[FORM 10-Q](index=1&type=section&id=FORM%2010-Q) This cover page details NexGel, Inc.'s Quarterly Report on Form 10-Q for Q2 2025, classifying it as a non-accelerated, smaller reporting, and emerging growth company - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2025[2](index=2&type=chunk) - NexGel, Inc. is classified as a non-accelerated filer, a smaller reporting company, and an emerging growth company[6](index=6&type=chunk) - As of August 12, 2025, the registrant had **8,067,580 shares of common stock outstanding**[7](index=7&type=chunk) [PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents NexGel, Inc.'s unaudited condensed consolidated financial statements, notes, and management's discussion and analysis [ITEM 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This item presents NexGel, Inc.'s unaudited condensed consolidated financial statements and notes for Q2 2025 and comparative periods [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance sheets show NexGel's financial position, with total assets decreasing to $9,711 thousand and equity declining to $5,055 thousand | Metric | June 30, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | Change ($ in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | :---------------------- | | Total Assets | $9,711 | $10,983 | $(1,272) | | Total Liabilities | $4,656 | $4,903 | $(247) | | Total Stockholders' Equity | $5,055 | $6,080 | $(1,025) | | Cash | $725 | $1,807 | $(1,082) | | Total Current Assets | $4,162 | $5,114 | $(952) | | Total Current Liabilities | $2,396 | $2,470 | $(74) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Operations statements show significant revenue growth for Q2 and H1 2025, improved gross profit margins, but continued net losses | Metric | 3 Months Ended June 30, 2025 ($ in thousands) | 3 Months Ended June 30, 2024 ($ in thousands) | 6 Months Ended June 30, 2025 ($ in thousands) | 6 Months Ended June 30, 2024 ($ in thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Revenues, net | $2,884 | $1,440 | $5,690 | $2,706 | | Cost of revenues | $1,626 | $1,147 | $3,244 | $2,187 | | Gross profit | $1,258 | $293 | $2,446 | $519 | | Loss from operations | $(636) | $(1,054) | $(1,413) | $(1,925) | | Net loss attributable to NexGel stockholders | $(665) | $(885) | $(1,377) | $(1,738) | | Net loss per common share - basic | $(0.09) | $(0.14) | $(0.18) | $(0.28) | - Revenue Growth (YoY): - Three months ended June 30, 2025: **+100.3%** ($2,884k vs $1,440k)[13](index=13&type=chunk) - Six months ended June 30, 2025: **+110.3%** ($5,690k vs $2,706k)[13](index=13&type=chunk) - Gross Profit Margin: - Three months ended June 30, 2025: **43.6%**[13](index=13&type=chunk) - Three months ended June 30, 2024: **20.3%**[13](index=13&type=chunk) - Six months ended June 30, 2025: **43.0%**[13](index=13&type=chunk) - Six months ended June 30, 2024: **19.2%**[13](index=13&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Equity statements detail changes for Q2 and H1 2025, with total stockholders' equity decreasing to $5,055 thousand due to net losses | Metric | Balance, Jan 1, 2025 | Balance, June 30, 2025 | Balance, Jan 1, 2024 | Balance, June 30, 2024 | | :----------------------------------- | :------------------- | :------------------- | :------------------- | :------------------- | | Common Stock Shares | 7,638,497 | 7,654,537 | 5,741,838 | 6,324,266 | | Common Stock Amount ($ in thousands) | $8 | $8 | $6 | $6 | | Additional Paid-in Capital ($ in thousands) | $23,743 | $24,036 | $19,406 | $20,614 | | Accumulated Deficit ($ in thousands) | $(17,996) | $(19,373) | $(14,715) | $(16,453) | | Total Stockholders' Equity ($ in thousands) | $6,080 | $5,055 | $5,166 | $4,527 | - Share-based compensation and restricted stock vesting amounted to **$293 thousand** for the six months ended June 30, 2025, compared to **$118 thousand** for the same period in 2024[16](index=16&type=chunk) - Equity offering proceeds, net of expenses, in 2024 were **$946 thousand**[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flow statements show a net decrease in cash, with operating cash usage decreasing and financing activities shifting to cash usage | Metric | 6 Months Ended June 30, 2025 ($ in thousands) | 6 Months Ended June 30, 2024 ($ in thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Net cash used in operating activities | $(807) | $(1,792) | | Net cash used in investing activities | $(20) | $(704) | | Net cash provided by (used in) financing activities | $(255) | $865 | | Net Decrease in Cash | $(1,082) | $(1,631) | | Cash – End of period | $725 | $1,069 | - Net cash used in operating activities decreased from **$1,792 thousand** in 2024 to **$807 thousand** in 2025, indicating improved operational cash management[18](index=18&type=chunk) - Investing activities in 2024 included **$361 thousand** in capital expenditures and **$400 thousand** for asset acquisition, significantly higher than **$20 thousand** in 2025[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the financial statements, covering policies, segments, and transactions [Note 1. Description of Business and Basis of Presentation](index=8&type=section&id=Note%201.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) NexGel manufactures hydrogels, expanded into branded consumer products and custom labels, and made key acquisitions like Silly George and Kenkoderm - NexGel manufactures high water content, electron beam cross-linked, aqueous polymer hydrogels for wound care, medical diagnostics, transdermal drug delivery, and cosmetics[19](index=19&type=chunk) - Since 2020, the company has expanded into **branded consumer products** and **custom/white label opportunities**, moving beyond its historical role as a contract manufacturer[19](index=19&type=chunk) - Key acquisitions include **Silly George** (eyeliner, fake eyelashes, lash serum, mascara business) on May 15, 2024, and **Kenkoderm** (skincare line for psoriasis) on December 1, 2023[20](index=20&type=chunk)[21](index=21&type=chunk) [Note 2. Going Concern](index=9&type=section&id=Note%202.%20Going%20Concern) NexGel's financial position raises substantial doubt about its going concern ability, prompting strategies for sales growth and capital raises - As of June 30, 2025, the Company had a cash balance of **$725 thousand**, a net loss attributable to NexGel stockholders of **$1.4 million**, and net cash usage in operating activities of **$807 thousand**, raising substantial doubt about its ability to continue as a going concern[27](index=27&type=chunk) - Management is exploring new product channel sales in adjacent industries (cosmetics, athletic products, proprietary medical devices) and increasing focus on sales and developing a sales pipeline[28](index=28&type=chunk) - Plans include maintaining and growing the existing contract manufacturing business, building a catalog of consumer products, developing proprietary medical devices, and evaluating strategic initiatives (e.g., acquisitions) and additional capital raises through debt or equity[29](index=29&type=chunk) [Note 3. Significant Accounting Policies and Estimates](index=9&type=section&id=Note%203.