What changed in this filing

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Item 1. Financial Statements

2024-08-19 compared with 2024-05-13 · 354 added, 214 removed, 789 unchanged (42% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

OF MARCH 31, 2024 AND DECEMBER 31, 2023

OF JUNE 30, 2024 AND DECEMBER 31, 2023

thousands, except share and per share data)

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Commitments and Contingencies (Note 16)

STOCKHOLDERS’ EQUITY

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, 25,000,000 shares authorized;

6,227,624 and 5,741,838 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

6,324,266 and 5,741,838 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

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CONSOLIDATED STATEMENTS OF OPERATIONS

THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

thousands, except share and per share data)

Three Months Ended

Six Months Ended

Revenues, net

Cost of revenues

Gross margin (loss)

Operating expenses

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Other income (expense)

Interest income (expense), net

Changes in fair value of warrant liability and warrant modification expense

Gain on investment in marketable securities

Total other income (expense), net

Interest expense

Interest income

Loss on sale of assets

Gain on investments

Changes in fair value of warrant liability

Total other income, net

Loss before income taxes

Income tax expense

Income (loss) attributable to non-controlling interest in joint venture

Income attributable to non-controlling interest in joint venture

Net loss attributable to NexGel stockholders

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

thousands, except share data)

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Share-based compensation and restricted stock vesting

Rights offering proceeds, net of expenses

Issuance of placement agent warrants in conjunction with the rights offering

Equity offering proceeds, net of expenses

Issuance of placement agent warrants in conjunction with the equity offering

Balance, March 31, 2024

Share-based compensation and restricted stock vesting

Shares issued in acquisition

Issuance of shares for services

Non-controlling interest contribution

Balance, June 30, 2024

accompanying notes are an integral part of these condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

thousands, except share data)

Stockholders’

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Non-controlling interest in JV

Non-controlling interest

Net income (loss)

Balance, March 31, 2023

Stock-based compensation

Exercise of warrants

Net income (loss)

Balance, June 30, 2023

accompanying notes are an integral part of these condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Three Months Ended

THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

Six Months Ended

Operating Activities

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Depreciation and amortization

Changes in ROU asset and operating lease liability

Share-based compensation and restricted stock vesting

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Changes in fair value of warrant liability

Amortization of right of use asset

Changes in operating assets and liabilities:

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Deferred revenue

Operating lease liability

Net Cash Used in Operating Activities

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Capital expenditures

Net cash paid for Asset acquisition

Net Cash Provided by (Used in) Investing Activities

Financing Activities

Proceeds from rights offering, net of expenses

Proceeds from equity offering, net of expenses

Investment by joint venture partner

Principal payment on financing lease liability

Change in contingent consideration liability

Principal payments of notes payable

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Supplemental Non-cash Investing and Financing activities

Shares issued in conjunction with asset acquisition

Property and equipment financed under notes payable

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thousands, except share and per share data)

Description of Business and Basis of Presentation

Description of Business, Stock Split and Basis of Presentation

(“NexGel” or the “Company”) manufactures high water content, electron beam cross-linked, aqueous polymer

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on November 14, 2019.

May 15, 2024, the Company purchased assets from Semmens Online Pty Ltd as Trustee for Semmens Business Trust (the “SG Seller”)

related to the SG Seller’s eyeliner, fake eyelashes, lash growth serum and mascara business operating under the tradename “Silly

George” (collectively, the “Silly George Business”).

December 1, 2023, the Company purchased substantially all of the assets Olympus Trading Company, LLC (the “Kenkoderm Seller”)

related to the Kenkoderm Seller’s skincare line focused on reducing symptoms associated with psoriasis operating under the tradename

“Kenkoderm” (“Kenkoderm acquisition”).

March 1, 2023, the Company acquired a

interest in a newly formed joint venture (“JV”), CG Converting and Packaging, LLC (“CGN”), with C.G.

50 % interest in a newly formed joint venture (“JV”), CG Converting and Packaging, LLC (“CGN”), with

Laboratories Inc.

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held by CG Labs.

in December 2023, the Company expanded their product portfolio to include the Kenkoderm brand.

Kenkoderm is a skincare line focused on

reducing symptoms associated with psoriasis.

Kenkoderm products do not utilize our gel technology and are manufactured by third parties.

On January 6, 2023, the Company acquired a 50 % interest in a newly formed JV (“Enigma”) to pursue branded

consumer product retail opportunities and the development of new patch products.

The JV agreement is effective January 6, 2023.

result of this transaction, the Company owns 50 % of the JV, with the remaining 50 % held by Moiety.

of Presentation

accompanying interim unaudited condensed consolidated financial statements and footnotes of NexGel have been prepared in accordance with

accompanying unaudited condensed consolidated financial statements and footnotes of NexGel have been prepared in accordance with

generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the

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subsidiary, NexGelRx, Inc.

and the fifty percent ( 50 %) owned JV (see Note 5).

and the fifty percent ( 50 %) owned JV’s (see Note 5).

