What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-13 compared with 2024-08-19 · 635 added, 617 removed, 526 unchanged (70% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

OF JUNE 30, 2024 AND DECEMBER 31, 2023

OF SEPTEMBER 30, 2024 AND DECEMBER 31, 2023

thousands, except share and per share data)

and cash equivalents

receivable, net

expenses and other current assets

current assets

Accounts receivable, net

Prepaid expenses and other current assets

Total current assets

Intangibles, net

Property and equipment, net

Operating lease - right of use asset

LIABILITIES AND STOCKHOLDERS’ EQUITY

and equipment, net

lease - right of use asset

AND STOCKHOLDERS’ EQUITY

expenses and other current liabilities

portion of note payable

consideration liability

lease liability, current portion

lease liabilities, current portion

current liabilities

Accounts payable

Accrued expenses and other current liabilities

Deferred revenue

Current portion of note payable

Warrant liability

Contingent consideration liability

Financing lease liability, current portion

Operating lease liabilities, current portion

Total current liabilities

Operating lease liabilities, net of current portion

Financing lease liability, net of current portion

Notes payable, net of current portion

Total liabilities

Commitments and Contingencies (Note 16)

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;

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

Additional paid-in capital

Accumulated deficit

Total NexGel stockholders’ equity

Non-controlling interest in joint venture

Total stockholders’ equity

Total liabilities and stockholders’ equity

lease liabilities, net of current portion

lease liability, net of current portion

payable, net of current portion

and Contingencies (Note 16)

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;

6,790,777 and 5,741,838 shares issued and outstanding as of September 30, 2024

and December 31, 2023, respectively

paid-in capital

NexGel stockholders’ equity

Non-controlling

interest in joint venture

stockholders’ equity

liabilities and stockholders’ equity

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

CONSOLIDATED STATEMENTS OF OPERATIONS

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

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

thousands, except share and per share data)

Three Months Ended

Six Months Ended

Revenues, net

Cost of revenues

and development

general and administrative

operating expenses

Research and development

Selling, general and administrative

Total operating expenses

Loss from operations

Other income (expense)

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 attributable to non-controlling interest in joint venture

Net loss attributable to NexGel stockholders

Net loss per common share - basic

Net loss per common share - diluted

Weighted average shares used in computing net loss per common share - basic

Weighted average shares used in computing net loss per common share – diluted

from operations

income (expense)

on investments

in fair value of warrant liability

other income, net

before income taxes

Loss (income) attributable to non-controlling interest in joint venture

loss attributable to NexGel stockholders

loss per common share - basic

loss per common share - diluted

average shares used in computing net loss per common share - basic

average shares used in computing net loss per common share – diluted

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

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

thousands, except share data)

Stockholders’

Balance, January 1, 2024

Share-based compensation and restricted stock vesting

Equity offering proceeds, net of expenses

Issuance of placement agent warrants in conjunction with the equity offering

January 1, 2024

compensation and restricted stock vesting

offering proceeds, net of expenses

of placement agent warrants in conjunction with the equity offering

Balance, March 31,

Share-based compensation and restricted stock vesting

Shares issued in acquisition

Issuance of shares for services

Non-controlling interest contribution

compensation and restricted stock vesting

issued in acquisition

Issuance of shares

Non-controlling

interest contribution

Balance, June 30,

compensation and restricted stock vesting

offering proceeds, net of expenses

of placement agent warrants in conjunction with the equity offering

September 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

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

thousands, except share data)

Stockholders’

Balance, January 1, 2023

Restricted stock vesting

January 1, 2023

stock vesting

Exercise of warrants

Non-controlling interest in JV

Non-controlling interest

Net income (loss)

Non-controlling

interest in JV

Non-controlling

interest contribution

income (loss)

Balance, March 31,

Stock-based compensation

Exercise of warrants

Net income (loss)

income (loss)

Balance, June 30,

income (loss)

September 30, 2023

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

Six Months Ended

Operating Activities

Adjustments to reconcile net loss to net cash used in operating activities:

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

Depreciation and amortization

Changes in ROU asset and operating lease liability

Share-based compensation and restricted stock vesting

Gain on investment in marketable securities

Changes in fair value of warrant liability

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other assets

Accounts payable

Accrued expenses and other current liabilities

Deferred revenue

Net Cash Used in Operating Activities

Investing Activities

Proceeds from sales of marketable securities

Capital expenditures

Net cash paid for Asset acquisition

Net Cash Provided by (Used in) Investing Activities

Financing Activities

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

Net Cash Provided by (Used in) Financing Activities

Net Decrease in Cash

Cash – Beginning of period

Cash – End of period

Supplemental Disclosure of Cash Flows Information

Cash paid during the year for:

