NEXGEL, INC. 10-K

Item 8. Financial Statements and Supplementary Data ​ CONSOLIDATED FINANCIAL STATEMENTS - TABLE OF CONTENTS For the Years Ended December 31, 2021 and 2020 ​ ​ Page(s) Report of Independent Registered Public Accounting Firm ​ F-2 ​ Consolidated Financial Statements: ​ ​ Balance Sheets at December 31, 2021 and 2020 ​ F-3 ​ Statements of Operations for the years ended December 31, 2021 and 2020 ​ F-4 ​ Statements of Stockholders' Equity for the years ended December 31, 2021 and 2020 ​ F-5 ​ Statements of Cash Flows for the years ended December 31, 2021 and 2020 ​ F-6 ​ Notes to Financial Statements ​ F-7 ​ ​ F- 1 Table of Contents ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ To the Board of Directors and Stockholders of NexGel, Inc. ​ Opinion on the Consolidated Financial Statements ​ We have audited the accompanying balance sheets of NexGel, Inc. (the “Company”) as of December 31, 2021 and 2020 and the related statements of operations, stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. ​ Basis for Opinion ​ These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. ​ Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ /s/ Turner, Stone & Company, L.L.P. ​ We have served as the Company’s auditor since 2019. ​ Dallas, Texas March 21, 2022 ​ ​ F- 2 Table of Contents NEXGEL, INC CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 ASSETS: ​ ​ ​ ​ Current Assets: ​ ​ Cash ​ $ 13,350 ​ $ 32 Accounts receivable, net ​ 209 ​ 73 Inventory ​ 291 ​ 233 Prepaid expenses and other current assets ​ 77 ​ 25 Total current assets ​ 13,927 ​ 363 Goodwill ​ ​ 311 ​ ​ 311 Intangibles ​ ​ 33 ​ ​ 47 Property and equipment, net ​ 723 ​ 553 Operating lease - right of use asset ​ 1,926 ​ 805 Other assets ​ 63 ​ 178 Total assets ​ $ 16,983 ​ $ 2,257 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ Current Liabilities: ​ ​ Accounts payable ​ $ 254 ​ $ 658 Accrued expenses and other current liabilities ​ 62 ​ 90 Deferred Revenue ​ ​ — ​ ​ 38 Convertible notes payable ​ ​ 2,037 ​ ​ 59 Note payable, current portion ​ ​ 10 ​ ​ 10 Note payable - PPP ​ ​ — ​ ​ 147 Warrant liability ​ 318 ​ 123 Operating lease liability, current portion ​ 207 ​ 207 Total current liabilities ​ 2,888 ​ 1,332 Operating lease liability, net of current portion ​ 1,744 ​ 598 Notes payable, net of current portion ​ ​ 266 ​ ​ 256 Total liabilities ​ $ 4,898 ​ $ 2,186 ​ ​ ​ ​ ​ ​ ​ Commitments and Contingencies (Note 17) ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ 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 and 2,838,047 shares issued and outstanding as of December 31, 2021 and 2020, respectively ​ 6 ​ 3 Additional paid-in capital ​ 18,891 ​ 2,570 Accumulated deficit ​ ( 6,812 ) ​ ( 2,502 ) Total stockholders' equity ​ 12,085 ​ 71 Total liabilities and stockholders' equity ​ $ 16,983 ​ $ 2,257 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F- 3 Table of Contents NEXGEL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 Revenues, net ​ $ 1,551 ​ $ 674 ​ ​ ​ ​ ​ ​ ​ Cost of revenues ​ 1,542 ​ 965 ​ ​ ​ ​ ​ ​ ​ Gross (loss)/profit ​ 9 ​ ( 291 ) ​ ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ Research and development ​ ​ 31 ​ ​ — Selling, general and administrative ​ 2,548 ​ 1,969 Total operating expenses ​ 2,579 ​ 1,969 ​ ​ ​ ​ ​ ​ ​ Loss from operations ​ ( 2,570 ) ​ ( 2,260 ) ​ ​ ​ ​ ​ ​ ​ Other income (expense) ​ ​ ​ ​ ​ ​ Change in fair value of warrant liability ​ 8 ​ ( 2 ) Forgiveness of debt ​ ​ 275 ​ ​ — Debt discount costs ​ ​ ( 68 ) ​ ​ ( 2 ) Loss on debt extinguishment ​ ​ ( 25 ) ​ ​ — Interest expense ​ ​ ( 1,930 ) ​ ​ ( 8 ) Other income ​ ​ — ​ ​ 8 Total other income (expense) ​ ​ ( 1,740 ) ​ ​ ( 4 ) Net loss ​ $ ( 4,310 ) ​ $ ( 2,264 ) ​ ​ ​ ​ ​ ​ ​ Net loss per common share - diluted and diluted ​ $ ( 1.45 ) ​ $ ( 1.05 ) ​ ​ ​ ​ ​ ​ ​ Weighted average shares used in computing net loss per common share - basic and diluted ​ 2,979,962 ​ 2,254,145 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F- 4 Table of Contents NEXGEL, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Stockholders’ ​ Shares Amount Capital Deficit Equity Balance, December 31, 2019 1,643,006 ​ $ 2 ​ $ 616 ​ $ ( 238 ) ​ ​ 380 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Issuance of common stock, net of issuance costs 757,786 ​ 1 ​ 1,369 ​ — ​ 1,370 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Issuance of common stock for acquisition ​ 267,858 ​ ​ — ​ ​ 375 ​ ​ ​ ​ ​ 375 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted stock vesting ​ 169,397 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Warrants issued for equity raising costs ​ — ​ ​ ​ ​ ​ ( 65 ) ​ ​ — ​ ​ ( 65 ) Beneficial conversion and warrant features of convertible debt ​ — ​ ​ — ​ ​ 43 ​ ​ — ​ ​ 43 Share-based compensation — ​ — ​ 232 ​ — ​ 232 Net loss — ​ — ​ — ​ ( 2,264 ) ​ ( 2,264 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2020 2,838,047 ​ $ 3 ​ $ 2,570 ​ $ ( 2,502 ) ​ $ 71 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Stockholders' ​ ​ Shares Amount ​ Capital ​ Deficit ​ Equity Balance, December 31, 2020 ​ 2,838,047 $ 3 $ 2,570 $ ( 2,502 ) $ 71 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Issuance of common stock, net of issuance costs ​ 2,686,800 ​ 3 ​ 13,468 ​ — ​ 13,471 Restricted stock vesting ​ 39,524 ​ — ​ 61 ​ — ​ 61 Beneficial conversion and warrant features of convertible debt ​ — ​ — ​ 2,587 ​ — ​ 2,587 Exercise of stock options ​ 7,183 ​ — ​ — ​ — ​ — Share-based compensation ​ — ​ — ​ 223 ​ — ​ 223 Derivative liability - COVA ​ — ​ — ​ ( 18 ) ​ — ​ ( 18 ) Share adjustment for stock split rounding ​ 680 ​ — ​ — ​ — ​ — Net loss ​ — ​ — ​ — ​ ( 4,310 ) ​ ( 4,310 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2021 ​ $ 5,572,234 ​ $ 6 ​ $ 18,891 ​ $ ( 6,812 ) ​ $ 12,085 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F- 5 Table of Contents NEXGEL, INC. STATEMENTS OF CASH FLOWS (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 Operating Activities ​ ​ Net loss ​ $ ( 4,310 ) ​ $ ( 2,264 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ Depreciation and amortization ​ 113 ​ 50 Share-based compensation ​ 285 ​ 232 Changes in ROU asset and operating lease liability ​ ( 8 ) ​ 2 Forgiveness of debt ​ ​ ( 275 ) ​ ​ — Changes in fair value of warrant liability ​ ​ 25 ​ ​ — Loss of extinguishment of debt ​ ​ 25 ​ ​ — Amortization of deferred financing costs ​ ​ 1,933 ​ ​ 2 Beneficial conversion feature in excess of face value ​ ​ 52 ​ ​ ​ Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable, net ​ ( 137 ) ​ 29 Inventory ​ ( 58 ) ​ ( 99 ) Prepaid expenses and other assets ​ 63 ​ 10 Accounts payable ​ ( 405 ) ​ 137 Accrued expenses and other liabilities ​ ( 18 ) ​ 62 Deferred revenue ​ ​ ( 38 ) ​ ​ 38 Net Cash Used in Operating Activities ​ ( 2,753 ) ​ ( 1,801 ) Investing Activities ​ ​ ​ ​ ​ ​ Purchase of equipment ​ ​ ( 269 ) ​ ​ ( 312 ) Net Cash Used in Investing Activities ​ ​ ( 269 ) ​ ​ ( 312 ) Financing Activities ​ ​ ​ Issuance of common stock, net of issuance costs ​ 13,471 ​ 1,370 Proceeds from notes payable ​ ​ 15 ​ ​ 414 Proceeds from convertible notes ​ ​ 2,957 ​ ​ 100 Payment of financing costs ​ ​ ( 115 ) ​ ​ ​ Principal payment of notes payable ​ ​ ( 15 ) ​ ​ — Principal payment on convertible notes ​ ​ ( 100 ) ​ ​ — Proceeds from notes payable (PPP) ​ ​ 127 ​ ​ — Net Cash Provided by Financing Activities ​ 16,340 ​ 1,884 Net Increase (Decrease) in Cash ​ 13,318 ​ ( 229 ) Cash  – Beginning of period ​ 32 ​ 261 Cash – End of period ​ $ 13,350 ​ $ 32 Supplemental Disclosure of Cash Flows Information ​ ​ Non-Cash Transactions: ​ ​ 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 assumed from acquisition ​ $ — ​ $ 13 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ F- 6 Table of Contents NEXGEL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 1. Description of Business, the Spin-off and Basis of Presentation Description of Business NexGel, Inc. (“NexGel” or the “Company”) manufactures high water content, electron beam cross-linked, aqueous polymer hydrogels, or gels, used for wound care, medical diagnostics, transdermal drug delivery and cosmetics. The Company specializes in custom gels by capitalizing on proprietary manufacturing technologies. NexGel has historically served as a contract manufacturer, supplying our gels to third parties who incorporate them into their own products and have recently began producing the Company’s own consumer products using our gels focused on proprietary branded products and white label opportunities. Both the Company’s gels and consumer products are manufactured using proprietary and non-proprietary mixing, coating and cross-linking technologies. Together, these technologies enable NexGel to produce gels that can satisfy rigid tolerance specifications with respect to a wide range of physical characteristics (e.g., thickness, water content, adherence, absorption, moisture vapor transmission rate (a measure of the passage of water vapor through a substance) and release rate) while maintaining product integrity. Additionally, the Company has the manufacturing ability to offer broad choices in the selection of liners onto which the gels are coated. Consequently, NexGel and our customers are able to determine tolerances in moisture vapor transmission rate and active ingredient release rates while personalizing color and texture. NexGel was previously known as AquaMed Technologies, Inc. (“AquaMed”) before changing its name to NexGel, Inc. on November 14, 2019. The consolidated financial statements include the accounts of the Company and its consolidated wholly-owned subsidiary, NexGelRX, Inc. Stock Split On November 29, 2021, the Company effected a 1-for-35 reverse stock split of our issued and outstanding common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, each issued and outstanding share of our common stock, and the per share exercise price of and number of shares of the Company’s common stock underlying our outstanding equity awards and warrants, was automatically proportionally adjusted based on the 1-for-35 Reverse Stock Split ratio. No fractional shares of common stock were issued in connection with the reverse stock split, and all such fractional interests were rounded up to the nearest whole number. Except as otherwise provided herein, all share and per-share amounts of our common stock, equity awards and warrants, including the shares of common stock and warrants being offered hereby, have been adjusted to give effect to the Reverse Stock Split for all periods presented. The Reverse Stock Split did not alter the par value of the Company’s common stock, which remains at $ 0.001 per share, modify any voting rights or other terms of our common stock, or impact