Going Concern

of March 31, 2024, the Company had a cash balance of $ 2.4 million.

For the three months ended March 31, 2024, the Company incurred a

net loss of $ 0.9 million and had a net usage of cash in operating activities of $ 1.1 million.

of June 30, 2024, the Company had a cash balance of $ 1.1 million.

For the six months ended June 30, 2024, the Company incurred a net

loss of $ 1.7 million and had a net usage of cash in operating activities of $ 1.8 million.

In addition, the Company had a working

capital of $ 2.4 million as of March 31, 2024.

Additionally, we believe we have sufficient cash and marketable securities to operate our

capital of $ 1.0 million as of June 30, 2024.

Additionally, we believe we have sufficient cash to operate our

business plan into 2025.

February 15, 2024, the Company, entered into subscription agreements with investors, the Company’s Chief Financial Officer and

certain members of its board of directors for a registered direct offering (“RDO”) of the Company’s common stock.

RDO sold an aggregate 242,891 units at a price to the public of $ 4.22 per unit, with each unit consisting of two shares of the Company’s

common stock, and a warrant to purchase one share of common stock at an exercise price of $ 4.00 per share.

The $ 4.22 purchase price equals

two times the last reported sale price of $2.11 per share of the Company’s common stock on February 15, 2024 on The Nasdaq Capital

The gross proceeds to the Company from the RDO were $ 1.025 million, before deducting the placement agent’s fees and other offering expenses payable by the Company, and excluding the proceeds, if any, from the exercise of the warrants.

intends to use the net proceeds from the RDO for working capital and for general corporate purposes.

August 8, 2024, the Company, entered into subscription agreements with investors, certain members of its board of directors for a registered

direct offering (“RDO”) of the Company’s common stock.

The RDO sold an aggregate 222,000

units at a price to the public of $ 5.00

per unit, with each

unit consisting of two shares of the Company’s common stock, and a warrant to purchase one share of common stock at an exercise

price of $ 4.25

The gross proceeds to the Company from the RDO

million, before deducting the placement agent’s

fees and other estimated offering expenses payable by the Company, and excluding the proceeds, if any, from the exercise of the warrants.

The Company intends to use the net proceeds from the RDO for working capital and for general corporate purposes (discussed further within Note 19).

is exploring new product channel sales in adjacent industries, such as cosmetics, athletic products, and proprietary medical devices.

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value creation.

have sufficient capital to maintain as a going concern due to the recent capital raise.

have sufficient capital to maintain as a going concern due to the recent capital raises.

We intend to maintain and attempt to grow our

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These estimates and assumptions

include allowances for credit losses, inventory reserves, deferred taxes, share-based compensation and related valuation allowances

and fair value of long-lived assets.

include allowances for credit losses, 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.

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The Company has two reportable segments - the NexGel segment and the “CGN” segment.

NexGel segment is comprised of the manufacturing of ultra-gentle, high-water-content hydrogel products for healthcare and consumer applications,

which is based in Langhorne, Pennsylvania.

CGN segment is comprised of the JV used for the Company’s converting and packaging business, which is based in Granbury,

NexGel segment is comprised of the manufacturing of ultra-gentle, high-water-content hydrogel products for healthcare and consumer

applications, which is based in Langhorne, Pennsylvania.

The NexGel segment includes the Kenkoderm and Silly George recent

acquisitions and the Enigma JV.

“CGN” segment is comprised of the JV used for the Company’s converting and packaging business, which is based in

Granbury, Texas.

is comprised of cash in banks and highly liquid investments, including U.S.

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The margin line credit

line was repaid in January 2024 and there is no outstanding balance under the credit line as of March 31, 2024.

line was repaid in January 2024 and there is no outstanding balance under the credit line as of June 30, 2024.

Receivable, net

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 credit losses based on factors including the

length of time the receivables are past due, the customer’s payment history, the credit quality of the customer and other

factors that may affect the customers’ ability to pay.

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 credit losses was $ 12

thousand as of March 31, 2024 and $ 11

thousand as of December 31, 2023.

The Company evaluates the collectability

of accounts receivable and records a provision to the allowance for credit losses based on factors including the length of time the receivables

are past due, the customer’s payment history, the credit quality of the customer and other factors that may affect the customers’

ability to pay.

Provisions to the allowances for doubtful accounts are recorded in selling, general and administrative expenses.

balances are charged off against the allowance when it is probable that the receivable will not be recovered.

The allowance for credit

losses was $ 18 thousand as of June 30, 2024 and $ 11 thousand as of December 31, 2023.

and Cost of Revenues

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Inventory is maintained at the Company’s warehouses

and at fulfillment centers owned by Amazon, Walmart and CVS.

and at fulfilment centers owned by Amazon, Walmart and CVS.