%20Significant%20Accounting%20Policies%20and%20Estimates) This note details NexGel's significant accounting policies and estimates, including segment reporting, revenue recognition, and fair value measurements - The Company has two reportable segments: the **NexGel segment** (manufacturing hydrogel products, Kenkoderm, Silly George, and the dissolved Enigma JV) and the **CGN segment** (converting and packaging business)[33](index=33&type=chunk)[34](index=34&type=chunk) - Revenue is recognized predominately from three sources: contract manufacturing, custom and white label finished goods manufacturing, and branded consumer products, generally upon the customer obtaining control of the goods or shipment to the end customer[55](index=55&type=chunk) | Sales Type | Six Months Ended June 30, 2025 ($ in thousands) | Six Months Ended June 30, 2024 ($ in thousands) | Change (YoY) | | :---------------------------------- | :------------------------------------------- | :------------------------------------------- | :----------- | | Contract manufacturing | $1,811 | $1,026 | +76.5% | | Custom and white label finished goods | $27 | $42 | -35.7% | | Consumer branded products | $3,666 | $1,585 | +131.3% | | Other | $186 | $53 | +250.9% | | **Total** | **$5,690** | **$2,706** | **+110.3%** | [Note 4. Business Segments](index=17&type=section&id=Note%204.%20Business%20Segments) NexGel operates two segments, NexGel and CGN JV, with the CGN JV showing improved operating income for Q2 and H1 2025 | Metric | NexGel (3M 2025, $ in thousands) | CGN JV (3M 2025, $ in thousands) | Total (3M 2025, $ in thousands) | NexGel (3M 2024, $ in thousands) | CGN JV (3M 2024, $ in thousands) | Total (3M 2024, $ in thousands) | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | | Total Revenue | $2,333 | $551 | $2,884 | $1,090 | $350 | $1,440 | | Income (Loss) from Operations | $(711) | $75 | $(636) | $(937) | $(117) | $(1,054) | | Metric | NexGel (6M 2025, $ in thousands) | CGN JV (6M 2025, $ in thousands) | Total (6M 2025, $ in thousands) | NexGel (6M 2024, $ in thousands) | CGN JV (6M 2024, $ in thousands) | Total (6M 2024, $ in thousands) | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | | Total Revenue | $4,331 | $1,359 | $5,690 | $1,941 | $765 | $2,706 | | Income (Loss) from Operations | $(1,583) | $170 | $(1,413) | $(1,716) | $(209) | $(1,925) | - The CGN JV segment improved its operating performance, moving from an operating loss of **$(117) thousand** in Q2 2024 to an operating income of **$75 thousand** in Q2 2025, and from **$(209) thousand** in H1 2024 to **$170 thousand** in H1 2025[85](index=85&type=chunk)[87](index=87&type=chunk)[89](index=89&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) [Note 5. Acquisition](index=20&type=section&id=Note%205.%20Acquisition) This note details NexGel's acquisitions of Silly George and Kenkoderm, along with its interest in the consolidated CGN JV - Silly George Acquisition (May 15, 2024): Purchased for **$600 thousand**, consisting of **$400 thousand cash** and **$200 thousand** in 89,892 shares of common stock[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - Kenkoderm Acquisition (December 1, 2023): Purchased for **$986 thousand**, comprising **$547 thousand cash** and **$439 thousand** in contingent consideration liability[100](index=100&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk) - CGN Joint Venture: Acquired a **50% interest** on March 1, 2023, contributing **$500 thousand cash**, and is consolidated as a Variable Interest Entity (VIE)[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) [Note 6. Variable interest entities](index=23&type=section&id=Note%206.%20Variable%20interest%20entities) This note details assets and liabilities of consolidated VIEs, primarily the CGN JV, with all liabilities being non-recourse | Metric | June 30, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Total Assets | $3,092 | $3,307 | | Total Liabilities | $2,362 | $2,731 | | Cash | $171 | $26 | | Accounts receivable, net | $506 | $764 | | Inventory | $621 | $646 | - The Enigma JV was dissolved on **December 23, 2024**[111](index=111&type=chunk) - All liabilities of the consolidated VIEs are **non-recourse** to NexGel, Inc. as of June 30, 2025, and December 31, 2024[112](index=112&type=chunk) [Note 7. Operating Leases](index=24&type=section&id=Note%207.%20Operating%20Leases) NexGel holds operating leases for facilities in PA and TX, with total undiscounted payments of $1,853 thousand as of Q2 2025 - The Company has an operating lease for a commercial manufacturing facility and administrative offices in Langhorne, Pennsylvania, running through **January 2031**[113](index=113&type=chunk) - A sublease for office and manufacturing space in Granbury, Texas, runs through **February 2028**[114](index=114&type=chunk) | Metric | Amount ($ in thousands) | | :-------------------------------- | :---------------------- | | Total undiscounted operating lease payments | $1,853 | | Present value of operating lease liability | $1,680 | | Weighted average remaining lease term | 5.9 years | | Weighted average discount rate | 3.0% | [Note 8. Financing Lease](index=24&type=section&id=Note%208.%20Financing%20Lease) The CGN JV entered a financing lease for equipment in February 2024, with a present value of $337 thousand as of Q2 2025 - In February 2024, the CGN JV entered into a financing lease agreement for certain equipment, maturing in **January 2030**[116](index=116&type=chunk) | Metric | Amount ($ in thousands) | | :-------------------------------- | :---------------------- | | Total undiscounted financing lease payments | $415 | | Present value of financing lease liability | $337 | | Weighted average remaining lease term | 4.6 years | | Weighted average discount rate | 9.1% | [Note 9. Inventory](index=25&type=section&id=Note%209.%20Inventory) Inventory increased slightly to $1,821 thousand as of Q2 2025, comprising raw materials, WIP, and finished goods with no reserve | Category | June 30, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Raw materials | $831 | $723 | | Work-in-progress | $52 | $25 | | Finished goods | $938 | $1,003 | | **Total Inventory** | **$1,821** | **$1,751** | - No inventory reserve for excess and slow-moving inventory was recorded as of June 30, 2025, and December 31, 2024[118](index=118&type=chunk) [Note 10. Property and Equipment, Net](index=25&type=section&id=Note%2010.%20Property%20and%20Equipment%2C%20Net) Net property and equipment decreased to $2,070 thousand as of Q2 2025, primarily due to increased accumulated depreciation | Category | June 30, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Machinery and equipment | $2,123 | $2,118 | | Office furniture and equipment | $191 | $187 | | Leasehold improvements | $419 | $419 | | Construction in progress | $543 | $532 | | Less: accumulated depreciation and amortization | $(1,206) | $(1,045) | | **Property and equipment, net** | **$2,070** | **$2,211** | - Depreciation expense for the six months ended June 30, 2025, was **$162 thousand**, compared to **$76 thousand** for the same period in 2024[119](index=119&type=chunk) [Note 11. Intangible Assets](index=26&type=section&id=Note%2011.%20Intangible%20Assets) Net intangible assets decreased to $744 thousand, including $600 thousand in indefinite-lived trademarks from the Silly George acquisition | Category | June 30, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Product/technology related, net | $85 | $134 | | Marketing related, net | $659 | $673 | | **Total identifiable intangible assets, net** | **$744** | **$807** | - The Silly George acquisition on May 15, 2024, included **$600 thousand** in trademark related intangibles with indefinite lives[120](index=120&type=chunk) | Fiscal Year | Estimated Annual Amortization Expense ($ in thousands) | | :----------------------- | :------------------------------------- | | 2025 (remainder of year) | $62 | | 2026 | $64 | | 2027 | $13 | | 2028 | $2 | | 2029 | $2 | | Thereafter | $1 | | **Subtotal (definite-lived)** | **$144** | | Indefinite lived intangible assets | $600 | | **Total** | **$744** | [Note 12. Accrued Expenses and Other Current Liabilities](index=27&type=section&id=Note%2012.