Supplemental Non-cash Investing and Financing activities

Shares issued in conjunction with asset acquisition

Property and equipment financed under notes payable

Property and equipment financed under financing leases

Property and equipment contributed as capital investment to JV

ROU asset and operating lease liabilities recognized upon consolidation of JV

THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

to reconcile net loss to net cash used in operating activities:

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

and amortization

in ROU asset and operating lease liability

compensation and restricted stock vesting

on investment in marketable securities

in fair value of warrant liability

in operating assets and liabilities:

expenses and other assets

expenses and other current liabilities

Cash Used in Operating Activities

from sales of marketable securities

cash paid for Asset acquisition

Cash (Used in) Provided by Investing Activities

from margin line of credit

from Rights offering

by joint venture partner

payment on financing lease liability

in contingent consideration liability

payments of notes payable

Cash Provided by Financing Activities

Decrease in Cash

Cash – Beginning

Disclosure of Cash Flows Information

paid during the year for:

Non-cash Investing and Financing activities

issued in conjunction with asset acquisition

and equipment financed under notes payable

and equipment financed under financing leases

and equipment contributed as capital investment to JV

asset and operating lease liabilities recognized upon consolidation of JV

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

24 unchanged sentences

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”).

May 15, 2024, the Company purchased substantially all of the 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 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”)

1 unchanged sentence

“Kenkoderm” (“Kenkoderm acquisition”).

March 1, 2023, the Company acquired a

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

March 1, 2023, the Company acquired a 50 % interest in a newly formed joint venture (“JV”), CG Converting and Packaging, LLC

(“CGN”), with C.G.

Laboratories Inc.

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

The JV is effective March 1, 2023.

a result of this transaction, the Company owns 50 %

of the JV, with the remaining 50 %

held by CG Labs.

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 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.

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.

As a result of this transaction,

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

of Presentation

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

instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”).

Accordingly, they do not

include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, these

unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered

necessary for a fair presentation of the results of the interim periods, but are not necessarily indicative of the results of

operations to be anticipated for the full year ending December 31, 2024 .

These condensed consolidated financial statements should

be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual

Report on Form 10-K for the year ended December 31, 2023.

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 instructions

to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”).

Accordingly, they do not include

all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, these unaudited

condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary

for a fair presentation of the results of the interim periods, but are not necessarily indicative of the results of operations

to be anticipated for the full year ending December 31, 2024 .

These condensed consolidated financial statements should be read

in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report

on Form 10-K for the year ended December 31, 2023.

of Consolidation

3 unchanged sentences

Going Concern

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 $ 1.0 million as of June 30, 2024.

Additionally, we believe we have sufficient cash to operate our

business plan into 2025.

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).

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

For the nine months ended September 30, 2024, the Company incurred

a net loss of $ 2.4 million and had a net usage of cash in operating activities of $ 3.0 million.

In addition, the Company had a

working capital of $ 1.6 million as of September 30, 2024.

November 11, 2024, the Company entered into subscription agreements with investors and certain members of its board of directors

and management for the sale by the Company of an aggregate of 363,636 units at a price to the public of $ 5.50

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

per share (the “November Financing”).

The November Financing is expected to close on or about November 13, 2024 with

gross proceeds to the Company expected to be $ 2.0 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

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

3 unchanged sentences

value creation.

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

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.

We intend to maintain and attempt to

grow our existing contract manufacturing business.

We also plan to continue building and developing our catalogue 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 and online advertising and 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.

25 unchanged sentences

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.

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

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

“CGN” segment is comprised of the CGN 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.

treasury bills purchased with an original maturity of three

months or less as well as investments in money market funds for which the carrying amount approximates fair value, due to the short maturities

of these investments.

and cash equivalents

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

treasury bills purchased with an original

maturity of three months or less as well as investments in money market funds for which the carrying amount approximates fair value,

due to the short maturities of these investments.

Line of Credit

6 unchanged sentences

as collateral.

As of December 31, 2023, there was $ 245 thousand outstanding under this short-term credit line which is included in accrued

expenses and other current liabilities within the accompanying condensed consolidated balance sheet (see Note 11).

The margin line credit

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

As of September 30, 2024 and December 31, 2023, there was $ 345 thousand and $ 245 thousand outstanding under this short-term

credit line which is included in accrued expenses and other current liabilities within the accompanying condensed consolidated balance

The short-term credit line will be repaid upon the maturity of U.S.

treasury bills of $0.8 million with an original maturity

of three months or less which are included in cash within the accompanying consolidated balance sheet (see Note 11).