the amount of preferred stock the Company is authorized to issue. The Spin-Off On June 21, 2019, NexGel became an independent company through the pro rata distribution (“Spin-Off”) by Adynxx, Inc. (“Adynxx” and the “Parent”) in connection with the closing of a reverse merger between Adynxx, Inc. and Alliqua BioMedical, Inc., Adynxx, Inc. was previously known as Alliqua BioMedical, Inc. and subsequently changed its name to Adynxx, Inc. on May 3, 2019. The terms and conditions of the Spin-Off provided that each record holder of Parent stock as of April 22, 2019, received one share of NexGel common stock in book-entry form and resulted in the distribution of 143,006 shares of common stock of NexGel. Following the distribution (“Capitalization”), all existing operations were distributed to NexGel with the exception of a corporate lease for property in Yardley, Pennsylvania which was retained by Adynxx. F- 7 Table of Contents Pursuant to the Spin-Off and in exchange for the 143,006 shares of common stock, NexGel assumed the following net liabilities from Parent as of June 21, 2019 ($ in thousands): ​ ​ ​ ​ ​ Assets: ​ Cash ​ $ 186 Accounts receivable, net ​ 72 Inventory ​ 140 Prepaid expenses and other current assets ​ 101 Property and equipment, net ​ 155 Operating lease - right of use asset ​ 976 Other assets ​ 178 Total assets ​ 1,808 ​ ​ ​ ​ Liabilities: ​ Accounts payable ​ ( 496 ) Accrued expenses and other current liabilities ​ ( 395 ) Operating lease liability ​ ( 976 ) ​ ​ ​ ​ Total liabilities ​ ( 1,867 ) Net liabilities assumed in Spin-Off on June 21, 2019 ​ $ ( 59 ) ​ Basis of Presentation The consolidated financial statements of the Company have been prepared without audit in accordance with generally accepted accounting principles in the United States of America ("GAAP") and are presented in US dollars. ​ 2. Going Concern As of December 31, 2021, the Company had a cash balance of $ 13.35 million. For the year ended December 31, 2021, the Company incurred a net loss of $ 4.31 million and had a net usage of cash in operating activities of $ 2.75 million. In addition, the Company had a working capital of $ 11.04 million as of December 31, 2021. On December 27, 2021, the Company sold an aggregate of 2,585,000 units at a price to the public of $ 5.50 per unit (the “Offering”), each unit consisting of one share of the Company’s common stock, par value $ 0.001 per share (the “Common Stock”), and a warrant to purchase one share of Common Stock at an exercise price of $ 5.50 per share (the “Warrants”), for net proceeds of $ 13.2 million. Proceeds from the offerings are expected to be used for working capital, new product development and testing, and general business operations. Management is exploring new product channel sales in adjacent industries, such as cosmetics, athletic products, and proprietary medical devices. The Company has increased focused on sales and developing a sales pipeline for potential customers. This customer base expansion will enable us to provide financial stability for the foreseeable future, expand our current processes, and position us for long-term shareholder value creation. We have sufficient capital to maintain as a going concern due to the capital raise that occurred on December 27, 2021. We intend to maintain and attempt to grow our existing contract manufacturing business. We also plan to continue building and developing its catalog of consumer products for sale to branding partners and to use our in-house capabilities to create and test market additional branded products. These products will be target marketed and sold online through social media, television and online marketplaces. Furthermore, the Company plans to develop its own proprietary medical devices and explore drug delivery programs for its technology. Additionally, the Company continues to evaluate strategic initiatives (e.g., acquisitions) and additional capital raises through debt or equity may be necessary to achieve these objectives. F- 8 Table of Contents We expect to continue incurring losses for the near-term future. Our ability to continue to operate as a going concern in the long-term is dependent upon our ability to manage and grow our current products and to ultimately achieve profitable operations. Management may consider various options to raise capital to fund potential acquisitions through equity or debt offerings. There can be no assurances, however, that management will be able to obtain sufficient additional funds, if needed, or that such funds, if available, will be obtained on terms satisfactory to us. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary should we be unable to continue as a going concern. Additionally, it is reasonably possible that estimates made in the consolidated financial statements have been, or will be, materially and adversely impacted in the near term as a result of these conditions, including the recoverability of long lived assets. ​ 3. Significant Accounting Policies and Estimates Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions include allowance for doubtful accounts, inventory reserves, deferred taxes, share-based compensation and related valuation allowances and fair value of long-lived assets. Actual results could differ from the estimates. Cash Cash include cash on hand and highly liquid investments having an original maturity of three months or less. Accounts receivable, net Trade accounts receivable are stated at the amount the Company expects to collect and do not bear interest. The Company evaluates the collectability of accounts receivable and records a provision to the allowance for doubtful accounts based on factors including the length of time the receivables are past due, the current business environment and the Company’s historical experience. Provisions to the allowances for doubtful accounts are recorded in selling, general and administrative expenses. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered. The allowance for doubtful accounts was $ 4 thousand as of December 31, 2021 and $ 1 thousand as of December 31, 2020. Inventory and Cost of Goods Sold Inventory is stated at the lower of cost, the value determined by the first-in, first-out method, or net realizable value. The Company evaluates inventories for excess quantities, obsolescence, and shelf-life expiration. This evaluation includes an analysis of historical sales levels by product, projections of future demand, the risk of technological or competitive obsolescence for products, general market conditions, and a review of the shelf-life expiration dates for products. These factors determine when, and if, the Company adjusts the carrying value of inventory to estimated net realizable value. The balance is made up of raw materials, work-in-progress, and finished goods of $ 178 thousand, $ 88 thousand, and $ 25 thousand on December 31, 2021, respectively, and the balance was made up of raw materials, work-in-progress, and finished goods of $ 190 thousand, $ 22 thousand, and $ 21 thousand on December 31, 2020, respectively. As a contract manufacturer, the Company builds its products based on customer orders and immediately ships the products upon completion of the production process. The “Cost of goods sold” line item in the consolidated statements of income is comprised of the book value of inventory sold to customers during the reporting period. When circumstances dictate that we use net realizable value as the basis for recording inventory, we base our estimates on expected future selling prices less expected disposal costs. F- 9 Table of Contents Research and Development Our research and development activities focus on new and innovative products designed to support revenue growth. Research and development expenses consist primarily of contracted development and testing efforts associated with development of products. Shipping and Handling Revenue and Expense Shipping and handling revenue and expense are included in our consolidated statements of operations in Revenue, net. This is primarily through shipping fees incurred in the Amazon marketplace. Property and equipment, net Property and equipment is recorded at historical cost, net of accumulated depreciation and amortization. Depreciation is provided over the assets’ useful lives on a straight-line basis. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms. Repairs and maintenance costs are expensed as incurred. Management periodically assesses the estimated useful life over which assets are depreciated or amortized. If the analysis warrants a change in the estimated useful life of property and equipment, management will reduce the estimated useful life and depreciate or amortize the carrying value prospectively over the shorter remaining useful life. The carrying amounts of assets sold or retired and the related accumulated depreciation are eliminated in the period of disposal and the resulting gains and losses are included in the results of operations during the same period. Impairment of Long-Lived Assets The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Goodwill and Intangible Assets In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially recorded at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 31, and whenever indicators of impairment exist. The fair value of intangible assets are compared with their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value. The Company performed the annual assessment and concluded it is more likely than not that the fair value exceeds the carrying value. Prepaid expenses and other current assets Prepaid expenses and other current assets is recorded at historical cost and is primarily made up of $ 23 thousand and $ 16 thousand of prepaid insurance, and $ 54 thousand and $ 9 thousand general prepaid expenses and other current assets in the years ended December 31, 2021 and 2020 respectively. Other Assets Other Assets is recorded at historical costs, and as of December 31, 2021 and 2020, the balance is entirely made up of spare parts for manufacturing equipment. Other assets are stated at cost and are not subject to depreciation, until such time that they are placed into service and the part that is being replaced is disposed. F- 10 Table of Contents Fair value measurements The Company utilizes the fair value hierarchy to apply fair value measurements. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair values that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The basis for fair value measurements for each level within the hierarchy is described below: Level 1 —Quoted prices for identical assets or liabilities in active markets. Level 2 —Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 —Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable. The Company considers the carrying amounts of its financial instruments (cash, accounts receivable and accounts payable, notes payable and convertible notes payable) in the balance sheet to approximate fair value because of the short-term or highly liquid nature of these financial instruments. Warrant Liability Warrants to purchase common stock were issued in connection with equity financing raises, which occurred on September 2, 2021, March 11, 2021, February 3, 2021, December 24, 2020, March 18, 2020, September 10, 2019 and November 6, 2019. The fair values of the warrants are estimated as of the date of issuance and again at each period end using a Black-Scholes option valuation model. At issuance, the fair value of the warrant is recognized as an equity issuance cost within additional paid-in-capital. Fair value adjustments to the warrant liability are recognized in other income (expense) in the statements of operations. Revenue recognition On January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing accounting principles generally accepted in the United States of America (“U.S. GAAP”) including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The Company adopted ASC 606 for all applicable contracts using the modified retrospective method, which would have required a cumulative-effect adjustment, if any, as of the date of adoption. The adoption of ASC 606 did not have a material impact on the Company’s consolidated financial statements as of the date of adoption. As a result, a cumulative-effect adjustment was not required. The Company recognizes revenue predominately from one type of revenue, contract manufacturing. Revenue from contract manufacturing is recognized at the point where the customer obtains control of the goods and the Company satisfies its performance obligation, which generally is at the time the customer receives the product. The Company’s customers consist of other life sciences companies and revenues are concentrated in the United States. Payment terms vary by the type and location of customer and may differ by jurisdiction and customer but payment is generally required in a term ranging from 30 to 60 days from date of shipment. Estimates for product returns, allowances and discounts are recorded as a reduction of revenue and are established at the time of sale. Returns are estimated through a comparison of historical return data and are determined for each product and adjusted for known or expected changes in the marketplace specific to each product, when appropriate. Historically, sales return provisions have not been material. Amounts accrued for sales allowances and discounts are based on estimates of amounts that are expected to be claimed on the related sales and are based on historical data. Payments for allowances and discounts have historically been immaterial. Disaggregated revenue by sales type: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended F- 11 Table of Contents ​ ​ December 31, ​ ​ 2021 2020 Contract manufacturing ​ $ 767 ​ $ 615 Custom and white label finished goods manufacturing ​ 492 ​ — NexGel branded consumer products ​ 194 ​ 42 Other ​ 98 ​ 17 Total ​ $ 1,551 ​ $ 674 ​ As of December 31, 2021 and 2020, the Company did not have any contract assets or contract liabilities from contracts with customers. As of December 31, 2021 and December 31, 2020, there were no remaining performance obligations that the Company had not satisfied. Share-based compensation On August 28, 2019, the Company adopted the 2019 Long-Term Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the granting of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights (“SARs”), restricted stock units, performance awards, dividend equivalent rights and other awards, which may be granted singly, in combination, or in tandem, and which may be paid in cash, shares of common stock of the Company or a combination of cash and shares of common stock of the Company. The Company initial reserved a total of 57,143 shares of the Company’s common stock for awards under the 2019 Plan. Effective as of May 26, 2020, the Board approved an increase of the number of authorized shares of common stock reserved under the 2019 Plan from 57,143 shares of common stock to 485,714 shares of common stock all of which may be delivered pursuant to incentive stock options. Subject to adjustments pursuant to the 2019 Plan, the maximum number of shares of common stock with respect to which stock options or SARs may be granted to an executive officer during any calendar year is 14,285 shares of common stock. The Company’s 2019 Long-Term Incentive Plan provides certain employees, contractors, and outside directors with share-based compensation in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights and other awards. The fair values of incentive stock option award grants are estimated as of the date of grant using a Black-Scholes option valuation model. Compensation expense is recognized in the statements of operations on a straight-line basis over the requisite service period, which is generally the vesting period required to obtain full vesting. Forfeitures are accounted for when they occur. In June 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-07, Compensation - Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting . These amendments expand the scope of Topic 718, Compensation - Stock Compensation , to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. This new standard is effective for the Company on January 1, 2020. The Company early adopted this new standard in the third quarter of 2019 and it did not have material impact to its consolidated financial statements. Income taxes Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities at the applicable tax rates. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates. Tax benefits are recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by a tax authority and based upon the technical merits of the tax position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement. An unrecognized tax benefit, or a portion thereof, is presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. Leases ASC 842 requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation F- 12 Table of Contents to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. A number of the lease agreements contain options to renew and options to terminate the leases early. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to be exercised. The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, and unamortized lease incentives provided by lessors. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur. The Company has elected not to separate lease and non-lease components for all property leases for the purposes of calculating ROU assets and lease liabilities. Segment reporting The Company operates in one business segment as a contract manufacturer of aqueous polymer hydrogels. As a result, the Company’s operations are a single reportable segment, which is consistent with the Company’s internal management reporting. Comprehensive loss Comprehensive loss consists of net loss and changes in equity during a period from transactions and other equity and circumstances generated from non-owner sources. The Company’s net loss equals comprehensive loss for all periods presented, Recently Issued Accounting Standards From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption. In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. ASU 2016-13 is effective for the Company's fiscal year beginning March 1, 2023 and subsequent interim periods. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on the Company's consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under the amendments in ASU 2017-04, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, ASU 2017-04 requires any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. We adopted ASU 2017-04 effective March 1, 2020 (the first quarter of our 2021 fiscal year). In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. We will adopt ASU 2019-12 effective March 1, 2021 and do not expect the adoption of this guidance to have a material impact on our consolidated financial statements. ​ F- 13 Table of Contents 4. Acquisition On May 29, 2020, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) whereby the Company purchased all of the outstanding equity securities of Sport Defense LLC, a Delaware limited liability company (“Sport Defense”), from the members of Sport Defense (the “Sellers”). Subsequent to the Closing Date, Sport Defense is a wholly-owned subsidiary of the Company. Sport Defense is a marketing and distribution company that leverages the unique benefits of ultra-gentle, high-water content hydrogels, manufactured by the Company, to build brands that treat various ailments of the skin caused by athletic training, such as blisters, turf burns, scrapes and skin irritations. To date the Company has commercialized four branded products acquired from the acquisition of Sport Defense. Under the terms of the Purchase Agreement, the purchase price paid to the Sellers was an aggregate of $ 375 thousand (the “Purchase Price”) which was paid by the Company through the issuance of an aggregate of 9,375,000 shares of the Company’s common stock, par value $ 0.001 (the “Shares”), which equates to a per share purchase price of $ 0.04 . The Shares are “restricted securities” as such term is defined by Rule 144 promulgated under the Securities Act of 1933, as amended. Adam Levy, the Company’s Chief Executive Officer and Chief Financial Officer, and Nachum Stein, a member of the Company’s Board of Directors (the “Board”), were each members of Sport Defense and part of the Sellers. Mr. Levy received 1,546,875 of the Shares and Mr. Stein received 3,187,500 of the Shares. Due to the potential conflict of interest that existed because of Messrs. Levy and Stein’s partial ownership of Sport Defense, the Board obtained an independent investment bank to prepare a valuation report with respect to Sport Defense. This valuation report supported the Purchase Price. Also, Mr. Stein recused himself from the vote of the Board regarding the approval to purchase Sport Defense. The Purchase Agreement and the Sport Defense acquisition were not subject to approval by the shareholders of the Company. The Purchase Agreement contained minimal representations and warranties regarding Sport Defense and certain limited representations and warranties regarding the Company and the Sellers. The provisional fair value of the purchase consideration issued to the Seller was allocated to the net tangible assets acquired. The Company accounted for the Sport Defense acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $ 375 thousand. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill. F- 14 Table of Contents The table below shows an analysis for the Sport Defense acquisition: ​ ​ ​ ​ ​ 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 Preliminary goodwill ​ $ 311 ​ The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the Sport Defense acquisition been completed as of January 1, 2020 or to project potential operating results as of any future date or for any future periods. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ December 31, ​ 2021 ​ 2020 Revenues, net ​ $ 1,551 ​ $ 691 Net loss allocable to common shareholders ​ $ ( 4,310 ) ​ $ ( 2,254 ) Net loss per share ​ $ ( 1.46 ) ​ $ ( 0.03 ) Weighted average number of shares outstanding ​ 2,942,057 ​ 2,477,359 ​ ​ 5. Leases The Company has one operating lease for a commercial manufacturing facility and administrative offices located in Langhorne, Pennsylvania that runs through January 2031. The following table presents information about the amount and timing of the liability arising from the Company’s operating lease as of December 31, 2021 ($ in thousands): ​ ​ ​ ​ ​ ​ ​ Operating ​ ​ Lease ​ Maturity of Lease Liability ​ Liability ​ 2022 ​ $ 207 ​ 2023 ​ 207 ​ 2024 ​ 207 ​ 2025 ​ ​ 207 ​ 2026 ​ 263 ​ Thereafter ​ ​ 1,165 ​ Total undiscounted operating lease payments ​ $ 2,256 ​ Less: Imputed interest ​ ( 305 ) ​ Present value of operating lease liability ​ $ 1,951 ​ Weighted average remaining lease term ​ 9.1 years ​ Weighted average discount rate ​ 3.0 % ​ Total operating lease expense for the year ended December 31, 2021 and 2020 was $ 207 thousand, and is recorded in cost of goods sold and selling, general and administrative expenses on the statement of operations. F- 15 Table of Contents Supplemental cash flows information related to leases was as follows ($ in thousands): ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 Cash paid for amounts included in the measurement of lease liability: ​ Operating cash flows from operating lease ​ $ 207 ​ ​ ​ ​ Right-of-use asset obtained in exchange for lease obligation: ​ Operating lease ​ $ 2,050 ​ ​ 6. Inventory Inventory consists of the following ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Raw materials ​ $ 178 $ 190 Work-in-progress ​ 88 ​ 22 Finished goods ​ 25 ​ 21 ​ ​ 291 ​ ​ 233 Less: Inventory reserve for excess and slow moving inventory ​ — ​ — Total ​ $ 291 $ 233 ​ As a contract manufacturer, the Company builds its products based on customer orders and immediately ships the products upon completion of the production process. ​ 7. Property and Equipment, Net Property and equipment consist of the following ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Useful Life December 31, 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 ​ ​ ​ ( 495 ) ​ ( 3,079 ) Property and equipment, net ​ ​ ​ $ 723 ​ $ 553 ​ Depreciation expense for the year ended December 31, 2021 and 2020 was $ 99 thousand and $ 42 thousand, respectively. ​ F- 16 Table of Contents 8. Intangible Assets The following provides a breakdown of identifiable intangible assets as of December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2021 2020 ​ Product/Technology Related ​ ​ ​ ​ Identifiable intangible assets, gross ​ $ 31 $ 31 ​ Accumulated amortization ​ ( 16 ) ​ ​ ( 6 ) ​ Product/Technology Related identifiable intangible assets, net ​ 15 ​ 25 ​ Marketing Related ​ ​ ​ ​ Customer related intangible asset, gross ​ 17 ​ 17 ​ Tradename related intangible asset, gross ​ 7 ​ 7 ​ Accumulated amortization ​ ( 6 ) ​ ​ ( 2 ) ​ Marketing related identifiable intangible assets, net ​ 18 ​ 22 ​ Total Identifiable intangible assets, net ​ $ 33 $ 47 ​ ​ In connection with the acquisitions of Sport Defense, the Company identified intangible assets of $ 55 thousand representing technology related and customer related intangibles. These assets are being amortized on a straight-line basis over their weighted average estimated useful life of 4.5 years and amortization expense amounted to $ 14 thousand and $ 8 thousand for the year ended December 31, 2021 and 2020, respectively. As of December 31, 2021, the estimated annual amortization expense for each of the next five fiscal years is as follows: ​ ​ ​ ​ ​ 2022 $ 14 2023 ​ 8 2024 ​ 2 2025 ​ 2 2026 ​ 2 Thereafter ​ 5 Total $ 33 ​ ​ 9. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2021 ​ 2020 Salaries, benefits, and incentive compensation ​ $ 54 ​ $ 43 Professional fees ​ — ​ — Other ​ 8 ​ 47 Total accrued expenses and other current liabilities ​ $ 62 ​ $ 90 ​ ​ 10. Common Stock Share issuances On December 27, 2021, the Company sold an aggregate of 2,585,000 units at a price to the public of $ 5.50 per unit (the “Offering”), each unit consisting of one share of our common stock, and a warrant to purchase one share of our common stock at an exercise price of $ 5.50 per share . In addition, the Company granted the Underwriter a 45-day option to purchase up to 387,750 additional shares of our common Stock, and/or 387,750 additional warrants, to cover over-allotments in connection with the Offering, which the Underwriter partially exercised to purchase 387,750 Warrants on the Closing Date. From January 1, 2021 through March 31, 2021, the Company entered into Securities Purchase Agreements with certain accredited investors whereby we sold 101,800 shares of our common stock at a price per share equal to $ 2.80 for an aggregate purchase price of $ 285,000 . F- 17 Table of Contents From February 6, 2020 through March 20, 2020, the Company entered into Securities Purchase Agreements with certain accredited investors whereby we sold 442,858 shares of our common stock at a price per share equal to $ 1.40 for an aggregate purchase price of $ 620,000 . Proceeds from this offering are expected to be used for working capital, new product development and testing, and general business operations. The placement agent for the private placement and is entitled to receive a total fee equal to 6 % of the total gross proceeds and warrants to purchase the number of shares of Common Stock equal to 10 % of the number of shares of Common Stock issued to the Investors, for such services rendered. The warrants are exercisable for 3 years at an exercise price equal to $ 1.40 . From July 30, 2020 through August 14, 2020, the Company entered into Securities Purchase Agreements with certain accredited investors whereby we sold 188,143 shares of our common stock at a price per share equal to $ 2.10 for an aggregate purchase price of $ 395,100 . From October 13, 2020 through December 24, 2020, the Company entered into Securities Purchase Agreements with certain accredited investors whereby we sold 126,786 shares of our common stock at a price per share equal to $ 2.80 for an aggregate purchase price of $ 355,000 . Proceeds from this offering are expected to be used for working capital, new product development and testing, and general business operations. On February 10, 2020, a majority of our stockholder through a written consent approved the following: an amendment to our Restated Certificate of Incorporation which will increase the number of authorized shares of Common Stock from 100,000,000 shares of Common Stock to 3,000,000,000 shares of Common Stock and (ii) an amendment to our Restated Certificate of Incorporation to effect a reverse stock split of our Common Stock by a ratio of not less than one-for-thirty and not more than one-for-one hundred , with the exact number to be set at a whole number within this range to be determined by our board of directors in its sole discretion and to authorize our board of directors to implement the reverse stock split by filing an amendment to our Amended and Restated Certificate of Incorporation. On May 26, 2020, the Company filed an amendment to the certificate of incorporation to increase the number of the Company’s authorized shares of common stock from 100,000,000 shares of common stock to 3,000,000,000 shares of common stock. The reverse stock split has not been effected as of date of the filing of this prospectus. For more information on these amendments, please see the Company’s Definitive Information Statement on Schedule 14C filed with the SEC on March 16, 2020. On February 17, 2020, the Company granted certain equity awards to the members of the Company’s Board of Director with the following terms: each of Messrs. Stefansky and Stein received two annual awards of stock options equal to $ 40,000 of the Company’s common stock, granted under the Company 2019 Long-Term Incentive Plan (the “Incentive Plan”), with (i) the first grant being the right to purchase up to 81,633 shares of the Company’s common stock at a per share exercise price of $ 0.49 with one-half of such option vesting on March 31, 2020 and the remaining one-half vesting in equal installments on June 30, 2020 and September 30, 2020, respectively, and with an acceleration of any unvested options upon the departure of applicable Board member from the Board for any reason and (ii) the second grant being the right to purchase up to a number of shares of the Company’s common stock equal to $ 40,000 divided by the Fair Market Value (as defined in the Incentive Plan) of the Company’s common stock as of October 10, 2020 at a per share exercise price equal to Fair Market Value of the Company’s common stock as of October 10, 2020 with one-fourth of such option vesting on each of December 31, 2020, March 31, 2021, June 30, 2021 and September 30, 2021, respectively, and with an acceleration of any unvested options upon the departure of applicable Board member from the Board for any reason. On February 17, 2020, the Company granted a restricted stock award of 169,388 shares of the Company’s common stock to the Company’s Chief Executive Officer and Chief Financial Officer, Adam Levy, with the following vesting terms: (i) 3/12th of such shares vested as of February 17, 2020; (ii) 1/12th of such shares vest on each of the eight months following February 17, 2020 and (iii) all remaining shares vest on September 10, 2020. In November 2020, the Company issued 169,397 shares to our Chief Executive Officer upon the vesting of the restricted stock awards (See Note 12). At December 31, 2021, the Company has reserved common stock for issuance in relation to the following: ​ ​ ​ ​ Share-based compensation plan 434,939 Warrants to purchase common stock 3,637,190 ​ ​ F- 18 Table of Contents 11. Share-based Compensation On August 28, 2019, the Company adopted the 2019 Long-Term Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the granting of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights (“SARs”), restricted stock units, performance