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Accrued expenses and other current liabilities increased to $534 thousand, mainly due to higher salaries, benefits, and incentive compensation | Category | June 30, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Salaries, benefits, and incentive compensation | $340 | $242 | | Other | $194 | $68 | | **Total accrued expenses and other current liabilities** | **$534** | **$310** | [Note 13. Common Stock](index=27&type=section&id=Note%2013.%20Common%20Stock) As of Q2 2025, NexGel had 7,654,537 shares outstanding, with shares reserved for compensation and warrants from a 2024 offering - As of June 30, 2025, **7,654,537 shares of common stock** were issued and outstanding[11](index=11&type=chunk) - The Company has reserved **879,111 shares** for its share-based compensation plan, **4,765,205 shares** for warrants to purchase common stock, and **89,990 shares** for restricted stock units[124](index=124&type=chunk) - A February 2024 offering resulted in the issuance of **485,782 shares** of common stock and warrants to purchase up to **242,891 shares**, generating net proceeds of **$900 thousand**[124](index=124&type=chunk)[126](index=126&type=chunk) [Note 14. Share-based Compensation](index=28&type=section&id=Note%2014.%20Share-based%20Compensation) NexGel's 2019 Incentive Plan has 1,651,429 reserved shares, with 879,111 options outstanding and $293 thousand in H1 2025 expense - The 2019 Long-Term Incentive Plan has **1,651,429 shares** of common stock reserved for awards[129](index=129&type=chunk) | Metric | Number of Options | Weighted Average Exercise Price | | :-------------------------------- | :---------------- | :------------------------------ | | Outstanding at January 1, 2025 | 588,397 | $2.67 | | Granted | 370,000 | $3.34 | | Exercised | (6,458) | $2.05 | | Forfeited | — | — | | Cancelled | (58,542) | $2.01 | | Expired | (14,286) | $5.25 | | **Outstanding at June 30, 2025** | **879,111** | **$2.96** | | Exercisable at June 30, 2025 | 374,111 | $2.13 | - Total unrecognized share-based compensation related to unvested stock options was approximately **$687 thousand**, and for unvested RSUs was **$124 thousand**, as of June 30, 2025[137](index=137&type=chunk)[146](index=146&type=chunk) [Note 15. Notes Payable](index=32&type=section&id=Note%2015.%20Notes%20Payable) Notes payable for NexGel and CGN JV total $539 thousand long-term, including equipment notes and an EIDL | Segment | Type | Principal Balance (June 30, 2025, $ in thousands) | Interest Rate | | :---------------- | :-------------------------------- | :---------------------------------------- | :------------ | | CGN JV | Equipment Promissory Note 1 | $178 | 8% | | CGN JV | Equipment Promissory Note 2 | $186 | 8% | | NexGel | Leasehold Improvements Promissory Note | $4 | 0% | | NexGel | Economic Injury Disaster Loan (EIDL) | $270 | 3.75% | - The total long-term portion of notes payable, net of current portion, was **$539 thousand** as of June 30, 2025[152](index=152&type=chunk) [Note 16. Warrant Liability](index=33&type=section&id=Note%2016.%20Warrant%20Liability) Warrant liability, a Level 3 fair value item, decreased to $14 thousand for 57,777 outstanding warrants as of Q2 2025 | Metric | December 31, 2024 ($ in thousands) | June 30, 2025 ($ in thousands) | Change ($ in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | :---------------------- | | Warrants Outstanding | 57,777 | 57,777 | 0 | | Fair Value per Share | $2.05 | $0.25 | $(1.80) | | **Fair Value** | **$118** | **$14** | **$(104)** | - The warrant liabilities are considered **Level 3 liabilities** on the fair value hierarchy, with fair value determined using a Black-Scholes option valuation model[154](index=154&type=chunk) [Note 17. Commitments and Contingencies](index=33&type=section&id=Note%2017.%20Commitments%20and%20Contingencies) NexGel may face legal proceedings, but management is unaware of material matters beyond those disclosed in Part II, Item 1 - The Company may be subject to legal proceedings and claims that arise in the ordinary course of business[155](index=155&type=chunk) - Management is not currently aware of any matters that will or may have a material effect on the financial position, results of operations, or cash flows of the Company, except as described in Part II, Item 1 'Legal Proceedings'[155](index=155&type=chunk) [Note 18. Concentrations of Risk](index=34&type=section&id=Note%2018.%20Concentrations%20of%20Risk) NexGel faces customer concentration risk, with one customer accounting for 10% of revenue and three for 61% of receivables - For the six months ended June 30, 2025, **one customer approximated 10% of total revenue**[156](index=156&type=chunk) - As of June 30, 2025, three customers had accounts receivable balances that were **12%, 14%, and 35%** of total accounts receivable[157](index=157&type=chunk) - Cash balances are maintained principally at major U.S. financial institutions and are insured by the FDIC up to regulatory limits; as of June 30, 2025, **no balance exceeded the $250 thousand limit**[158](index=158&type=chunk) [Note 19. Related Party Transactions](index=34&type=section&id=Note%2019.%20Related%20Party%20Transactions) As of Q2 2025, NexGel had an outstanding balance of $447 thousand due to C.G. Laboratories, Inc. for related party services - As of June 30, 2025, the Company had an outstanding balance of **$447 thousand** due to C.G. Laboratories, Inc., a related party[160](index=160&type=chunk) - These balances primarily relate to transactions for contract manufacturing, packaging, and other services provided by C.G. Laboratories, Inc[160](index=160&type=chunk) [Note 20. Subsequent Events](index=34&type=section&id=Note%2020.%20Subsequent%20Events) Subsequent events include an expanded partnership with STADA, a $950,000 August financing, and a new board member appointment - On July 14, 2025, the Company announced an expanded partnership with STADA Arzneimittel AG, including a **$1 million non-dilutive advance** to support product launches and marketing efforts[162](index=162&type=chunk) - On July 31, 2025, the Company entered into an August Financing, closing on August 5, 2025, for the sale of **413,043 shares** of common stock and warrants to purchase **206,521 shares**, generating approximately **$950,000 in gross proceeds**[163](index=163&type=chunk)[164](index=164&type=chunk) - On July 31, 2025, Steven A. Ciardiello was appointed to the Board and granted an option to purchase **30,000 shares** of common stock at an exercise price of **$2.25 per share**[167](index=167&type=chunk)[168](index=168&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses NexGel's business, financial condition, operations, liquidity, and capital resources, including its four business lines [Overview](index=37&type=section&id=Overview) NexGel manufactures hydrogels, expanded into branded consumer products, and operates four business lines, including the CGN JV - NexGel manufactures high water content, electron beam cross-linked, aqueous polymer hydrogels for wound care, medical diagnostics, transdermal drug delivery, and cosmetics[176](index=176&type=chunk) - The company has expanded its business to include its own line of **branded consumer products** and **custom/white label opportunities** since 2020[176](index=176&type=chunk) - NexGel operates four distinct lines of business: **Contract Manufacturing**, **Custom & White Label**, **Consumer Branded Products** (MedaGel, Kenkoderm, Silly George), and **Medical Devices/Other**[177](index=177&type=chunk)[178](index=178&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) [Results of Operations (Three Months)](index=38&type=section&id=Comparison%20of%20the%20Three%20Months%20ended%20June%2030%2C%202025%20and%202024) Q2 2025 saw 100.3% revenue growth to $2,884 