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 UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 WASHINGTON
D.C. 20549

 FORM

 (Mark
One)

 ANNUAL
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For
the fiscal year ended: December 31, 2023

 OR

 TRANSITION
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For
the transition period from ___________ to ___________

 Commission
file number: 001-41173

 NexGel,
Inc.

 (Exact
name of registrant as specified in its charter)

 Delaware

 26-4042544

 (State
 or other jurisdiction

 of
 incorporation or organization)

 (I.R.S.
 Employer

 Identification
 Number)

 2150
 Cabot Blvd West, Suite B
 Langhorne, PA

 19047

 (Address
 of principal executive office)

 (Zip
 Code)

 Registrant's
telephone number, including area code: (215) 702-8550

 Securities
registered pursuant to Section 12(b) of the Act:

 Title
 of each class

 Trading
 Symbol(s)

 Name
 of each exchange on which registered

 Common
 Stock, par value $0.001

 NXGL

 The
 Nasdaq Capital Market LLC

 to Purchase Common Stock

 NXGLW

 The
 Nasdaq Capital Market LLC

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes No

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large
 accelerated filer

 Accelerated
 filer

 Non-accelerated
 filer

 Smaller
 reporting company

 Emerging
 growth company

 If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.

 If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).

 Yes
 No

 The
aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2023, the last business day of the
registrant's second fiscal quarter, was approximately $ 10,695,605 based on the price at which the registrant last sold common equity.

 As
of April 10, 2024, the registrant had 6,227,624 shares of common stock outstanding.

 DOCUMENTS
INCORPORATED BY REFERENCE

 Portions
of the registrant's definitive proxy statement relating to its 2024 annual meeting of stockholders (the "2024 Proxy Statement")
are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2024 Proxy Statement will be filed
with the U.S. Securities and Exchange Commission within 120 days after the end of the year to which this report relates.

 Table
of Contents

 Part
 I

 Item

 Business

 Item
 1A

 Risk Factors

 Item
 1B

 Unresolved Staff Comments

 Item
 1C

 Cybersecurity

 Item

 Properties

 Item

 Legal Proceedings

 Item

 Mine Safety Disclosures

 Item

 Market for Registrant's Common Equity, Related Stockholder Matters

 Item

 [Reserved]

 Item

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item
 7A

 Quantitative and Qualitative Disclosures About Market Risk

 Item

 Financial Statements and Supplementary Data

 Item

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item
 9A

 Controls and Procedures

 Item

 Directors, Executive Officers and Corporate Governance

 Item

 Executive Compensation

 Item

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item

 Certain Relationships and Related Transactions, and Director Independence

 Item

 Principal Accountant Fees and Services

 Item

 Exhibits and Financial Statement Schedules

 Signatures

 Forward-Looking
Statements

 This
Annual Report on Form 10-K contains "forward-looking statements," which include information relating to future events, future
financial performance, strategies, expectations, competitive environment and regulation. Words such as "may," "should,"
"could," "would," "predict," "potential," "continue," "expect,"
"anticipate," "future," "intend," "plan," "believe," "estimate,"
and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should
not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will
actually be achieved. Forward-looking statements are based on information we have when those statements are made or our management's
good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance
or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could
cause such differences include, but are not limited to:

 our
 ability to continue as a going concern;

 inadequate
 capital;

 inadequate
 or an inability to raise sufficient capital to execute our business plan;

 our
 ability to comply with current good manufacturing practices;

 loss
 or retirement of key executives;

 our
 plans to make significant additional outlays of working capital before we expect to generate significant revenues and the uncertainty
 regarding when we will begin to generate significant revenues, if we are able to do so;

 adverse
 economic and geopolitical conditions, including the current conflict in Ukraine, and/or intense competition;

 loss
 of a key customer or supplier;

 entry
 of new competitors;

 adverse
 federal, state and local government regulation;

 technological
 obsolescence of our manufacturing process and equipment;

 technical
 problems with our research and products;

 risks
 of mergers and acquisitions including the time and cost of implementing transactions and the potential failure to achieve expected
 gains, revenue growth or expense savings;

 price
 increases for supplies and components; and

 the
 inability to carry out our business plans.

 For
a discussion of these and other risks that relate to our business and investing in shares of our common stock, you should carefully review
the risks and uncertainties described elsewhere in this Annual Report on Form 10-K. The forward-looking statements contained in this
Annual Report on Form 10-K are expressly qualified in their entirety by this cautionary statement. We do not undertake any obligation
to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made
or to reflect the occurrence of unanticipated events.

 There
may be other factors that may cause our actual results to differ materially from the forward-looking statements, including factors disclosed
under the section titled and "Management's Discussion and Analysis of Financial Condition and Results of Operations"
in this information statement. You should evaluate all forward-looking statements made in this information statement in the context of
these risks and uncertainties.

 No
assurance can be given that any goal or plan set forth in any forward-looking statement can or will be achieved, and readers are cautioned
not to place undue reliance on such statements which speak only as of the date they are made. We do not undertake any obligation to update
or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this information
statement or to reflect the occurrence of unanticipated events, except as required by law.

 Item 1. Business

 Our
Company

 We were incorporated in Delaware on January 13, 2009. We manufacture high
water content, electron beam cross-linked, aqueous polymer hydrogels, or gels, used for wound care, medical diagnostics, transdermal drug
delivery and cosmetics. We specialize in custom gels by capitalizing on proprietary manufacturing technologies. We have historically served
as a contract manufacturer, supplying our gels to third parties who incorporate them into their own products. Beginning in 2020, we created
two new lines of business for the company. First, our own line of branded consumer products sold direct to consumers. Second, we expanded
into custom and white label opportunities, which focuses on combining our gels with proprietary branded products and white label opportunities.
All of our gel products are manufactured using proprietary and non-proprietary mixing, coating and cross-linking technologies. Together,
these technologies enable us to produce gels that can satisfy rigid tolerance specifications with respect to a wide range of physical
characteristics (e.g., thickness, water content, adherence, absorption, moisture vapor transmission rate [a measure of the passage of
water vapor through a substance] and release rate) while maintaining product integrity. Additionally, we have the manufacturing ability
to offer broad choices in the selection of liners onto which the gels are coated. Consequently, we and our customers are able to determine
tolerances in moisture vapor transmission rate and active ingredient release rates while personalizing color and texture.

Manufacturing Business

 As
described above, we have historically served as a contract manufacturer, supplying our gels to third parties who incorporate them into
their own products. Our hydrogels are currently being marketed in the U.S. and abroad by our customers for the following applications:

 Drug
 Delivery. We believe delivering medication through hydrogel patches has important advantages over traditional methods of drug
 delivery. Hydrogel patches are less intrusive, painless, allow for pre-planned medication time periods, can potentially release medication
 in a manner consistent with the body's own glandular activity (by avoiding dosage spikes and/or digestive alteration), and
 minimize side effects related to the medication via injection or ingestion.

 Other
 Medical Applications. Hydrogel patches are being used for transdermal applications such as hormone replacement therapy and contraception,
 treatment of acne, shingles, diabetes, motion sickness, treatment of angina with nitroglycerin and treatment of smoking addiction
 using nicotine and palliatives (i.e., pain relievers).

 Non-Prescription
 Therapeutic Applications. Hydrogel patches are also used in the medical community and are also directly marketed to consumers
 for topical application of over the counter ("OTC") drugs such as non-prescription acne treatments, pain relievers, diet
 preparations, cough suppressants, treatment of warts, calluses and corns, and pain relief.

 Moist
 Wound and Burn Dressings. Hydrogel dressings have long been used for treating wounds and burns. Clinical trials have demonstrated
 the benefits of moist wound healing versus traditional dressings. Some of these benefits include immediate anti-inflammatory effects,
 allowing for freer cell flow and less scarring, increased absorption of exudate, and accelerated healing.

 Components
 of Medical Devices. Several medical devices utilize hydrogels as components. These devices include active drug delivery systems
 such as iontophoresis, warming and cooling devices, medical electrodes and various medical products for sensitive skin.

 Cosmetic
 Applications. Hydrogel patches and applications allow for delivery systems of cosmetic skin care products to consumers and skin
 care providers for uses that include moisturizers, face masks, cooling masks and applicators.

 We
believe our competitive advantage in each of the general hydrogel patch applications described above is that our hydrogel patches are
gentler to the skin because we do not use chemical cross-linking agents which are incorporated into other hydrogel patches. Once the
gels are manufactured according to a customer's specifications, the gels are generally shipped to the customer via a contract carrier
(e.g., United Parcel Service, Inc.).

 Our
Facilities

 We
manufacture our hydrogels at what we believe to be one of only two facilities that can produce state-of-the–art hydrogel
transdermal products and we have successfully used over two hundred active ingredients combinations in our hydrogels to date. Our
facility consists of 13,500 square feet of manufacturing space, which we currently operate at approximately 10% capacity. Given the
significant unused capacity, we can expand rapidly to meet increased demand, including for our healthcare and consumer product lines
as described in more detail below. At full capacity, we estimate our existing facility would produce approximately 1.4 billion
square inches of product annually. In addition, we sublease approximately 6,200 square feet of a 12,000 square foot combined office
and manufacturing facility in Granbury, Texas, for our joint venture CG Converting and Packaging, LLC ("JV"). Our facilities are subject
to stringent FDA compliance requirements. We also believe our hydrogel facility creates a high barrier to entry into our hydrogel
and consumer product business.

Products

 Beginning
in the third quarter of 2020, we began selling our own branded products using our hydrogel technology on the Amazon marketplace. In 2022
we expanded access to our products by launching our own direct to consumer website, Medagel.com. Our hydrogel consumer products are marketed
under the brand names MedaGel and LumaGel Beauty. The products we sell under our MedaGel brand primarily relate to over-the-counter ("OTC")
remedy solutions, such as blister and pain applications; while the products we sell under our LumaGel Beauty brand primarily relate to
beauty and cosmetic solutions, such as wrinkle and skin cream applications. In December 2023 we added a third consumer product brand
when we completed the purchase of the Kenkoderm brand. The Kenkoderm skincare line was originally developed by a dermatologist to provide
alternative treatments for psoriasis that did not use steroids or biologics that often have side effects.

 Additionally,
we have several more products in our development pipeline. We intend for these products to address various market opportunities
including the OTC pharmaceutical drug delivery market, pain management, beauty and cosmetics, sports related applications,
cannabinoids ("CBD" and/or "THC") and general podiatry.

and White Label Opportunities

 We
are leveraging our hydrogel products and technologies by allowing other OTC brands to incorporate them into their products. We believe
our hydrogels, which do not use chemical cross-linking agents and can be made in paraben free formulations, will be attractive to other
OTC brands, especially in the beauty and cosmetics industry, and their customers. We believe these white labeling opportunities will
increase the markets' awareness of us as a consumer-friendly and reliable supplier of customizable patches. Additionally, we created
a process where customers have the ability to create their own custom hydrogel products. Customers pay a development fee, eliminating
our financial risk in the success or failure of the custom product. As opposed to our contract manufacturing business, where we provide
bulk sale of roll stock hydrogel to our customers who then use it as one component in their products which they themselves then manufacture,
test, market and sell, our custom and white label business will provide customers with a finished product which they will then brand
and re-sell.

Devices

 We
entered into the medical device development sector which a focus on analyzing, creating and developing devices and solutions that reduce
skin pain and irritation, improve and maintain skin integrity and provide greater comfort and safety for patients at the site of which
a medical device interfaces with the human body.

 We
conducted proof of concept studies for the development of our first medical device, which we call NEXDrape and have filed for a patent
on this device under the Patent Cooperation Treaty which provides patent protection in the nations who are members of the treaty. The
NEXDrape device is an incise surgical drape designed for patients with impaired skin. The elderly, diabetics, trauma patients and those
with an adhesive sensitivity can have adverse events from the removal of adhesive drapes. Additionally, patients taking certain medications,
such as ELIQUIS and steroids, may experience impaired skin as well. These groups represent a sizable percentage of the
incise surgical drape market, a market we believe to be significant and growing. The incise surgical drape market is currently fragmented
with 3M Healthcare being the market leader. Skin tears, infections, rashes, and post-surgical site pain are some of the problems that
can occur as a result of the removal of adhesive drapes, and have been reported with other currently available surgical drapes.