awards, dividend equivalent rights and other awards, which may be granted singly, in combination, or in tandem, and which may be paid in cash, shares of common stock of the Company or a combination of cash and shares of common stock of the Company. The Company initially reserved a total of 2,000,000 shares of the Company’s common stock for awards under the 2019 Plan. Effective as of May 26, 2020, the Board approved an increase of the number of authorized shares of common stock reserved under the 2019 Plan from 2,000,000 shares of common stock to 17,000,000 shares of common stock all of which may be delivered pursuant to incentive stock options., all of which may be delivered pursuant to incentive stock options. Subject to adjustments pursuant to the 2019 Plan, the maximum number of shares of common stock with respect to which stock options or SARs may be granted to an executive officer during any calendar year is 500,000 shares of common stock. Incentive stock options On February 17, 2020, the Company granted certain equity awards to the members of the Company’s Board of Director with the following terms: each of Messrs. Stefansky and Stein received two annual awards of stock options equal to $ 40,000 of the Company’s common stock, granted under the Company 2019 Long-Term Incentive Plan (the “Incentive Plan”), with (i) the first grant being the right to purchase up to 81,633 shares of the Company’s common stock at a per share exercise price of $ 0.49 with one-half of such option vesting on March 31, 2020 and the remaining one-half vesting in equal installments on June 30, 2020 and September 30, 2020, respectively, and with an acceleration of any unvested options upon the departure of applicable Board member from the Board for any reason and (ii) the second grant being the right to purchase up to a number of shares of the Company’s common stock equal to $ 40,000 divided by the Fair Market Value (as defined in the Incentive Plan) of the Company’s common stock as of October 10, 2020 at a per share exercise price equal to Fair Market Value of the Company’s common stock as of October 10, 2020, which the Board determined to be $ 2.10 and equates to 19,048 shares underlying each of the second grants, with one-fourth of such option vesting on each of December 31, 2020, March 31, 2021, June 30, 2021 and September 30, 2021, respectively, and with an acceleration of any unvested options upon the departure of applicable Board member from the Board for any reason. In May 2020 and July 2020, pursuant to the terms of the 2019 Plan, the Company awarded options to purchase an aggregate of 152,143 shares of common stock to two of its employees and one contractor. Pursuant to the terms of the option agreements, 9,286 of the options vested on the date of grant, and of the 142,858 options, 10 % of such options vested on the date of grant, and the remaining of such options will vest upon meeting established criteria. The term of the options is ten years. On January 15, 2021, the Company awarded a contractor options to purchase an aggregate of 14,286 shares of the Company’s common stock at a per share exercise price of $ 2.80 under the Company’s 2019 Long-Term Incentive Plan. This option award fully vested 20 % as of the date of grant and the remaining 80 % in November 2022. On March 8, 2021, the Company granted Dr. Jerome Zeldis, a member of the Company Board, an option to purchase up to 19,048 shares of the Company’s common stock at a per share exercise price of $ 2.80 under the Company’s 2019 Long-Term Incentive Plan. This option award fully vested as of the date of grant. On March 8, 2021, the Company appointed Steven Glassman to the Board of Directors to serve for a term expiring at the next annual meeting of stockholders or until his successor is duly elected and qualified. On March 8, 2021 and in consideration for his appointment to the board of directors, the Company granted Mr. Glassman an option to purchase up to 14,286 shares of common stock at a per share exercise price of $ 2.80 under the Company’s 2019 Long-Term Incentive Plan. This option award fully vested as of the date of grant. On September 2, 2021, the Company appointed Adam Levy, Yaakov Spinrad and Miranda J. Toledano to the Board of Directors to serve for a term expiring at the next annual meeting of stockholders or until their successor is duly elected and qualified. On September 9, 2021 and in consideration for each person’s appointment to the board of directors, the Company granted each of Mr. Levy, Mr. Spinrad, and Ms. Toledano an option to purchase up to 14,286 shares of common stock at a per share exercise price of $ 5.25 under the Company’s 2019 Long-Term Incentive Plan. This option award vests in four equal calendar quarter installments beginning on October 1, 2021. F- 19 Table of Contents The following table contains information about the 2019 Plan as of December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ Awards ​ Awards ​ ​ Reserved for ​ Awards ​ Available for ​ ​ Issuance ​ Issued ​ Grant 2019 Plan 571,429 434,939 136,490 ​ The following table summarizes the Company’s incentive stock option activity and related information for the period ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ Average ​ ​ ​ ​ Average ​ Contractual ​ ​ Number of ​ Exercise ​ Term in ​ Options Price Years Outstanding at January 1, 2020 28,576 ​ 1.873375 9.6 Granted 363,028 ​ $ 1.0185 10.0 Exercised — ​ — — Forfeited — ​ — — Cancelled — ​ — — Expired — ​ — — Outstanding at December 31, 2020 391,604 $ 0.97076 9.32 ​ ​ ​ ​ ​ ​ ​ ​ Granted 90,478 ​ $ 3.960526 10.00 Exercised ( 7,183 ) ​ 1.75 — Forfeited — ​ — — Cancelled ( 39,960 ) ​ 1.49975 — Expired — ​ — — Outstanding at December 31, 2021 434,939 $ 1.675747 8.56 Exercisable at December 31, 2021 291,364 ​ $ 1.331957 8.43 ​ As of December 31, 2021, vested outstanding stock options had $ 529 thousand intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock. As of December 31, 2021, there was approximately $ 195 thousand of total unrecognized share-based compensation related to unvested stock options, which the Company expects to recognize over the next 12 months . The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. The following assumptions were used to calculate share-based compensation expense for year ended December 31, 2021: ​ ​ ​ ​ ​ Volatility 171.12 %- 183.48 % Risk-free interest rate 0.46 % - 0.86 % Dividend yield 0.0 % Expected term 5.0 - 5.75 years ​ ​ The Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Accordingly, the Company has elected to use the “simplified method” to estimate the expected term of its share-based awards. The simplified method computes the expected term as the sum of the award’s vesting term plus the original contractual term divided by two. Based on the lack of historical data of volatility for the Company’s common stock, the Company based its estimate of expected volatility on a weighted-average of the historical volatility of comparable public companies that manufacture similar products and are similar in size, stage of life cycle, and financial leverage. Restrictive stock awards On February 17, 2020, the Company granted a restricted stock award of 169,388 shares of the Company’s common stock to the Company’s Chief Executive Officer and Interim Chief Financial Officer, Adam Levy, with the following vesting terms: (i) 3/12 th of F- 20 Table of Contents such shares vested as of February 17, 2020; (ii) 1/12 th of such shares vest on each of the eight months following February 17, 2020 and (iii) all remaining shares vest on September 10, 2020. On March 8, 2021, the Company granted a restricted stock award of 39,524 shares of the Company’s common stock to the Adam Levy for his service as our Chief Executive Officer and Chief Financial Officer from October 1, 2020 through September 30, 2021, all of which shares vested immediately. ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ Number of ​ Grant Date ​ ​ Units ​ Fair Value Granted 208,912 ​ $ 0.805 Exercised and converted to common shares ( 169,388 ) ​ 0.490 Forfeited — ​ — Outstanding at December 31, 2020 ​ 39,524 ​ $ 2.100 Granted ​ — ​ ​ — Exercised and converted to common shares ​ ( 39,524 ) ​ ​ 2.100 Forfeited ​ — ​ ​ — Outstanding at December 31, 2021 — ​ $ — Exercisable at December 31, 2021 — ​ $ — ​ Under ASC 718, Compensation-Stock Compensation (“ASC 718”), the Company has measured the value of its February 2020 award as if it were vested and issued on the grant date with a value of $ 83 thousand based on the closing price of the Company's stock at the grant date of the RSU Grant ($ 0.49 per share). An additional issuance of 39,924 shares was granted based on a closing price of the closing price of the Company’s stock at the grant date of the RSU Grant ($ 2.10 per share). Compensation expense will be recognized ratably over the total vesting schedule. The Company will periodically adjust the cumulative compensation expense for forfeited awards. Stock based compensation of $ 284 thousand and $ 232 thousand has been recorded for the year ended December 31, 2021 and 2020, respectively. Warrants The following table shows a summary of common stock warrants through December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Weighted ​ ​ ​ ​ Average ​ Average ​ ​ Number of ​ Exercise ​ Contractual ​ ​ Warrants ​ Price ​ Term in Years Outstanding at December 31, 2019 150,000 ​ $ 0.49000 2.81 ​ ​ ​ ​ ​ ​ ​ ​ Granted 60,500 ​ $ 1.7752 5.00 Exercised — ​ — — Forfeited — ​ — — Cancelled — ​ — — Expired ​ — ​ ​ — — Outstanding at December 31, 2020 ​ 210,500 ​ $ 0.85938 ​ 2.54 Granted ​ 3,426,690 ​ $ 5.42717 ​ 4.98 Exercised ​ — ​ ​ — ​ — Forfeited ​ — ​ ​ — ​ — Cancelled ​ — ​ ​ — ​ — Expired — ​ — ​ — Outstanding at December 31, 2021 3,637,190 ​ $ 5.16281 4.63 Exercisable at December 31, 2021 3,637,190 ​ $ 5.16281 4.63 ​ As of December 31, 2021, vested outstanding warrants had $ 372 thousand intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock. ​ F- 21 Table of Contents 12. Note Payable PPP Loan On April 22, 2020, the Company, entered into a promissory note (the “Promissory Note”) with PNC Bank, N.A. (the “Bank”), which provides for a loan in the amount of $ 147,300 (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). On March 4, 2021, the Company received a second PPP Loan in the amount of $ 127,400 thousand under Phase II of the Paycheck Protection Program which commenced on January 13, 2021 and allowed certain businesses that received an initial PPP Loan to seek a second draw PPP Loan. The PPP Loan has a two-year term and bears interest at a rate of 1.0 % per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the PPP Loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The