“Cost of revenues” line item in the condensed consolidated statements of operations is comprised of the book value of inventory

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thousand and $ 64

thousand of prepaid insurance, and $ 298

thousand and $ 336

thousand general prepaid expenses and other current assets as of March 31, 2024 and December 31, 2023, respectively.

assets are recorded at historical costs, and as of March 31, 2024 and December 31, 2023, the balance is primarily comprised of spare

parts for manufacturing equipment.

Spare parts are not subject to depreciation until such time that they are placed into service and

the part that is being replaced is disposed.

thousand of prepaid insurance, and $ 458 thousand

thousand general prepaid expenses and other current assets as of June 30, 2024 and December 31, 2023, respectively.

assets are recorded at historical costs, and as of June 30, 2024 and December 31, 2023, the balance is primarily comprised of spare parts

for manufacturing equipment.

Spare parts are not subject to depreciation until such time that they are placed into service and the part

that is being replaced is disposed.

Value Measurements

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Custom and white label finished goods manufacturing

Consumer branded products

of March 31, 2024 and December 31, 2023, the Company did not have any contract assets or contract liabilities from contracts with customers

Branded consumer products

Six months ended

Contract manufacturing

Custom and white label finished goods manufacturing

Branded consumer products

of June 30, 2024 and December 31, 2023, the Company did not have any contract assets or contract liabilities from contracts with customers

and there were no remaining performance obligations that the Company had not satisfied except for deferred revenue of $ 179 thousand and

$ 20 thousand at March 31, 2024 and December 31, 2023, respectively, that the Company had not satisfied as of the end of the respective

$ 20 thousand at June 30, 2024 and December 31, 2023, respectively, that the Company had not satisfied as of the end of the respective

Company has four distinct lines of business;

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

Devices/Other.

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

and Medical Devices/Other.

Manufacturing

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into the gel for a beauty mask).

The rollstock is converted and packaged into salable units.

The rollstock is converted and packaged into saleable units.

The finished goods are shipped to the customer,

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

Branded Products

Consumer 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, which include Medagel, Lumagel Beauty, and Kenkoderm.

Devices are a hybrid business, combining elements of Custom and 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.

These products carry the Company’s brand names, which include Medagel, Lumagel

Beauty, Kenkoderm and Silly George.

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

August 28, 2019, the Company adopted the 2019 Long-Term Incentive Plan, as amended (the “2019 Plan”).

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Business Segments

Company’s CODM evaluates the financial performance of the Company’s segments

based upon segment adjusted operating income or (loss) as the profitability measure.

Items outside of adjusted operating income or (loss)

are not reported by segment, since they are excluded from the single measure of segment profitability reviewed by the CODM.

financial information concerning the Company’s reportable segments for each of the quarters ended March 31, 2024 and 2023 is presented

Company’s CODM evaluates the financial performance of the Company’s segments based upon segment adjusted operating income

or (loss) as the profitability measure.

Items outside of adjusted operating income or (loss) are not reported by segment, since they

are excluded from the single measure of segment profitability reviewed by the CODM.

financial information concerning the Company’s reportable segments for each of the quarters ended June 30, 2024 and 2023 is presented

of Reportable Segments

Quarter Ended March 31, 2024 ($ in thousands)

Quarter Ended June 30, 2024 ($ in thousands)

Contract Manufacturing

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Loss from operations

Quarter Ended March 31, 2023 ($ in thousands)

Quarter Ended June 30, 2023 ($ in thousands)

Contract Manufacturing

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Loss from operations

of March 31, 2024 ($ in thousands)

the Six Months Ended June 30, 2024 ($ in thousands)

Contract Manufacturing

Custom and White Label Finished Goods

Branded Consumer Products

Total revenue

Cost of sales

Operating expenses

Loss from operations

the Six Months Ended June 30, 2023 ($ in thousands)

Contract Manufacturing

Custom and White Label Finished Goods

Branded Consumer Products

Total revenue

Cost of sales

Operating expenses

Loss from operations

of June 30, 2024 ($ in thousands)

Current assets:

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Total liabilities

December 1, 2023, the Company closed a transaction related to an Asset Purchase Agreement dated November 30, 2023 (the “Purchase

Agreement”) with Olympus Trading Company, LLC, a Virginia limited liability company (the “Seller”), whereby the Company

purchased all assets related to the Seller’s skincare line focused on reducing symptoms associated with psoriasis operating under

the tradename “Kenkoderm” (“Kenkoderm acquisition”).

the terms of the Kenkoderm acquisition, the Company paid the Seller a cash payment of $ 546,500 .

Additionally, the Company shall pay the

Seller a cash earn-out of the same amount each quarter, payable in the subsequent month following quarter end, of $ 136,625 .

earn-out can fluctuate higher or lower based on the quarterly results of the Kenkoderm business during 2024 according to the formula

contained in the Purchase Agreement.

