NexGel(US:NXGL)2025-05-13 21:00PART I – FINANCIAL INFORMATION This section provides NexGel's unaudited condensed consolidated financial statements and management's discussion and analysis for the first quarter of 2025 Condensed Consolidated Financial Statements (Unaudited) This section presents NexGel's unaudited condensed consolidated financial statements for the three months ended March 31, 2025, compared to the same period in 2024 Condensed Consolidated Balance Sheets This section presents the company's financial position, highlighting changes in assets, liabilities, and equity as of March 31, 2025 Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $4,740 | $5,114 | | Total Assets | $10,437 | $10,983 | | Total Current Liabilities | $2,519 | $2,470 | | Total Liabilities | $4,869 | $4,903 | | Total Stockholders' Equity | $5,568 | $6,080 | - Cash decreased from $1.81 million at the end of 2024 to $1.19 million as of March 31, 202511 Condensed Consolidated Statements of Operations This section details the company's operational performance, showing significant revenue growth and improved gross margin despite a net loss Statements of Operations Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues, net | $2,806 | $1,266 | | Gross margin | $1,188 | $160 | | Loss from operations | $(777) | $(871) | | Net loss attributable to NexGel | $(712) | $(853) | | Net loss per common share - basic & diluted | $(0.09) | $(0.14) | - Revenues more than doubled year-over-year, increasing by 121.6%, leading to a significant improvement in gross margin from 12.6% to 42.3%13180 Condensed Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities, and the resulting net decrease in cash Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(400) | $(1,092) | | Net Cash Used in Investing Activities | $0 | $(118) | | Net Cash (Used in) Provided by Financing Activities | $(215) | $929 | | Net Decrease in Cash | $(615) | $(281) | | Cash – End of period | $1,192 | $2,419 | - Cash used in operating activities significantly decreased year-over-year, from $1.09 million to $400 thousand, indicating improved operational cash management19 Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of the company's business, accounting policies, revenue segmentation, and the going concern assessment - Business Description: The company manufactures hydrogels and has expanded from contract manufacturing to include branded consumer products (Medagel, Kenkoderm, Silly George) and custom/white label opportunities. Recent activities include the acquisition of the Silly George business in May 2024 and the Kenkoderm business in December 2023202122 - Going Concern: The company's cash balance of $1.2 million, net loss of $712 thousand for the quarter, and net cash usage in operations of $400 thousand raise substantial doubt about its ability to continue as a going concern. Management plans to grow sales, explore strategic initiatives, and potentially raise additional capital282931 Disaggregated Revenue by Sales Type (in thousands) | Sales Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Contract manufacturing | $948 | $601 | | Custom and white label | $0 | $31 | | Consumer branded products | $1,782 | $617 | | Other | $76 | $17 | | Total | $2,806 | $1,266 | - Customer Concentration: For Q1 2025, one customer accounted for approximately 10% of total revenue. As of March 31, 2025, two customers represented 26% and 49% of total accounts receivable157158 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for Q1 2025, highlighting a 121.6% increase in net revenues to $2.8 million, driven by growth in contract manufacturing and branded consumer products Results of Operations This section analyzes the company's revenue growth, gross profit improvement, and increased operating expenses for the quarter - Revenues for Q1 2025 increased by $1.54 million, or 121.6%, to $2.81 million compared to Q1 2024, primarily due to sales growth in both contract manufacturing and branded products179 - Gross profit increased by $1.03 million to $1.19 million in Q1 2025, with gross margin expanding to 42.3% from 12.6% in Q1 2024, mainly due to the increase in higher-margin consumer branded products180 - Selling, general and administrative (SG&A) expenses increased by $935 thousand, or 90.9%, to $1.96 million in Q1 2025. This was driven by a $505 thousand increase in advertising and marketing, a $103 thousand increase in compensation, and a $110 thousand increase in share-based compensation182183184185 Liquidity and Capital Resources This section discusses the company's cash position, working capital, and management's plans to address liquidity and going concern risks - As of March 31, 2025, the company had $1.19 million in cash and cash equivalents, a decrease from $1.81 million at December 31, 2024190 - Working capital decreased to $2.22 million at March 31, 2025, from $2.64 million at December 31, 2024, primarily due to the quarterly loss from operations193 - Management acknowledges that the company's ability to continue as a going concern depends on its ability to grow its business and achieve profitability, and it may consider raising additional capital through debt or equity offerings197 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, NexGel is not required to provide these disclosures - The company is not required to provide disclosures for this item204 Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2025 - Management concluded that Disclosure Controls and Procedures were not effective as of March 31, 2025205 - Material weaknesses were identified, including: (i) lack of controls for journal entry review, (ii) a single accounting individual having 'super user' system access, and (iii) an ineffective financial reporting process leading to improper adjustments and reconciliations206207 - Remediation efforts are underway and are expected to be completed by June 30, 2025, or at the latest, by September 30, 2025206 PART II – OTHER INFORMATION This section details legal proceedings, risk factors, equity sales, and other disclosures for the reporting period Legal Proceedings NexGel has initiated legal action against Kiss Nail Products, Inc. concerning a patent dispute - On April 9, 2025, NexGel filed a Complaint for Declaratory Judgment against Kiss Nail Products, Inc. regarding a patent dispute209 - The dispute relates to ready-to-use eyelash extension products sold under the Silly George brand on Amazon.com209 - If NexGel does not prevail, certain products may be removed from Amazon.com, which would result in a material adverse effect on the business209 Risk Factors The company reports that there have been no material changes to the risk factors previously disclosed in its 2024 Annual Report on Form 10-K - There have been no material changes during fiscal year 2025 to the risk factors included in the 2024 Annual Report on Form 10-K211 Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2025, the company did not sell any unregistered securities nor did it repurchase any of its own securities - The Company did not sell any unregistered securities or repurchase any of its securities during the three months ended March 31, 2025212213 Other Information The company states that no director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the first quarter of 2025 - During Q1 2025, no director or officer of the Company adopted, modified or terminated a Rule 10b5-1 trading arrangement216 Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including corporate governance documents, officer certifications (Sections 302 and 906), and iXBRL data files - Lists all exhibits filed with the quarterly report, including Certifications of the CEO and CFO pursuant to the Sarbanes-Oxley Act219