What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-08 compared with 2022-08-10 · 167 added, 153 removed, 164 unchanged (66% of the section changed)

50 unchanged sentences

of water vapor through a substance] and release rate) while maintaining product integrity.

Additionally, we have the manufacturing ability

Additionally, we have the manufacturing capability

to offer broad choices in the selection of liners onto which the gels are coated.

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of Operations

following sections discuss and analyse the changes in the significant line items in our statements of operations for the comparison periods

of the Three Months ended June 30, 2022 and 2021

the three months ended June 30, 2022 revenues were $561 thousand and increased by $144 thousand, or 35%, when compared to $417 thousand

for the three months ended June 30, 2021.

The increase in our overall revenues was due to sales growth of new products as well as our

initiatives in custom label manufacturing and branded consumer product.

following sections discuss and analyze the changes in the significant line items in our statements of operations for the comparison periods

of the Three Months ended September 30, 2022 and 2021

the three months ended September 30, 2022 revenues were $568 thousand and increased by $233 thousand, or 69.6%, when compared to

$335 thousand for the three months ended September 30, 2021.

The increase in our overall revenues was primarily due to sales growth

in branded consumer products and our contract manufacturing products.

profit (loss) .

Our gross profit was $101 thousand for the three months ended June 30, 2022 compared to a gross profit of $4 thousand

for the three months ended June 30, 2021.

The profit recorded for the three months ended June 30, 2022, as compared to a profit recorded

for the three months ended June 30, 2021, was primarily due to the higher volume of contract manufacturing sales against fixed costs.

Gross profit was approximately 18% for the three months ended June 30, 2022 compared to a gross profit of 1% for the three months ended

June 30, 2021.

The Company anticipates continued improvement in gross margins due to both increased revenue against fixed facility expenses

and larger productions runs on commercially proven products.

components of cost of revenues are as follows for the three months ended June 30, 2022 and 2021 ($ in thousands):

Our gross profit was $148 thousand for the three months ended September 30, 2022 compared to a gross loss of $57 thousand

for the three months ended September 30, 2021.

The profit recorded for the three months ended September 30, 2022, as compared to a loss

recorded for the three months ended September 30, 2021, was primarily due to the higher volume of contract manufacturing sales against

Gross profit was approximately 26% for the three months ended September 30, 2022 compared to a gross loss of (17)% for the

three months ended September 30, 2021.

The Company anticipates continued improvement in gross margins due to both increased revenue against

fixed facility expenses and larger productions runs on commercially proven products.

components of cost of revenues are as follows for the three months ended September 30, 2022 and 2021 ($ in thousands):

Three Months Ended

September 30,

Cost of revenues

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Total cost of revenues

of revenues increased by $47 thousand, or 11.0%, to $460 thousand for the three months ended June 30, 2022, as compared to $413 thousand

for the three months ended June 30, 2021.

The increase in cost of revenues is primarily aligned with the new product line growth in the

current year.

of revenues increased by $28 thousand, or 7.1%, to $420 thousand for the three months ended September 30, 2022, as compared to $392 thousand

for the three months ended September 30, 2021.

The increase in cost of revenues is primarily aligned with the revenue growth in the current

general and administrative expenses .

The following table highlights selling, general and administrative expenses by type for the

three months ended June 30, 2022 and 2021 ($ in thousands):

three months ended September 30, 2022 and 2021 ($ in thousands):

Three Months Ended

September 30,

Selling, general and administrative expenses

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Total Selling, general and administrative expenses

general and administrative expenses increased by $161 thousand, or 29%, to $708 thousand for the three months ended June 30, 2022, as

compared to $547 thousand for the three months ended June 30, 2021.

The increase in Selling, general and administrative expenses is primarily

attributable to our costs for professional fees and other administrative expenses in the current period associated with public company

governance requirements.

and benefits increased by $52 thousand, or 63%, to $135 thousand for the three months ended June 30, 2022, as compared to $83 thousand

for the three months ended June 30, 2021.

The number of employees increased compared to the prior period and officer compensation increased

in conjunction with contract renewals.

compensation decreased by $16 thousand, or 17%, to $79 thousand for the three months ended June 30, 2022, as compared to $95 thousand

for the three months ended June 30, 2021.