Purchase Agreement and the transaction contemplated thereby were not subject to approval by the shareholders of the Company.

Agreement contains standard representations and warranties regarding the Seller and the Kenkoderm business and certain limited representations

and warranties regarding the Company.

The Purchase Agreement also contains indemnification provisions for the benefit of the Company

and the Seller.

Neither the Company nor the Seller shall be liable for more than the Purchase Price under the indemnification provisions

except in the case of fraud or willful misconduct.

The Seller and the Seller’s President and owner agreed to 3-year non-compete

provisions as part of the Purchase Agreement.

provisional fair value of the purchase consideration issued to the Seller was allocated to the net tangible assets acquired.

accounted for the Kenkoderm 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 condensed consolidated

George Acquisition

May 15, 2024, the Company entered into and closed a transaction related to an Asset Purchase Agreement dated May 15, 2024 (the

“SG Purchase Agreement”) with Semmens Online Pty Ltd as Trustee for Semmens Business Trust, an Australian proprietary

limited, whereby the Company purchased the Silly George Business.

The Company believes the acquisition will be accretive and synergistic to its existing health and beauty customer

product brands.

the terms of the Purchase Agreement and on the Closing Date, the Company paid the SG Seller a cash payment of $ 400,000

and issued $ 200,000

in shares of the Company’s common stock based on the 10-Day VWAP (as defined in the SG Purchase Agreement), or 89,892

of shares of the Company’s common Stock.

Additionally, the Company shall pay the Seller a cash earn-out based on 20 %

of the Net Profit (as defined in the SG Purchase Agreement) related to the SG Assets for the fiscal quarterly period beginning June

30, 2024 and ending on June 30, 2028.

Per the scope exception under ASC 815, the Company has not accrued the contingent consideration.

Schedule of Business Acquisitions

Provisional purchase consideration at preliminary fair value:

Purchase price

Contingent consideration liability

Co nsideration paid

Assets acquired and liabilities assumed at preliminary fair value

Product/technology related intangibles

Trademark related intangibles

Net tangible assets acquired

December 1, 2023, the Company closed a transaction related to an Asset Purchase Agreement dated November 30, 2023 with Olympus Trading Company, LLC, a Virginia limited liability company,

whereby the Company purchased all assets related to the Kenkoderm Seller’s skincare line focused on reducing symptoms associated

with psoriasis operating under the tradename “Kenkoderm” (“Kenkoderm acquisition”).

The Company believes the Kenkoderm brand fits its health and wellness lines of product.

the terms of the Kenkoderm Purchase Agreement, the Company paid the Kenkoderm Seller a cash payment of $ 546,500 on December 1, 2023.

Additionally, the Company shall pay the Kenkoderm Seller a cash earn-out of the same amount each quarter, payable in the subsequent month

following quarter end, of $ 136,625 , subject to adjustment.

The cash earn-out can fluctuate higher or lower based on the quarterly results

of the Kenkoderm business during 2024 according to the formula contained in the Purchase Agreement.

provisional fair value of the purchase consideration issued to the Kenkoderm Seller was allocated to the net tangible assets acquired.

The Company accounted for the Kenkoderm 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 condensed consolidated

with those of the Company.

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table below shows a preliminary analysis for the Kenkoderm acquisition ($ in thousands):

of Business Acquisitions

Schedule of Business Acquisitions

Provisional purchase consideration at preliminary fair value:

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Non-controlling

Interest in Joint Venture – CG Labs

Interest in Joint Venture – CGN

March 1, 2023, the Company acquired a 50 % interest in

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to the JV, on a schedule to be determined, to be used for equipment and facility upgrades as well as general corporate purposes for the

JV is considered to be a VIE and we have consolidated the JV.

JV is considered to be a VIE and we have consolidated the JV because we believe we are the primary beneficiary because

we meet the Power and the Economics

Criteria, as laid out in ASC 323.

recorded assets acquired and liabilities assumed in connection with the formation of the JV based on their estimated fair values as of

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The purchase price allocation is as follow ($ in thousands):

of Business Acquisitions

Schedule of Business Acquisitions

Purchase consideration at fair value:

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Noncontrolling interest portion of CG Labs contributed business

Amount of consideration

C onsideration Paid

Assets acquired and liabilities assumed at fair value

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Net tangible assets acquired

Total net assets acquired

Consideration paid

Non-controlling Interest in Joint Venture –

On January 6, 2023, the Company acquired a 50 % interest

in a newly formed JV (“Enigma”) to pursue branded consumer product retail opportunities and the development of new patch products.

The JV agreement is effective January 6, 2023.

As a result of this transaction, the Company owns 50 % of the JV, with the remaining 50 %

held by Moiety.

As of June 30, 2024, the Company has contributed $ 20 thousand and $ 37 thousand has been contributed by the non-controlling

interest portion of Enigma contributed business.