Company used the proceeds from the PPP Loan for qualifying expenses and plans to apply for forgiveness of the PPP Loan in accordance with the terms of the CARES Act. On June 2, 2021, the Company received notice from PNC Bank that its initial loan of $ 147,300 had been forgiven in its entirety by the SBA. On November 16, 2021, the Company received notice from PNC Bank that its second PPP loan of $ 127,400 had been forgiven in its entirety by the SBA. The balance of the PPP loan as of December 31, 2020 amounted to $ 147,300 . Economic Injury Disaster Loan On May 28, 2020, the Company entered into the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), the principal amount of the EIDL Loan is up to $ 260,500 , with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75 % per annum. Installment payments, including principal and interest, are due monthly beginning May 28, 2021 (twelve months from the date of the SBA Note) in the amount of $ 1,270 . The balance of principal and interest is payable thirty years from the date of the SBA Note. In connection therewith, the Company received an $ 8,000 advance, which does not have to be repaid. On March 26, 2021, the SBA announced that all EIDL loans issued in 2020 will start repayment 24 months from the date of the SBA Note. ​ 13. Convertible Notes Payable On December 24, 2020, the Company entered into two Securities Purchase Agreement, dated December 24, 2020 (the “Purchase Agreement”) pursuant to which the Company issued the following (i) $ 100,000 6 % Secured Convertible Promissory Note which was convertible into shares of the Company’s common stock at a price per share of $ 2.80 and (ii) Common Stock purchase warrants to purchase up to 8,929 shares of common stock with an exercise price of $ 2.80 . The notes are secured by all of the assets and equipment owned by the Company. The notes were due on or before June 24, 2021 and fully-repaid (including all accrued but unpaid interest) on March 14, 2021. On January 19, 2021, the Company entered into a Securities Purchase Agreement, (the “2021 Purchase Agreement”) pursuant to which the Company issued the following (i) $ 15,000 Secured Convertible Promissory Note which was convertible into shares of the Company’s common stock at a price per share of $ 1.05 . The notes were due on or before March 19, 2021 and fully-repaid (including all accrued but unpaid interest) on March 14, 2021. Auctus Fund Financing On March 11, 2021 (the “Issuance Date”), the Company entered into a securities purchase agreement (the “Auctus Purchase Agreement”) with Auctus Fund, LLC, a Delaware limited liability company (“Auctus”), pursuant to which the Company issued to Auctus a senior secured convertible promissory note in the principal amount of $ 1,680,000 , including Original Issue Discount (OID) of $ 180,000 (the “Auctus Note”). The net proceeds received by the Company were $ 1,337,000 (after deducting fees and expenses related to the transaction, including a payment to Alere (as defined and discussed below). The Company intends to use the net proceeds for working capital and general corporate purposes. On August 13, 2021, the Company and Auctus entered a First Amendment to the Senior Secured Promissory Note, Warrants and Securities Purchase Agreement dated March 11, 2011 (the “Auctus Amendment”). On October 28, 2021, the Company and Auctus Fund, LLC entered a Second Amendment to the Senior Secured Promissory Note, Warrants and Securities Purchase Agreement dated March 11, 2011 (the “Auctus Second Amendment”). F- 22 Table of Contents The Auctus Note has a maturity date of one year from the Issuance Date. The Auctus Note bears interest at a rate of 12 % per annum, which is also payable on maturity, with the understanding that the first 12 months of interest (equal to $ 180,000 ) is guaranteed and deemed to be earned in full as of the Issuance Date. In the event the Company fails to pay any amount when due under the Auctus Note, the interest rate will increase to the greater of 16 % or the maximum amount permitted by law. The Auctus Note may be prepaid during the first 180 calendar days from the Issuance Date subject to a 110 % prepayment penalty on all principal and accrued but unpaid interest then outstanding. The Auctus Note may not be paid in whole or in part after 180 calendar days from the Issuance Date. Auctus may convert any amount due under the Auctus Note at any time, and from time to time, into shares of the Company’s common stock at a conversion price of $ 3.50 per share; provided, however, that Auctus may not convert any portion of the Auctus Note that would cause it to beneficially own in excess of 4.99 % of the Company’s common stock. The conversion price and number of shares of the Company’s common stock issuable upon conversion of the Auctus Note will be subject to adjustment from time to time for any subdivision or consolidation of shares and other standard dilutive events. The Auctus Note (as amended by the Auctus Amendment and Auctus Second Amendment) contains a number of events of default, including but not limited to the following: (i) the Company’s failure to be quoted or listed (as applicable) on the OTCQB, OTCQX, any tier of the NASDAQ Stock Market, the New York Stock Exchange, or the NYSE American by December 15, 2021 (the “Trading Date”) and (ii) the Company’s failure to file a registration statement covering the Auctus’ resale at prevailing market prices (and not fixed prices) of all of the common stock underlying the Auctus Note and the Auctus Warrants (as defined below) within 30 calendar days following the Issuance Date, (iii) cause the registration statement to become effective by the Trading Date and (iv) maintain a certain share reserve for the conversion of the note. An event of default is subject to a confession of judgment against the Company in the favor of Auctus. Additionally, the Auctus Note is secured by all of the assets of the Company pursuant to a security agreement that was entered into in connection with the issuance of the Auctus Note (the “Security Agreement”); provided, however, the Security Agreement will be automatically terminated as of the Trading Date assuming no event of default then exists. The Auctus Amendment waived any events of default which may have existed under Sections 3.18 and 3.19 of the Auctus Note prior to August 13, 2021. There were no events of default for the year ended December 31, 2021 and through the note repayment on March 15, 2022 (see Note 19). In connection with the issuance of the Auctus Note, Auctus was also issued two five-year warrants as follows: the first warrant was to purchase up to an aggregate of 171,429 shares of the Company’s common stock at an exercise price of $ 4.375 per share (the “First Auctus Warrant”) and the second warrant was to purchase up to an aggregate of 142,858 shares of the Company’s common stock at an exercise price of $ 5.25 per share (the “Second Auctus Warrant”). The First Auctus Warrant and the Second Auctus Warrant are referred to herein as the “Auctus Warrants” and the shares of the Company’s common stock underlying the Auctus Warrants are referred to as the “Auctus Warrant Shares”. Auctus may not exercise the Auctus Warrants with respect to any number of Auctus Warrant Shares that would cause it to beneficially own in excess of 4.99 % of the Company’s common stock. The Auctus Warrants may be exercised for cash, or, if the “market price” of the Company’s common stock is greater than the Auctus Warrant’s exercise price, and there is not an effective registration statement covering the Auctus Warrant Shares, the Auctus Warrants may be exercised on a cashless basis. The number of shares of common stock to be deliverable upon exercise of the Auctus Warrants is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events, or in the event the Company effects a reorganization, reclassification, merger, consolidation, disposition of assets, or other fundamental transaction. Pursuant to the Auctus Purchase Agreement, the Company granted Auctus piggyback registration rights with respect to the shares underlying the Auctus Note and the Auctus Warrant. In addition, the Company agreed that, while any amount remains unpaid under the Auctus Note, it would not sell securities on more favorable terms than those provided to Auctus, without adjusting Auctus’ terms accordingly. Further, among other things, the Company agreed that, while any amount remains unpaid under the Auctus Note, it would not enter into any variable rate transactions. Further and in connection with the issuance of the Auctus Note, the Company entered into a registration rights agreement with Auctus (the “Registration Rights Agreement”) whereby it the Company agreed to (i) file with the Securities and Exchange Commission a registration statement covering resale by Auctus at prevailing market prices (and not fixed prices) of all of the common stock underlying the Auctus Note and the Auctus Warrants within 30 calendar days following the Issuance Date, (ii) cause the registration statement to become effective by the Trading Date. Alere Financial, A Division of Cova Capital Partners, LLC (“Alere”), served as the placement agent for the Auctus Note and received a total cash fee equal to $ 120,000 (or 8 % of the principal amount of the Auctus Note). Additionally, Alere received warrants to purchase 654,545 and 545,455 shares of common stock at an exercise price equal to $ 4.375 and $ 5.25 , respectively, for such services rendered. Alere’s warrants are in a customary form reasonably acceptable to Alere and exercisable for 3 years . Mr. Levy, the Company’s Chief F- 23 Table of Contents Executive Officer, is affiliated with Alere but has waived any portion of such fee received by Alere to which he is entitled as an affiliate of Alere. As of December 31, 2021, the Auctus Fund Financing note outstanding was $ 1,357,808 , which consisted of principal of $ 1,680,000 , net of unamortized balance of $ 256,410 of a beneficial conversion and warrant features, unamortized original issue discount of $ 34,521 . and unamortized debt issuance costs of $ 31,261 . Investor Private Placement Offering On September 2, 2021, the Company conducted a closing of a private placement offering (the “September 2 Offering”) with twenty accredited investors (the “September 2 Investors”) whereby the Company entered into a securities purchase agreement (the “September Purchase Agreement”) with the Investors pursuant to which the Company issued to the Investors subordinated secured convertible promissory notes in the aggregate principal amount of $ 1,620,000 (the “September 2 Notes”). The net proceeds received by the Company were $ 1,504,400 (after deducting