thousand and improved gross profit, but SG&A expenses increased by 49.0% - Revenues, net, increased by **$1,444 thousand (100.3%)** to **$2,884 thousand** for the three months ended June 30, 2025, primarily due to sales growth in contract manufacturing and branded products[185](index=185&type=chunk) - Gross profit increased by **$965 thousand** to **$1,258 thousand (43.6% margin)** for the three months ended June 30, 2025, compared to **$293 thousand (20.3% margin)** in the prior year, mainly driven by consumer branded products[186](index=186&type=chunk) - Selling, general and administrative expenses increased by **$623 thousand (49.0%)** to **$1,894 thousand**, primarily due to increases in compensation and benefits (**+53.6%**), share-based compensation (**+132.1%**), and advertising, marketing, and Amazon fees (**+91.1%**) related to consumer branded product sales[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) [Results of Operations (Six Months)](index=40&type=section&id=Comparison%20of%20the%20Six%20Months%20ended%20June%2030%2C%202025%20and%202024) H1 2025 revenues grew 110.3% to $5,690 thousand with improved gross profit, while SG&A expenses increased by 63.1% - Revenues, net, increased by **$2,984 thousand (110.3%)** to **$5,690 thousand** for the six months ended June 30, 2025, primarily due to sales growth in branded consumer products and the Silly George acquisition[195](index=195&type=chunk) - Gross profit increased by **$1,927 thousand** to **$2,446 thousand (43.0% margin)** for the six months ended June 30, 2025, compared to **$519 thousand (19.2% margin)** in the prior year, mainly due to branded consumer products[196](index=196&type=chunk) - Selling, general, and administrative expenses increased by **$1,492 thousand (63.1%)** to **$3,858 thousand**, primarily driven by increased advertising, marketing, and Amazon fees (**+139.7%**) related to promoting Kenkoderm and Silly George[199](index=199&type=chunk)[202](index=202&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) NexGel's cash decreased to $725 thousand, with significant cash usage in operations and investing, and working capital declined | Metric | June 30, 2025 ($ in thousands) | June 30, 2024 ($ in thousands) | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(807) | $(1,792) | | Net cash used in investing activities | $(20) | $(704) | | Net cash provided by (used in) financing activities | $(255) | $865 | | Net increase (decrease) in cash and cash equivalents | $(1,082) | $(1,631) | | Cash and cash equivalent at end of quarter | $725 | $1,069 | - Working capital decreased to **$1,766 thousand** at June 30, 2025, from **$2,644 thousand** at December 31, 2024, primarily due to the loss from operations of **$1,413 thousand**[212](index=212&type=chunk) - The company intends to grow its contract manufacturing business, develop consumer products, explore proprietary medical devices, and evaluate strategic initiatives and additional capital raises to achieve profitability and financial stability[215](index=215&type=chunk)[216](index=216&type=chunk) [Off Balance Sheet Arrangements](index=43&type=section&id=Off%20Balance%20Sheet%20Arrangements) As of Q2 2025, NexGel, Inc. reported no off-balance sheet arrangements or related obligations - As of June 30, 2025, NexGel, Inc. had **no off-balance sheet arrangements**[218](index=218&type=chunk) [Critical Accounting Policies and Estimates](index=43&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies involve significant judgment for share-based compensation and warrant liability, valued using Black-Scholes - Share-based compensation fair values are estimated using a **Black-Scholes option valuation model**, with compensation expense recognized straight-line over the vesting period, using the 'simplified method' for expected term[221](index=221&type=chunk) - Warrant liability fair values are estimated at issuance and re-measured at each reporting period using a **Black-Scholes option valuation model**, with adjustments recognized in other income (expense)[222](index=222&type=chunk) - The Black-Scholes model requires assumptions regarding the fair value of common stock, expected volatility (based on comparable public companies), dividend yield (**0.0%**), risk-free interest rates, and the expected term[223](index=223&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Quantitative and qualitative disclosures regarding market risk are not required for NexGel, Inc - Quantitative and qualitative disclosures about market risk are **not required** for the Company[224](index=224&type=chunk) [ITEM 4. Controls and Procedures](index=44&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Disclosure controls were ineffective as of Q2 2025 due to material weaknesses in internal control over financial reporting - As of June 30, 2025, the Company's disclosure controls and procedures were **not effective** due to material weaknesses in internal control over financial reporting[225](index=225&type=chunk) - Identified material weaknesses include a lack of designed controls for accounting journal entry approvals and one individual having 'super user' access and security administration rights to financial reporting systems[226](index=226&type=chunk) - Additional weaknesses noted were improper fair value adjustments to contingent consideration, failure to record adequate inventory reserves, and various balance sheet accounts not being properly reconciled, indicating an ineffective financial reporting process[227](index=227&type=chunk) [PART II – OTHER INFORMATION](index=45&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section covers other information not in Part I, including legal proceedings, risk factors, and equity security sales [ITEM 1. Legal Proceedings](index=45&type=section&id=ITEM%201.%20Legal%20Proceedings) NexGel filed a declaratory judgment against Kiss Nail Products over a patent dispute concerning Silly George eyelash products - On April 9, 2025, NexGel, Inc. filed a Complaint for Declaratory Judgment against Kiss Nail Products, Inc. in the United States District Court for the Eastern District of Pennsylvania[229](index=229&type=chunk) - The dispute relates to a takedown notice from Kiss Nail Products to Amazon.com, claiming NexGel's Silly George eyelash extension products violate a U.S. patent[229](index=229&type=chunk) - NexGel believes the patent is invalid and expects to prevail; however, an inability to prevail could result in products being removed from Amazon.com, materially affecting the business[229](index=229&type=chunk) [ITEM 1A. Risk Factors](index=45&type=section&id=ITEM%201A.%20Risk%20Factors) Readers are referred to the 2024 Form 10-K for risk factors, with no material changes noted in fiscal year 2025 - Readers should carefully review the risk factors described in Part I, 'Item 1A. Risk Factors' in the Company's **2024 Annual Report on Form 10-K**[231](index=231&type=chunk) - There have been **no material changes** during fiscal year 2025 to the risk factors included in the Form 10-K[231](index=231&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) NexGel did not sell any unregistered securities or repurchase its own securities during the six months ended June 30, 2025 - The Company did not sell any unregistered securities during the six months ended June 30, 2025[232](index=232&type=chunk) - The Company did not repurchase any of its securities during the six months ended June 30, 2025[233](index=233&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=45&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) NexGel, Inc. reported no defaults upon senior securities - There were **no defaults upon senior securities**[234](index=234&type=chunk) [ITEM 4. Mine Safety Disclosures](index=45&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to NexGel, Inc - Mine Safety Disclosures are **not applicable** to the Company[235](index=235&type=chunk) [ITEM 5. Other Information](index=45&type=section&id=ITEM%205.