JV is considered to be a VIE and we have consolidated the JV because we believe we are the primary beneficiary because we meet the

Power and the Economics Criteria, as laid out in ASC 323.

allocation of the purchase price to identifiable assets is based on the preliminary valuations performed to determine the fair value

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unaudited pro-forma condensed consolidated results of operations are presented for information purposes only.

The unaudited pro-forma

condensed consolidated results of operations are not intended to present actual results that would have been attained had the Kenkoderm

acquisition and the JV been completed as of January 1, 2023 or to project potential operating results as of any future date or for any

future periods ($ in thousands except share and per share amounts):

of Unaudited Pro-Forma Results of Operations

March 31, March 31,

The unaudited

pro-forma condensed consolidated results of operations are not intended to present actual results that would have been attained had

the Kenkoderm and Silly George acquisitions and the CGN JV and Enigma JV been completed as of January 1, 2023 or to project

potential operating results as of any future date or for any future periods ($ in thousands except share and per share

Schedule of Unaudited Pro-Forma Results of Operations

Revenues, net

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following table presents information about the amount and timing of the liability arising from the Company’s operating lease as

of March 31, 2024 ($ in thousands):

of Future Minimum Operating Lease Payments

of June 30, 2024 ($ in thousands):

Schedule of Future Minimum Operating Lease Payments

Maturity of Lease Liability

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Weighted average discount rate

operating lease expense for the three months ended March 31, 2024 and 2023, was $ 71 thousand and $ 65 thousand, respectively, and is recorded

operating lease expense for the six months ended June 30, 2024 and 2023, was $ 143 thousand and $ 136 thousand, respectively, and is recorded

in cost of goods sold and selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

cash flows information related to leases was as follows:

of Supplemental Cash Flows Information Related to Leases

Schedule of Supplemental Cash Flows Information Related to Leases

Cash paid for amounts included in the measurement of lease liability ($ in thousands):

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Financing Lease

February 2024, the JV entered into a lease agreement for certain equipment under separate non-cancelable equipment loan and security

February 2024, the CGN JV entered into a lease agreement for certain equipment under separate non-cancelable equipment loan and

security agreements.

The agreement matures in January 2030.

The agreements require monthly payments of principal and interest through maturity

and are secured by the assets under the lease.

As of March 31, 2024, $ 416 thousand is included in the property and equipment on the balance

The weighted average interest rate was 9.1 % at March 31, 2024.

The agreements require monthly payments of principal and interest

through maturity and are secured by the assets under the lease.

As of June 30, 2024, $ 394

thousand is included in the property and equipment on the balance sheet.

The weighted average interest rate was 9.1 %

at June 30, 2024.

following table presents information about the amount and timing of the liability arising from the Company’s financing lease as

of March 31, 2024 ($ in thousands):

of Future Minimum Financing Lease Payments

of June 30, 2024 ($ in thousands):

Schedule of Future Minimum Financing Lease Payments

Maturity of Lease Liability

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consists of the following ($ in thousands):

Schedule of Inventory

Raw materials

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and equipment consist of the following ($ in thousands):

of Property and Equipment

Schedule of Property and Equipment

Machinery and equipment

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Property and equipment, net

expense for the three months ended March 31, 2024 and 2023 was $ 38 thousand and $ 27 thousand, respectively.

expense for the six months ended June 30, 2024 and 2023 was $ 76 and $ 61 , respectively.

Intangible Assets

following provides a breakdown of identifiable intangible assets as of March 31, 2024 and December 31, 2023 ($ in thousands):

following provides a breakdown of identifiable intangible assets as of June 30, 2024 and December 31, 2023 ($ in thousands):

Schedule of Breakdown of Identifiable Intangible Assets

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Tradename related intangible asset, gross

Trademark related intangibles

Accumulated amortization

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technology related and customer related intangibles.

connection with the March 1, 2023 JV, the Company identified intangible assets of $ 287 thousand representing technology related and customer

related intangibles.

connection with the March 1, 2023 CGN JV, the Company identified intangible assets of $ 287

thousand representing technology related and customer related intangibles.

connection with the December 1, 2023 acquisition of Kenkoderm, the Company identified intangible assets of $ 113 thousand representing

technology related and customer related intangibles.

connection with the May 15, 2024 acquisition of Silly George, the Company identified intangible assets of $ 600 thousand representing

trademark related intangibles with indefinite lives.

Intangible assets with indefinite lives are tested for impairment within one year of the acquisition date or annually

as of December 31, and whenever indicators of impairment exist.