The share-based compensation related to the issuance of stock restricted stock awards and options

to our CEO and options to board members, employees, and advisors.

Expenses and professional fees increased by $125 thousand, or 34%, to $490 thousand for the three months ended June 30, 2022 from $365

thousand for the three months ended June 30, 2021.

Other Selling, general and administrative expenses generally consist of costs associated

with our selling efforts and general management, including information technology, travel, training and recruiting.

We continued to incur

legal, accounting and consulting fees associated with public company governance requirements, however, the increase in professional fees

compared to the prior year period was the primary an increase in professional fees in connections with our in the NASDAQ up-listing on

December 27, 2021.

general and administrative expenses increased by $439 thousand, or 79.4%, to $992 thousand for the three months ended September 30,

2022, as compared to $553 thousand for the three months ended September 30, 2021.

The increase in selling, general and

administrative expenses is primarily attributable to an increase of franchise tax expense, increased research and development

investment and the costs for professional fees and other administrative expenses in the current period associated with public

company governance requirements.

The exceptionally high franchise tax charge of $220 thousand was due to the company’s IPO and

related increase in gross assets.

In August of 2022 the Company reduced its authorized shares at its annual

stockholders’ meeting.

The result of this reduction, assuming a similar asset base as the Company currently has will reduce

the 2023 franchise tax liability to approximately $28 thousand.

and benefits increased by $31 thousand, or 35.6%, to $118 thousand for the three months ended September 30, 2022, as compared to $87

thousand for the three months ended September 30, 2021.

The number of employees increased compared to the prior period and officer compensation

increased in conjunction with contract renewals.

compensation increased by $40 thousand, or 88.9%, to $85 thousand for the three months ended September 30, 2022, as compared to $45 thousand

for the three months ended September 30, 2021.

The share-based compensation related to the issuance of restricted stock awards

and options to our CEO, restricted stock awards to all employees and options to board members, employees, and advisors.

expenses and professional fees increased by $367 thousand, or 87.8%, to $785 thousand for the three months ended September 30, 2022

from $418 thousand for the three months ended September 30, 2021.

Other selling, general and administrative expenses generally

consist of costs associated with our selling efforts and general management, including information technology, travel, training and

We continued to incur legal, accounting and consulting fees associated with public company governance requirements,

however, the increase in professional fees compared to the prior year period was primarily due to the increase in professional

fees in connection with our in the NASDAQ up-listing on December 27, 2021.

and development expenses .

Research and development expenses increased by $101 thousand to $111 thousand for the three months ended

June 30, 2022 from $10 thousand for the three months ended June 30, 2021.

The increase is due to the initiation of two proof of concept

studies for drug delivery candidates utilizing our hydrogel technology as well as continuing development on the NEXDrape medical device.

of the Six Months ended June 30, 2022 and 2021

the six months ended June 30, 2022 revenues were $956 thousand and increased by $273 thousand, or 40%, when compared to $683 thousand

for the six months ended June 30, 2021.

The increase in our overall revenues was due to sales growth of new products as well as our initiatives

in custom label manufacturing and branded consumer product.

Research and development expenses increased by $193 thousand for the three months ended September 30, 2022

from $0 for the three months ended September 30, 2021.

The increase is due to the initiation of two proof of concept studies for drug

delivery candidates utilizing our hydrogel technology.

of the Nine Months ended September 30, 2022 and 2021

the nine months ended September 30, 2022 revenues were $1,524 thousand and increased by $506 thousand, or 49.7%, when compared to $1,018

thousand for the nine months ended September 30, 2021.

The increase in our overall revenues was due to sales growth of new products as

well as our initiatives in custom label manufacturing and branded consumer product.

profit (loss) .

Our gross profit was $72 thousand for the six months ended June 30, 2022 compared to a gross loss of $39 thousand

for the six months ended June 30, 2021.