 We
have conducted one animal and two human cadaver proof of concept studies with respect to NEXDrape. As a result of these studies, we believe
NEXDrape will represent a gentle to the skin alternative to the current adhesive based standard of care and will provide a unique solution
for patients with fragile or compromised skin. Additionally, we believe NEXDrape offers the following benefits over the current incise
surgical drape products: (i) no skin irritation; (ii) able to deliver a wide range of antiseptic and antibiotic agents; (iii) eliminates
air bubbles; and (iv) prevents dermis removal post-surgery, which reduces the risk of patient infection and discomfort. We intend to
file a 510(k) premarket submission with the Food and Drug Administration ("FDA"), which is an application to demonstrate that NEXDrape
is as safe and effective (or substantially equivalent to) a legally marketed surgical drape device. There can be no guarantee that the
FDA approves our application, if submitted.

 We
are also in the process of developing a product we call NEXDerm which will be an adhesive tape designed to secure central lines and intravenous
tubes and devices to patients before, during and after medical treatment. We believe NEXDerm will be an attractive alternative to Tegaderm,
a 3M Healthcare product. Based on our discussion with medical professionals, Tegaderm is often difficult and painful to remove
after adhesion, particularly for comprised skin patients. NEXDerm, which will incorporate exclusively licensed technology owned by Noble
Fiber, is designed to create a gentle to skin surgical tape impregnated with antimicrobial X-Static silver fiber. We
believe NEXDerm, if successfully developed, will offer the following advantages over Tegaderm: (i) ability to easily reposition
the adhesive tape; (ii) pain-free removal; (iii) gentle to the skin; and (iv) increased infection prevention. As with NEXDrape, we intend
to file a 510(k) premarket submission with the FDA to demonstrate that NEXDrape is as safe and effective (or substantially equivalent
to) a legally marketed surgical drape device. There can be no guarantee that the FDA approves our application, if submitted.

 Our
current intent with any medical devices will not be to commercialize due to the expense required but to potentially prepare them to go
to market and to identify and pursue licensing and partnering arrangements with third parties possessing the necessary resources and
capabilities to bring the devices to market.

 Sales
and Marketing

Manufacturing, Consumer Products and Customer and White Label Offerings. We continue to focus on sales and marketing efforts in the
United States. We use commission-based, fractional sales personnel to supplement our in-house efforts.

Devices. We do not intend to spend efforts or resources on selling or marketing our medical device business. Our current intent with
any medical devices will not be to commercialize due to the expense required but to identify and pursue licensing arrangements with third
parties possessing the necessary resources and capabilities to bring the devices to market.

 Competition

Manufacturing. To our knowledge, NexGel is one of two manufacturers using electron beam technology for high performance hydrogels
for the wound care, cosmetic and drug delivery industries.

Products and Medical Devices. As we expand our consumer products and medical device business, we will face a number of competitors.
Our competitors include numerous manufacturers; distributors; marketers; online, specialty, mass, and other retailers; and physicians
that actively compete for the business of consumers both in the United States and abroad, including companies such as Johnson & Johnson,
Pfizer Consumer Healthcare and Procter & Gamble. Most of our competitors have longer operating histories, significantly greater resources,
better developed and more innovative sales and distribution channels and platforms, greater name recognition, and larger established
customer bases than we do. Therefore, a strategic partnership will be critical to our success in the medical device business. We also
face similar challenges with our own consumer branded products and may pursue similar strategic partnerships, though direct to consumer
marketing and selling is more feasible.

and White Label Offerings. As our custom and white label offering business will provide customers with a finished product which they
will then brand and re-sell, the competition will depend, to a great deal, on the type of product the customer request and will not result
in direct competition to us.

 Sources
and Availability of Raw Materials; Principal Suppliers

 In
general, raw materials essential to our business are readily available from multiple sources. For reasons of quality assurance, availability,
or cost effectiveness, certain components and raw materials are available only from a sole supplier. The principal suppliers for our
raw materials are Berry Global, Inc., DeWolf Chemical, Inc., and Univar, Inc. Our policy is to maintain sufficient inventory of components
and raw materials so that our production will not be significantly disrupted even if a particular component or material is not available
for a period of time.

 Because
we have no direct control over these suppliers, interruptions or delays in the products and services provided by these parties may be
difficult to remedy in a timely fashion. In addition, if such suppliers are unable or unwilling to deliver the necessary components or
raw materials, we may be unable to redesign or adapt our technology to work without such components or raw materials or find alternative
suppliers or manufacturers. In such events, we could experience interruptions, delays, increased costs, quality control problems, and
or be unable to sell the applicable products, all of which could have a significant adverse impact on our revenue.

 Other
than as discussed above, we believe that, due to the size and scale of production of our suppliers, there should be an adequate supply
of components and raw materials from our other suppliers.

 Customers

 During
the year ended December 31, 2023, one major customer accounted for approximately 20%. During the year ended December 31, 2022 one major
customer accounted for approximately 29% of our revenue. We cannot be certain as to this customer's intentions to use our services
during and beyond the fiscal year ended December 31, 2023 since we do not currently have a contract with this customer. However, we have
been supplying this customer for more than 15 years and have no reason to anticipate any change. Our contract manufacturing business,
including with respect to this customer, operates on a purchase order basis.

 Patents,
Proprietary Rights and Trademarks

 We
own or license trademarks covering our company and our products. We filed for a patent on NEXDrape under the Patent Cooperation Treaty
which provides patent protection in the nations who are members of the treaty. We also rely upon trade secrets and continuing technological
innovations to develop and maintain our competitive position. We also hold certain intellectual property that is not material to our
current business and prospects, including patent rights to one patent in Europe, which covers the use of lignin for inhibiting restenosis
and thrombosis formation, and coated medical devices where the coating includes lignin. This patent is set to expire in the near future,
however we believe the expiration of these patents will not have an adverse impact on our overall business. We hold an exclusive license
with right to sub-license from Specialty Pharmaceutical Products, L.L.C. (which was held by our former parent, Adynxx, Inc.) to two issued
patents, one in the U.S. and one in Europe, which cover technology relating to a transdermal patch containing transcutol. The transdermal
patch is effective to deliver lidocaine to a patient. Neither of these patent rights are material to our current business and prospects.
These licensed patent rights are expected to expire in April 2032.

 Government
Regulation

 Product
Regulation. Under the Federal Food, Drug and Cosmetic Act, medical devices are classified by the FDA into one of three classes - Class
I, Class II or Class III - depending on the degree of risk associated with each medical device and the extent of control
needed to ensure safety and effectiveness. While some applications of hydrogels fall under the jurisdiction of the FDA, hydrogels are
generally classified as Class I exempt devices and the majority of the hydrogel products that we manufacture are thereby exempt from
the FDA filing of any regulatory submissions and/or pre-market notification requirements. To the extent that any FDA regulatory submissions
are required, we will be required to file these submissions and maintain all appropriate documentation. With respect to registering the
manufacturing facility with the FDA under the Code of Federal Regulations, 21 CFR 820.1, Scope: Part A, it is stated that the regulation
does not apply to manufacturers of component parts of finished devices. Currently, hydrogels are sold as component parts to various medical
device/cosmetic manufacturers.

 Quality
Assurance Requirements. The FDA enforces regulations to ensure that the methods used in, and the facilities and controls used
for, the manufacture, processing, packing and holding of drugs and medical devices conform with current good manufacturing practice
("cGMP"). The cGMP regulations enforced by the FDA are comprehensive and cover all aspects of manufacturing operations,
from receipt of raw materials to finished product distribution, insofar as they bear upon whether drugs meet all the identity,
strength, quality and purity characteristics required of them. The cGMP regulations for devices, called the Quality System
Regulation, are also comprehensive and cover all aspects of device manufacture, from pre-production design validation to
installation and servicing, insofar as they bear upon the safe and effective use of the device and whether the device otherwise
meets the requirements of the Federal Food, Drug and Cosmetic Act. To assure compliance requires a continuous commitment of time,
money and effort in all operational areas.

 The
FDA also conducts periodic inspections of drug and device registered facilities to assess their current cGMP status. If the FDA were
to find serious non-compliant manufacturing or processing practices during such an inspection, it could take regulatory actions that
could adversely affect our business, results of operations, financial condition and cash flows. With respect to domestic
establishments, the FDA could initiate product seizures or in some instances require product recalls and seek to enjoin a
product's manufacture and distribution. In certain circumstances, violations could support civil penalties and criminal
prosecutions. In addition, if the FDA concludes that a company is not in compliance with cGMP requirements, sanctions may be imposed
that include preventing that company from receiving the necessary licenses to export its products and classifying that company as an
"unacceptable supplier", thereby disqualifying that company from selling products to federal agencies.

 We
conduct audits of our outside manufacturers and believe that we and our suppliers and outside manufacturers are currently in
compliance with cGMP requirements. We are currently registered as a device manufacturer and distributor with the FDA and we intend
to register as a drug facility with the FDA when we are required to do so.

 Environmental
Regulation. We are subject to various laws and governmental regulations concerning environmental matters and employee safety and
health in the U.S. and other countries. We have made, and continue to make, significant investments to comply with these laws and regulations.
We cannot predict the future capital expenditures or operating costs required to comply with environmental laws and regulations. We believe
that we are currently compliant with applicable environmental, health and safety requirements in all material respects. However, we cannot
assure you that current or future regulatory, governmental, or private action will not have a material adverse effect on our performance,
results or financial condition.

 In
the future, if a loss contingency related to environmental matters, employee safety, health or conditional asset retirement obligations
is recognized, we would record a liability for the obligation and it may result in a material impact on net income for the annual or
interim period during which the liability is recorded. The investigation and remediation of environmental obligations generally occur
over an extended period of time, and therefore we do not know if these events would have a material adverse effect on our financial condition,
liquidity, or cash flow, nor can we assure you that such liabilities would not have a material adverse effect on our performance, results
or financial condition.

 Federal
and State Anti-kickback, Self-referral, False Claims and Similar Laws. Our relationships with physicians, hospitals and the marketers
of our products are subject to scrutiny under various federal anti-kickback, self-referral, false claims and similar laws, often referred
to collectively as healthcare fraud and abuse laws. Healthcare fraud and abuse laws are complex, and even minor, inadvertent violations
can give rise to claims that the relevant law has been violated. Certain states have similar fraud and abuse laws, imposing substantial
penalties for violations. Any government investigation or a finding of a violation of these laws would likely result in a material adverse
effect on the market price of our common stock, as well as our business, financial condition and results of operations. We believe that
we are currently compliant with applicable anti-kickback, self-referral, false claims in all material respects.

 Research
and Development Costs

 For
the years ended December 31, 2023 and 2022, we incurred approximately $103 thousand and $367 thousand, respectively, in research and
development costs. We expect to incur increased costs in the future for our medical device business. Research and development will be
an important component in the growth of our business.

 Employees

 As
of December 31, 2023, we had 19 full-time employees. 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 currently plan to retain and utilize the services of outside
consultants for additional research, testing, regulatory, accounting and tax services, legal compliance, and other services on an as
needed basis.

 Properties

 We
maintain a combined corporate office and manufacturing facility in Langhorne, Pennsylvania, where we lease approximately 16,500
square feet of office and manufacturing space which expires on January 31, 2031. In addition, we sublease approximately 6,200 square
feet of a 12,000 square foot combined office and manufacturing facility in Granbury, Texas, for our JV. The lease expires in March 2028.

 We
believe that our facilities are well maintained and are suitable and adequate for our current needs.

 Legal
Proceedings

 From
time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may
harm our business. We are currently not aware of any such legal proceedings or claims.

 There
are no material proceedings in which any of our directors, officers or affiliates or any registered or beneficial shareholder of more
than 5% of our common stock is an adverse party or has a material interest adverse to our interest.

 Contractual
Obligations

 The
Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide
the information under this item.