fees owed to its placement agent, Alere (as defined and discussed below)). The Company intends to use the net proceeds for working capital and general corporate purposes. The Notes have a maturity date of one year from September 2, 2021. The Notes bear interest at a rate of 12 % per annum, which is also payable on maturity, with the understanding that the first 12 months of interest (equal to an aggregate of $ 194,400 ) is guaranteed and deemed to be earned in full as of September 2, 2021. In the event the Company fails to pay any amount when due under the September 2 Notes, the interest rate will increase to the greater of 18 % or the maximum amount permitted by law. The Notes may be prepaid during the first 180 calendar days from September 2, 2021 subject to a 110 % prepayment penalty on all principal and accrued but unpaid interest then outstanding. The Notes may not be prepaid in whole or in part after 180 calendar days from September 2, 2021. The September 2 Investors may convert any amount due under the September 2 Notes at any time, and from time to time, into shares of the Company’s common stock at a conversion price of $ 5.25 per share; provided, however, that the Investors may not convert any portion of the September 2 Notes that would cause such Investor to beneficially own in excess of 4.99 % of the Company’s common stock. The conversion price and number of shares of the Company’s common stock issuable upon conversion of the September Notes will be subject to adjustment from time to time for any subdivision or consolidation of shares and other dilutive events. If the Company issues Common Stock or securities convertible into Common Stock at a per share price lower than the conversion price of $ 5.25 (the “Base Price”), then the conversion price of the Notes will be reduced to the new Base Price at the option of the holder. Additionally, the September 2 Notes are secured by all of the assets of the Company pursuant to a security agreement that was entered into in connection with the issuance of the September 2 Notes (the “September 2 Security Agreement”); provided, however, the Security Agreement will automatically terminate on the business day immediately preceding the Company’s common stock being quoted or listed for trading on the OTCQB Marketplace, OTCQX, any tier of the NASDAQ, Stock Market, the New York Stock Exchange, or the NYSE American assuming that no event of default under the Notes then exists. The secured interest in all of the Company’s assets granted to the Investors is subordinated to a first priority secured interest previous granted to Auctus Fund, LLC pursuant to the terms of a September 2 Subordination Agreement (the “September 2 Subordination Agreement”). In connection with the issuance of the Notes, the Investors were also issued five-year warrants to purchase up to an aggregate of 308,571 shares of the Company’s common stock (the “September Warrant Shares”) at an exercise price of $ 5.25 per share (the “September 2 Warrants”). The Investors may not exercise the September 2 Warrants with respect to any number of September 2 Warrant Shares that would cause such Investor to beneficially own in excess of 4.99 % of the Company’s common stock. The September 2 Warrants may be exercised for cash, or, if the “market price” of the Company’s common stock is greater than the September 2 Warrant’s exercise price, and there is not an effective registration statement covering the September 2 Warrant Shares, the September 2 Warrants may be exercised on a cashless basis. The number of shares of common stock to be deliverable upon exercise of the September 2 Warrants is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events, or in the event the Company effects a reorganization, reclassification, merger, consolidation, disposition of assets, or other fundamental transaction. In the event that the Company issues Common Stock, securities convertible into Common Stock, or the right to acquire Common Stock at an effective per share price less than $5.25 (the “Base Price”), the per share price the of September 2 Warrants are adjustable down to the new Base Price at the option of the holder. If such adjustment occurs, the number of warrant shares issuable under the September 2 Warrants shall also be increased such that the aggregate exercise price of the warrants shall be the same of the aggregate price prior to the adjustment. Pursuant to the September 2 Purchase Agreement, the Company agreed that, while any amount remains unpaid under the September 2 Notes, it would not sell securities on more favorable terms than those provided to the Investors, without adjusting the Investors’ terms accordingly. This right will terminate as of the Post Lock-Up Termination Date (as defined in the September 2 Purchase Agreement). F- 24 Table of Contents Further, among other things, the Company agreed that, while any amount remains unpaid under the Notes, it would not enter into any variable rate transactions. In connection with the issuance of the September 2 Notes, the Company entered into a registration rights agreement with the September 2 Investors (the “September 2 Registration Rights Agreement”) whereby the Company agreed to file a registration statement covering the September 2 Investors’ resale of all of the common stock underlying the September 2 Notes and the September 2 Warrants upon the earlier of 30 calendar days following the effectiveness of a registration statement relating to an underwritten public offering of the Company or December 31, 2021 and cause such registration statement to become effective within 150 calendar days following the initial filing date. In connection with the September 2 Offering, the Investors entered into a Lock-Up Agreement (the “Lock-Up Agreement”) whereby each Investor agreed not to sell certain percentages of the equity such Investor owns in the Company for a certain period of time subsequent to an initial public offering of the Company’s equity. Alere Financial, a division of Cova Capital Partners, LLC (“Alere”), served as the placement agent for the September 2Notes and received a total cash fee equal to $ 115,600 and warrants to purchase up to 770,667 shares of the Company’s common stock, with a term of five years, at a per share exercise price of $ 5.25 . Mr. Levy, the Company’s Chief Executive Officer, is affiliated with Alere but has waived any portion of such fee received by Alere to which he is entitled as an affiliate of Alere. As of December 31, 2021, the September 2 Notes’ outstanding balance was $ 678,864 , which consisted of principal of $ 1,814,400 , net of unamortized balance of $ 927,734 of a beneficial conversion and warrant features, unamortized original issue discount of $ 130,312 and unamortized debt issuance costs of $ 77,490 . ​ 14. Warrant Liability On September 2, 2021, March 11, 2021, February 3, 2021, December 24, 2020, March 18, 2020, September 10, 2019, and November 6, 2019, the Company issued 22,019 , 34,286 , 7,429 , 7,286 , 44,286 , 35,715 and 114,286 warrants, respectively, as equity issuance consideration, in connection with a private placement of the Company’s common stock. The warrants entitle the holder to purchase one share of our common stock at an exercise price equal to $ 0.49 to $ 5.25 per share at any time on or after their issuance date and on or prior to the close of business 3 years after the issuance date (the “Termination Date”). The Company determined that these warrants are free standing financial instruments that are legally detachable and separately exercisable from the common stock included in the public share offering. Management also determined that the warrants required classification as a liability pursuant to ASC 815. In accordance with the accounting guidance, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations. The fair value of the warrant liabilities was measured using a Black-Scholes model. Significant inputs into the model at the inception are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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) ​ $ .0525 ​ September 2, 2026 ​ $ 3.50 0.78 % 182.74 % 5.0 ​ $ 0.3325 ​ $ — March 11, 2021 (2) ​ $ 4.375 – 5.25 ​ March 11, 2026 ​ $ 3.50 0.17 % 172.54 % 5.0 ​ $ 0.3325 - 0.0329 ​ $ — February 3, 2021 (3) ​ $ 2.80 ​ February 3, 2024 ​ $ 2.80 0.18 % 171.71 % 3.0 ​ $ 2.417461 ​ $ — December 24, 2020 (4) ​ $ 2.80 ​ December 24, 2023 ​ $ 2.80 0.17 % 172.54 % 3.0 ​ $ 2.422658 ​ $ — March 18, 2020 (5) ​ $ 1.40 ​ March 18, 2023 ​ $ 1.40 0.66 % 137.41 % 3.0 ​ $ 1.075547 ​ $ — September 10, 2019 (6) ​ $ 0.49 ​ September 10, 2022 ​ $ 0.49 1.61 % 139.84 % 3.0 ​ $ 0.38185 ​ $ — November 6, 2019 (7) ​ $ 0.49 ​ November 6, 2022 ​ $ 0.49 1.60 % 138.48 % 3.0 ​ $ 0.38255 ​ $ — ​ F- 25 Table of Contents Significant inputs into the model at the reporting period measurement dates are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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) December 31, 2021 (1) ​ $ .0525 ​ September 2, 2026 ​ $ 3.50 0.98 % 205.16 % 4.67 ​ $ 0.0968371 ​ $ — December 31, 2021 (2) ​ $ 4.375 – 5.25 ​ March 11, 2026 ​ $ 3.50 0.98 % 205.16 % 4.19 ​ $ 0.096101 - 0.0957467 ​ $ — December 31, 2021 (3) ​ $ 2.80 ​ February 3, 2024 ​ $ 2.80 0.28 % 205.16 % 2.09 ​ $ 0.0690620 ​ $ — December 31, 2021 (4) ​ $ 2.80 ​ December 24, 2023 ​ $ 2.80 0.28 % 205.16 % 1.98 ​ $ 0.0681813 ​ $ — December 31, 2021 (5) ​ $ 1.40 ​ March 18, 2023 ​ $ 1.40 0.28 % 205.16 % 1.21 ​ $ 0.0296661 ​ $ — December 31, 2021 (6) ​ $ 0.49 ​ September 10, 2022 ​ $ 0.49 0.09 % 205.16 % 0.69 ​ $ 0.0091855 ​ $ — December 31, 2021 (7) ​ $ 0.49 ​ November 6, 2022 ​ $ 0.49 0.19 % 205.16 % 0.85 ​ $ 0.0085006 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Future ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated ​ ​ ​ ​ ​ Warrant ​ ​ ​ ​ Interest ​ ​ ​ Time to ​ Calculated ​ Quarterly ​ ​ Exercise ​ Expiration ​ Stock ​ Rate ​ Volatility ​ Maturity ​ fair value ​ Dividend Black-Scholes Assumptions Price Date Price (8) (annual) (9) (annual) (10) (Years) per share per share (11) December 31, 2020 (4) ​ $ 2.80 ​ December 24, 2020 ​ $ 2.80 0.17 % 172.38 % 2.98 ​ $ 2.422658 ​ $ — December 31, 2020 (5) ​ $ 1.40 ​ March 18, 2023 ​ $ 1.40 0.13 % 172.38 % 2.21 ​ $ 1.075547 ​ $ — December 31, 2020 (6) ​ $ 0.49 ​ September 10, 2022 ​ $ 0.49 0.13 % 172.38 % 1.85 ​ $ 0.38185 ​ $ — December 31, 2020 (7) ​ $ 0.49 ​ November 6, 2022 ​ $ 0.49 1.13 % 172.38 % 1.69 ​ $ 0.3825 ​ $ — ​ (1) Based on the terms provided in the warrant agreement related to the issuance of common stock of on September 2 nd , 2021 (2) Based on the terms provided in the warrant agreement related to the issuance of common stock of on March 11 th , 2021 (3) Based on the terms provided