The profit recorded for the six months ended June 30, 2022, as compared to a loss recorded for

the six months ended June 30, 2021, was primarily due to the higher volume of contract manufacturing sales against fixed costs.

profit was approximately 8% for the six months ended June 30, 2022 compared to a gross loss of 6% for the six months ended June 30, 2021.

The components of cost of revenues are as follows for the six months ended June 30, 2022 and 2021 ($ in thousands):

Six Months Ended

Our gross profit was $220 thousand for the nine months ended September 30, 2022 compared to a gross loss of $(95)

thousand for the nine months ended September 30, 2021.

The profit recorded for the nine months ended September 30, 2022, as compared

to a loss recorded for the nine months ended September 30, 2021, was primarily due to the higher volume of contract manufacturing sales

against fixed costs.

Gross profit was approximately 14.4% for the nine months ended September 30, 2022 compared to a gross loss of (9.3)%

for the nine months ended September 30, 2021.

The components of cost of revenues are as follows for the nine months ended September 30,

2022 and 2021 ($ in thousands):

and finished products

and amortization

production and other expenses

cost of revenues

Materials and finished products

Compensation and benefits

Depreciation and amortization

Equipment, production and other expenses

Total cost of revenues

of revenues increased by $162 thousand, or 22%, to $884 thousand for the six months ended June 30, 2022, as compared to $722 thousand

for the six months ended June 30, 2021.

The increase in cost of revenues is primarily aligned with the new product line growth in the

current year.

of revenues increased by $191 thousand, or 17.2%, to $1,304 thousand for the nine months ended September 30, 2022, as compared to $1,113

thousand for the nine months ended September 30, 2021.

The increase in cost of revenues is primarily aligned with the new product line

growth in the current year.

general and administrative expenses .

The following table highlights selling, general and administrative expenses by type for the

six months ended June 30, 2022 and 2021 ($ in thousands):

Six Months Ended

nine months ended September 30, 2022 and 2021 ($ in thousands):

general and administrative expenses

and amortization

expenses and professional fees

Selling, general and administrative expenses

Compensation and benefits

Share-based compensation

Depreciation and amortization

Other expenses and professional fees

Total Selling, general and administrative expenses

general and administrative expenses increased by $450 thousand, or 44%, to $1,467 thousand for the six months ended June 30, 2022, as

compared to $1,017 thousand for the six months ended June 30, 2021.

The increase in Selling, general and administrative expenses is primarily

attributable to our costs for professional fees and other administrative expenses in the current period associated with public company

governance requirements.

and benefits increased by $89 thousand, or 52%, to $261 thousand for the six months ended June 30, 2022, as compared to $172 thousand

for the six months ended June 30, 2021.

The number of employees increased compared to the prior period and officer compensation increased

in conjunction with contract renewals.

compensation decreased by $51 thousand, or 28%, to $134 thousand for the six months ended June 30, 2022, as compared to $185 thousand

for the six months ended June 30, 2021.

The share-based compensation related to the issuance of stock restricted stock awards and options

to our CEO and options to board members, employees, and advisors.

expenses and professional fees increased by $412 thousand, or 63%, to $1.1 million for the six months ended June 30, 2022 from $653 thousand

for the six months ended June 30, 2021.

Other Selling, general and administrative expenses generally consist of costs associated with

our selling efforts and general management, including information technology, travel, training and recruiting.

We continued to incur

legal, accounting and consulting fees associated with public company governance requirements, however, the increase in professional fees

compared to the prior year period was the primary an increase in professional fees in connections with our in the NASDAQ up-listing on

December 27, 2021.

general and administrative expenses increased by $888 thousand, or 56.5%, to $2,459 thousand for the nine months ended September 30,

2022, as compared to $1,571 thousand for the nine months ended September 30, 2021.

The increase in selling, general and administrative

expenses is primarily attributable to our costs for professional fees and other administrative expenses in the current period associated

with public company governance requirements.

and benefits increased by $120 thousand, or 46.3%, to $379 thousand for the nine months ended September 30, 2022, as compared to $259

thousand for the nine months ended September 30, 2021.

The number of employees increased compared to the prior period and officer compensation

increased in conjunction with contract renewals.

compensation decreased by $11 thousand, or 4.8%, to $219 thousand for the nine months ended September 30, 2022, as compared to $230 thousand

for the nine months ended September 30, 2021.