 Item
1A. Risk Factors

 You
should carefully consider the risks described below and elsewhere in this Annual Report on Form 10-K before making an investment decision.
Our business, financial condition or results of operations could be materially adversely affected by any of these risks. Our common stock
is considered speculative and the trading price of our common stock could decline due to any of these risks, and you may lose all or
part of your investment. The following risk factors are not the only risk factors facing the Company. Additional risks and uncertainties
not presently known to us or that we currently deem immaterial may also affect our business.

 Risks
Relating to Our Business

 Our
future success depends upon market acceptance of our existing and future products.

 We
believe that our success will depend in part upon the acceptance of our existing and future products by the medical community, hospitals
and physicians and other health care providers, third-party payers, and end-users. Such acceptance may depend upon the extent to which
the medical community and end-users perceive our products as safer, more effective or cost-competitive than other similar products. Ultimately,
for our products to gain general market acceptance, it may also be necessary for us to develop marketing partners for the distribution
of our products. There can be no assurance that our products will achieve significant market acceptance on a timely basis, or at all.
Failure of some or all of our future products to achieve significant market acceptance could have a material adverse effect on our business,
financial condition, and results of operations.

 Our
suppliers may fail to deliver components and raw materials and parts according to schedules, prices, quality and volumes that are acceptable
to us, or we may be unable to manage these components and raw materials effectively.

 Our
products contain materials and parts purchased globally from many suppliers, including single-source direct suppliers, which exposes
us to potential component shortages or delays. Unexpected changes in business conditions, materials pricing, labor issues, wars such
as the current conflict in Ukraine, trade policies, natural disasters, health epidemics, trade and shipping disruptions, port congestions
and other factors beyond our or our suppliers' control could also affect these suppliers' ability to deliver components to
us or to remain solvent and operational. Additionally, if our suppliers do not accurately forecast and effectively allocate production
or if they are not willing to allocate sufficient production to us, it may reduce our access to components and raw materials, thus requiring
us to search for new suppliers. The unavailability of any component or supplier could result in production delays, idle manufacturing
facilities, product design changes and loss of access to important technology and tools for producing and supporting our products. Our
suppliers may not be willing or able to sustainably meet our timelines or our cost, quality and volume needs, or to do so may cost us
more, which may require us to replace them with other sources. While we believe that we will be able to secure additional or alternate
sources for most of our components, there is no assurance that we will be able to do so quickly or at all.

 As
the scale of production of our products, we will also need to accurately forecast, purchase, warehouse and transport components at high
volumes to our manufacturing facilities. If we are unable to accurately match the timing and quantities of component purchases to our
actual needs or successfully implement automation, inventory management and other systems to accommodate the increased complexity in
our supply chain and parts management, we may incur unexpected production disruption, storage, transportation and write-off costs, which
may harm our business and operating results.

 We
are dependent on significant customers.

 Our
hydrogel manufacturing business is currently our primary source of revenue, and much of this revenue is generated from a limited
number of clients, who account for a substantial percentage of our total revenues. For the year ended December 31, 2023, one major
customer accounted for approximately 20% of our revenue. The loss of any of our significant customers would have a significantly
negative effect on our overall operations.

 We
rely heavily on the Amazon marketplace for the sales and distribution of our consumer products, and if we are unable to maintain a good
relationship with Amazon or if Amazon experiences disruptions, our business will suffer.

 We
rely heavily on the Amazon marketplace for the sales and distribution of our consumer products to our end consumers. We believe that
we have good relationships with Amazon. However, if we or any of our partners, (or if Amazon believes we or any of our partners have
violated) its terms of service, Amazon could limit or terminate its relationship with us. Any limitation or termination of our
relationship with Amazon could materially adversely affect one of all of our business, financial condition and our results of
operations. Additionally, any prolonged disruption of Amazon's website or its delivery and distribution of our consumer
products could materially adversely impact our business.

 We
have no contracts in place with our customers in either our contract manufacturing or consumer products business. The absence of such
contracts could result in periods during which we must continue to pay costs without revenues.

 Our
sales are made on a purchase order basis, we do not have contracts with our customers in either our contract manufacturing or consumer
products business. Accordingly, our customers are not required to purchase a minimum amount of our products, and we therefore could have
periods during which we have no or limited orders for our products, which will make it difficult for us to operate as we will have to
continue paying our expenses. We cannot provide assurance that we will be able to timely locate new customers, if at all, when our existing
customers are not placing orders. The periods in which we have no or limited purchase orders for our products would have a material adverse
effect on our business and financial condition.

 We
operate in a highly competitive industry.

 Competition
from other hydrogel manufacturers is intense. There can be no assurance that we can develop products that are more effective or achieve
greater market acceptance than competitive products, or that our competitors will not succeed in developing or acquiring products and
technologies that are more effective than those being developed by us, that would render our products and technologies less competitive
or obsolete.

 Our
competitors enjoy several competitive advantages over us, including some or all of the following:

 large
 and established distribution networks in the U.S. and/or in international markets;

 greater
 financial, managerial and other resources for products, research and development, sales and marketing efforts and protecting and
 enforcing intellectual property rights;

 significantly
 greater name recognition;

 more
 expansive portfolios of intellectual property rights; and

 greater
 experience in obtaining and maintaining regulatory approvals and/or clearances from the FDA and other regulatory agencies.

 Our
competitors' products will compete directly with our products. In addition, our competitors, as well as new market entrants, may
develop or acquire new products that will compete directly or indirectly with our products. The presence of this competition in our market
may lead to pricing pressure which would make it more difficult to sell our products at a price that will make us profitable or prevent
us from selling our products at all. Our failure to compete effectively would have a material and adverse effect on our business, results
of operations and financial condition.

 As
we enter the consumer product business sector to a larger extent, our failure to compete successfully could materially harm our business,
financial condition, and operating results.

 The
business of developing and marketing consumer and personal care products is highly competitive and sensitive to the introduction of new,
competitive products, which may rapidly capture a significant share of the applicable market. Our competitors include numerous manufacturers;
distributors; marketers; online, specialty, mass, and other retailers; and physicians that actively compete for the business of consumers
both in the United States and abroad. Most of our competitors have longer operating histories, significantly greater resources, better-developed
and more innovative sales and distribution channels and platforms, greater name recognition, and larger established customer bases than
we do. Our present and future competitors may be able to better withstand reductions in prices or other adverse economic or market conditions
than we can; develop products that are comparable or superior to those we offer; adapt more quickly or effectively to new technologies,
changing regulatory requirements, evolving industry trends and standards, and customer requirements than we can; and/or devote greater
resources to the development, promotion, and sale of their products than we do. In addition, because the industry in which we operate
is not particularly capital intensive or otherwise subject to high barriers to entry, it is relatively easy for new competitors to emerge
that will compete with us. Accordingly, competition may intensify, and we may not be able to compete effectively in our markets. If we
are not able to compete successfully in the consumer products sector, our business, financial condition, and operating results would
be materially adversely affected.

 Our
failure to appropriately respond to changing consumer trends, preferences, and demand for new products and product enhancements could
materially harm our business, financial condition, and operating results.

 Our
consumer products business is subject to rapidly changing consumer trends and preferences and product introductions. Our success will
depend in part on our ability to anticipate and respond to these changes and introductions, and we may not respond or develop new products
or product enhancements in a cost-effective, timely, or commercially appropriate manner. The success of our new product offerings and
enhancements depends on a number of factors, including our ability to:

 accurately
 anticipate consumer needs;

 innovate
 and develop new products and product enhancements that meet these needs;

 successfully
 commercialize new products and product enhancements;

 price
 our products competitively;

 manufacture
 and deliver our products in sufficient volumes and in a cost-effective and timely manner; and

 differentiate
 our product offerings from those of our competitors and successfully respond to other competitive pressures, including technological
 advancements, evolving industry standards, and changing regulatory requirements.

 Our
failure to accurately predict changes in consumer demand and technological advancements could negatively impact consumer opinion of our
products or our business. In addition, if we do not introduce new products or make enhancements to meet the changing needs of our customers
in a cost-effective, timely, and commercially appropriate manner, or if our competitors release new products or product enhancements
before we do, some of our product offerings could be rendered obsolete, which could cause our market share to decline and negatively
impact our business, financial condition, and operating results.

 If
we fail to further penetrate existing markets, the sales of our consumer products, along with our operating results, could be negatively
impacted.

 The
success of our consumer product business will be to a large extent contingent on our ability to penetrate existing markets, which is
subject to numerous factors, many of which are out of our control. Moreover, our growth in existing markets will depend upon our ability
to achieve brand awareness. Therefore, we cannot assure you that our general efforts to achieve market penetration in existing markets
will be successful. If we are unable to further penetrate existing markets, our business, financial condition, and operating results
could materially suffer.

 We
are subject to governmental regulations in all aspects of our business.

 Like
other companies in the healthcare industry, we are subject to extensive regulation, investigations and legal action, by national, state
and local government agencies in the U.S. Regulatory issues regarding compliance with cGMP by
manufacturers of medical devices and consumer products can lead to fines and penalties, product recalls, product shortages, interruptions
in production, delays in new product approvals and litigation. In addition, the marketing, pricing and sale of our products are subject
to regulation, investigations and legal actions including under the Federal Food, Drug, and Cosmetic Act, federal and state false claims
acts, state unfair trade practices acts and consumer protection laws. Scrutiny of health care industry business practices by government
agencies and state attorneys general in the U.S., and any resulting investigations and prosecutions, carry risk of significant civil
and criminal penalties.

 As
we continue to develop our medical devices, if we fail to protect our intellectual property in the future, our ability to compete could
be negatively affected, which could materially harm our financial condition and operating results.

 As
we continue to develop our medical devices, such as NEXDrape, our future success and the market for our products will depend to a significant
extent upon the goodwill associated with our trademark and tradenames and our ability to protect our proprietary rights in our innovative
products and product enhancements. We own, or have licenses to use, the material trademark and trade name rights used in connection with
the packaging, marketing, and distribution of our products in the markets where those products are sold. Therefore, trademark and trade
name protection are important to our business. Although most of our trademarks are filed in the United States, we may not be successful
in asserting trademark or trade name protection or obtaining new trademark registrations.

 We
will attempt to protect our innovative products and product enhancements under a combination of patents, trademarks, and trade secret
laws, confidentiality procedures, and contractual provisions. However, monitoring infringement or misappropriation of intellectual property
can be difficult and expensive, and we may not be able to detect every infringement or misappropriation of our proprietary rights or
to prevent third parties from infringing upon or misappropriating our proprietary rights or from independently developing non-infringing
products that are competitive with, equivalent to, or superior to our products. Even if we do detect infringement or misappropriation
of our proprietary rights, litigation to enforce these rights could cause us to divert financial and other resources away from our business
operations and may result in the impairment or loss of all or portions of our proprietary rights. As a result, we cannot assure you that
we will be able to adequately protect our intellectual property in any jurisdiction. The loss or infringement of our trademarks, tradenames,
or other proprietary rights could impair the goodwill associated with our brands and harm our reputation, which could materially harm
our business, financial condition, and operating results.

 We
have limited sales, marketing and distribution capabilities.

 We
currently have limited sales, marketing and distribution capabilities. We must either develop our own sales, marketing and distribution
capabilities, which will be expensive and time-consuming, or make arrangements with third parties to perform these services for us. If
we enter into third party arrangements, the third parties may not be capable of successfully selling any of our products. If we decide
to market any of our products on our own, we will have to commit significant resources to developing a marketing and sales force and
supporting distribution capabilities. If we decide to enter into arrangements with third parties for performance of these services, we
may find that they are not available on terms acceptable to us, or at all. If we are not able to establish and maintain successful arrangements
with third parties or build our own sales and marketing infrastructure, our business and financial condition will be adversely affected.

 Our
products risk exposure to product liability claims.

 We
are exposed to potential product liability risks, which are inherent in the testing, manufacturing and marketing of our products. We
may incur significant expense investigating and defending any product liability claims, even if they do not result in liability. Moreover,
even if no judgments, fines, damages or liabilities are imposed on us, our reputation could suffer, which could have a material adverse
effect on our business, financial condition and results of operations.

 We
are reliant upon two manufacturers for key ingredients used to manufacture of our hydrogels.

