NexGel(NXGL) - 2024 Q1 - Quarterly Report

Revenue and Profit Growth - Revenue for Q1 2024 increased by 104.2% to $1.266 million compared to$620 thousand in Q1 2023, driven by growth in contract manufacturing and branded products[152] - Gross profit for Q1 2024 was $277 thousand, a significant improvement from a gross loss of$57 thousand in Q1 2023, with gross profit margin improving to 21.9% from -9.2%[158] Cost and Expense Analysis - Cost of revenues increased by 46.1% to $989 thousand in Q1 2024, primarily due to revenue growth[159] - Selling, general and administrative expenses increased by 43.8$1.146 million in Q1 2024, driven by higher compensation, marketing, and professional fees[160] - Advertising and marketing expenses surged by 169.1% to $253 thousand in Q1 2024, reflecting increased investment in consumer branded products[163] - Research and development expenses decreased significantly to$2 thousand in Q1 2024 from $29 thousand in Q1 2023[166] Cash Flow and Financial Position - Net cash used in operating activities increased to$1.092 million in Q1 2024 from $709 thousand in Q1 2023[168] - Cash and cash equivalents decreased to$2.419 million at the end of Q1 2024 from $2.7 million at the end of 2023[168] - Current assets totaled$4,863 million and current liabilities totaled $2,483 million as of March 31, 2024, resulting in working capital of$2,380 million, a decrease from $2,503 million at December 31, 2023[171] - The company reported a loss from operations of$871 million and net proceeds of $946 million from the RDO, contributing to the change in working capital[171] Strategic Initiatives and Future Plans - The company expanded its product portfolio with the acquisition of the Kenkoderm skincare brand in December 2023 for$546.5 thousand, with potential additional earn-out payments based on 2024 performance[149] - The company formed a 50% joint venture in March 2023 for its converting and packaging business[148] - Management is exploring new product channel sales in consumer products, including cosmetics, athletic products, and proprietary medical devices, to expand the customer base and ensure financial stability[174] - The company believes it has sufficient capital to operate into 2025, with plans to grow its contract manufacturing business and develop a catalog of consumer products for online sales[175] - The company plans to develop proprietary medical devices and explore drug delivery programs, while also evaluating strategic initiatives such as acquisitions[175] - The company expects to continue incurring losses in the near term and may consider raising capital through equity or debt offerings to fund potential acquisitions[176] Dividend Policy and Capital Allocation - The company has no plans to declare or pay cash dividends in the foreseeable future, as all available funds will be used to finance business growth[172] Accounting and Valuation - As of March 31, 2024, the company had no off-balance sheet arrangements, including guarantee contracts or contingent obligations[178] - The company uses the Black-Scholes option valuation model to estimate the fair value of share-based compensation and warrant liabilities, with key inputs including expected volatility and risk-free interest rates[180][181][182] - The company's financial statements are prepared using critical accounting policies that require significant estimates and assumptions, which could materially impact results if actual outcomes differ[179]