The share-based compensation related to the issuance of restricted stock awards and

options to our CEO, restricted stock awards to all employees and options to board members, employees, and advisors.

expenses and professional fees increased by $778 thousand, or 72.6%, to $1.9 million for the nine months ended September 30, 2022

from $1.1 million for the nine months ended September 30, 2021.

Other selling, general and administrative expenses generally consist

of costs associated with our selling efforts and general management, including information technology, travel, training and

We continued to incur legal, accounting and consulting fees associated with public company governance requirements,

however, the increase in professional fees compared to the prior year period was primarily due to the increase in

professional fees in connection with our in the NASDAQ up-listing on December 27, 2021.

and development expenses .

Research and development expenses increased by $118 thousand to $135 thousand for the six months ended

June 30, 2022 from $17 thousand for the six months ended June 30, 2021.

The increase is due to the initiation of two proof of concept

studies for drug delivery candidates utilizing our hydrogel technology as well as continuing development on the NEXDrape medical device.

Research and development expenses increased by $311 thousand to $328 thousand for the nine months ended

September 30, 2022 from $17 thousand for the nine months ended September 30, 2021.

The increase is due to the initiation of two proof

of concept studies for drug delivery candidates utilizing our hydrogel technology as well as continuing development on the NEXDrape medical

and Capital Resources

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalent at end of year

of June 30, 2022, we had $4.4 million of cash and cash equivalents and $5.4 million of marketable securities, compared to $13.4

cash used in operating activities

cash used in investing activities

cash provided by (used in) financing activities

increase (decrease) in cash and cash equivalents

and cash equivalents at beginning of period

and cash equivalent at end of period

of September 30, 2022, we had $1.4 million of cash and cash equivalents and $6.0 million of marketable securities, compared to $13.4

million of cash at December 31, 2021.

Net cash used in operating activities was $1.5 million and $1.0 million for the six months

ended June 30, 2022 and 2021, respectively.

See Notes 2 and 3 of our financial statements above for a more detailed

discussion of our marketable securities.

cash used in investing activities was $5,402 thousand and $267 thousand for the six months ended June 30, 2022 and 2021, respectively,

consisting of investments in marketable securities of $5,371 and purchases of capital equipment of $31 thousand for the six months ended

June 30, 2022 and purchases of capital equipment of $267 thousand in the prior year period.

cash used by financing activities for the six months ended June 30, 2022 was $2.0 million which is attributable to the principal payments

of convertible notes of $2.0 million.

For the six months ended June 30, 2021 cash flows from financing activities were $1.7 million which

is attributable to the issuance of common stock of $285 thousand and proceeds of a notes payable of $15 thousand and proceeds from the

PPP loan of $128 thousand and convertible notes payable of $1.34 million.

June 30, 2022, current assets totaled $10.8 million and current liabilities totaled $2.5 million, as compared to current assets totaling

Net cash used in operating activities was $2.3 million and $1.6 million for the nine months ended

September 30, 2022 and 2021, respectively.

See Notes 2 and 3 of our financial statements above for a more detailed discussion of our

marketable securities.

cash used in investing activities was $6,068 thousand and $390 thousand for the nine months ended September 30, 2022 and 2021, respectively,

consisting of investments in marketable securities of $6,980 thousand, the sale of marketable securities for $1,000 thousand, and purchases

of capital equipment of $88 thousand for the nine months ended September 30, 2022 and purchases of capital equipment of $390 thousand

in the prior year period.

cash used by financing activities for the nine months ended September 30, 2022 was $3.5 million which is attributable to the principal

payments of convertible notes of $3.5 million.

For the nine months ended September 30, 2021 cash flows from financing activities were

$3.2 million which is attributable to the issuance of common stock of $285 thousand and proceeds of a notes payable of $15 thousand and

proceeds from the PPP loan of $127 thousand and convertible notes payable, net of $2.8 million, net of costs and principal payments of

convertible notes of $100 thousand.