in the warrant agreement related to the issuance of common stock of on February 3 rd , 2021 (4) Based on the terms provided in the warrant agreement related to the issuance of common stock of on December 24 th , 2020 (5) Based on the terms provided in the warrant agreement related to the issuance of common stock of on March 18 th , 2020 (6) Based on the terms provided in the warrant agreement related to the issuance of common stock of on September 10 th , 2019 (7) Based on the terms provided in the warrant agreement related to the issuance of common stock of on November 6 th , 2019 (8) Based on the observable transaction value of common stock of per the most recent stock issuance financing agreements. (9) Interest rate for U.S. Treasury Bonds, as of the issuance dates and each presented period ending date, as published by the U.S. Federal Reserve. (10) Based on the historical daily volatility of Guideline Public Companies and each presented period ending date. (11) Current estimated dividend payments beyond initial four quarters. At a future date, the company will review the working capital needs and make a final determination of any future dividend payments. F- 26 Table of Contents The warrants outstanding and fair values at each of the respective valuation dates are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Warrants Fair Value ​ ​ Warrant Liability ​ Outstanding ​ per Share ​ Fair Value Fair Value at initial measurement date of 12/31/19 150,000 ​ $ 0.38185 ​ $ 56 ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value at initial measurement dates 51,572 ​ $ 1.2656 ​ $ 65 Change in fair value of warrant liability ​ ​ ​ ​ ​ ​ ​ 2 Fair Value as of period ending 12/31/2020 201,572 ​ ​ $ 123 Fair Value at initial measurement dates 63,733 ​ $ 3.2097 ​ $ 203 Change in fair value of warrant liability ​ ​ ( 8 ) Fair Value as of period ending 12/31/2021 265,305 ​ ​ $ 318 ​ The warrant liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair value includes various assumptions about of future activities and the Company’s stock prices and historical volatility of Guideline Public Companies as inputs. As of December 31, 2020, none of the warrants have been exercised. ​ 15. Related Party Transactions Convertible Promissory Note On December 24, 2020, the Company issued two Secured Convertible Promissory Notes in an aggregate amount of $ 100,000 to Mr. Stein, a member of the board of directors and an entity affiliated to Mr. Stein, N&F Trust 774 (See Note 13). The notes were repaid in March 2021. On September 2, 2021, the Company issued three Secured Convertible Promissory Notes to members of the board of directors in an aggregate amounts of $ 150,000 to Mr. Stein, $ 150,000 to Mr. Stefansky (Bezalel Partners, LLC), and $ 50,000 to Dr. Zeldis (See Note 13). Sport Defense Acquisition On May 29, 2020, the Company entered into a Membership Interest Purchase Agreement whereby the Company purchased all of the outstanding equity securities of Sport Defense LLC., Adam Levy, the Company’s Chief Executive Officer and Chief Financial Officer, and Nachum Stein, a member of the Company’s Board of Directors (the “Board”), were each members of Sport Defense and part of the Sellers. Mr. Levy received 44,197 of the shares and Mr. Stein received 91,072 of the shares (See Note 4). Advances Dr. Jerome Zeldis, a member of the Company Board, has an outstanding balance due of $ 30,000 for services as of December 31, 2020. The fees were paid in March, 2021. ​ 16. Income Taxes The Company has established a full valuation allowance for its deferred tax assets based on management’s belief that it is not more likely than not that the related deferred tax assets will be realized. For the years ended December 31, 2021 and 2020, there was no income tax expense or benefit. At December 31, 2021 and December 31, 2020, the Company had no recorded tax liabilities for uncertain tax positions. The Company does not expect any significant changes to the estimate amount of liabilities associated with uncertain tax positions in the next 12 months. Pursuant to the Spin-off, the Company and Alliqua BioMedical, Inc. entered into a Tax Matters Agreement to provide for the payment of tax liabilities and entitlement of refunds; allocation of the responsibility for, and cooperation in, filing of tax returns; and other matters relating to taxes for the pre- and post-Spin-off periods. Prior to the consummation of the Spin-Off, NexGel’s operating results were included in Adynxx consolidated U.S. federal and state income tax returns. For the purposes of the Company’s Consolidated and Combined Financial Statements for periods prior to the Separation, income tax expense and deferred tax balances have been recorded as if the Company filed tax returns on a standalone basis F- 27 Table of Contents separate from Adynxx. The Separate Return Method applies the accounting guidance for income taxes to the standalone financial statements as if the Company was a separate taxpayer and a standalone enterprise prior to the separation from Adynxx. The income tax (benefit) provision consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For The Years Ended ​ ​ December 31 ​ 2021 2020 Federal: ​ ​ Current ​ $ — ​ $ — Deferred ​ — ​ — State and local: ​ ​ Current ​ — ​ — Deferred ​ — ​ — Income tax provision ​ $ — ​ $ — ​ Company has established a full valuation allowance for its deferred tax assets based on management’s belief that it is not more likely than not that the related deferred tax assets will be realized. For the years ended December 31, 2021 and 2020, the expected tax benefit based on the statutory rate reconciled with the actual benefit is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ For The Years Ended December 31, ​ 2021 2020 U.S. federal statutory rate 21.0 % 21.0 % State tax rate, net of federal benefit 5.3 % 5.3 % Permanent differences ​  Non-deductible expenses ( 10.5 ) % ( 1.3 ) % State tax change 0.0 % 0.0 % Timing differences ​ 0.6 % 0.0 % Change in valuation allowance ( 16.4 ) % ( 25.0 ) % Income tax provision 0.0 % 0.0 % ​ For the years ended December 31, 2021 and 2020, differences between the expected tax expense based on the federal statutory rate and the actual tax expense is primarily attributable to losses for which no benefit is recognized. As of December 31, 2021 and 2020, the Company’s deferred tax assets consisted of the effects of temporary differences attributable to the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2021 2020 Deferred tax assets: ​ ​ Net operating loss carryforwards ​ $ 3,165 ​ $ 2,494 Intangible Assets ​ — ​ — Other ​ 4 ​ 3 Total deferred tax assets ​ 3,169 ​ 2,497 Valuation allowance ​ ( 3,169 ) ​ ( 2,382 ) Deferred tax assets, net of valuation allowance ​ $ — ​ $ 115 Deferred tax liabilities: ​ ​ ​ Property and equipment, net ​ — ​ ( 115 ) Total deferred tax liabilities ​ — ​ ( 115 ) Net deferred tax liabilities ​ $ — ​ $ — ​ The deferred tax assets associated with net operating losses included in the table above reflect proforma net operating losses as if the Company were a separate taxpayer during the periods presented. As of December 31, 2021 and 2020, reported approximately $ 12.6 million and $ 10.0 million of federal NOL carryovers, respectively, which begin to expire in 2029 and through 2036. Similarly, the subsidiary’s Pennsylvania state returns reported state NOL carryovers of approximately $ 12.6 million and $ 10 million, as of December 31, 2021 and 2020, respectively. However, these loss carryforwards on a separate company basis may be subject to limitations on the amounts that may be utilized pursuant to Internal Revenue Code section 382 and applicable state law. Section 382 imposes significant F- 28 Table of Contents limitations on the utilization of net operating losses after certain changes of corporate ownership. The Company will need to determine the amount of loss carryforwards that may be utilized in the future as necessary. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of the deferred tax assets is dependent upon the future generation of taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance against net deferred tax assets at December 31, 2021 and 2020 because management has determined that it is more likely than not that these deferred tax assets will not be realized. The Company is subject to taxation in the U.S. and various states. Based on the history of net operating losses all jurisdictions and tax years are open for examination until the operating losses are utilized or the statute of limitations expires. As of December 31, 2021 and 2020, the Company does not have any significant uncertain tax positions. ​ 17. Commitments and Contingencies ​ Litigation ​ The Company may be subject to legal proceedings and claims that arise in the ordinary course of business. Management is not currently aware of any matters that will have a material effect on the financial position, results of operations, or cash flows of the Company. ​ 18. Concentrations of Risk The Company’s revenues are concentrated in a small group of customers with some individually having more than 10 % of total revenues. Revenues from three customers that exceeded 10 % of total revenues for the year ended December 31, 2021 were 15 %, 14 %, and 13 %. The accounts receivable from the top three customers were 45 %, 12 %, and 8 % as well as 20 % from one other customer of the total accounts receivable as of December 31, 2021. Revenues from three customers that exceeded 10 % of total revenues for the year ended December 31, 2020 were 45 %, 22 %, and 11 %. The accounts receivable from the top three customers were 57 %, 0 %, and 0 % as well as 12 % from one other customer of the total accounts receivable as of December 31, 2020. The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash. Cash balances are maintained principally at major U.S. financial institutions and are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to regulatory limits. From time to time, cash balances may exceed the FDIC insurance limit. The Company has not experienced any credit losses associated with its cash balances in the past. ​ 19. Subsequent Events On March 11, 2021, the Company entered into a securities purchase agreement with Auctus Fund, LLC, a Delaware limited liability company (“Auctus”), pursuant to which the Company issued to Auctus a senior secured convertible promissory note in the principal amount of $ 1,500,000 with a one-year term (the “Auctus Note”). The Auctus Note was fully repaid by the Company, including all principle and interest, on March 15, 2022 which thereby extinguished the Auctus Note in its entirety. ​ F- 29 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ​ None. ​