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 $ 24 and $ 4 thousand for the three months ended March 31, 2024 and 2023, respectively.

of March 31, 2024, the estimated annual amortization expense for each of the next five fiscal years is as follows ($ in thousands):

amounted to $ 72 and $ 4 thousand for the six months ended June 30, 2024 and 2023, respectively.

of June 30, 2024, the estimated annual amortization expense for each of the next five fiscal years is as follows ($ in thousands):

Schedule of Estimated Annual Amortization Expense

2024 (remainder of the year)

Indefinite lived intangible assets subject to impairment

Accrued Expenses and Other Current Liabilities

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Total accrued expenses and other current liabilities

March 31, 2024, the Company has reserved common stock for issuance in relation to the following:

June 30, 2024, the Company has reserved common stock for issuance in relation to the following:

Schedule of Reserved Common Stock For Issued Securities in Relation

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Restricted stock units

June 6, 2024, Company issued 5,000 common shares to a consultant valued at $ 9 thousand.

February 15, 2024 (the “Closing Date”), the Company, entered into subscription agreements with investors, the Company’s

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The Company issued 485,782 shares of common stock and warrants to purchase up to 242,891 shares of common stock.

to certain ownership limitations, each of the warrants will become exercisable on the Closing Date, will have an exercise price of $ 4.00

per share and will expire five years after the Closing Date.

to certain ownership limitations, each of the warrants became exercisable on the Closing Date, with an exercise price of $ 4.00 per share

and will expire five years after the Closing Date.

The warrants may only be exercised on a cashless basis if there is no registration

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may be increased or decreased at the holder’s election not to exceed 9.99 %.

net proceeds to the Company from the RDO were $ 0.9 million, after deducting the placement agent’s fees and other offering

net proceeds to the Company from the RDO were $ 0.9 million, after deducting the placement agent’s fees and other estimated offering

expenses payable by the Company, and excluding the proceeds, if any, from the exercise of the warrants.

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Company retained Alere Financial Partners, LLC (A division of Cova Capital Partners, LLC) to act as the placement agent for the RDO.

The Company agreed to pay the placement agent a cash fee of 6 % of the aggregate gross proceeds in the RDO received from non-affiliates

of the Company and 3 % of the aggregate gross proceeds in the RDO received from affiliates of the Company.

Additionally, and upon the

closing of the RDO, the Company agreed to issue to the placement agent warrants exercisable for a period of five years to purchase up

to 6 % of the number of shares sold in this offering, or up to 27,725 shares, at a per share exercise price of $ 4.00 .

The Company paid the placement agent a cash fee of 6 % of the aggregate gross proceeds in the RDO received from non-affiliates of the

Company and 3 % of the aggregate gross proceeds in the RDO received from affiliates of the Company.

Additionally, on the Closing Date,

the Company issued to the placement agent warrants exercisable for a period of five years to purchase up to 6 % of the number of shares

sold in this offering, or up to 27,725 shares, at a per share exercise price of $ 4.00 .

Share-based Compensation

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an executive officer during any calendar year is 14,286 shares of common stock.

following table contains information about the 2019 Plan as of March 31, 2024:

following table contains information about the 2019 Plan as of June 30, 2024:

Schedule of Information about Incentive Plan

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stock options

following table summarizes the Company’s incentive stock option activity and related information for the period ended March 31,

following table summarizes the Company’s incentive stock option activity and related information for the period ended June 30,

Schedule of Incentive Stock Option Activity

Outstanding at January 1, 2024

Outstanding at March 31, 2024

Exercisable at March 31, 2024

of March 31, 2024, vested outstanding stock options had $ 342 thousand intrinsic value as the exercise price is greater than the estimated

fair value of the underlying common stock, respectively.

As of March 31, 2024, there was approximately $ 31 thousand of total unrecognized

share-based compensation related to unvested stock options, which the Company expects to recognize over the next 3 months excluding options

fully contingent upon certain sales-based milestones being achieved within 18 to 36 months of commercial release.

Outstanding at June 30, 2024

Exercisable at June 30, 2024

of June 30, 2024 and 2023, vested outstanding stock options had $ 207

thousand and $ 129

thousand of intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock,

respectively.

As of June 30, 2024, there were no

unrecognized share-based compensation related to unvested stock options, excluding options fully contingent upon certain sales-based milestones being achieved within 18

months of commercial release.

as of January 1, 2024, the Company granted an aggregated restricted stock award of 22,222 shares of the Company’s common stock

to Adam Levy for his service as our Chief Executive Officer pursuant to the terms of his Executive Employment Agreement dated December

31, 2023, all of which shares vested monthly from April 1, 2024 through December 31, 2024.

The shares vested monthly from April 1, 2024 through December 31, 2024.

Under ASC 718, Compensation—Stock

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Exercised and converted to common shares

Outstanding at March 31, 2024

Exercisable at March 31, 2024

Outstanding at June 30, 2024

Exercisable at June 30, 2024

expense will be recognized ratably over the total vesting schedule.

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expense for forfeited awards.

Stock based compensation of $ 54 thousand and $ 24 thousand has been recorded for the three months ended

March 31, 2024 and 2023, respectively.