 The
Dow Chemical Company and the BASF Corporation are the principal manufacturers of the two polymers, polyethylene oxide and polyvinylpyrrolidone,
respectively, that we primarily use in the manufacture of hydrogels. Although we have not experienced significant production delays attributable
to supply changes, we believe that developing alternative sources of supply for the polymers used to make our current hydrogels would
be difficult over a short period of time. Because we have no direct control over its third-party suppliers, interruptions or delays in
the products and services provided by these third parties may be difficult to remedy in a timely fashion. In addition, if such suppliers
are unable or unwilling to deliver the necessary raw materials or products, we may be unable to redesign or adapt our technology to work
without such raw materials or products or find alternative suppliers or manufacturers. In such events, we could experience interruptions,
delays, increased costs or quality control problems, which would have a material and adverse effect on our business, results of operations
and financial condition.

 There
can be no assurance that our internal controls over financial reporting will be able to detect fraud or other issues.

 We
will be required under the Sarbanes-Oxley Act of 2002 to include a report of management on our internal controls that contains an assessment
by management of the effectiveness of our internal control over financial reporting. Because and so long as we are an emerging growth
company, our public accounting firm auditing our financial statements will not be required to report on the effectiveness of internal
control over financial reporting, and our stockholders will not have the benefit thereof. Effective internal controls are necessary for
us to provide reliable financial reports and effectively prevent fraud. However, a control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the control system are met. There can be no assurance that
all control issues or fraud will be detected. In connection with the Merger, and as we continue to grow our business, our internal controls
continue to become more complex and require more resources.

 Our
ability to provide customers with competitive services is dependent on our ability to attract and retain qualified personnel, including
our senior management team.

 Our
ability to grow and provide our customers with competitive services is partially dependent on our ability to attract and retain highly
motivated people with the skills necessary to serve our customers. Personnel with the requisite skills or qualifications may be in short
supply or generally unavailable. The loss of personnel could impair our ability to perform under certain contracts, which could have
a material adverse effect on our consolidated financial position, results of operations, prospects and cash flows.

 Changes
in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could
significantly affect our financial results or financial condition.

 GAAP
and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are
relevant to our business, including but not limited to revenue recognition, business combinations, impairment of goodwill, indefinite-lived
intangible assets and long-lived assets, inventory and equity-based compensation, are highly complex and involve many subjective assumptions,
estimates and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments
could significantly change our reported or expected financial performance or financial condition.

 Our
ability to pursue strategic partnerships may impact our ability to compete in the markets we serve or desire to enter.

 We
have entered into, and expect to seek to enter into, additional strategic partnerships with other industry participants as part of an
effort to expand our business. However, we may be unable to identify attractive strategic partnership candidates or complete such partnerships
on terms favorable to us. In addition, if we are unable to successfully implement our partnership strategies or our strategic partners
do not fulfill their obligations or otherwise do not prove advantageous to our business, our investments in such partnerships and our
anticipated business expansion could be adversely affected.

 Achieving
our growth objectives may prove unsuccessful. We may be unable to identify future attractive strategic partnerships, which may adversely
affect our growth. In addition, our ability to consummate or implement our strategic partnerships may be materially and adversely affected.

 Risks
Relating to our Common Stock and Capital Structure

 An
active trading market may not develop or be sustained, and our stock price may fluctuate significantly once we do trade.

 Our
common stock and certain of our warrants trade on The Nasdaq Capital Market under the symbols "NXGL" and "NXGLW,"
respectively.

 We
cannot predict the prices at which our common stock may trade. The market price of our common stock may fluctuate widely, depending on
many factors, some of which may be beyond our control, including:

 actual
 or anticipated fluctuations in our operating results due to factors related to our business;

 success
 or failure of our business strategies;

 our
 quarterly or annual earnings, or those of other companies in our industry;

 our
 ability to obtain financing as needed;

 announcements
 by us or our competitors of significant acquisitions or dispositions;

 changes
 in accounting standards, policies, guidance, interpretations or principles;

 the
 failure of securities analysts to cover our common stock after we commence trading;

 changes
 in earnings estimates by securities analysts or our ability to meet those estimates;

 the
 operating and stock price performance of other comparable companies;

 overall
 market fluctuations;

 results
 from any material litigation or government investigation;

 changes
 in laws and regulations (including tax laws and regulations) affecting our business;

 changes
 in capital gains taxes and taxes on dividends affecting stockholders; and

 general
 economic conditions and other external factors, including wars such as the current conflict in Ukraine and other geopolitical risks.

 Furthermore,
our business profile and market capitalization may not fit the investment objectives of some of our stockholders and, as a result, these
stockholders may sell their shares of our common stock if we are able to list our common stock on The Nasdaq Capital Market. Substantial
sales of our common stock may occur, which could cause our stock price to decline. Low trading volume for our stock, which may occur
if an active trading market does not develop, among other reasons, would amplify the effect of the above factors on our stock price volatility.

 Our
failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of our common stock and warrants.

 If
we fail to continue to satisfy the continued listing requirements of The Nasdaq Stock Market, LLC such as the corporate governance requirements,
the stockholder's equity requirement or the minimum closing bid price requirement, Nasdaq may take steps to delist our common stock
and warrants. Such a delisting or even notification of failure to comply with such requirements would likely have a negative effect on
the price of our common stock and warrants and would impair your ability to sell or purchase our common stock and warrants when you wish
to do so. In the event of a delisting, we expect that we would take actions to restore our compliance with Nasdaq's listing requirements,
but we can provide no assurance that any such action taken by us would allow our common stock and warrants to become listed again, stabilize
the market price or improve the liquidity of our common stock and warrants, prevent our common stock from dropping below the Nasdaq minimum
bid price requirement or prevent future non-compliance with Nasdaq's listing requirements.

 We
cannot assure you that we will pay dividends on our common stock, and our indebtedness may limit our ability to pay dividends on our
common stock.

 The
timing, declaration, amount and payment of future dividends to stockholders will fall within the discretion of our Board of Directors.
Our Board of Directors' decisions regarding the payment of future dividends will depend on many factors, including our financial
condition, earnings, capital requirements of our business and covenants associated with debt obligations, as well as legal requirements,
regulatory constraints, industry practice and other factors that our Board of Directors deems relevant. There can be no assurance that
we will pay a dividend in the future or continue to pay any dividend if we do commence paying dividends.

 The
interests of our principal stockholders, officers and directors, who collectively beneficially own approximately 27% of our stock, may
not coincide with yours and such stockholders will have the ability to control decisions with which you may disagree.

 As
of April 10, 2024, our principal stockholders, officers and directors beneficially owned approximately 27% of our common stock. As a
result, our principal stockholders, officers and directors will have the ability to substantially influence matters requiring stockholder
approval, including the election of directors and approval of significant corporate transactions. In addition, this concentration of
ownership may delay or prevent a change in control of our company and make some future transactions more difficult or impossible without
the support of our controlling stockholders. The interests of such stockholders may not coincide with your interests or the interests
of other stockholders.

 If
we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial
results or prevent fraud and our business may be harmed and our stock price may be adversely impacted.

 Effective
internal controls over financial reporting are necessary for us to provide reliable financial reports and to effectively prevent fraud.
Any inability to provide reliable financial reports or to prevent fraud could harm our business. The Sarbanes-Oxley Act requires management
to evaluate and assess the effectiveness of our internal control over financial reporting. In order to continue to comply with the requirements
of the Sarbanes-Oxley Act, we are required to continuously evaluate and, where appropriate, enhance our policies, procedures and internal
controls. If we fail to maintain the adequacy of our internal controls over financial reporting, we could be subject to litigation or
regulatory scrutiny and investors could lose confidence in the accuracy and completeness of our financial reports. We cannot assure you
that in the future we will be able to fully comply with the requirements of the Sarbanes-Oxley Act or that management will conclude that
our internal control over financial reporting is effective. If we fail to fully comply with the requirements of the Sarbanes-Oxley Act,
our business may be harmed and our stock price may decline.

 If
securities or industry analysts do not publish research about our business, or publish negative reports about our business, our share
price and trading volume could decline.

 The
trading market for our common stock, to some extent, may at some point depend on the research and reports that securities or industry
analysts publish about our business. We do not have any control over these analysts. If one or more of the analysts elect to cover us
and downgrade our shares or lower their opinion of our shares, our share price would likely decline. If one or more of these analysts
elect to cover us and subsequently cease coverage of our company or fail to regularly publish reports on us, we could lose visibility
in the financial markets, which could cause our share price or trading volume to decline.

 Future
sales or potential sales of our common stock in the public market could cause our share price to decline.

 If
the existing holders of our common stock, particularly our directors and officers, sell a large number of shares, they could adversely
affect the market price for our common stock. Sales of substantial amounts of our common stock in the public market, or the perception
that these sales could occur, could cause the market price of our common stock to decline.

 We
may issue additional securities in the future upon conversion or exercise of outstanding securities which would result in dilution to
our stockholders.

 As
described elsewhere in this Form 10-K, we have previously issued warrants, restricted stock units, and stock options to fund our operations,
pay for services rendered and incentivize our employees and directors. The conversion or exercise of these securities would result in
substantial dilution to our stockholders. As of the date of the filing of this Form 10-K, we may be required to issue:

 560,650
 shares of common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $2.350742
 per share;

 3,442,904
 shares of common stock issuable upon the exercise of warrants at a weighted average exercise price of approximately $5.42034; and

 50,812
 shares of restricted common stock issuable upon vesting and another 13,750 shares of vested shares of restricted common stock.

 We
are an "emerging growth company" and a "smaller reporting company" and may elect to comply with reduced public
company reporting requirements applicable to emerging growth companies, and are subject to lesser public company reporting requirements
applicable to smaller reporting companies, which could make our common stock less attractive to investors.

 We
are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies that are not "emerging growth companies" including reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously
approved. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company." We will
remain an "emerging growth company" until the earliest of (i) the last day of the fiscal year in which we have total annual
gross revenues of $1.07 billion or more; (ii) the fifth anniversary of the Distribution; (iii) the date on which we have issued
more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a "large
accelerated filer" under the Exchange Act. We cannot predict if investors will find our common stock less attractive because we
may rely on these exemptions. In addition, we are a "smaller reporting company" and accordingly are required to provide less
public disclosure than larger public companies. If some investors find our common stock less attractive as a result, there may be a less
active trading market for our common stock and our stock price may be more volatile.

 We
will incur costs as a result of operating as a public company, and our management will be required to devote substantial time to new
compliance initiatives.

 As
a public reporting company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting
and other expenses. The Sarbanes-Oxley Act and rules subsequently implemented by the SEC, have imposed various requirements on public
companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.
Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these
rules and regulations will entail significant legal and financial compliance costs and will make some activities more time consuming
and costly. For example, we expect that these rules and regulations may make it difficult and expensive for us to obtain director and
officer liability insurance, and we may be required to accept low policy limits and coverage.

 Provisions
in our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws and of Delaware law may prevent or delay an
acquisition of our company, which could decrease the trading price of our common stock.

 Several
provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws and Delaware law may discourage, delay
or prevent a merger or acquisition that stockholders may consider favorable. These include provisions that:

 permit
 us to issue blank check preferred stock as more fully described under "Description of Our Capital Stock Anti-Takeover Effects
 of Various Provisions of Delaware Law and Our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws";

 require
 stockholders to follow certain advance notice and disclosure requirements in order to propose business or nominate directors at an
 annual or special meeting; and

 limit
 our ability to enter into business combination transactions with certain stockholders.

 These
and other provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws and Delaware law may discourage,
delay or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of us, including
unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to sell their shares of our common
stock at a price above the prevailing market price. See "Description of Our Capital Stock Anti-Takeover Effects of Various Provisions
of Delaware Law and Our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws" for more information.

 Our
Amended and Restated Bylaws include a forum selection clause, which could limit our stockholders' ability to obtain a favorable
judicial forum for disputes with us.