Receivable, net

7 unchanged sentences

The allowance for credit

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

losses was $ 19 thousand as of September 30, 2024 and $ 11 thousand as of December 31, 2023.

and Cost of Revenues

20 unchanged sentences

expenses consist primarily of contracted development and testing efforts associated with development of products.

and Handling Revenue and Expense

and handling revenue and expense are included in our condensed consolidated statements of operations in revenues and cost of revenues,

respectively.

Shipping revenue and expense are primarily generated through the Amazon marketplace.

and Equipment, net

34 unchanged sentences

Expenses and Other Current Assets

expenses and other current assets are recorded at historical cost and are primarily made up of $ 10

thousand and $ 64

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.

expenses and other current assets are recorded at historical cost and are primarily made up of $ 65 thousand and $ 64 thousand of prepaid

insurance, and $ 814 thousand and $ 336 thousand general prepaid expenses and other current assets as of September 30, 2024 and December

31, 2023, respectively.

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

parts for manufacturing equipment.

The Company maintains spare for either repair and maintenance, which is expensed as incurred, or replacement

of capitalized equipment.

Capitalized 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

18 unchanged sentences

The fair values

of the warrants are estimated as of the date of issuance and again at each year end using a Black-Scholes option valuation model.

issuance, the fair values of the warrant are recognized as an equity issuance cost within additional paid-in-capital.

of the warrants are estimated as of the date of issuance and again at each reporting period using a Black-Scholes option valuation model.

At issuance, the fair values of the warrant are recognized as an equity issuance cost within additional paid-in-capital.

Fair value adjustments

to the warrant liability are recognized in other income (expense) in the condensed consolidated statements of operations.

Classified Warrants

that meet all necessary criteria to be accounted for as equity in accordance with ASC 815-40, Derivatives and

Hedging—Contracts in Entity’s Own Equity are presented within additional paid-in capital within Company’s

condensed consolidated statements of changes in stockholders’ equity and condensed consolidated balance sheets.

classified as equity are initially measured at fair value.

Subsequent changes in fair value are not recognized as long as the

warrants continue to be classified as equity.

Company records revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

6 unchanged sentences

Company currently recognizes revenue predominately from three sources, contract manufacturing, custom and white label finished goods

manufacturing and our branded products.

Revenues from manufactured products are recognized at the point where the customer obtains control

of the goods and the Company satisfies its performance obligation, which generally is at the time the customer receives the product.

manufacturing (“Custom and white label”), and our branded consumer products.

Contract manufacturing and Custom and white

label revenues are recognized at the point where the customer obtains control of the goods and the Company satisfies its performance

obligation, which generally is at the time the customer receives the product.

Branded consumer product revenue is derived from direct-to-consumer

purchases through websites like Amazon and through our Shopify stores.

Revenue is recognized upon shipment to the end customer.

Company’s customers consist of other life sciences companies and Amazon retail customers.

Revenues are entirely concentrated in

the United States.

Payment terms vary by the type and location of customer and may differ by jurisdiction and customer but payment is

generally required in a term ranging from 30 to 60 days from date of shipment.

Revenues are predominately concentrated

in the United States, but with the Silly George acquisition, have expanded into Europe and Asia.

Payment terms, excluding branded consumer

products, vary by the type and location of customer and may differ by jurisdiction and customer but payment is generally required in

a term ranging from 30 to 60 days from date of shipment.

Branded consumer products are purchased and paid for by the consumer at the

time the transaction is completed.

for product returns, allowances and discounts are recorded as a reduction of revenue and are established at the time of sale.

8 unchanged sentences

of Disaggregated Revenue by Sales Type

Three months ended

Contract manufacturing

Custom and white label finished goods manufacturing

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

manufacturing

and white label

consumer products

devices/other

manufacturing

and white label

consumer products

devices/other

of September 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

and $ 20 at September 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 and White Label, Branded Consumer Products,

and Medical Devices/Other.

Contract Manufacturing, Custom and White Label, Branded Consumer Products, and Medical Devices/Other.

Manufacturing

12 unchanged sentences

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

Custom and white label revenue is recognized upon delivery of the finished product.

Consumer Products

1 unchanged sentence

is responsible for sales, marketing, and distribution.

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

Beauty, Kenkoderm and Silly George.

When merchandise is shipped to a customer, our performance obligation is met,

and revenue is recognized when control passes to the customer.

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

Medagel, Lumagel Beauty, Kenkoderm and Silly George.

Devices/Other

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.

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.

Other includes shipping and handling revenue from

customers who purchase the Company’s branded consumer products through their Shopify stores.