As of March 31, 2024, there was $ 50 thousand unrecognized share-based compensation related to

unvested RSUs, which the Company expects to recognize through December 2024.

following table shows a summary of common stock warrants through March 31, 2024:

Stock based compensation of $ 118 thousand and $ 53 thousand has been recorded for the six months ended June

30, 2024 and 2023, respectively.

As of June 30, 2024, there was $ 77 thousand unrecognized share-based compensation related to unvested

RSUs, which the Company expects to recognize through December 2025.

following table shows a summary of common stock warrants through June 30, 2024:

Schedule of Common Stock Warrants

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Outstanding at January 1, 2024

Outstanding at March 31, 2024

Exercisable at March 31, 2024

of March 31, 2024 and 2023, vested outstanding warrants had $ 0 and $ 90 thousand, respectively, intrinsic value as the exercise price

is greater than the estimated fair value of the underlying common stock.

Notes Payable

Outstanding at June 30, 2024

Exercisable at June 30, 2024

of June 30, 2024 and 2023, vested outstanding warrants had no intrinsic value as the exercise price is greater than the estimated fair

value of the underlying common stock.

Notes Payable

JV has entered into a $ 231 thousand promissory note agreement for certain equipment.

JV Notes Payable

CGN JV has entered into a $ 231

thousand promissory note agreement for certain equipment.

The equipment was installed in December 2023.

promissory note has a term of five years beginning on March 13, 2024.

The promissory note accrues interest at 8 % and requires interest

only payments through March 13, 2024 and monthly payments of $ 4 thousand thereafter.

principal balance amounted to $ 227 thousand and $ 231 thousand as of March 31, 2024 and December 31, 2023, respectively.

JV has entered into a $ 242 thousand promissory note agreement for certain equipment.

The funding advances of $ 153 thousand and $ 84 thousand

have been issued in February 2024 and December 2023, respectively.

The promissory note has a term of five years beginning on March 13,

The promissory note accrues interest at 8 % and requires interest only payments through March 13, 2024 and monthly payments of $ 5

The promissory note has a

years beginning on March 13, 2024.

The promissory note accrues interest at 8 %

and requires interest only payments through March 13, 2024 and monthly payments of $ 4

thousand thereafter.

The principal balance amounted

to $ 234 thousand and $ 84 thousand as of March 31, 2024 and December 31, 2023, respectively.

Compay has entered into a $ 13

thousand promissory note agreement for LED energy efficient lighting.

The installation was certified

complete in February 2024.

thousand and $ 231

thousand as of June 30, 2024 and December 31, 2023, respectively.

CGN JV has entered into a $ 237

thousand promissory note agreement for certain equipment.

The funding advances of $ 153

thousand and $ 84

thousand have been issued in February 2024 and December 2023, respectively.

The promissory note has a term of five

years beginning on March 13, 2024.

The promissory note accrues interest at 8 %

and requires interest only payments through March 13, 2024 and monthly payments of $ 5

thousand thereafter.

The principal balance amounted

thousand and $ 84

thousand as of June 30, 2024 and December 31, 2023, respectively.

Company has entered into a $ 13

thousand promissory note agreement for certain leasehold improvements.

The leasehold improvements were installed

in February 2024.

The promissory note has a term of two

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principal balance amounted to $ 11

thousand as of March 31, 2024.

thousand as of June 30, 2024.

Injury Disaster Loan

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The balances of the principal

and accrued interest amounted to $ 276 and $ 279 thousand as of March 31, 2024 and December 31, 2023, respectively.

future annual principal amounts and accrued interest to be paid as of March 31, 2024 are as follows:

and accrued interest amounted to $ 275 and $ 279 thousand as of June 30, 2024 and December 31, 2023, respectively.

future annual principal amounts and accrued interest to be paid as of June 30, 2024 are as follows:

Schedule of Debt Instruments

For the year ending December 31 ($ in thousands):

February 21, 2024, 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 27,725 , 22,019 , 34,285 , 7,429 , 7,286 , 44,286 , 35,714 and 114,286 warrants, respectively, as equity issuance

consideration, in connection with equity offering 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,

Derivatives and Hedging .

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 (expense) in the condensed consolidated statements of operations.

February 21, 2024, 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 27,725 , 22,019 , 34,285 , 7,429 , 7,286 , 44,286 , 35,714

warrants, respectively, as equity issuance consideration, in connection with equity offering 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

per share at any time on or after their issuance date and on or prior to the close of business three 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, Derivatives and Hedging .

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 (expense) in the condensed consolidated statements of operations.

warrants outstanding and fair values at each of the respective valuation dates are summarized below:

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Fair value as of year ended 6/30/2024

following assumptions were used to calculate the warrant liability for three months ended March 31, 2024 and 2023:

of Assumptions Used in Warrant Liability

following assumptions were used to calculate the warrant liability for six months ended June 30, 2024 and 2023:

Schedule of Assumptions Used in Warrant Liability

Exercise price

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Company’s revenues are concentrated in a small group of customers with some individually having more than 10% of total revenues.

the three months ended March 31, 2024, the Company had revenue from one customer that approximated 10 % of total revenue.