 Our
Amended and Restated Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive
forum for (i) any internal corporate claims within the meaning of the Delaware General Corporation Law ("DGCL"), (ii) any
derivative action or proceeding brought on our behalf, (iii) any action asserting a claim of breach of a fiduciary duty owed by any of
our directors, officers, or employees to us or to our stockholders, or (iv) any action asserting a claim arising pursuant to any provision
of the DGCL, will be a state court located within the State of Delaware (or, if no state court located within the State of Delaware has
jurisdiction, the federal court for the District of Delaware). Specifically, the sole and exclusive forum for such legal actions shall
be (i) first, the Court of Chancery of the State of Delaware, (ii) second, if the Court of Chancery of the State of Delaware lacks jurisdiction,
the Superior Court of the State of Delaware, or (iii) third, if the Superior Court of the State of Delaware lacks jurisdiction, the United
States District Court for the District of Delaware, in all cases subject to the court's having personal jurisdiction over the indispensable
parties named as defendants. This exclusive forum provision will apply to state and federal law claims, including claims under the federal
securities laws (including actions arising under the Exchange Act or the Securities Act), although our stockholders will not be deemed
to have waived our compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities
Act, however, creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created
by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce
such a forum selection provision as written in connection with claims arising under federal securities laws. Any person or entity purchasing
or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing provisions.
This forum selection provision in our bylaws may limit our stockholders' ability to obtain a favorable judicial forum for disputes
with us. It is also possible that, notwithstanding the forum selection clause included in our bylaws, a court could rule that such a
provision is inapplicable or unenforceable.

 Item
1B. Unresolved Staff Comments

 None.

 Item
1C. Cybersecurity

 Cybersecurity
Risk Management and Strategy

 We
have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability
of our critical systems and information.

 We
have implemented a number of security measures designed to protect our systems and data, including firewalls, antivirus and malware detection
tools, patches, log monitors, and routine back-ups,. In addition, we have continued our efforts to migrate our platforms to cloud-based
computing, which is designed to further strengthen our security posture.

 Our
cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies,
reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic,
operational, and financial risk areas.

 Our
cybersecurity risk management program includes the following:

 the
 use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security controls;

 cybersecurity
 awareness training of our employees, incident response personnel, and senior management; and

 There
can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will
be fully implemented, complied with or effective in protecting our systems and information.

 Cybersecurity
Governance

 Our
Board considers cybersecurity risks as part of its risk oversight.

 The
Board oversees management's implementation of our cybersecurity risk management program and receives updates on the cybersecurity
risk management program from management at least annually. In addition, management updates the Board regarding any material or significant
cybersecurity incidents, as well as incidents with lesser impact potential as necessary.

 Ongoing
Risks

 We
have not experienced any material cybersecurity incidents. We have not identified risks from known cybersecurity threats, including as
a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results
of operations, or financial condition.

 Incident
Response and Assessment Policies and Procedures

 We
align with industry-standard cybersecurity frameworks designed to protect the company and customer data from unintentional disclosure,
cybersecurity events, and other threats of all severity levels. As part of our alignment with these frameworks we are in the process
of implementing a Cybersecurity Incident Response Plan that outlines actions to be taken after identifying a suspected information security
breach and the people responsible for managing those actions. Additionally, this plan will outline communication responsibilities during
incidents of all severity levels.

 Item
2. Properties

 We maintain a combined corporate office and manufacturing facility in Langhorne,
Pennsylvania, where we lease approximately 16,500 square feet of office and manufacturing space which expires on January 31, 2031. In
addition, we sublease approximately 6,200 square feet of a 12,000 square foot combined office and manufacturing facility in Granbury,
Texas for our JV. The lease expires in March 2028. We believe that our facilities are well
maintained and are suitable and adequate for our current needs.

 Item
3. Legal Proceedings

 From
time to time, we may become involved in lawsuits, investigations and claims that arise in the ordinary course of business. As of the
date of this information statement, we are not a party to any litigation whereby the outcome of such litigation, if determined adversely
to us, would materially affect our financial position, results of operations or cash flows.

 Item
4. Mine Safety Disclosure

 Not
applicable.

 Part
II

 Item
5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Market
Information

 Our
common stock is traded on NASDAQ Capital Markets under the symbol "NXGL" and certain warrants to purchase our common stock
issued on December 27, 2021 are trade on NASDAQ Capital Markets under the symbol "NXGLW."

 Holders

 As
of April 10, 2024, there were over 1,074 shareholders of record and 6,227,624 shares of common stock outstanding.

 On
November 29, 2021, we effected a 1-for-35 reverse stock split of our issued and outstanding common stock (the "Reverse Stock Split").
As a result of the Reverse Stock Split, each issued and outstanding share of our common stock, and the per share exercise price of and
number of shares of our common stock underlying our outstanding equity awards and warrants, was automatically proportionally adjusted
based on the 1-for-35 Reverse Stock Split ratio. No fractional shares of common stock were issued in connection with the reverse stock
split, and all such fractional interests were rounded up to the nearest whole number.

 Sales
of Unregistered Securities during the Fiscal Year Ended December 31, 2023

 The
Company did not sell any unregistered securities during the fiscal year ended December 31, 2023.

 Issuer
Repurchases of Securities during the Fiscal Year Ended December 31, 2023

 The
Company did not repurchase any of its securities during the fiscal year ended December 31, 2023.

 Item
6. [Reserved]

 The
Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide
the information under this item.

 Item
7. Management's Discussion and Analysis of Financial Condition and Results of Operations

 The
following discussion and analysis are intended to help prospective investors understand our business, financial condition, results
of operations, liquidity and capital resources. You should read this discussion in conjunction with our consolidated financial
statements and related notes thereto included elsewhere in this information statement.

 The
statements in this discussion regarding industry outlook, expectations regarding our future performance, liquidity and capital resources
and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and
uncertainties, including, but not limited to, the risks and uncertainties described in "Special Note Regarding Forward-Looking
Statements." Actual results may differ materially from those contained in any forward-looking statements.

 The
NexGel Financial Statements, discussed below, reflect the NexGel financial condition, results of operations, and cash flows. The financial
information discussed below and included in this information statement, however, may not necessarily reflect what the NexGel financial
condition, results of operations, or cash flows would have been had NexGel been operated as a separate, independent entity during the
years presented, or what the NexGel financial condition, results of operations, and cash flows may be in the future.

 Overview

 We manufacture high water content, electron beam cross-linked, aqueous polymer hydrogels, or gels, used for wound
care, medical diagnostics, transdermal drug delivery and cosmetics. We specialize in custom gels by capitalizing on proprietary manufacturing
technologies. We have historically served as a contract manufacturer, supplying our gels to third parties who incorporate them into their
own products. Beginning in 2020, we created two new lines of business for the company. First, our own line of branded consumer products
sold direct to consumers. Second, we expanded into custom and white label opportunities, which focuses on combining our gels with proprietary
branded products and white label opportunities. All of our gel products are manufactured using proprietary and non-proprietary mixing,
coating and cross-linking technologies. Together, these technologies enable us to produce gels that can satisfy rigid tolerance specifications
with respect to a wide range of physical characteristics (e.g., thickness, water content, adherence, absorption, moisture vapor transmission
rate [a measure of the passage of water vapor through a substance] and release rate) while maintaining product integrity. Additionally,
we have the manufacturing ability to offer broad choices in the selection of liners onto which the gels are coated. Consequently, we and
our customers are able to determine tolerances in moisture vapor transmission rate and active ingredient release rates while personalizing
color and texture.

 Joint
Venture

 On
March 1, 2023, the Company acquired a 50% interest in its newly formed JV for its converting and packaging business. The JV
agreement 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.

 Acquisition

 On
December 1, 2023, we purchased substantially all of the assets Olympus Trading Company, LLC (the "Seller") related to the
Seller's skincare line focused on reducing symptoms associated with psoriasis operating under the tradename "Kenkoderm"
("Kenkoderm acquisition").

 Under
the terms of the Kenkoderm acquisition, the Company paid the Seller a cash payment of $546,500.

 Additionally, the Company shall pay the Seller a cash
earn-out of the same amount each quarter, payable in the subsequent month flowing quarter end, of $136,625. 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 Asset Purchase
Agreement relating to the Kenkoderm acquisition.

 Results
of Operations

 The
following sections discuss and analyze the changes in the significant line items in our statements of operations for the comparison years
identified.

 Year
Ended December 31, 2023 Compared to the Year Ended December 31, 2022 ($ in thousands)

 Revenues,
net

 For
the year ended December 31, 2023 revenues were $4,089 and increased by $2,041, or 99.7%, when compared to $2,048 for the year ended December
31, 2022. The increase in our overall revenues was primarily due to sales growth in both our contract manufacturing and branded products,
including revenue from the JV from March 1, 2023 through December 31, 2023 of $1,987.

 The
Company has four distinct lines of business; Contract Manufacturing, Custom & White Label, Consumer Branded Products, and Medical
Devices/Other.

Manufacturing

 Customers
order rolls of gel ("rollstock"). The rollstock is shipped to our customers, which they package into finished goods. Historically,
this has been the Company's primary source of revenue.

& White Label

 These
products often infuse various ingredients into our base gel to develop unique product offerings to satisfy market demand (e.g. aloe infused
into the gel for a beauty mask). The rollstock is converted and packaged into salable units. The finished goods are shipped to the customer,
who is ultimately responsible for product distribution. Frequently these products started as development deals, in which the customer
paid the company a small fee to develop a specific product. Once completed, the customer places a large order for newly developed product.

Branded Products

 These
products are finished goods marketed and sold directly to the customer by the Company through online and retail channels. The Company
is responsible for sales, marketing, and distribution. These products carry the Company's brand names.

Devices/Other

Devices are a hybrid business, combining elements of Custom & White Label and Consumer Branded 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.

 Gross
profit (loss) Our gross profit was $619 for the year ended December 31, 2023 compared to a gross profit of $256 for the year
ended December 31, 2022. The increase in the profit recorded for the year ended December 31, 2023, as compared to December 31, 2022,
directly correlates to our higher sales. Gross profit was approximately 15.1% for the year ended December 31, 2023 compared to a gross
profit of 12.5% for the year ended December 31, 2022.

 The
components of cost of revenues are as follows for the years ended December 31, 2023 and 2022 ($ in thousands):

 Year Ended December 31,

 2023

 2022

 Cost of revenues

 Materials and finished products

 $
 2,147

 $

 Compensation and benefits

 Share-based compensation

 -

 Depreciation and amortization

 Equipment, production and other expenses

 Total cost of revenues

 $
 3,470

 $
 1,792

 Cost
of revenues increased by $1,678, or 93.6 %, to $3,470 for the year ended December 31, 2023, as compared to $1,792 for the year ended
December 31, 2022. The increase in cost of revenues pertains to an increase in materials and finished products and equipment, production,
and other expenses. These increases primarily align with the increased revenues.

 Selling,
general and administrative expenses. The following table highlights selling, general and administrative expenses by type for the
years ended December 31, 2023 and 2022 ($ in thousands):

 Year Ended December 31,

 2023

 2022

 Selling, general and administrative expenses

 Compensation and benefits

 $

 $

 Share-based compensation

 Depreciation and amortization

 Advertising, marketing, and Amazon fees

 Investor and shareholder services

 Franchise taxes and corporate insurance

 Professional and consulting fees

 1,339

 Other expenses and professional fees

 Total selling, general and administrative expenses

 $
 3,993

 $
 3,237

 Selling,
general and administrative expenses increased by $756, or 23.4%, to $3,993 for the year ended December 31, 2023, as compared to $3,237
for the year ended December 31, 2022. The increase in selling, general and administrative expenses is primarily attributable to an increase
of compensation and benefits expense, advertising, marketing, and Amazon fees as well as the costs for professional and consulting fees.

 Compensation
and benefits increased by $214, or 40.7%, to $740 for the year ended December 31, 2023, as compared to $526 for the year ended December
31, 2022. The number of employees increased compared to the prior year with the inclusion of the JV.

 Share-based
compensation decreased by $79, or 28.0%, to $203 for the year ended December 31, 2023, as compared to $282 for the year ended December
31, 2022. The decrease in share-based compensation year over year relates to the issuance of stock, restricted stock, and options to
our CEO and options to board members in 2023 in comparison to companywide restricted stock awards issued to employees in 2022.

 Advertising,
marketing, and Amazon fees increased by $184, or 42.20%, to $620 for the year ended December 31, 2023, as compared to $436 for the
year ended December 31, 2022. The increase corresponds to increased Amazon sales, partially offset by optimization of Amazon
advertising spend in 2023.