%20Other%20Information) Two officers and directors adopted Rule 10b5-1 trading plans for common stock sales during Q2 2025 - Scott R. Henry, a board member, adopted a Rule 10b5-1 trading plan on June 24, 2025, for the sale of up to **35,515 shares** of common stock, terminating on December 31, 2026[237](index=237&type=chunk) - Adam R. Levy, CEO and board member, adopted a Rule 10b5-1 trading plan on June 24, 2025, for the sale of up to **24,000 shares** of common stock, terminating on February 27, 2026[238](index=238&type=chunk) [ITEM 6. Exhibits](index=46&type=section&id=ITEM%206.%20Exhibits) This item lists exhibits filed with the Form 10-Q, including corporate documents, certifications, and XBRL financials - Exhibits include Certificate of Incorporation, Bylaws, Certification of Chief Executive Officer (31.1, 32.1), Certification of Chief Financial Officer (31.2, 32.2), and iXBRL formatted financial statements (101, 104)[241](index=241&type=chunk) [Signatures](index=47&type=section&id=Signatures) The report is signed by the CEO and CFO, certifying its submission on August 12, 2025 - The report was signed by Adam Levy, Chief Executive Officer, and Joseph F. McGuire, Chief Financial Officer[246](index=246&type=chunk) - The signing date of the report was **August 12, 2025**[246](index=246&type=chunk)

Executive Summary & Highlights [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) NEXGEL achieved strong financial performance in Q2 2025, with revenue growing 100.3% YoY and gross margin significantly improving to 43.6%, while the adjusted EBITDA loss continued to narrow **Key Financial Metrics Comparison for Q2 2025 (in millions USD):** | Metric | Q2 2025 | Q2 2024 | YoY Change | Q1 2025 | QoQ Change | | :----- | :------ | :------ | :--------- | :------ | :--------- | | Net Revenue | $2.88 | $1.44 | +100.3% | $2.81 | +2.5% | | Gross Profit | $1.26 | $0.29 | +334.5% | $1.19 | +5.9% | | Gross Profit Margin | 43.6% | 20.3% | +23.3 pp | 42.4% | +1.2 pp | | Net Loss Attributable to NEXGEL Stockholders | ($0.67) | ($0.89) | -24.6% | ($0.71) | -5.6% | | EBITDA | ($0.53) | ($0.76) | -30.2% | ($0.58) | -8.6% | | Adjusted EBITDA | ($0.42) | ($0.79) | -46.8% | ($0.50) | -16.0% | [CEO Commentary and Outlook](index=1&type=section&id=CEO%20Commentary%20and%20Outlook) CEO Adam Levy highlighted strong Q2 2025 revenue and gross margin performance, reaffirming the full-year $13 million revenue guidance and the goal of achieving positive EBITDA - Year-over-year growth was primarily driven by increased consumer demand for branded products and new contract manufacturing agreements[4](index=4&type=chunk) - Subsequent to the quarter, the company expanded its partnership with STADA, including a **$1 million non-dilutive capital advance** to support product launch and marketing efforts[4](index=4&type=chunk)[11](index=11&type=chunk) - The company completed a **gross financing of $1.05 million**, sufficient to support upcoming growth initiatives[4](index=4&type=chunk)[11](index=11&type=chunk) - Reaffirmed the **2025 revenue guidance of $13 million** and plans to achieve **positive EBITDA** within the year[2](index=2&type=chunk)[4](index=4&type=chunk) Second Quarter 2025 Financial Results Analysis [Revenue and Cost of Revenues](index=1&type=section&id=Revenue%20and%20Cost%20of%20Revenues) Net revenues reached $2.88 million in Q2 2025, a 100.3% YoY increase, driven by growth in contract manufacturing and branded product sales, with a corresponding rise in cost of revenues **Revenue and Cost of Revenues (in millions USD):** | Metric | Q2 2025 | Q2 2024 | YoY Change | | :----- | :------ | :------ | :--------- | | Revenues, net | $2.88 | $1.44 | +100.3% | | Cost of revenues | $1.63 | $1.15 | +41.7% | - The increase in total revenues was primarily attributable to growth in contract manufacturing and branded product sales[5](index=5&type=chunk) - The increase in cost of revenues was primarily consistent with the growth in branded consumer product sales, as Silly George was acquired mid-way through the comparable period in 2024[6](index=6&type=chunk) [Gross Profit](index=1&type=section&id=Gross%20Profit) Gross profit for Q2 2025 substantially increased to $1.26 million with the gross margin improving to 43.6% from 20.3% in the prior year period **Gross Profit and Gross Margin (in millions USD):** | Metric | Q2 2025 | Q2 2024 | YoY Change | | :----- | :------ | :------ | :--------- | | Gross profit | $1.26 | $0.29 | +334.5% | | Gross profit margin | 43.6% | 20.3% | +23.3 pp | - The increase in gross profit was primarily due to growth in contract manufacturing and consumer branded product sales, along with the acquisition of Silly George mid-way through the comparable period in 2024[7](index=7&type=chunk) [Operating Expenses (Selling, General and Administrative)](index=1&type=section&id=Operating%20Expenses%20(Selling%2C%20General%20and%20Administrative)) Selling, general and administrative expenses for Q2 2025 rose to $1.89 million, primarily due to increased costs in compensation, stock-based compensation, and professional fees **Selling, General and Administrative Expenses (in millions USD):** | Metric | Q2 2025 | Q2 2024 | YoY Change | | :----- | :------ | :------ | :--------- | | Selling, general and administrative expenses | $1.89 | $1.27 | +48.8% | - The increase in expenses was attributable to rises in compensation and benefits, stock-based compensation, advertising, professional consulting fees, other expenses, and investor and stockholder services, partially offset by a decrease in depreciation and amortization[8](index=8&type=chunk) [Net Loss and Profitability Metrics](index=1&type=section&id=Net%20Loss%20and%20Profitability%20Metrics) NEXGEL reduced its net loss attributable to stockholders to $0.67 million in Q2 2025, with significant improvements in both EBITDA and Adjusted EBITDA **Net Loss and Profitability Metrics (in millions USD):** | Metric | Q2 2025 | Q2 2024 | YoY Change | | :----- | :------ | :------ | :--------- | | Net loss attributable to NEXGEL stockholders | ($0.67) | ($0.89) | -24.6% | | EBITDA | ($0.53) | ($0.76) | -30.2% | | Adjusted EBITDA | ($0.42) | ($0.79) | -46.8% | Financial Position and Liquidity [Cash and Financing Activities](index=2&type=section&id=Cash%20and%20Financing%20Activities) As of June 30, 2025, NEXGEL held a cash balance of approximately $0.73 million and secured additional funding post-quarter through a partnership expansion and financing **Cash Balance (in millions USD):** | Metric | As of June 30, 2025 | | :----- | :------------------ | | Cash Balance | $0.73 | - Expanded partnership with STADA, including a **$1 million non-dilutive capital advance** to support product launch and marketing efforts[4](index=4&type=chunk)[11](index=11&type=chunk) - Completed a **gross financing of $1.05 million**, sufficient to support upcoming growth initiatives[4](index=4&type=chunk)[11](index=11&type=chunk) [Condensed Consolidated Balance Sheets Overview](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20Overview) As of June 30, 2025, the company's total assets were $9.71 million, with total liabilities and stockholders' equity at $4.66 million and $5.06 million, respectively **Key Data from Condensed Consolidated Balance Sheets (in thousands USD):** | Metric | June 30, 2025 | December 31, 2024 | Change | | :----- | :------------ | :---------------- | :----- | | Total assets | $9,711 | $10,983 | ($1,272) | | Total liabilities | $4,656 | $4,903 | ($247) | | Total