:
United States treasury bills (due August 23, 2022)	$	1,497
Cash equivalents	$	1,497

Marketable securities:
United States treasury bills (due December 29, 2022)		494
United States treasury bills (due February 23, 2023)		493
United States treasury bills (due June 15, 2023)		4,384
Total marketable securities		5,371
Total	$	6,868

	Level 1		Level 2		Level 3		Fair Value
	June 30, 2022
	Level 1		Level 2		Level 3		Fair Value
Assets
Cash equivalents:
United States treasury bills	$	1,497	$	—	$	—	$	1,497
Cash equivalents	$	1,497	$	—	$	—	$	1,497

Marketable securities:
United States treasury bills	$	5,371	$	—	$	—	$	5,371
Marketable securities	$	5,371	$	—	$	—	$	5,371
Total	$	6,868	$	—	$	—	$	6,868

	2022		2021
	Three months ending
	June 30,
	2022		2021
Contract manufacturing	$	324	$	153
Custom and white label finished goods manufacturing		19		153
NexGel branded consumer products		180		111
Other		38		—
Total	$	561	$	417

	2022		2021
	Six months ending
	June 30,
	2022		2021
Contract manufacturing	$	459	$	379
Custom and white label finished goods manufacturing		19		194
NexGel branded consumer products		392		110
Other		86		—
Total	$	956	$	683

	Operating
	Lease
Maturity of Lease Liability	Liability
2022	$	104
2023		207
2024		207
2025		207
2026		263
Thereafter		1,165
Total undiscounted operating lease payments	$	2,153
Less: Imputed interest		(277	)
Present value of operating lease liability	$	1,876
Weighted average remaining lease term		8.5 years
Weighted average discount rate		3.0	%

	June 30,
	2022
Cash paid for amounts included in the measurement of lease liability:
Operating cash flows from operating lease	$	103

	Useful Life		June 30,			December 31,
	(Years)		2022			2021
Machinery and equipment		3 - 10	$	971		$	940
Office furniture and equipment		3 - 10		50			50
Leasehold improvements		6		228			228
Property and equipment, gross				1,249			1,218
Less: accumulated depreciation and amortization				(545	)		(495	)
Property and equipment, net			$	704		$	723

Share-based compensation plan			334,938
Warrants to purchase common stock			3,637,190

						Weighted
				Weighted		Average
				Average		Contractual
	Number of			Exercise		Term in
	Options			Price		Years
Outstanding at January 1, 2022		434,939		$	1.675747		8.56

Granted		—			—		—
Exercised		—			—		—
Forfeited		—			—		—
Cancelled		(100,001	)		1.40		—
Expired		—			—		—
Outstanding at June 30, 2022		334,938		$	1.758076		8.08
Exercisable at June 30, 2022		312,790		$	1.600341		8.02

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

	Warrants		Fair Value
Warrant Liability	Outstanding		per Share	Fair Value
Fair Value as of period ending 12/31/2021		265,305		$	318
Change in fair value of warrant liability					101
Fair Value as of period ending 6/30/2022		265,305		$	419

	Three Months Ended June 30,
	2022		2021
Cost of revenues
Materials and finished products	$	196	$	171
Compensation and benefits		163		134
Depreciation and amortization		22		22
Equipment, production and other expenses		79		86
Total cost of revenues	$	460	$	413

	Six Months Ended June 30,
	2022		2021
Cost of revenues
Materials and finished products	$	290	$	231
Compensation and benefits		342		262
Depreciation and amortization		43		43
Equipment, production and other expenses		209		186
Total cost of revenues	$	884	$	722

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).
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: August 10, 2022	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)