For the three

months ended March 31, 2023, the Company had revenue from three customers that exceeded 10% of total revenues which were 52 %, 21 %, and

Company had two customers with accounts receivable balances that were 24 % and 44 % of total accounts receivable as of March 31, 2024.

The Company had three customers with accounts receivable balances that were 25 %, 31 %, and 10 % of total accounts receivable as of March

Revenues from one customer that exceeded 10% of total revenues for the six months ended June 30, 2024, was 15 %.

The accounts receivable from the top customer was 58 %

as well as 14 %

from one other customer of the total accounts receivable as of June 30, 2024.

from two customers that exceeded 10% of total revenues for the six months ended June 30, 2023, were 40 % and 14 %.

The accounts receivable

from those top two customers were 0 % and 22 % as well as 13 %, 15 %, and 16 % from three other customers of the total accounts receivable

as of June 30, 2023.

Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents and

5 unchanged sentences

limit of $ 250 thousand.

As of March 31, 2024, the total amount exceeding such limit was $ 98 thousand.

As of June 30, 2024, the Company did not have any balances that exceeded the FDIC insurance limit, however the Company had approximately $82

thousand in cash in non FDIC insured entities at June 30, 2024.

The Company has not experienced

10 unchanged sentences

Related Party Transactions

Jerome Zeldis, a member of the Company board of directors, has an outstanding balance due of $ 25,000 for services as of March 31, 2024

and December 31, 2023, included in accounts payable in the accompanying condensed consolidated balance sheets.

Jerome Zeldis, a member of the Company board of directors, has an outstanding balance due of $ 25,000 for services as of June 30, 2024

and December 31, 2023, which is included in accounts payable in the accompanying condensed consolidated balance sheets.

Subsequent Events

1 unchanged sentence

if there were any such events or transactions requiring adjustment to or disclosure in the accompanying condensed consolidated financial

statements, noting no such events or transactions.

statements, noting no such events or transactions except as set forth below:

On August 8, 2024, the Company

entered into subscription agreements with investors, certain members of its board of directors, and management for the sale by the Company of an aggregate of 222,000

units at a price to the public of $ 5.00

per unit (the “August Offering”), with each

unit consisting of two shares of the Company’s common stock and a warrant to purchase one share of common stock at an exercise

price of $ 4.25

per share (the “August Warrants”) .

closing of the August Offering is subject to customary closing conditions and is expected to occur on or about August 14, 2024 (the

“August Closing Date”).

On or about the August Closing Date, the Company expects to issue 444,000

shares of common stock and issue August Warrants to purchase up to 222,000

shares of common stock

Subject to certain ownership limitations, each of

the August Warrants will become exercisable on the August Closing Date, will have an exercise price of $ 4.25 per share and will expire

five years after the August Closing Date.

The August Warrants may only be exercised on a cashless basis if there is no registration statement

registering, or the prospectus contained in the registration statement is not available for, the issuance or resale of shares of common

stock underlying the August Warrants to or by the holder.

The holder of an August Warrant is prohibited from exercising of any such warrants

to the extent that such exercise would result in the number of shares of common stock beneficially owned by such holder and its affiliates

exceeding 4.99% of the total number of shares of common stock outstanding immediately after giving effect to the exercise, which percentage

may be increased or decreased at the holder’s election not to exceed 9.99%.

Certain members of the Company’s board of directors

and management have agreed to purchase an aggregate of 27,000 units in the August Offering.

In connection with the August Offering, the

members of board of directors and management purchasing units in the August Offering have agreed not to offer, issue, sell, contract to

sell, encumber, grant any option for the sale of or otherwise dispose of any of securities relating to the units for a period of 180 days

following the date of the prospectus used in the August Offering.

The gross proceeds to the Company from the August

Offering are expected to be approximately $ 1.110 million, before deducting the placement agent’s fees and other estimated offering

expenses payable by the Company, and excluding the proceeds, if any, from the exercise of the August Warrants.

The Company intends to

use the net proceeds from the August Offering for working capital and for general corporate purposes.

The Company retained Alere Financial

Partners, LLC (a division of Cova Capital Partners, LLC) to act as the placement agent (the “Placement Agent”) for the

August Offering.

The Company agreed to pay the Placement Agent a cash fee of 8 %

of the aggregate gross proceeds in the August Offering received from non-affiliates of the Company and 4 %

of the aggregate gross proceeds in the August Offering received from affiliates of the Company.

Additionally, and upon the closing

of the August Offering, the Company agreed to issue to the Placement Agent warrants exercisable for a period of five

years to purchase up to 8 %

of the number of shares sold in August Offering, or up to 33,360

shares, at a per share exercise price of $ 4.25 .

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 1. Financial Statements