 Investor
and shareholder services decreased by $141, or 24.9%, to $426 for the year ended December 31, 2023, as compared to $567 for the year
ended December 31, 2022. The decrease is due to the Company's management of outsourced services.

 Franchise
taxes and corporate insurance decreased by $181, or 44.7%, to $224 for the year ended December 31, 2023, as compared to $405 for the
year ended December 31, 2022. The vast majority of this decrease pertains to the Company's reduction in authorized shares, which
lowered its franchise tax expense.

 Professional
and consulting fees increased by $696, or 108.2%, to $1,339 for the year ended December 31, 2023, as compared to $643 for the year
ended December 31, 2022. We incurred significant expenses related to our European Medical Device Regulation project in
preparation for entering European markets.

 Other
expenses decreased by $47, or 13.0%, to $315 for the year ended December 31, 2023 from $362 for the year ended December 31, 2022. Other
selling, general and administrative expenses generally consist of costs associated with our selling efforts and general management, including
information technology, travel, training and recruiting.

 Research
and development expenses

 Research
and development expenses decreased by $264 to $103 for the year ended December 31, 2023 from $367 for the year ended December 31, 2022.
The decrease is due to the completion of development efforts of two proof of concept studies for drug delivery candidates utilizing our
hydrogel technology.

 Liquidity
and Capital Resources

 Cash
Flow (in thousands)

 Years Ended December 31,

 2023

 2022

 Net cash used in operating activities

 $
 (3,236
)

 $
 (2,992
)

 Net cash provided by (used in) investing activities

 4,456

 (5,595
)

 Net cash provided by (used in) financing activities

 (3,662
)

 Net increase (decrease) in cash and cash equivalents

 1,599

 (12,249
)

 Cash and cash equivalents at beginning of year

 1,101

 13,350

 Cash and cash equivalent at end of year

 $
 2,700

 $
 1,101

 As
of December 31, 2023, we had $2,700 of cash and cash equivalents compared to $1,101 of cash and cash equivalents and $5,508 of
marketable securities at December 31, 2022. Net cash used in operating activities was $3,236 and $2,992 for the years ended December
31, 2023 and 2022, respectively. See Notes 2 and 3 of the accompanying consolidated financial statements for a more detailed
discussion of our marketable securities.

 Net
cash provided by investing activities was $4,456 million and net cash used in investing activities was $5,595 for the year ended December
31, 2023 and 2022, respectively, consisting of the sales of marketable securities of $5,699, offset by purchases of capital equipment
of $696 and the Kenkoderm acquisition of $547 for the year ended December 31, 2023 and consisting of investments in marketable securities
of $6,999, the sale of marketable securities for $1,500, and purchases of capital equipment of $96 for the year ended December 31, 2022.

 Net
cash provided by financing activities for year ended December 31, 2023 was $379 which is attributable to the proceeds of equipment
notes payable of $315, proceeds from margin line of credit of $245, offset by principal payments of notes payments of $6 and
payments of $175 made on the operating lease liability. Net cash used in financing activities for year ended December 31, 2022 was
$3,662 which is attributable to the principal payments of convertible notes of $3,511 and payments of $151 made on the operating
lease liability.

 At
December 31, 2023, current assets totaled $5,052 and current liabilities totaled $2,549, as compared to current assets totaling $7,505
and current liabilities totaling $859 at December 31, 2022. As a result, we had working capital of $2,503 at December 31, 2023, compared
to a working capital of $6,646 at December 31, 2022. The decrease in the working capital as of December 31, 2023 is primarily
attributable to the loss from operations of $3,477.

 We
have never declared or paid any cash dividends on our common stock. For the foreseeable future, we anticipate that all available funds
and any earnings generated in our business will be used to finance the growth of our business and will not be paid out as dividends to
our shareholders. Any future determination related to our dividend policy will be made at the discretion of our Board of Directors and
will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions,
business prospects and other factors our Board of Directors may deem relevant.

 Management
is exploring new product channel sales in consumer products, such as cosmetics, athletic products, and proprietary medical devices. The
Company has increased its focus on sales and developing a sales pipeline for potential customers. This customer base expansion will enable
us to provide financial stability for the foreseeable future, expand our current processes, and position us for long-term shareholder
value creation.

 We
have sufficient capital to maintain as a going concern due to the recent capital raise on February 14, 2024 (discussed further
within Note 20). We believe we have sufficient cash and marketable securities to operate our business plan into 2025. 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
expect to continue incurring losses for the near-term future. Our ability to continue to operate as a going concern in the long term
is dependent upon our ability to manage and grow our current products and to ultimately achieve profitable operations. Management may
consider various options to raise capital to fund potential acquisitions through equity or debt offerings. There can be no assurances,
however, that management will be able to obtain sufficient additional funds, if needed, or that such funds, if available, will be obtained
on terms satisfactory to us. The financial statements do not include any adjustments relating to the recoverability and classification
of recorded assets and liabilities that might be necessary should we be unable to continue as a going concern. Additionally, it is reasonably
possible that estimates made in the financial statements have been, or will be, materially and adversely impacted in the near term as
a result of these conditions, including the recoverability of long-lived assets.

 Additionally,
it is reasonably possible that estimates made in the financial statements have been, or will be, materially and adversely impacted in
the near term as a result of these conditions, including the recoverability of long-lived assets.

 Off
Balance Sheet Arrangements

 As
of December 31, 2023, we had no off-balance sheet arrangements in the nature of guarantee contracts, retained or contingent interests
in assets transferred to entities (or similar arrangements serving as credit, liquidity or market risk support to entities for any such
assets), or obligations (including contingent obligations) arising out of variable interests in entities providing financing, liquidity,
market risk or credit risk support to us, or that engage in leasing, hedging or research and development services with us.

 Critical
Accounting Policies and Estimates

 The
preparation of our accompanying consolidated financial statements in accordance with generally accepted accounting principles is
based on the selection and application of accounting policies that require us to make significant estimates and assumptions about
the effects of matters that are inherently uncertain. We consider the accounting policies discussed below to be critical to the
understanding of our Financial Statements. Actual results could differ from our estimates and assumptions, and any such differences
could be material to our Financial Statements.

 Share-based
compensation – We utilize share-based compensation in the form of incentive stock options. The fair values of incentive stock
option award grants are estimated as of the date of grant using a Black-Scholes option valuation model. Compensation expense is recognized
in the statements of operations on a straight-line basis over the requisite service period, which is generally the vesting period required
to obtain full vesting. The expected term of the awards granted is estimated using the simplified method which computes the expected
term as the sum of the award's vesting term plus the original contractual term divided by two.

 Warrant
Liability – Warrants to purchase common stock were issued in connection with equity financing raises which occurred during
2019 through 2021. 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. At issuance, the fair value of the warrant is 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 statements of operations. The expected
term of the awards granted are based on either the three-year or five-year contractual expiration date.

 Black
Scholes Inputs - The fair value of each stock option award and warrant issued was estimated on the date of grant using a Black-Scholes
option-valuation model, which requires management to make certain assumptions regarding: (i) fair value of the common stock that underlies
the stock option; (ii) the expected volatility in the market price of our common stock; (iii) dividend yield; (iv) risk-free interest
rates; and (iv) the period of time employees are expected to hold the award prior to exercise (referred to as the expected term). Under
the Black-Scholes option-valuation model, entities typically estimate the expected volatility based on historical volatilities of the
entity's own common stock. Based on the lack of historical data of volatility for the Company's common stock, the Company
based its estimate of expected volatility on a weighted average of the historical volatility of comparable public companies that manufacture
similar products and are similar in size, stage of life cycle, and financial leverage. The fair value of the common stock that underlies
the stock option is estimated by the Company considering the price of the most recent issuance of the Company's common stock. The
dividend yield is based upon the assumption that the Company will not declare a dividend over the life of the options. The risk-free
interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for bonds with maturities consistent with the
expected term of the related award.

 Item
7A. Quantitative and Qualitative Disclosures About Market Risk

 Not
required.

 Item
8. Financial Statements and Supplementary Data

 FINANCIAL
STATEMENTS - TABLE OF CONTENTS

 For
the Years Ended December 31, 2023 and 2022

 Page(s)

 Report of Independent Registered Public Accounting Firm (PCAOB ID: 76)

 Consolidated
Financial Statements:

 Consolidated Balance Sheets at December 31, 2023 and 2022

 Consolidated Statements of Operations for the years ended December 31, 2023 and 2022

 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2023 and 2022

 Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022

 Notes to Consolidated Financial Statements

 F- 1

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 Board
of Directors and Shareholders of

 NexGel,
Inc.

 Opinion
on the Consolidated Financial Statements

 We
have audited the accompanying consolidated balance sheets of NexGel, Inc. (the "Company") as of December 31, 2023 and 2022,
and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the two years in the period
ended December 31, 2023, and the related notes (collectively referred to as the "consolidated financial statements"). In
our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the two years
in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

 Basis
for Opinion

 These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose
of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, we express
no such opinion.

 Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.

 /s/
 Turner, Stone & Company, L.L.P.

 Dallas,
Texas

 April 9, 2024

 We
have served as the Company's auditor since 2019.

 F- 2

INC

 CONSOLIDATED
BALANCE SHEETS

 (in
thousands, except share and per share data)

 December 31, 2023

 December 31, 2022

 ASSETS:

 Current Assets:

 Cash

 $
 2,700

 $
 1,101

 Marketable securities

 -

 5,508

 Accounts receivable, net

 1,319

 Prepaid expenses and other current assets

 Total current assets

 5,052

 7,505

 Goodwill

 1,128

 Intangibles, net

 Property and equipment, net

 1,499

 Operating lease - right of use asset

 1,855

 1,737

 Other assets

 Total assets

 $
 9,955

 $
 10,357

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current Liabilities:

 Accounts payable

 $
 1,233

 $

 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

 2,549

 Operating lease liability, net of current portion

 1,727

 1,593

 Notes payable, net of current portion

 Total liabilities

 4,789

 2,720

 Commitments and Contingencies (Note 16)

 -

 -

 STOCKHOLDERS' EQUITY

 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; 5,741,838 and 5,577,916 shares issued and outstanding as of December 31, 2023 and 2022, respectively

 Additional paid-in capital

 19,406

 19,189

 Accumulated deficit

 ( 14,715
)

 ( 11,558
)

 Total NexGel stockholders' equity

 4,697

 7,637

 Non-controlling interest in joint venture

 -

 Total stockholders' equity

 5,166

 7,637

 Total liabilities and stockholders' equity

 $
 9,955

 $
 10,357

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

 F- 3

INC.

 CONSOLIDATED
STATEMENTS OF OPERATIONS

 (in
thousands, except share and per share data)

 2023

 2022

 Year Ended December 31,

 2023

 2022

 Revenues, net

 $
 4,089

 $
 2,048

 Cost of revenues

 3,470

 1,792

 Gross profit

 Operating expenses

 Research and development

 Selling, general and administrative

 3,993

 3,237

 Total operating expenses

 4,096

 3,604

 Loss from operations

 ( 3,477
)

 ( 3,348
)

 Other income (expense)

 Change in fair value of warrant liability, net of warrant modification expense

 Realized gain on investments in marketable securities

 Loss on debt extinguishment

 -

 ( 150
)

 Interest expense, net

 ( 15
)

 ( 1,336
)

 Other expense

 ( 2
)

 -

 Other income

 Total other income (expense), net

 ( 1,398
)

 Loss before income taxes

 ( 3,188
)

)

 Income tax expense

 -

 -

 Net loss

 ( 3,188
)

)

 Less: Loss attributable to non-controlling interest in joint venture

 -

 Net loss attributable to NexGel stockholders

 $
 ( 3,157
)

 $
)

 Net loss per common share – basic and diluted

 $
 ( 0.56
)

 $
 ( 0.85
)

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

 5,671,842

 5,574,818

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

 F- 4

INC.