It also includes a small amount of

freight revenue from contract manufacturing customers.

and Handling Revenue and Expense

and handling revenue and expense are included in our condensed consolidated statements of operations in revenues and cost of revenues,

respectively.

The Company accounts for shipping activities, consisting of direct costs to ship products performed after the control passes

to the customer.

Shipping revenue and expense are primarily generated through the Amazon marketplace and Silly George direct customer

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

67 unchanged sentences

for which creditors have recourse to the Company’s general assets.

Comprehensive

loss consists of net loss and changes in equity during the period from transactions and other equity and circumstances generated from

non-owner sources.

The Company’s net loss equals comprehensive loss for all periods presented.

Issued Accounting Standards

15 unchanged sentences

Pronouncements Issued But Not Yet Adopted

June 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-05, Business Combinations (ASC

Joint Venture Formations, which provides guidance on accounting for joint ventures established through new entities.

update mandates the application of the acquisition method of accounting for such transactions, requiring parties to recognize and measure

identifiable assets and liabilities based on fair values at the acquisition date and establishes a measurement period for adjustments.

The amendments in this Update are effective prospectively for all joint venture formations with a formation date on or after January

ASU 2023-05 will be effective for non-public entities for annual periods beginning after December 15, 2025, with early adoption

The Company is currently evaluating the implications of this update on its accounting practices for joint ventures and expects

it will enhance consistency and transparency in financial reporting, without a material impact on its financial position or results of

December 2023, the FASB issued ASU 2023-09 , Income Taxes (Topic 740):

34 unchanged sentences

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

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

presented below.

of Reportable Segments

Quarter Ended June 30, 2024 ($ in thousands)

Contract Manufacturing

Custom and White Label Finished Goods

Branded Consumer Products

Total revenue

Quarter Ended September 30, 2024 ($ in thousands)

Manufacturing

and White Label Finished Goods

Consumer Products

Cost of sales

Operating expenses

Loss from operations

Quarter Ended June 30, 2023 ($ in thousands)

Contract Manufacturing

Custom and White Label Finished Goods

Branded Consumer Products

Total revenue

from operations

Quarter Ended September 30, 2023 ($ in thousands)

Manufacturing

and White Label Finished Goods

Consumer Products

Cost of sales

Operating expenses

Loss from operations

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

Contract Manufacturing

Custom and White Label Finished Goods

Branded Consumer Products

Total revenue

from operations

the Nine Months Ended September 30, 2024 ($ in thousands)

Manufacturing

and White Label Finished Goods

Consumer Products

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

from operations

the Nine Months Ended September 30, 2023 ($ in thousands)

Manufacturing

and White Label Finished Goods

Consumer Products

Cost of sales

Operating expenses

Loss from operations

of June 30, 2024 ($ in thousands)

from operations

of September 30, 2024 ($ in thousands)

receivable, net

expenses and other current assets

current assets

Accounts receivable, net

Prepaid expenses and other current assets

Total current assets

Intangibles, net

Property and equipment, net

Operating lease – right of use asset

and equipment, net

lease – right of use asset

expenses and other current liabilities

portion of note payable

consideration liability

lease liability, current portion

lease liabilities, current portion

current liabilities

Accounts payable

Accrued expenses and other current liabilities

Deferred revenue

Current portion of note payable

Warrant liability

Contingent consideration liability

Financing lease liability, current portion

Operating lease liabilities, current portion

Total current liabilities

Financing lease liability, net of current portion

Operating lease liabilities, net of current portion

Notes payable, net of current portion

Total liabilities

lease liability, net of current portion

lease liabilities, net of current portion

payable, net of current portion

of December 31, 2023 ($ in thousands)

receivable, net

expenses and other current assets

current assets

Accounts receivable, net

Prepaid expenses and other current assets

Total current assets

Intangibles, net

Property and equipment, net

Operating lease – right of use asset

and equipment, net

lease – right of use asset

expenses and other current liabilities

portion of note payable

consideration liability

lease liability, current portion

current liabilities

Accounts payable

Accrued expenses and other current liabilities

Deferred revenue

Current portion of note payable

Warrant liability

Contingent consideration liability

Operating lease liability, current portion

Total current liabilities

Operating lease liability, net of current portion

Notes payable, net of current portion

Total liabilities

lease liability, net of current portion

payable, net of current portion

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

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 company

(the “SG Seller”), whereby the Company purchased the Silly George assets.

The Company believes the Silly George assets will

be accretive and synergistic to its existing health and beauty customer product brands.

the terms of the SG 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

Additionally, the Company will pay the Seller a cash earn-out based on 20 % of the Net

Profit (as defined in the SG Purchase Agreement) related to the Silly George assets for the fiscal quarterly period beginning June 30,

2024 and ending on June 30, 2028.

1 unchanged sentence

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”).

purchase consideration at preliminary fair value:

consideration liability

Consideration

related intangibles

assets acquired

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

Agreement”) 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.

the terms of the Kenkoderm Purchase Agreement, the Company paid the Kenkoderm Seller a cash payment of $ 547 thousand on December 1, 2023.

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

following quarter end, of $ 137 thousand, 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 Kenkoderm Purchase Agreement.

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

7 unchanged sentences

Schedule of Business Acquisitions

Provisional purchase consideration at preliminary fair value:

Purchase price

Contingent consideration liability

Amount of consideration

Assets acquired and liabilities assumed at preliminary fair value

Product/technology related intangibles

Marketing related intangibles

Net tangible assets acquired

Total net assets acquired

Consideration paid

Preliminary goodwill

Non-controlling

Interest in Joint Venture – CGN

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

the JV (see Note 1).

purchase consideration at preliminary fair value:

consideration liability

of consideration

acquired and liabilities assumed at preliminary fair value

Product/technology

related intangibles

tangible assets acquired

net assets acquired

Consideration

Defense Acquisition

May 29, 2020, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) whereby the

Company purchased all of the outstanding equity securities of Sport Defense LLC, a Delaware limited liability company (“Sports

Defense”), from the members of Sport Defense (the “Sellers”).

Subsequent to the Closing Date, Sport Defense is a wholly-owned

subsidiary of the Company.

Defense is a marketing and distribution company that leverages the unique benefits of ultra-gentle, high-water content hydrogels, manufactured

by the Company, to build brands that treat various ailments of the skin caused by athletic training, such as blisters, turf burns, scrapes

and skin irritations.

the terms of the Purchase Agreement, the purchase price paid to the Sellers was an aggregate of $ 375 thousand (the “Sports Defense

Purchase Price”) which was paid by the Company through the issuance of an aggregate of 9,375,000 shares of the Company’s

common stock, par value $ 0.001 (the “Shares”), which equates to a per share purchase price of $ 0.04 .

The Shares are “restricted

securities” as such term is defined by Rule 144 promulgated under the Securities Act of 1933, as amended.

Levy, the Company’s Chief Executive Officer and Chief Financial Officer, and Nachum Stein, a member of the Company’s Board

of Directors (the “Board”), were each members of Sport Defense and part of the Sellers.

Levy received 1,546,875

of the Shares and Mr.

Stein received 3,187,500 of the Shares.

Due to the potential conflict of interest that existed because of

Levy and Stein’s partial ownership of Sport Defense, the Board obtained an independent investment bank to prepare

a valuation report with respect to Sport Defense.

This valuation report supported the Sports Defense Purchase Price.

recused himself from the vote of the Board regarding the approval to purchase Sport Defense.

Purchase Agreement and the Sport Defense acquisition were not subject to approval by the shareholders of the Company.

The Purchase Agreement

contained minimal representations and warranties regarding Sport Defense and certain limited representations and warranties regarding

the Company and the Sellers.

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

The Company accounted

for the Sports Defense acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets

and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the

The fair value of the net assets acquired was approximately $ 375 thousand.

The excess of the aggregate fair value of the net

tangible assets has been allocated to goodwill.

table below shows an analysis for the Sports Defense acquisition:

Schedule of Business Acquisitions

Consideration at preliminary fair value:

of consideration

acquired and liabilities assumed at preliminary fair value

Product/Technology

related intangibles

payable and accrued expenses

tangible assets acquired

net assets acquired

Consideration

in Joint Venture – CGN

March 1, 2023, the Company acquired a 50 % interest in the JV (see Note 1).

The JV is owned 50 % by the Company and 50 % by CG Labs.

CG Labs contributed its existing converting and packaging

division to the JV, including, but not limited to, its facilities, equipment, employees, and customers.

The Company will contribute $ 500,000

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 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

the March 1, 2023.

Labs contributed its existing converting and packaging division to the JV, including, but not limited to, its facilities, equipment,

employees, and customers.

The Company will contribute $ 500,000 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.

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.

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

as of the March 1, 2023.

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

Schedule of Business Acquisitions

Purchase consideration at fair value:

Cash contributed by the Company

Noncontrolling interest portion of CG Labs contributed business

C onsideration Paid

Assets acquired and liabilities assumed at fair value

Cash contributed by the Company

Product/technology related intangibles

Marketing related intangibles

Net tangible assets acquired

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.

consideration at fair value:

contributed by the Company

Noncontrolling

interest portion of CG Labs contributed business

Consideration

acquired and liabilities assumed at fair value

contributed by the Company

Product/technology

related intangibles

tangible assets acquired

in Joint Venture – Enigma

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.

As a result of this transaction,

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

As of September 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

6 unchanged sentences

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 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

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 amounts):

Schedule of Unaudited Pro-Forma Results of Operations

Revenues, net

Net loss allocable to common shareholders

Net loss per share

Weighted average number of shares outstanding

loss allocable to common shareholders

loss per share

average number of shares outstanding

Operating Leases

4 unchanged sentences

to renew is solely at the Company’s discretion.

Company also has a sublease for office and manufacturing space in Granbury, Texas that runs through February 2028.

There is an option

Company also has a sublease for office and manufacturing space in Granbury, Texas that runs through February 2028.There is an option

that can extend the lease term for an additional five years through February 2033.

2 unchanged sentences

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

of June 30, 2024 ($ in thousands):

of September 30, 2024 ($ in thousands):

Schedule of Future Minimum Operating Lease Payments

Maturity of Lease Liability

of Lease Liability

(Remainder of year)

Total undiscounted operating lease payments

undiscounted operating lease payments

Imputed interest

Present value of operating lease liabilities

Weighted average remaining lease term

Weighted average discount rate

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.

value of operating lease liabilities

Weighted average

remaining lease term

Weighted average

discount rate

operating lease expense for the nine months ended September 30, 2024 and 2023, was $ 183 thousand and $ 197 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:

Schedule of Supplemental Cash Flows Information Related to Leases

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

Operating cash flows from operating lease

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

cash flows from operating lease

Financing Lease

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

security agreements.

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

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 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.

The agreements require monthly payments of principal and interest through maturity

and are secured by the assets under the lease.

As of September 30, 2024, $ 417 thousand is included in the property and equipment on the

balance sheet.

The weighted average interest rate was 9.1 % at September 30, 2024.

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

of June 30, 2024 ($ in thousands):

of September 30, 2024 ($ in thousands):

Schedule of Future Minimum Financing Lease Payments

Maturity of Lease Liability

of Lease Liability

(Remainder of year)

Total undiscounted operating lease payments `

undiscounted financing lease payments `

Imputed interest

Present value of operating lease liability

Weighted average remaining lease term

Weighted average discount rate

value of financing lease liability

Weighted average

remaining lease term

Weighted average

discount rate

consists of the following ($ in thousands):

Schedule of Inventory

Raw materials

Work-in-progress

Finished goods

Inventory, gross

6 unchanged sentences

Schedule of Property and Equipment

Machinery and equipment

Office furniture and equipment

Leasehold improvements

Construction in progress

and equipment

furniture and equipment

Property and equipment, gross

accumulated depreciation and amortization

Property and equipment, net

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

and equipment, net

expense for the nine months ended September 30, 2024 and 2023 was $ 240 and $ 95 , respectively.

Intangible Assets

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

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

Schedule of Breakdown of Identifiable Intangible Assets

Product/Technology Related

Identifiable intangible assets, gross

Accumulated amortization

Product/technology related identifiable intangible assets, net

Marketing Related

Customer related intangible asset, gross

Tradename related intangible asset, gross

Trademark related intangibles

Accumulated amortization

Marketing related identifiable intangible assets, net

Total identifiable intangible assets, net

Product/Technology

intangible assets, gross

Product/technology

related identifiable intangible assets, net

related intangible asset, gross

related intangibles

related identifiable intangible assets, net

identifiable intangible assets, net

connection with the May 29, 2020 acquisition of Sports Defense, the Company identified intangible assets of $ 55 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 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

2 unchanged sentences

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 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 2.2 years and amortization expense

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):

amounted to $ 88 thousand and $ 4 thousand for the nine months ended September 30, 2024 and 2023, respectively.

of September 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

(remainder of the year)

Indefinite lived intangible assets subject to impairment

lived intangible assets (subject to impairment analysis)

Accrued Expenses and Other Current Liabilities

1 unchanged sentence

Schedule of Accrued Expenses and Other Current Liabilities

Salaries, benefits, and incentive compensation

Margin line of credit

Total accrued expenses and other current liabilities

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

benefits, and incentive compensation

line of credit

accrued expenses and other current liabilities

September 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

Share-based compensation plan

Warrants to purchase common stock

Restricted stock units

compensation plan

to purchase common stock

August 8, 2024, the Company entered into subscription agreements with investors and 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 Financing”),

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”).

The closing of the August Offering occurred August 23, 2024 (the

“August Closing Date”).

On the August Closing Date, the Company issued 444,000 shares of common stock and issued August Warrants

to purchase up to 222,000 shares of common stock.

to certain ownership limitations, each of the August Warrants will became exercisable on the August Closing Date and will expire five

years after the August Closing Date.

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 %.

net proceeds to the Company from the August Offering were approximately $ 1.1 million, after deducting the placement agent’s fees

and other estimated offering expenses payable by the Company.

The Company has and intends to continue to use the net proceeds from the

August Offering for working capital and for general corporate purposes.

Company retained Alere Financial Partners, LLC (a division of Cova Capital Partners, LLC) to act as the placement agent (the “August

Placement Agent”) for the August Offering.

The Company agreed to pay the August 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 August 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 .

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

Chief Financial Officer and certain members of its board of directors for a RDO of the Company’s common stock.

The 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 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 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

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 warrants to or by the holder.

The holder of a 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 %.

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.

The Company intends to use the

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

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

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 .

February 15, 2024, the Company entered into subscription agreements with investors and certain members of its board of directors and

management for the sale by the Company of an aggregate of 242,891 units at a price to the public of $ 4.22 per unit (the “February

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 $ 4.00 per share (the “February Warrants”).

The closing of the February Offering occurred

on March 1, 2024 (the “February Closing Date”).

On the February Closing Date, the Company issued 485,782 shares of common

stock and issued February Warrants to purchase up to 242,891 shares of common stock.

to certain ownership limitations, each of the February Warrants became exercisable on the February Closing Date and will expire five

years after the February Closing Date.

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 warrants to or by the holder.

of a 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 %.

net proceeds to the Company from the February Offering 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.

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

Company retained Alere Financial Partners, LLC (A division of Cova Capital Partners, LLC) (the “February Placement Agent”)

to act as the placement agent for the February Offering.

The Company paid the February Placement Agent a cash fee of 6 % of the aggregate

gross proceeds in the February Offering received from non-affiliates of the Company and 3 % of the aggregate gross proceeds in the February

Offering received from affiliates of the Company.

Additionally, on the February Closing Date, the Company issued to the February 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

13 unchanged sentences

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

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

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

Schedule of Information about Incentive Plan

Available for

2019 Plan (1)

Awards issued in excess of 2019 Plan (2)

issued in excess of 2019 Plan (2)

incentive stock options and restricted stock units discussed below.

1 unchanged sentence

stock options

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

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

Schedule of Incentive Stock Option Activity

Outstanding at January 1, 2024

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.

at January 1, 2024

at September 30, 2024

of September 30, 2024 and 2023, vested outstanding stock options had $ 428 thousand and $ 282 thousand of intrinsic value as the exercise

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

As of September 30, 2024, there were $ 255

thousand of unrecognized share-based compensation related to unvested stock options, excluding options fully contingent upon certain

sales-based milestones being achieved within 18 to 36 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

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

Under ASC 718, Compensation—Stock

Compensation, the Company has measured the value of the 22,222 shares granted based on the closing price of the Company’s stock

at the grant date of the RSU Grant ($ 2.25 per share).

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

Under ASC 718, Compensation—Stock Compensation,

the Company has measured the value of the 22,222 shares granted based on the closing price of the Company’s stock at the grant

date of the RSU Grant ($ 2.25 per share).

Schedule of Restricted Stock Units Granted

Outstanding at January 1, 2024

Exercised and converted to common shares

Outstanding at June 30, 2024

Exercisable at June 30, 2024

expense will be recognized ratably over the total vesting schedule.

at January 1, 2024

and converted to common shares

at September 30, 2024

expense will be recognized ratable over the total vesting schedule.

The Company will periodically adjust the cumulative compensation

expense for forfeited awards.

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:

Stock based compensation of $ 271 thousand and $ 120 thousand has been recorded for the nine months ended

September 30, 2024 and 2023, respectively.

As of September 30, 2024, there was $ 53 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 September 30, 2024:

Schedule of Common Stock Warrants

Term in Years

Outstanding at January 1, 2024

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.

at January 1, 2024 (originally reported)

Warrants – 2021 IPO (1)

Outstanding at January 1, 2024 (corrected)

at September 30, 2024

The warrants outstanding

have been corrected to reflect 387,750 additional warrants related to the December 27, 2021 unit offering not previously included in

the prior year warrant schedule.

of September 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 Notes Payable

CGN JV has entered into a $ 231

thousand promissory note agreement for certain equipment.

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

The equipment was installed in December 2023.

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

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

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 $ 4 thousand thereafter.

The principal balance amounted to $ 208 thousand

and $ 231 thousand as of September 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

years beginning on February 11, 2024.