stockholders' equity | $5,055 | $6,080 | ($1,025) | | Cash | $725 | $1,807 | ($1,082) | | Total current assets | $4,162 | $5,114 | ($952) | | Total current liabilities | $2,396 | $2,470 | ($74) | Company Information & Disclosures [About NEXGEL, INC.](index=2&type=section&id=About%20NEXGEL%2C%20INC.) NEXGEL, Inc. is a leading provider of healthcare, beauty, and over-the-counter (OTC) products, specializing in ultra-gentle, high-water-content hydrogels - NEXGEL is a leading provider of healthcare, beauty, and over-the-counter (OTC) products, including ultra-gentle, high-water-content hydrogel products[14](index=14&type=chunk) - The company has over two decades of experience in electron-beam cross-linked hydrogel development and manufacturing in Langhorne, Pennsylvania[14](index=14&type=chunk) - NEXGEL's brands include SilverSeal, Hexagels, Turfguard, Kenkoderm, and Silly George, and it maintains strategic contract manufacturing relationships with leading consumer healthcare companies[14](index=14&type=chunk) [Non-GAAP Financial Measures](index=2&type=section&id=Non-GAAP%20Financial%20Measures) The company utilizes non-GAAP financial measures like EBITDA and Adjusted EBITDA to provide a clearer view of its core operational performance for investors and management - Non-GAAP financial measures are intended to provide a representation of the company's core operating performance and information that may be useful in assessing its future prospects and potential trends[15](index=15&type=chunk) - Excluded items include amortization of intangible assets, stock-based compensation, adjusted tax impacts, other non-recurring items, and discrete items that impact the income tax provision[15](index=15&type=chunk) [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This section contains cautionary notes regarding forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from expectations - Statements include expectations for significant growth opportunities in the second half of 2025, and continued expectations of at least **$13 million in revenue** and achieving **positive EBITDA** in 2025[16](index=16&type=chunk) - These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the company's actual results, performance, or achievements to be materially different from expectations[16](index=16&type=chunk) - The company does not intend and does not assume any obligation to revise any forward-looking statements[16](index=16&type=chunk) [Investor Relations](index=3&type=section&id=Investor%20Relations) This section provides contact information for investor inquiries, directed to Valter Pinto, Managing Director at KCSA Strategic Communications - Investor Contact: Valter Pinto, Managing Director, KCSA Strategic Communications, Phone: 212.896.1254, Email: Nexgel@kcsa.com[18](index=18&type=chunk) Condensed Consolidated Financial Statements [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets present NEXGEL's financial position as of June 30, 2025, and December 31, 2024 **NEXGEL, INC. Condensed Consolidated Balance Sheets (in thousands USD):** | ASSETS: | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Current Assets: | | | | Cash | $725 | $1,807 | | Accounts receivable, net | 753 | 933 | | Inventory, net | 1,821 | 1,751 | | Prepaid expenses and other current assets | 863 | 623 | | **Total current assets** | **4,162** | **5,114** | | Goodwill | 1,128 | 1,128 | | Intangibles, net | 744 | 807 | | Property and equipment, net | 2,070 | 2,211 | | Operating lease - right of use asset | 1,512 | 1,628 | | Other assets | 95 | 95 | | **Total assets** | **$9,711** | **$10,983** | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Current Liabilities: | | | | Accounts payable | $826 | $761 | | Accounts payable - related party | 447 | 531 | | Accrued expenses and other current liabilities | 534 | 310 | | Deferred revenue | 180 | 179 | | Current portion of note payable | 99 | 97 | | Warrant liability | 14 | 118 | | Contingent consideration liability | - | 178 | | Financing lease liability, current portion | 62 | 59 | | Operating lease liabilities, current portion | 234 | 237 | | **Total current liabilities** | **2,396** | **2,470** | | Operating lease liabilities, net of current portion | 1,446 | 1,538 | | Financing lease liability, net of current portion | 275 | 307 | | Notes payable, net of current portion | 539 | 588 | | **Total liabilities** | **4,656** | **4,903** | | Stockholders' Equity: | | | | Common stock | 8 | 8 | | Additional paid-in capital | 24,036 | 23,743 | | Accumulated deficit | (19,373) | (17,996) | | Total NexGel stockholders' equity | 4,671 | 5,755 | | Non-controlling interest in joint venture | 384 | 325 | | **Total stockholders' equity** | **5,055** | **6,080** | | **Total liabilities and stockholders' equity** | **$9,711** | **$10,983** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations detail revenues, costs, expenses, and net loss for the three and six-month periods ending June 30, 2025 and 2024 **NEXGEL, INC. Condensed Consolidated Statements of Operations (in thousands USD):** | | Three Months Ended June 30, | | Six Months Ended June 30, | | | :------------------------------------------ | :------------ | :------------ | :------------ | :------------ | | | **2025** | **2024** | **2025** | **2024** | | Revenues, net | $2,884 | $1,440 | $5,690 | $2,706 | | Cost of revenues | 1,626 | 1,147 | 3,244 | 2,187 | | **Gross profit** | **1,258** | **293** | **2,446** | **519** | | Operating expenses: | | | | | | Research and development | - | 76 | 1 | 78 | | Selling, general and administrative | 1,894 | 1,271 | 3,858 | 2,366 | | **Total operating expenses** | **1,894** | **1,347** | **3,859** | **2,444** | | **Loss from operations** | **(636)** | **(1,054)** | **(1,413)** | **(1,925)** | | Other income (expense): | | | | | | Interest expense, net | (21) | (29) | (42) | (44) | | Loss on sale of assets | - | (4) | - | (4) | | Other expense | (37) | - | (76) | - | | Other income | 41 | 6 | 109 | 6 | | Gain on investments | - | 23 | - | 57 | | Changes in fair value of warrant liability | 13 | 79 | 104 | 26 | | **Total other income (expense), net** | **(4)** | **75** | **95** | **41** | | **Loss before income taxes** | **(640)** | **(979)** | **(1,318)** | **(1,884)** | | Income tax expense | - | - | - | - | | **Net loss** | **(640)** | **(979)** | **(1,318)** | **(1,884)** | | Less: Income (loss) attributable to non-controlling interest in joint venture | (25) | 94 | (59) | 146 | | **Net loss attributable to NexGel stockholders** | **$(665)** | **$(885)** | **$(1,377)** | **$(1,738)** | | Net loss per common share - basic | $(0.09) | $(0.14) | $(0.18) | $(0.28) | | Net loss per common share - diluted | $(0.09) | $(0.14) | $(0.18) | $(0.28) | | Weighted average shares used in computing net loss per common share - basic | 7,654,348 | 6,254,659 | 7,649,878 | 6,118,212 | | Weighted average shares used in computing net loss per common share – diluted | 7,654,348 | 6,254,659 | 7,649,878 | 6,118,212 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows outline cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 **NEXGEL, INC. Condensed Consolidated Statements of Cash Flows (in thousands USD):** | | Six Months Ended June 30, | | | :---------------------------------------------------------- | :------------ | :------------ | | | **2025** | **2024** | | Operating Activities | | | | Net loss | $(1,377) | $(1,738) | | Adjustments to reconcile net loss to net cash used in operating activities: | | | | Income (loss) attributable to non-controlling interest in joint venture | 59 | (146) | | Depreciation and amortization | 225 | 144 | | Net changes in operating lease assets and liabilities | 21 | 22 | | Share-based compensation