September 30, 2022, current assets totaled $8.3 million and current liabilities totaled $1.1 million, as compared to current assets totaling

$13.9 million and current liabilities totaling $2.9 million at December 31, 2021.

As a result, we had working capital of $7.2 million

at June 30, 2022, compared to a working capital of $11.0 million at December 31, 2021.

The decrease in the working capital as

of June 30, 2022 is primarily attributable to the repayment of convertible notes payable of $2.0 million in the current period and investments

in marketing securities of $5.4 million in the six months ended June 30, 2022.

at September 30, 2022, compared to a working capital of $11.0 million at December 31, 2021.

The decrease in the working capital

as of September 30, 2022 is primarily attributable to the repayment of convertible notes payable of $3.5 million in the current period.

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”),

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September 2, 2021, the Company entered into a securities purchase agreement pursuant to which the Company issued to twenty investors

a 12% senior secured convertible promissory note in the principal amount of $1.8 million, including $194 thousand (which represents the

twelve months of guaranteed interest which was earned in full as of September 2, 2021), which is convertible into shares of the Company’s

common stock at a price per share of $5.25 subject to certain adjustments as discussed herein in Note 13 in the Notes to the Consolidated

The net proceeds received by the Company were $1.5 million after deducting fees and expenses related to the transaction.

The purchasers in the September 2021 securities purchase agreement also received warrants to purchase shares of our common stock.

January 25, 2022, the Company repaid an investor in full with a one-time cash payment of $300 thousand of outstanding principal and accrued

but unpaid interest the September 2 Offering.

The Company did incur a 105% pre-payment penalty of $16,800 with respect to the repayment

of the investor’s note and the repayment extinguished the note in its entirety.

a 12% senior secured convertible promissory note in the principal amount of $1.8 million, including $194 thousand (which represents

the twelve months of guaranteed interest which was earned in full as of September 2, 2021), which is convertible into shares of the

Company’s common stock at a price per share of $5.25 subject to certain adjustments as discussed herein in Note 13 in the

Notes to Condensed Consolidated Financials.

The net proceeds received by the Company were $1.5 million after deducting fees and

expenses related to the transaction.

The purchasers in the September 2021 securities purchase agreement also received warrants to

purchase shares of our common stock.

On January 25, 2022, the Company repaid an investor in full with a one-time cash payment of

$300 thousand of outstanding principal and accrued but unpaid interest the September 2 Offering.

The Company did incur a 105%

pre-payment penalty of $16,800 with respect to the repayment of the investor’s note and the repayment extinguished the note in

its entirety.

Furthermore, the remaining September 2 Notes’ were fully repaid (including all principal and

interest) on September 6, 2022 with a one-time cash payment of $1.5 million.

March 11, 2021, the Company and Auctus entered into a senior secured convertible promissory note in the principal amount of $1,680

thousand, which includes $180 thousand of interest which was deemed fully earned as of the issuance date.

The Auctus Note was fully

repaid (including all principal and interest) on March 15, 2022 with a one-time cash payment of $1,680 thousand.

have never declared or paid any cash dividends on our common stock.

For the foreseeable future, we anticipate that all available fund

For the foreseeable future, we anticipate that all available funds

and any earnings generated in our business will be used to finance the growth of our business and will not be paid out as dividends to

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value creation.

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.

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.

believe we have sufficient cash and marketable securities to operate our business plan through 2024.

We intend to maintain and attempt

to grow our existing contract manufacturing business.

We also plan to continue building and developing our 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.

expect to continue incurring losses for the near-term future.

1 unchanged sentence

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 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.

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 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,

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Balance Sheet Arrangements

of June 30, 2022, we had no off-balance sheet arrangements in the nature of guarantee contracts, retained or contingent interests in

assets transferred to entities (or similar arrangements serving as credit, liquidity or market risk support to entities for any such

of September 30, 2022, we had no off-balance sheet arrangements in the nature of guarantee contracts, retained or contingent interests

in assets transferred to entities (or similar arrangements serving as credit, liquidity or market risk support to entities for any such

assets), or obligations (including contingent obligations) arising out of variable interests in entities providing financing, liquidity,

44 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis