What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-13 compared with 2023-08-14 · 152 added, 170 removed, 184 unchanged (64% of the section changed)

70 unchanged sentences

(“CG Labs”) for its converting and packaging business.

The agreement is effective March

The JV agreement is effective

March 1, 2023.

As a result of this transaction, the Company owns 50% of the JV, with the remaining 50% held by CG Labs.

of Operations

following sections discuss and analyze the changes in the significant line items in our condensed consolidated statements of

operations for the comparison periods identified.

of the Three Months ended June 30, 2023, and 2022

the three months ended June 30, 2023, revenues were $1.17 million and increased by $606 thousand, or 108.0%, when compared to $561 thousand

for the three months ended June 30, 2022.

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

manufacturing and branded products, including the revenue from CG Labs from April 1, 2023 through June 30, 2023 of $602 thousand.

Company has four distinct lines of business;

Contract Manufacturing, Custom & White Label, Consumer Branded Products, and Medical

Devices as further described below.

Manufacturing

order rolls of gel (“rollstock”).

The rollstock is shipped to our customers, which they package into finished goods.

Historically,

this has been the Company’s primary source of revenue.

& White Label

products often infuse various ingredients into our base gel to develop unique product offerings to satisfy market demand (e.g.

into the gel for a beauty mask).

The rollstock is converted and packaged into salable units.

The finished goods are shipped to the customer,

who is ultimately responsible for product distribution.

Frequently these products started as development deals, in which the customer

paid the company a small fee to develop a specific product.

Once completed, the customer places a large order for newly developed product.

Branded Products

products are finished goods marketed and sold directly to the customer by the Company through online and retail channels.

is responsible for sales, marketing, and distribution.

These products carry the Company’s brand names.

Devices are a hybrid business, combining elements of Custom & White Label and Consumer Branded Products.

Medical Devices, which are

not yet marketed, are expected to be distributed through strategic partnerships.

The Company will manufacture and possibly convert/package

the device while the strategic partner brings the product to market.

Small market Medical Devices could be launched by the Company, but

also be offered to a distributor to reach the full scale of the market.

Our gross profit was $175 thousand for the three months ended June 30, 2023, compared to a gross profit of $101 thousand

for the three months ended June 30, 2022.

The increase of $74 thousand in gross profit quarter over quarter was primarily due to the

higher volume of contract manufacturing sales against fixed costs partially offset by higher manufacturing labor costs and increased manufacturing of promotional materials, customer product samples and other marketing materials to support

our new product launches.

profit was approximately 15% for the three months ended June 30, 2023, compared to a gross profit of 18% for the three months ended

June 30, 2022.

components of cost of revenues are as follows for the three months ended June 30, 2023 and 2022 ($ in thousands):

following sections discuss and analyze the changes in the significant line items in our condensed consolidated statements of operations

for the comparison periods identified.

of the Three Months ended September 30, 2023, and 2022 ($ in thousands)

For the three months ended September 30, 2023,

revenues were $1,221 and increased by $653, or 115.0%, when compared to $568 for the three months ended September 30, 2022.

in our overall revenues was primarily due to sales growth in both our contract manufacturing and branded products, including the revenue

from JV from March 1, 2023 through September 30, 2023 of $1,375.

The Company has four distinct lines of business;

Manufacturing, Custom & White Label, Consumer Branded Products, and Medical Devices as further described in Footnote #3.

Gross profit (loss) .

Our gross profit was $344 for the three months ended September 30, 2023, compared to a gross profit of $148 for the three months ended September

The increase of $196 in gross profit was primarily due to the higher volume of contract manufacturing sales against

fixed costs partially offset by increased manufacturing.

Gross profit was approximately 28.2% for the three months ended September 30,

2023, compared to a gross profit of 26.1% for the three months ended September 30, 2022.

The components of cost of revenues are as follows

for the three months ended September 30, 2023 and 2022 ($ in thousands):

Three Months Ended

September 30,

Cost of revenues

1 unchanged sentence

Compensation and benefits

Share-based compensation

Depreciation and amortization

1 unchanged sentence

Total cost of revenues

of revenues increased by $532 thousand, or 115.7%, to $992 thousand for the three months ended June 30, 2023, as compared to $460 thousand

for the three months ended June 30, 2022.

The increase in cost of revenues is pertains to and increase in materials and finished products and equipment,

production and other expenses.

These increases primarily align with the new product line growth and increased amounts of promotional materials, customer product samples and other marketing materials to support

our new product launches.

of revenues increased by $457, or 108.8%, to $877 for the three months ended September 30, 2023, as compared to $420 for the three months ended September 30, 2022.

The increase in cost of revenues pertains to an increase in materials and finished

products and equipment, production, and other expenses.

These increases primarily align with the growth in revenues.

general, and administrative expenses .

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

three months ended June 30, 2023 and 2022 ($ in thousands):

Three Months Ended

three months ended September 30, 2023 and 2022 ($ in thousands):

general and administrative expenses

and amortization

marketing, & Amazon fees

& shareholder services

tax & corporate insurance

& consulting fees

expenses and professional fees

selling, general and administrative expenses

Compensation and benefits

Share-based compensation

Depreciation and amortization

general and administrative expenses decreased by $42, or 4.2%, to $950 for the three months ended September 30, 2023,

as compared to $992 for the three months ended September 30, 2022.

The decrease in Selling, general and administrative expenses

is primarily attributable to the factors described below.

and benefits increased by $51, or 43.2%, to $169 for the three months ended September 30, 2023, as compared to $118 for the three months ended September 30, 2022.

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

increased in conjunction with contract renewals.

compensation decreased by $19, or 22.4%, to $66 for the three months ended September 30, 2023, as compared to $85 for the three months ended September 30, 2022.

The decrease in share-based compensation related to the issuance of stock options and

restricted awards to our officers, employees, and advisors in the prior year period that compared to members of the Board of Directors

in the current period.

Advertising, marketing, & Amazon fees

Investor & shareholder services

Franchise tax & corporate insurance

Professional & consulting fees

Other expenses and professional fees

Total selling, general and administrative expenses

general and administrative expenses increased by $174 thousand, or 24.6%, to $882 thousand for the three months ended June 30, 2023,

as compared to $708 thousand for the three months ended June 30, 2022.

The increase in Selling, general and administrative expenses is

primarily attributable to the factors described below.

and benefits increased by $55 thousand, or 45.5%, to $176 thousand for the three months ended June 30, 2023, as compared to $121 thousand

for the three months ended June 30, 2022.

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

in conjunction with contract renewals.

compensation decreased by $20 thousand, or 46.5%, to $23 thousand for the three months ended June 30, 2023, as compared to $43 thousand

for the three months ended June 30, 2022.

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

awards to our officers, employees, and advisors in the prior year period that were not issued in the current period.

marketing, Amazon fees increased by $86 thousand, or 107.5% to $166 thousand for the three months ended June 30, 2023, as compared to

$80 thousand for the three months ended June 30, 2022.

The increase is due to the increased Amazon selling fees and Amazon Advertising,

which correlates with our increase in Branded Sales, as well as an increase in advertising and marketing in channels outside of Amazon.

and shareholder services increased by $11 thousand, or 8.5% to $140 thousand for the three months ended June 30, 2023, as compared to

$129 thousand for the three months ended June 30, 2022.

increased by $75, or 72.8% to $178 for the three months ended September 30, 2023, as compared to $103 for the three months ended September 30, 2022.

The increase is due to the increased Amazon selling fees and Amazon

Advertising, which correlates with our increase in Branded Sales.

Investor and shareholder services increased by $15, or 21.1% to $86 for the three months ended September 30, 2023, as compared to $71 for the three months

ended September 30, 2022.

The increase is due to an increase in investor outreach.

taxes and corporate insurance increased by $15 thousand, or 31.3% to $63 thousand for the three months ended June 30, 2023, as compared

to $48 thousand for the three months ended June 30, 2022.

and consulting fees increased by $29 thousand, or 13.4% to $246 thousand for the three months ended June 30, 2023, as compared to $217

thousand for the three months ended June 30, 2022.

We continued to incur accounting and consulting fees associated with public company

governance requirements.

expenses decreased by $11 thousand, or 17.5%, to $52 thousand for the three months ended June 30, 2023 from $63 thousand for the three

months ended June 30, 2022.

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.

and development expenses .

Research and development expenses were $55 thousand and $111 thousand for the three months ended June 30,

2023 and June 30, 2022, respectively.

of the Six Months ended June 30, 2023 and 2022

the six months ended June 30, 2023, revenues were $1.79 million and increased by $830 thousand, or 86.8%, when compared to $956 thousand

for the six months ended June 30, 2022.

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

and branded products, including the revenue from CG Labs from April 1, 2023 through June 30, 2023 of $792 thousand.

Our gross profit was $117 thousand for the six months ended June 30, 2023, compared to a gross profit of $72 thousand

for the six months ended June 30, 2022.

The increase in profit recorded for the six months ended June 30, 2023, as compared to the

six months ended June 30, 2022, was primarily due to the higher volume of contract manufacturing sales against fixed costs, partially offset by increased manufacturing of promotional materials,

customer product samples and other marketing materials to support our new product launches.

profit was approximately 7% for the six months ended June 30, 2023, compared to a gross profit of 8% for the six months ended June

The components of cost of revenues are as follows for the six months ended June 30, 2023 and 2022 ($ in

Six Months Ended

Franchise taxes and corporate insurance decreased

by $212, or 80.3% to $52 for the three months ended September 30, 2023, as compared to $264 for the three months

ended September 30, 2022.