and restricted stock vesting | 293 | 118 | | Gain on investment in marketable securities | — | (57) | | Changes in fair value of warrant liability and warrant modification expense | (104) | (26) | | Changes in operating assets and liabilities: | | | | Accounts receivable, net | 180 | 28 | | Inventory | (70) | (127) | | Prepaid expenses and other assets | (240) | (68) | | Accounts payable | 65 | 117 | | Accounts payable – related party | (84) | (105) | | Accrued expenses and other current liabilities | 224 | (113) | | Deferred revenue | 1 | 159 | | **Net Cash Used in Operating Activities** | **(807)** | **(1,792)** | | Investing Activities | | | | Proceeds from sales of marketable securities | — | 57 | | Capital expenditures | (20) | (361) | | Net cash paid for asset acquisition | — | (400) | | **Net Cash Used in Investing Activities** | **(20)** | **(704)** | | Financing Activities | | | | Proceeds from equity offering, net of expenses | — | 946 | | Investment by joint venture partner | — | 37 | | Payment of contingent consideration liability | (178) | (69) | | Principal payment on financing lease liability | (29) | (22) | | Principal payments of notes payable | (48) | (27) | | **Net Cash Provided by (Used in) Financing Activities** | **(255)** | **865** | | **Net Decrease in Cash** | **(1,082)** | **(1,631)** | | Cash – Beginning of period | 1,807 | 2,700 | | **Cash – End of period** | **$725** | **$1,069** | | Supplemental Disclosure of Cash Flows Information | | | | Cash paid during the year for: | | | | Interest | $18 | $27 | | Taxes | $— | $— | | Supplemental Non-cash Investing and Financing activities | | | | Shares issued in conjunction with asset acquisition | $— | $200 | | Property and equipment financed under notes payable | $— | $165 | | Property and equipment financed under financing leases | $— | $416 | Reconciliation of Non-GAAP Measures [Calculation of EBITDA & Adjusted EBITDA](index=7&type=section&id=Calculation%20of%20EBITDA%20%26%20Adjusted%20EBITDA) This section provides a detailed reconciliation of GAAP net loss to the non-GAAP measures of EBITDA and Adjusted EBITDA for the respective periods **Reconciliation of GAAP Measures to Non-GAAP Measures (in thousands USD):** | | Three Months Ended | | | Six Months Ended June 30, | | | :------------------------------------------ | :------------ | :------------ | :------------ | :------------ | :------------ | | | **March 31, 2025** | **June 30, 2025** | **June 30, 2024** | **2025** | **2024** | | Net (loss) income: | $(678) | $(640) | $(979) | $(1,318) | $(1,884) | | Less: Loss (income) attributable to non-controlling interest in joint venture | (34) | (25) | 94 | (59) | 146 | | **Net loss attributable to NexGel stockholders** | **(712)** | **(665)** | **(885)** | **(1,377)** | **(1,738)** | | Adjustments: | | | | | | | Depreciation and amortization | 114 | 111 | 92 | 225 | 144 | | Interest expense, net | 21 | 21 | 29 | 42 | 44 | | Income tax expense | - | - | - | - | - | | **EBITDA** | **(577)** | **(533)** | **(764)** | **(1,110)** | **(1,550)** | | Change in warrant liability(1) | (91) | (13) | (79) | (104) | (26) | | Share-based compensation expense(2) | 166 | 127 | 55 | 293 | 118 | | **Adjusted EBITDA:** | **$(502)** | **$(419)** | **$(788)** | **$(921)** | **$(1,458)** | - Adjustments for EBITDA include depreciation and amortization, interest expense, and income tax expense[25](index=25&type=chunk) - Further adjustments for Adjusted EBITDA include the non-cash change in warrant liability and share-based compensation expense[25](index=25&type=chunk)[26](index=26&type=chunk)

Financial Performance - Second quarter 2025 revenue totaled $2.88 million, an increase of 100.3% compared to $1.44 million for the same period in 2024 [1][4] - Gross profit for the quarter was $1.26 million, with a gross profit margin of 43.6%, compared to a gross profit of $0.29 million and a margin of 20.3% for the same period in 2024 [6][8] - The net loss attributable to NEXGEL stockholders was $0.67 million, an improvement from a net loss of $0.89 million in Q2 2024 [9][8] Business Growth and Strategy - The year-over-year revenue growth was driven by increased consumer demand for branded products and new agreements in contract manufacturing [3] - The company expects significant growth opportunities in the second half of 2025 due to new consumer product launches and onboarding new contract manufacturing customers [3] - A partnership with STADA was expanded, including a $1 million advance in non-dilutive capital to support product launches and marketing efforts [10][3] Cost and Expenses - Cost of revenues for the second quarter of 2025 was $1.63 million, up from $1.15 million in Q2 2024, primarily due to sales growth in branded consumer products [5] - Selling, general and administrative expenses totaled $1.89 million for the second quarter of 2025, compared to $1.27 million for the same period in 2024, driven by increases in compensation, advertising, and professional fees [7] Future Outlook - The company is reiterating its revenue guidance for 2025 of $13 million and aims to achieve positive EBITDA during the year [1][3] - As of June 30, 2025, the company had a cash balance of approximately $0.73 million, with additional financing of $1.05 million secured to support growth initiatives [10]

Company Overview - NEXGEL creates custom hydrogel solutions and develops patented medical devices, custom/white label products, and OTC healthcare consumer products[7] - The company has agreements with multi-billion dollar corporations[9] - NEXGEL has one of two state-of-the-art manufacturing facilities in North America that can produce hydrogel transdermal products[14] - The facility has a total capacity of over 1.4 billion square inches of product per year[15] Strategic Partnerships - Cintas Corporation will distribute NEXGEL's SilverSeal wound care solution to its customers[41] - STADA Arzneimittel AG is partnering with NEXGEL to expand its OTC product portfolio, with their first joint product, Histasolv, generating over $20 million in annualized European revenue[42] - CG Converting and Packaging is the exclusive supplier of gel pads for AbbVie's Rapid Acoustic Pulse device, with AbbVie acquiring Soliton for $550 million in December 2021[43] Financial Performance - Q2 2025 revenue was $2.88 million, a 100% increase compared to $1.44 million for Q2 2024[50] - Q2 2025 gross profit was $1.26 million with a profit margin of 43.6%, compared to 20.3% in Q2 2024[50] - The company reiterates revenue guidance of $13 million for 2025 and expects to achieve positive EBITDA during the year[50] Acquisitions - Silly George Beauty Brand was acquired in May 2024 and has an annual run-rate of over $5 million[36] - Kenkoderm Skincare Line was acquired in December 2023 and is immediately accretive[40]

Core Viewpoint - NEXGEL, Inc. is set to report its financial results for the second quarter of 2025 on August 12, 2025, followed by a conference call to discuss the results [1]. Group 1: Financial Results Announcement - The financial results for the second quarter of 2025 will be released after market close on August 12, 2025 [1]. - A conference call will be held at 4:30 P.M. ET on the same day to discuss the financial results [2]. Group 2: Company Overview - NEXGEL is a leading provider of ultra-gentle, high-water-content hydrogel products for healthcare and consumer applications [3]. - The company has over two decades of experience in developing and manufacturing electron-beam, cross-linked hydrogels [3]. - NEXGEL's product brands include Silverseal, Hexagels, Turfguard, Kenkoderm, and Silly George, and it has strategic contract manufacturing relationships with major consumer healthcare companies [3].

Core Insights - NEXGEL, Inc. has appointed Steve Ciardiello, CPA, to its Board of Directors, bringing over 25 years of experience in financial leadership and corporate governance [1][2] - The CEO of NEXGEL, Adam Levy, expressed confidence that Ciardiello's financial acumen will be valuable as the company enters a new growth phase [2] - Ciardiello, currently the Chief Accounting Officer at Shutterstock, has a strong background in financial transformation and operational efficiency [2] Company Overview - NEXGEL is a provider of healthcare, beauty, and over-the-counter products, specializing in ultra-gentle, high-water-content hydrogels [3] - The company has been developing and manufacturing electron-beam, cross-linked hydrogels for over two decades [3] - NEXGEL's product brands include Silverseal®, Hexagels®, Turfguard®, Kenkoderm®, and Silly George®, and it has strategic manufacturing relationships with leading consumer healthcare companies [3]

Core Viewpoint - NEXGEL, Inc. has announced a definitive agreement for the issuance and sale of 413,044 shares of common stock at $2.30 per share, along with unregistered warrants for an additional 206,522 shares at an exercise price of $4.25, aimed at strengthening its balance sheet and providing working capital for anticipated growth in the second half of the year [1][2]. Group 1: Financial Details - The total number of shares being offered is 413,044 at a price of $2.30 each [1]. - Concurrently, NEXGEL will issue unregistered warrants to purchase up to 206,522 shares at an exercise price of $4.25, which are immediately exercisable for five years [1][2]. - The financing, combined with a recent $1 million non-dilutive advance from STADA, enhances the company's cash position [2]. Group 2: Regulatory Information - The shares are being offered under the company's shelf registration statement on Form S-3, which was declared effective by the SEC on June 7, 2023 [3]. - The unregistered warrants are offered under an exemption from registration requirements of the Securities Act [4]. Group 3: Company Overview - NEXGEL is a provider of healthcare, beauty, and OTC products, specializing in ultra-gentle, high-water-content hydrogels [6]. - The company has over two decades of experience in developing and manufacturing electron-beam, cross-linked hydrogels [6].

Company Overview - NEXGEL, Inc. is a leading provider of ultra-gentle, high-water-content hydrogel products for healthcare and consumer applications, based in Langhorne, Pennsylvania [1][3] - The company has developed and manufactured electron-beam, cross-linked hydrogels for over two decades and offers brands such as SilverSeal, Hexagels, Turfguard, Kenkoderm, and Silly George [3] Partnership Expansion - NEXGEL announced an expansion of its partnership with STADA Arzneimittel AG, a European leader in consumer health, which includes the planned launch of digestive enzyme formulas and solutions targeting scars and stretch marks [1][2] - As part of the agreement, STADA will provide $1 million in non-dilutive capital to support NEXGEL's product launches and marketing efforts [2] Financial Performance of STADA - In the financial year 2024, STADA achieved group sales of €4,059 million and adjusted constant-currency earnings before interest, taxes, depreciation, and amortization (adj. cc EBITDA) of €886 million [2] - STADA operates globally, selling products in over 100 countries and employing 11,649 people as of December 31, 2024 [2]

Company Overview - NEXGEL, Inc. is a leading provider of healthcare, beauty, and over-the-counter (OTC) products, specializing in ultra-gentle, high-water-content hydrogels [3] - The company has developed and manufactured electron-beam, cross-linked hydrogels for over two decades [3] - NEXGEL's product brands include SilverSeal, Hexagels, Turfguard, Kenkoderm, and Silly George [3] - The company has established strategic contract manufacturing relationships with leading consumer healthcare companies [3] Event Participation - Adam Levy, the Chief Executive Officer of NEXGEL, will participate in the 6th Annual CEO Networking Event hosted by Semco Capital in Chicago on June 2, 2025 [1] - The event will feature a fireside chat with Scott Weis of Semco Capital [1] - The Annual CEO Networking Event aims to bring together leading microcap companies with unique business models and strong management teams [2]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 totaled $2,810,000, representing a 121% increase year over year compared to $1,270,000 in Q1 2024 [4][20] - Gross margins normalized to 42.4%, compared to 37% in Q4 2024 and 43.6% in Q3 2024 [4][21] - EBITDA loss narrowed to negative $540,000 from negative $840,000 in the same period last year [5][22] - Net loss for Q1 2025 was $710,000, down from a net loss of $850,000 in Q1 2024 [22] Business Line Data and Key Metrics Changes - Contract manufacturing revenue increased by 58% year over year, driven by demand from existing customers and new partnerships [4][5] - Consumer branded products revenue surged by 189% year over year, significantly boosted by the addition of Silly George [4] - The entire consumer products portfolio saw strong expansion, with new product launches planned for 2025 [11][12] Market Data and Key Metrics Changes - The company is experiencing increased interest in U.S.-made gels due to potential tariff impacts, which may enhance competitiveness against imported products [17][18] - There is a robust pipeline of new and potential customers for 2025, indicating strong market demand [8][19] Company Strategy and Development Direction - The company aims to expand its product lines, including new offerings for MetaGel and Cancoderm, and is transitioning Silly George into a broader beauty brand [12][13] - Strategic partnerships, such as with Stata, are expected to drive growth, with plans for additional product launches in 2025 and 2026 [14][30] - The company is monitoring tariff situations closely and is prepared to adjust manufacturing strategies if necessary [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the product launch with AbbVie, despite delays, and sees it as a substantial opportunity [8][51] - The company does not foresee any weakness in consumer product sales and maintains guidance of $13,000,000 in revenue for 2025 [19][58] - Management is optimistic about achieving cash flow positivity in 2025, supported by ongoing innovation and growth [19][22] Other Important Information - The company has a cash balance of approximately $1,190,000 as of March 31, 2025 [22] - The company is exploring various financing options but prefers to avoid debt until achieving EBITDA positivity [48][64] Q&A Session Summary Question: How much revenue was expected from AbbVie, and does the delay affect guidance? - Management indicated that not much revenue was baked in from AbbVie, so the delay should not impact the projection of $13,000,000 [25] Question: Can you provide details on the product launching with Stata? - The first product is Histosol, a digestive enzyme, with plans for additional digestive enzymes in the future [30] Question: Is there a seasonal decline in Silly George sales? - Management noted a slight decline but emphasized that it was the most profitable quarter despite being smaller than previous quarters [57] Question: Will transitioning manufacturing to Texas impact other business lines? - Management confirmed that there is enough capacity in the new clean room to accommodate potential shifts in manufacturing [35] Question: Will the company survive on current cash reserves until EBITDA positive? - Management believes they can manage with current cash reserves until reaching EBITDA positivity [64]