 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY

 Years
Ended December 31, 2023 and 2022

 (in
thousands, except share data)

 Shares

 Amount

 Capital

 Interest

 Deficit

 Equity

 Common Stock

 Additional
 Paid-in

 Non-
 controlling

 Accumulated

 Total
 Stockholders'

 Shares

 Amount

 Capital

 Interest

 Deficit

 Equity

 Balance, December 31, 2021

 5,572,234

 $

 $
 18,891

 $
 -

 $
 ( 6,812
)

 $
 12,085

 Stock-based compensation

 -

 -

 -

 -

 Restricted stock vesting

 5,682

 -

 -

 -

 Net loss

 -

 -

 -

 -

)

)

 Balance, December 31, 2022

 5,577,916

 $

 $
 19,189

 $
 -

 $
 ( 11,558
)

 $
 7,637

 Common Stock

 Additional
 Paid-in

 Non-
 controlling

 Accumulated

 Total
 Stockholders'

 Shares

 Amount

 Capital

 Interest

 Deficit

 Equity

 Balance, December 31, 2022

 5,577,916

 $

 $
 19,189

 $
 -

 $
 ( 11,558
)

 $
 7,637

 Balance

 5,577,916

 $

 $
 19,189

 $
 -

 $
 ( 11,558
)

 $
 7,637

 Stock-based compensation

 3,295

 -

 -

 -

 Restricted stock issuances

 50,907

 -

 -

 -

 -

 -

 Exercise of warrants

 109,720

 -

 -

 -

 -

 -

 Non-controlling interest contribution

 -

 -

 -

 -

 Net loss

 -

 -

 -

 ( 31
)

 ( 3,157
)

 ( 3,188
)

 Balance, December 31, 2023

 5,741,838

 $

 $
 19,406

 $

 $
 ( 14,715
)

 $
 5,166

 Balance

 5,741,838

 $

 $
 19,406

 $

 $
 ( 14,715
)

 $
 5,166

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

 F- 5

INC.

 CONSOLIDATED
STATEMENTS OF CASH FLOWS

 (in
thousands)

 2023

 2022

 Year Ended December 31,

 2023

 2022

 Operating Activities

 Net loss

 $
 ( 3,157
)

 $
)

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

 Loss attributable to non-controlling interest in joint venture

 ( 31
)

 -

 Depreciation and amortization

 Share-based compensation

 Realized gain on investment in marketable securities

 ( 191
)

 ( 9
)

 Change in fair value of warrant liability

 ( 125
)

 ( 133
)

 Amortization of right of use asset

 Warrant modification expense

 Loss of extinguishment of debt

 -

 Amortization of deferred financing costs

 -

 1,324

 Changes in operating assets and liabilities:

 Accounts receivable, net

 ( 411
)

 ( 13
)

 ( 760
)

 ( 211
)

 Prepaid expenses and other current assets

 ( 260
)

 ( 95
)

 Accounts payable

 Accrued expenses and other current liabilities

 Deferred revenue

 -

 Net Cash Used in Operating Activities

 ( 3,236
)

 ( 2,992
)

 Investing Activities

 Purchases of equipment

 ( 696
)

 ( 96
)

 Investment in subsidiary

 ( 547
)

 -

 Proceeds from sales of marketable securities

 5,699

 1,500

 Investments in or purchases of marketable securities

 -

 ( 6,999
)

 Net Cash Provided by (Used in) Investing Activities

 4,456

 ( 5,595
)

 Financing Activities

 Principal payments on operating lease liability

 ( 175
)

 ( 151
)

 Proceeds from notes payable

 -

 Principal payments of notes payable

 ( 6
)

 -

 Principal payments on convertible notes

 -

 ( 3,511
)

 Proceeds from margin line of credit

 -

 Net Cash Provided by (Used in) Financing Activities

 ( 3,662
)

 Net Increase (Decrease) in Cash

 1,599

 ( 12,249
)

 Cash – Beginning of year

 1,101

 13,350

 Cash – End of year

 $
 2,700

 $
 1,101

 Supplemental Non-cash Investing and Financing Activities

 Property and equipment and intangibles contributed as capital investment to JV

 $

 $
 -

 ROU asset and operating lease liabilities recognized upon consolidation of JV

 $

 $
 -

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

 F- 6

INC.

 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

 (in
thousands, except share and per share data)

 1.
 Description of Business, Stock Split and Basis of Presentation

 NexGel, Inc. ("NexGel" or the "Company") manufactures
high water content, electron beam cross-linked, aqueous polymer hydrogels, or gels, used for wound care, medical diagnostics, transdermal
drug delivery and cosmetics. The Company specializes in custom gels by capitalizing on proprietary manufacturing technologies. The Company
has historically served as a contract manufacturer, supplying our gels to third parties who incorporate them into their own products.
Beginning in 2020, we created two new lines of business for the company. First, we launched our own line of branded consumer products
sold direct to consumers. Second, we expanded into custom and white label opportunities, which focuses on combining our gels with proprietary
branded products and white label opportunities. All of our gel products are manufactured using proprietary and non-proprietary mixing,
coating and cross-linking technologies. Together, these technologies enable us to produce gels that can satisfy rigid tolerance specifications
with respect to a wide range of physical characteristics (e.g., thickness, water content, adherence, absorption, moisture vapor transmission
rate [a measure of the passage of water vapor through a substance] and release rate) while maintaining product integrity. Additionally,
we have the manufacturing ability to offer broad choices in the selection of liners onto which the gels are coated. Consequently, we and
our customers are able to determine tolerances in moisture vapor transmission rate and active ingredient release rates while personalizing
color and texture.

 NexGel
was previously known as AquaMed Technologies, Inc. ("AquaMed") before changing its name to NexGel, Inc. on November 14, 2019.

 On
March 1, 2023, the Company acquired a 50 % interest in a newly formed joint venture ("JV"), CG Converting and Packaging, LLC,
with C.G. Laboratories Inc. ("CG Labs") for its converting and packaging business. 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.

 Basis
of Presentation

 The
consolidated financial
statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America
("GAAP") and are presented in US dollars.

 Principles
of Consolidation

 The
accompanying consolidated financial statements include the accounts of the Company and its consolidated wholly-owned subsidiary, NexGelRx,
Inc. and the fifty percent ( 50 %) owned JV (see Note 13).

 F- 7

 2.
 Going Concern

 As
of December 31, 2023, the Company had a cash balance of $ 2.7 million. For the year ended December 31, 2023,
the Company incurred a net loss of $ 3.2 million and had a net usage of cash in operating activities of $ 3.2 million. In addition,
the Company had a working capital of $ 2.5 million as of December 31, 2023. Additionally, we believe we have sufficient cash and marketable
securities to operate our business plan into 2025.

 On
February 15, 2024, the Company, entered into subscription agreements with investors, the Company's Chief Financial Officer and
certain members of its board of directors for a registered direct offering ("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
Market. The gross proceeds to the Company from the Offering are expected to be approximately $ 1.025 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 Offering for working capital and for general corporate purposes
(See Note 20).

 Management
is exploring new product channel sales in adjacent industries, such as cosmetics, athletic products, and proprietary medical devices.
The Company has increased focus on sales and developing a sales pipeline for potential customers. This customer base expansion will enable
us to provide financial stability for the foreseeable future, expand our current processes, and position us for long-term shareholder
value creation.

 We
have sufficient capital to maintain as a going concern due to the recent capital raise. 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
expect to continue incurring losses for the near-term future. Our ability to continue to operate as a going concern in the long-term
is dependent upon our ability to manage and grow our current products and to ultimately achieve profitable operations. Management may
consider various options to raise capital to fund potential acquisitions through equity or debt offerings. There can be no assurances,
however, that management will be able to obtain sufficient additional funds, if needed, or that such funds, if available, will be obtained
on terms satisfactory to us. The consolidated financial statements do not include any adjustments relating to the recoverability and
classification of recorded assets and liabilities that might be necessary should we be unable to continue as a going concern. Additionally,
it is reasonably possible that estimates made in the consolidated financial statements have been, or will be, materially and adversely
impacted in the near term as a result of these conditions, including the recoverability of long-lived assets.

 3.
 Significant Accounting Policies and Estimates

 Use
of Estimates

 The
preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions include
allowances for doubtful accounts, inventory reserves, deferred taxes, share-based compensation and related valuation allowances and fair
value of long-lived assets. Actual results could differ from the estimates.

 F- 8

 Segment
Reporting

 The
Financial Accounting Standards Board ("FASB") Accounting Standard Codification ("ASC") Topic 280, Segment
Reporting, requires that an enterprise report selected information about reportable segments in its financial reports issued to its
stockholders. The Company has two reportable segments - the Nexgel segment and the CG labs segment.

 The
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
CG labs segment is comprised of the JV used for the Company's converting
and packaging business, which is based in Granbury, Texas.

 Cash

 Cash
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.

 Marketable
Securities

 The
Company classifies its marketable securities as held-to-maturity, which include U.S. treasury bills with original maturities of greater
than three months. These securities are carried at fair value with any change in fair value recorded as an unrealized gain (loss) in
the statement of operations of the year in which such change occurs.

 The
Company had the following marketable securities as of December 31, 2023 and 2022 ($ in thousands):

of Marketable Securities

 2023

 2022

 Marketable Securities

 United States treasury bills (due February 23, 2023)

 $
 -

 $

 United States treasury bills (due April 27, 2023)

 -

 United States treasury bills (due June 15, 2023)

 -

 4,384

 United States treasury bills (due July 13, 2023)

 -

 United States treasury bills (due August 10, 2023)

 -

 Total

 $
 -

 $
 5,508

 Margin
Line of Credit

 We
have a brokerage account through which we buy and sell U.S. treasury bills. The provisions of the account allow us to borrow on
certain securities held in the account and to purchase additional securities based on the account equity (including cash). Amounts
borrowed are collateralized by the securities held in the account and bear interest at a negotiated rate payable monthly. Securities
pledged to secure margin balances cannot be specifically identified as a portion of all securities held in a brokerage account are
used 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 consolidated balance sheet (see Note 10). The short-term credit line will be repaid upon the maturity of U.S. treasury bills of
$ 3
million with an original maturity of three months or less which are included in cash within the accompanying consolidated balance
sheet.

 F- 9

 Accounts
Receivable, net

 Trade
accounts receivable are stated at the amount the Company expects to collect and do not bear interest. The Company evaluates the collectability
of accounts receivable and records a provision to the allowance for doubtful accounts based on factors including the length of time the
receivables are past due, the current business environment and the Company's historical experience. Provisions to the allowances
for doubtful accounts are recorded in selling, general and administrative expenses. Account balances are charged off against the allowance
when it is probable that the receivable will not be recovered. The allowance for doubtful accounts was $ 11 thousand as of December 31,
2023 and $ 9 thousand as of December 31, 2022.

and Cost of Revenues

is stated at the lower of cost, the value determined by the first-in, first-out method, or net realizable value. The Company evaluates
inventories for excess quantities, obsolescence, and shelf-life expiration. This evaluation includes an analysis of historical sales
levels by product, projections of future demand, the risk of technological or competitive obsolescence for products, general market conditions,
and a review of the shelf-life expiration dates for products. These factors determine when, and if, the Company adjusts the carrying
value of inventory to estimated net realizable value.

 The
Company produces proprietary branded products and white label opportunities in our manufacturing of consumer products. In our contract
manufacturing, the Company builds its products based on customer orders and immediately ships the products upon completion of the production
process.

 The
balance is made up of raw materials, work-in-progress, and finished goods. Inventory is maintained at the Company's warehouses
and at fulfillment centers owned by Amazon, Walmart and CVS.

 The
"Cost of revenues" line item in the consolidated statements of operations is comprised of the book value of inventory sold
to customers during the reporting period. When circumstances dictate that we use net realizable value as the basis for recording inventory,
we base our estimates on expected future selling prices less expected disposal costs.

 Research
and Development

 Our
research and development activities focus on new and innovative products designed to support revenue growth. Research and development
expenses consist primarily of contracted development and testing efforts associated with development of products.

 Shipping
and Handling Revenue and Expense

 Shipping
and handling revenue and expense are included in our consolidated statements of operations in revenues and cost of revenues, respectively.
Shipping revenue and expense are primarily generated through the Amazon marketplace.