The vast majority of this decrease pertains to the Company’s reduction in authorized shares, which lowered

its franchise tax expense.

Professional and consulting fees increased by $58, or 27.2% to $271 for the three months ended September 30, 2023, as compared to $213 for the three months ended

September 30, 2022.

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

Other expenses decreased by $11, or 8.2%,

to $123 for the three months ended September 30, 2023 from $134 for the three months ended September 30, 2022.

selling, general and administrative expenses generally consist of costs associated with our selling efforts and general management, including

information technology, travel, training and recruiting.

Research and development expenses .

and development expenses were $6 and $193 for the three months ended September 30, 2023 and September 30, 2022, respectively.

The decrease is due to the completion of development efforts of two proof of concept studies for drug delivery candidates utilizing our

hydrogel technology.

Comparison of the Nine Months ended September

30, 2023 and 2022 ($ in thousands)

Revenues, net .

For the nine months ended September 30, 2023, revenues

were $3,007 and increased by $1,483, or 97.3%, when compared to $1,524 for the nine months ended September

The increase in our overall revenues was primarily due to sales growth in both our contract manufacturing and branded products,

including the revenue from our JV from March 1, 2023 through September 30, 2023 of $1,375.

Our gross profit was $461 for the nine months ended September 30, 2023, compared to a gross profit of $220 for the nine months ended September 30, 2022.

The increase in profit recorded for the nine months ended September 30, 2023, as compared

to the nine months ended September 30, 2022, was primarily due to the higher volume of contract manufacturing sales against fixed costs,

partially offset by increased manufacturing of promotional materials, customer product samples and other marketing materials to support

our new product launches.

Gross profit was approximately 15.3% for the nine months ended September 30, 2023, compared to a gross profit

of 14.4% for the nine months ended September 30, 2022.

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

30, 2023 and 2022 ($ 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 $785 thousand, or 88.8%, to $1.67 million for the six months ended June 30, 2023, as compared to $884 thousand

for the six months ended June 30, 2022.

The increase in cost of revenues pertains to and increase in materials and finished products

and equipment, production and other expenses.

These increases primarily align with the new product line growth and increased amounts

of promotional materials, customer product samples and other marketing materials to support our new product launches.

Cost of revenues increased by $1,242, or

95.2%, to $2,546 for the nine months ended September 30, 2023, as compared to $1,304 for the nine months ended September

The increase in cost of revenues pertains to an increase in materials and finished products and equipment, production and other

These increases primarily align with the increased revenues.

general, and administrative expenses .

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

six months ended June 30, 2023 and 2022 ($ in thousands):

Six Months Ended

nine months ended September 30, 2023 and 2022 ($ in thousands):

Nine Months Ended

September 30,

Selling, general, and administrative expenses

8 unchanged sentences

Total selling, general and administrative expenses

general, and administrative expenses increased by $212 thousand, or 14.5%, to $1.68 million for the six months ended June 30, 2023, as

compared to $1.47 million for the six months ended June 30, 2022.

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 $88 thousand, or 37.8%, to $321 thousand for the six months ended June 30, 2023, as compared to $233 thousand

for the six months ended June 30, 2022.

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

in conjunction with contract renewals.

compensation decreased by $19 thousand, or 31.1%, to $42 thousand for the six months ended June 30, 2023, as compared to $61 thousand

for the six months ended June 30, 2022.

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.

marketing, Amazon fees increased by $141 thousand or 118.5%, to $260 thousand for the six months ended June 30, 2023, as compared to

$119 thousand for the six months ended June 30, 2022.

The increase is due to the increased Amazon selling fees as well as an increase

in advertising and marketing.

and shareholder services decreased by $41 thousand or 14.7%, to $237 thousand for the six months ended June 30, 2023, as compared to

$278 thousand for the six months ended June 30, 2022.

The decrease is due to initial fees related to the Nasdaq listing in 2022 upon

the IPO occurring on December 27, 2021.

taxes and corporate insurance increased by $25 thousand or 25.8%, to $122 thousand for the six months ended June 30, 2023, as compared

to $97 thousand for the six months ended June 30, 2022.

and consulting fees increased by $109 thousand or 24.6% to $552 thousand for the six months ended June 30, 2023, as compared to $443

thousand for the six months ended June 30, 2022.

We continued to incur accounting and consulting fees associated with public company

governance requirements.

expenses decreased by $103 thousand, or 46.4%, to $119 thousand for the six months ended June 30, 2023 from $222 thousand for the six

months ended June 30, 2022.

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.

general, and administrative expenses increased by $170, or 6.9%, to $2,629 for the nine months ended September 30,

2023, as compared to $2,459 for the nine months ended September 30, 2022.