The promissory note accrues interest at 0 %

and requires monthly payments of $ 545 .

principal balance amounted to $ 11

thousand as of June 30, 2024.

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 to $ 218 thousand and $ 84 thousand as of September 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 years beginning on February 11, 2024.

The promissory note accrues interest

at 0 % and requires monthly payments of less than $ 1 .

The principal balance amounted to $ 9 thousand as of September 30, 2024.

Injury Disaster Loan

15 unchanged sentences

The balances of the principal

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:

and accrued interest amounted to $ 273 and $ 279 thousand as of September 30, 2024 and December 31, 2023, respectively.

future annual principal amounts and accrued interest to be paid as of September 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

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.

the year ending December 31 ($ in thousands):

September 2, 2021, March 11, 2021, February 3, 2021, December 24, 2020, March 18, 2020, September 10, 2019, and November 6, 2019, the

Company issued 22,019 ,

respectively, as equity issuance consideration, in connection with equity offering of the Company’s common stock.

entitle the holder to purchase one share of our common stock at an exercise price equal to $ 0.49

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

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.

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

Schedule of Warrant Liability

Warrant Liability

Warrants Outstanding

Fair Value per Share

Fair value as of year ended 12/31/2023

Fair value at initial measurement date

Change in fair value of warrant liability

Fair value as of year ended 6/30/2024

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

Value per Share

value as of year ended 12/31/2023

in fair value of warrant liability

value as of year ended 9/30/2024

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

Schedule of Assumptions Used in Warrant Liability

Exercise price

$ 2.80 to $ 5.25

$ 0.49 - $ 5.25

$ 1.99 - $ 2.73

113.39 % - 283.32 %

137.02 - 287.87 %

Risk-free interest rate

4.21 % - 5.09 %

3.81 % - 4.74 %

Dividend yield

Expected term

1.2 to 5.0 years

0.1 to 3.4 years

interest rate

warrant liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair value includes various

11 unchanged sentences

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

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 %.

from one customer that exceeded 10% of total revenues for the nine months ended September 30, 2024, was 10 %.

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.

from the top customer was 25 % as well as 10 %, 13 % and 23 % from three other customers of the total accounts receivable as of September

from three customers that exceeded 10% of total revenues for the nine months ended September 30, 2023, were 20 %, 11 % and 10 %.

receivable from those top three customers were 0 % and 23 % and 0 % as well as 15 %, 18 %, and 13 % from three other customers of the total

accounts receivable as of September 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 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

any credit losses associated with its cash balances in the past.

As of September 30, 2024, the Company did not have any balances that exceeded the FDIC insurance limit.

has not experienced any credit losses associated with its cash balances in the past.

The Company invests its cash equivalents in U.S.

treasury bills with

original maturities of three months or less.

treasury bills with original maturities of three months or less.

securities are comprised of U.S.

5 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 June 30, 2024

and December 31, 2023, which is 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 December 31,

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

The balance was repaid in August

Subsequent Events

2 unchanged sentences

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 .

November 11, 2024, the Company entered into subscription agreements with investors and certain members of its board of directors and

management for the sale by the Company of an aggregate of 363,636 units at a price to the public of $ 5.50 per unit (the

“November Financing”), 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 “November Warrants”).

of the November Financing is expected to occur on or about November 13, 2024 (the “November Closing Date”).

On or about the

November Closing Date, the Company expects to issue 727,272 shares of common stock and issue November Warrants to purchase up to 363,636 shares

of common stock

to certain ownership limitations, each of the November Warrants will become exercisable on the November Closing Date and will expire five

years after the November Closing Date.

The November 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 November Warrants to or by the holder.

The holder of an November 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%.

members of the Company’s board of directors and management have agreed to purchase an aggregate of 19,659 units in the November

In connection with the November Financing, the members of board of directors and management purchasing units in the November

Financing 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 November Financing.

gross proceeds to the Company from the November Financing are expected to be approximately $ 2.0 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 November Warrants.

The Company intends to use the net proceeds from the November Financing for working capital and for general

corporate purposes.

Company retained Alere Financial Partners, LLC (a division of Cova Capital Partners, LLC) to act as the placement agent (the “November

Placement Agent”) for the November Financing.

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

the aggregate gross proceeds in the November Financing received from non-affiliates of the Company and 4 % of the aggregate

gross proceeds in the November Financing received from affiliates of the Company.

Additionally, and upon the closing of the November

Financing, the Company agreed to issue to the November Placement Agent warrants exercisable for a period of five years to purchase

up to 8 % of the number of shares sold in November Financing, or up to 58,182 shares, at a per share exercise price of

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