What changed in NEXGEL, INC.'s 10-K — 2023 vs 2024

In May 2023, we formed a joint venture with CG Laboratories, Inc. called CG Converting and Packaging, LLC, which is located in Granbury, Texas and of which we own a 50% interest, allowing us to expand our ability to deliver finished goods to our growing customer base.

As we expand our consumer products and medical device business, we will face a number of competitors.

Of these employees, five are involved with finance, sales, marketing, and administration and 14 are involved with manufacturing and regulatory matters. Our employees are not represented by a labor union or other collective bargaining groups, and we consider relations with our employees to be good.

We are continually working on a human resources strategy that helps drive the right culture, leadership, talent management, performance, reward and recognition, personal development, and ways of working to ensure we achieve our strategic goals while our people benefit from an exceptional experience.

Our efforts in creating a working environment that draws out the best in our employees and allows them to fulfil their potential and support our goals focus on the following: · Attract, identify, develop and retain high-performing employees across all areas. · Develop and support the growth of management and leadership. · Enable the development of a high-performance culture in which staff performance can be supported, rewarded, enhanced and managed effectively. · Foster a values-based culture focused on diversity, equity, inclusion, well-being, and positive staff engagement. · Develop a total reward approach which is valued by staff and facilitates company objectives.

Any limitation or termination of our relationship with Amazon and/or Shopify could materially adversely affect our business, financial condition and our results of operations. Additionally, any prolonged disruption of Amazon’s and/or Shopify’s websites or its or their delivery and distribution of our consumer products could materially adversely impact our business.

We have a history of operating losses and may require but have difficulty or be unsuccessful in raising potentially needed capital in the future to continue to operate as a going concern. While we expect to be cash flow positive by the end of fiscal year 2025, there is no guarantee this will occur.

Currently we do not have sufficient cash resources to meet our plans for the next twelve months from the issuance of the financial statements included herein. Our recurring losses from operations, negative cash flows and potential need for additional capital raise substantial doubt about our ability to continue as a going concern.

If we do require additional financing to fund our operations, such funds may not be available on acceptable terms, if at all, and such availability will depend on a number of factors, some of which are outside of our control, including general capital markets conditions and investors’ view of our prospects and valuation.

In addition, our ability to raise capital in the public capital markets, including through our at-the-market equity offerings, may in the future be limited by, among other things, SEC rules and regulations impacting the eligibility of smaller companies to use Form S-3 for primary offerings of securities.

In general, under the “baby shelf” rules if our public float is less than $75 million at the time we file our Annual Report on Form 10-K to update our Form S-3 and our public float remains less than $75, we may not sell more than the equivalent of one-third of our public float during any 12 consecutive months pursuant to the baby shelf rules.

Alternative public and private transaction structures may require additional time and cost, may impose operational restrictions on us, and may not be available on attractive terms.

Further, investors’ perception of our ability to continue as a going concern may make it more difficult for us to obtain financing, or necessitate that we obtain financing on terms that are more favorable to investors, and could result in the loss of confidence by investors, suppliers and employees.

We have identified material weaknesses in connection with our internal control over financial reporting which, if not remediated, could adversely affect our business, reputation and stock price. Our executive management and Audit Committee have concluded that we have material weaknesses in our internal control over financial reporting.

Specifically, we have not designed controls to ensure all accounting journals entries are reviewed and approved. We also identified one individual in our accounting department who has “super user” access and security administration rights to the financial reporting systems. Please see Item 9A - Control and Procedures for more information about identified material weaknesses.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We are in the process of designing and implementing measures to remediate the material weaknesses described above.

Specifically, we expect to implement appropriate controls for accounting journal entry approvals, including the approval of our Chief Financial Officer, and to actively monitor any accounting user with elevated rights or assign another employee outside of an accounting and reporting role with elevated access.

While we are designing and implementing measures to remediate the material weaknesses, we cannot predict the success of such measures or the outcome of our assessment of these measures at this time.

We can give no assurance that these measures will remediate the weakness in internal control or that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future.

Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that may lead to restatements of our financial statements, cause us to fail to meet our reporting obligations, or prevent fraud.