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 $111, or 29.3%, to $490 for the nine months ended September 30, 2023, as compared to $379 for the nine months ended September 30, 2022.

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

increased in conjunction with contract renewals.

Share-based compensation decreased by $110,

or 50.2%, to $109 for the nine months ended September 30, 2023, as compared to $219 for the nine months ended September

The decrease in share-based compensation year over year relates to the issuance of stock, restricted stock, and options

to our CEO and options to board members in 2023 in comparison to companywide restricted stock awards issued to employees in 2022.

Advertising, marketing, & Amazon fees

increased by $91, or 26.2% to $438 for the nine months ended September 30, 2023, as compared to $347 for

the nine months ended September 30, 2022.

The corresponds to increased Amazon sales, partially offset by optimization of Amazon

advertising spend in 2023.

Investor and shareholder services increased by $144, or 80.4% to $323 for the nine months ended September 30, 2023, as compared to $179 for the nine months ended

September 30, 2022.

The increase is due to an increase in investor outreach.

Franchise taxes and corporate insurance decreased

by $160, or 47.9% to $174 for the nine months ended September 30, 2023, as compared to $334 for the nine months

ended September 30, 2022.

The vast majority of this decrease pertains to the Company’s reduction in authorized shares, which lowered

its franchise tax expense.

Professional and consulting fees increased by $239, or 40.9% to $823 for the nine months ended September 30, 2023, as compared to $584 for the nine months ended

September 30, 2022.

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

expenses decreased by $166, or 40.9%, to $240 for the nine months ended September 30, 2023 from $406 for the

nine months ended September 30, 2022.

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.

and development expenses .

Research and development expenses decreased by $51 thousand to $84 thousand for the six months ended June

30, 2023 from $135 thousand for the six months ended June 30, 2022.

The decrease is due to the completion of development efforts of two

proof of concept studies for drug delivery candidates utilizing our hydrogel technology.

Research and development expenses decreased by $238 to $90 for the nine months ended

September 30, 2023 from $328 for the nine months ended September 30, 2022.

The decrease is due to the completion of development

efforts of two proof of concept studies for drug delivery candidates utilizing our hydrogel technology.

and Capital Resources

September 30,

Net cash used in operating activities

Net cash provided by investing activities

Net cash 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 quarter

of June 30, 2023, we had $3.7 million of cash and $612 thousand of marketable securities ,

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

Cash at beginning of year

Cash at end of quarter

of September 30, 2023, we had $3.3 million of cash and $0 thousand of marketable securities ,

compared to $1.1 million of cash and $5.5 million of marketable securities at December 31,

Net cash used in operating activities was $1.9 million and $1.5 million for the six months ended June 30, 2023 and 2022, respectively.

cash provided by investing activities was $4.5 million and net cash used in investing activities was $5.4 million for the six months

ended June 30, 2023 and 2022, respectively, consisting of the sales of marketable securities of

$4.8 million and purchases of capital equipment of $253 thousand for six months ended June 30, 2023.

cash used in financing activities for the six months ended June 30, 2023 and 2022 was $3 thousand and $2 million and is attributable

to the principal payments of notes payable and convertible notes, respectively.

June 30, 2023, current assets totaled $6.7 million and current liabilities totaled $1.7 million, as compared to current assets totaling

Net cash used in operating activities was $2.6 million and $2.3 million for the nine months ended September 30, 2023 and 2022,

respectively.

cash provided by investing activities was $4.7 million and net cash used in investing activities was $6.1 million for the nine months

ended September 30, 2023 and 2022, respectively, consisting of the sales of marketable securities

of $5.3 million and purchases of capital equipment of $611 thousand for nine months ended September 30,

2023 and 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.

cash provided by financing activities and cash used in financing activities for the nine months ended September 30, 2023 and 2022 was

$85 thousand and $3.5 million, respectively, and is attributable to the proceeds from the margin line of credit of $89 thousand and principal

payments of notes payable and convertible notes of $4 thousand for the nine months ended September 30, 2023 and attributable to principal

payments of convertible notes of $3.5 million in the nine months ended September 30, 2022.

September 30, 2023, current assets totaled $5.9 million and current liabilities totaled $1.7 million, as compared to current assets totaling

$7.5 million and current liabilities totaling $859 thousand at December 31, 2022.

As a result, we had working capital of $4.2 million

at June 30, 2023, compared to a working capital of $6.6 million at December 31, 2022.

The decrease in the working capital as of

June 30, 2023 is primarily attributable to the loss from operations of $1.6 million.

at September 30, 2023, compared to a working capital of $6.6 million at December 31, 2022.

The decrease in the working capital

as of September 30, 2023 is primarily attributable to the loss from operations of $2.3 million.

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

35 unchanged sentences

Balance Sheet Arrangements

of June 30, 2023, 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, 2023, 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,

42 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