 Property
and Equipment, net

 Property
and equipment is recorded at historical cost, net of accumulated depreciation and amortization. Depreciation is provided over the assets'
useful lives on a straight-line basis. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated
useful lives or lease terms. Repairs and maintenance costs are expensed as incurred.

 Management
periodically assesses the estimated useful life over which assets are depreciated or amortized. If the analysis warrants a change in
the estimated useful life of property and equipment, management will reduce the estimated useful life and depreciate or amortize the
carrying value prospectively over the shorter remaining useful life.

 The
carrying amounts of assets sold or retired and the related accumulated depreciation are eliminated in the year of disposal and any resulting
gains and losses are included in the results of operations during the same year.

 F- 10

 Impairment
of Long-Lived Assets

 The
Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds
the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs
to sell.

 Goodwill
and Intangible Assets

 In
applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated
fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially recorded
at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets
with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise.
Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 31, and
whenever indicators of impairment exist. The fair value of intangible assets is compared with their carrying values, and an impairment
loss would be recognized for the amount by which a carrying amount exceeds its fair value.

 The
Company performed the annual assessment and concluded it is more likely than not that the fair value exceeds the carrying value and no
impairments were recognized in the years ended December 31, 2023 and 2022.

 Prepaid
Expenses and Other Current Assets

 Prepaid
expenses and other current assets are recorded at historical cost and is primarily made up of $ 64 thousand and $ 63 thousand of prepaid
insurance, and $ 336 thousand and $ 109 thousand general prepaid expenses and other current assets in the years ended December 31, 2023
and 2022 respectively.

 Other
Assets

 Other
Assets is recorded at historical costs, and as of December 31, 2023 and 2022, 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.

 Fair
Value Measurements

 The
Company utilizes the fair value hierarchy to apply fair value measurements. The fair value hierarchy is based on inputs to valuation
techniques that are used to measure fair values that are either observable or unobservable. Observable inputs reflect assumptions market
participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs
reflect a reporting entity's pricing based upon its own market assumptions. The basis for fair value measurements for each level
within the hierarchy is described below:

 Level
1 —Quoted prices for identical assets or liabilities in active markets.

 Level
2 —Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities
in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable.

 Level
3 —Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable.

 F- 11

 The
Company considers the carrying amounts of its financial instruments (cash, accounts receivable and accounts payable, notes payable and
convertible notes payable) in the balance sheet to approximate fair value because of the short-term or highly liquid nature of these
financial instruments.

 The
following table sets forth the fair value of the Company's financial assets within the fair value hierarchy ($ in thousands):

of Fair Value of Financial Assets

 Level 1

 Level 2

 Level 3

 December 31, 2023

 Level 1

 Level 2

 Level 3

 Assets

 Marketable securities:

 United States treasury bills

 $
 -

 $
 -

 $
 -

 $
 -

 Total

 $
 -

 $
 -

 $
 -

 $
 -

 Level 1

 Level 2

 Level 3

 December 31, 2022

 Level 1

 Level 2

 Level 3

 Assets

 Marketable securities:

 United States treasury bills

 $
 5,508

 $
 -

 $
 -

 $
 5,508

 Total

 $
 5,508

 $
 -

 $
 -

 $
 5,508

 Warrant
Liability

to purchase common stock were issued in connection with equity financing raises, which occurred during 2019 through 2021. 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. 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 statements of operations.

 Revenue
Recognition

 On
January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with
Customers ("ASC 606"). The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in
exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible
more judgment and estimates may be required within the revenue recognition process than required under existing GAAP including identifying
performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating
the transaction price to each separate performance obligation. The Company adopted ASC 606 for all applicable contracts using the modified
retrospective method, which would have required a cumulative-effect adjustment, if any, as of the date of adoption.

 The
Company currently recognizes revenue predominately from three types of revenue, 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.

 The
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.

 F- 12

 Estimates
for product returns, allowances and discounts are recorded as a reduction of revenue and are established at the time of sale. Returns
are estimated through a comparison of historical return data and are determined for each product and adjusted for known or expected changes
in the marketplace specific to each product, when appropriate. Historically, sales return provisions have not been material. Amounts
accrued for sales allowances and discounts are based on estimates of amounts that are expected to be claimed on the related sales and
are based on historical data. Payments for allowances and discounts have historically been immaterial.

 Disaggregated
revenue by sales type ($ in thousands):

of Disaggregated Revenue by Sales Type

 2023

 2022

 Year
 Ended

 December
 31,

 2023

 2022

 manufacturing

 $

 2,748

 $

 1,033

 and white label finished goods manufacturing

 branded products

 1,242

 Other

 Total

 $

 4,089

 $

 2,048

 As
of December 31, 2023 and 2022, 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 $ 20
thousand at December 31, 2023 that the Company had not satisfied as of the end of the year. The Company had no remaining performance obligations as of December 31, 2022.

 The
Company has four distinct lines of business; Contract Manufacturing, Custom & White Label, Consumer Branded Products, and Medical
Devices.

Manufacturing

 Customers
order rolls of gel ("rollstock"). The rollstock is shipped to our customers, which they convert and package into finished
goods. Historically, this has been the Company's primary source of revenue.

and White Label

 These
products often infuse various ingredients into our base gel to develop unique product offerings to satisfy market demand (e.g. aloe infused
into the gel for a beauty mask). The rollstock is converted and packaged into salable units. The finished goods are shipped to the customer,
who is ultimately responsible for product distribution. Frequently these products started as development deals, in which the customer
paid the Company a small fee to develop a specific product. Once completed, the customer places a large order for newly developed product.

Branded Products

 These
products are finished goods marketed and sold directly to the customer by the Company through online and retail channels. The Company
is responsible for sales, marketing, and distribution. These products carry the Company's brand names.

Devices/Other

Devices are a hybrid business, combining elements of Custom & White Label and Consumer Branded 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.

 Share-based
Compensation

 On
August 28, 2019, the Company adopted the 2019 Long-Term Incentive Plan, as amended (the "2019 Plan"). See Note 12 below for further details regarding the 2019 Plan.

 F- 13

 The
2019 Plan provides certain employees, contractors, and outside directors with share-based compensation in the form of incentive stock
options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend
equivalent rights and other awards. The fair values of incentive stock option award grants are estimated as of the date of grant using
a Black-Scholes option valuation model. Compensation expense is recognized in the statements of operations on a straight-line basis over
the requisite service period, which is generally the vesting period required to obtain full vesting. Forfeitures are accounted for when
they occur.

 Income
Taxes

 Income
taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities
at the applicable tax rates. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates.

 Tax
benefits are recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon
examination by a tax authority and based upon the technical merits of the tax position. The tax benefit recognized in the consolidated
financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement.
An unrecognized tax benefit, or a portion thereof, is presented in the financial statements as a reduction to a deferred tax asset for
a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the
event the uncertain tax position is disallowed.

 Leases

 ASC
842 requires recognition of leases on the consolidated balance sheets as right-of-use ("ROU") assets and lease liabilities.
ROU assets represent the Company's right to use underlying assets for the lease terms and lease liabilities represent the Company's
obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized
based on the present value and future minimum lease payments over the lease term at commencement date. As the Company's leases
do not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at commencement
date in determining the present value of lease payments. A number of the lease agreements contain options to renew and options to terminate
the leases early. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that
are deemed reasonably certain to be exercised.

 The
Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing
operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances
of accrued and prepaid rent, and unamortized lease incentives provided by lessors. Operating lease cost is recognized as a single lease
cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments
for common area maintenance, property taxes and other operating expenses are recognized as expense in the year when the changes in facts
and circumstances on which the variable lease payments are based occur. The Company has elected not to separate lease and non-lease components
for all property leases for the purposes of calculating ROU assets and lease liabilities.

 Variable
Interest Entity

 The
Company reviews each legal entity formed by parties related to the Company to determine whether or not the Company has a variable
interest in the entity and whether or not the entity would meet the definition of a variable interest entity ("VIE") in
accordance with ASC Topic 810, Consolidation. In assessing whether the Company has a variable interest in the entity as a
whole, the Company considers and makes judgements regarding the purpose and design of the entity, the value of the licensed assets
to the entity, the value of the entity's total assets and the significant activities of the entity. If the Company has a
variable interest in the entity as a whole, the Company assesses whether or not the Company is a primary beneficiary of that VIE,
based on a number of factors, including: (i) which party has the power to direct the activities that most significantly affect the
VIE's economic performance, (ii) the parties' contractual rights and responsibilities pursuant to the collaboration
agreement, and (iii) which party has the obligation to absorb losses of or the right to receive benefits from the VIE that could be
significant to the VIE.

 If
the Company determines that it is the primary beneficiary of a VIE at the onset of the collaboration, the collaboration is treated as
a business combination and the Company consolidates the financial statements of the VIE into the Company's consolidated financial
statements. As of December 31, 2023, and on a quarterly basis thereafter, the Company will evaluate whether it continues to be the primary
beneficiary of the consolidated VIE. If the Company determines that it is no longer the primary beneficiary of a consolidated VIE,
it deconsolidates the VIE in the period in which the determination is made.

 Assets
and liabilities recorded as a result of consolidating the financial results of the VIE into the Company's consolidated balance
sheet do not represent additional assets that could be used to satisfy claims against the Company's general assets or liabilities
for which creditors have recourse to the Company's general assets.

 F- 14

 Comprehensive
loss

 Comprehensive
loss consists of net loss and changes in equity during a year from transactions and other equity and circumstances generated from non-owner
sources. The Company's net loss equals comprehensive loss for all years presented.

 Recently
Issued Accounting Standards

 From
time to time, new accounting pronouncements are issued by the FASB, or other standard setting bodies and adopted by us as of the specified
effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material
impact on our consolidated financial position or results of operations upon adoption.

 In
June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
ASU 2016-13 significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require
immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally
result in earlier recognition of allowances for credit losses on loans and other financial instruments. ASU 2016-13 is effective for
the Company's fiscal year beginning January 1, 2023 and subsequent interim periods. The Company adopted this new standard in the current year and it did not have a material impact to its consolidated
financial statements.

 Accounting
Pronouncements Issued But Not Yet Adopted

 In
December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires
that an entity disclose specific categories in the effective tax rate reconciliation as well as reconciling items that meet a quantitative
threshold. Further, the ASU requires additional disclosures on income tax expense and taxes paid, net of refunds received, by jurisdiction.
The new standard is effective for annual periods beginning after December 15, 2024 on a prospective basis with the option to apply it
retrospectively. Early adoption is permitted. The adoption of this guidance will result in the Company being required to include enhanced
income tax related disclosures. The Company is currently evaluating the impact this standard will have on its consolidated financial
statements.

 In
November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.
This ASU includes amendments that expand the existing reportable segment disclosure requirements and requires disclosure of (i)
significant expense categories and amounts by reportable segment as well as the segment's profit or loss measure(s) that are
regularly provided to the chief operating decision maker (the "CODM") to allocate resources and assess performance; (ii)
how the CODM uses each reported segment profit or loss measure to allocate resources and assess performance; (iii) the nature of
other segment balances contributing to reported segment profit or loss that are not captured within segment revenues or expenses;
and (iv) the title and position of the individual or name of the group or committee identified as the CODM. This guidance requires
retrospective application to all prior periods presented in the financial statements and is effective for fiscal years beginning
after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The
adoption of this guidance will result in the Company being required to include enhanced disclosures relating to its reportable
segments. The Company is currently evaluating the impact this standard will have on its consolidated financial
statements.

 F- 15

 4.
 Business Segments

 The Company's Chief Executive
Officer, who serves as the chief operating decision maker ("CODM"), evaluates the financial performance of the Company's
segments based upon segment adjusted operating income or (loss) as the profitability measure. Items outside of adjusted operating income
or (loss) are not reported by segment, since they are excluded from the single measure of segment profitability reviewed by the CODM.

 Summarized
financial information concerning the Company's reportable segments for the years ended December 31, 2023 and 2022 is presented
below.

of Reportable Segments

 For
Year Ended December 31, 2023 ($ in thousands)

 Nexgel

 CG Labs

 Total

 Revenue

 Contract Manufacturing

 $

 $
 1,979

 $
 2,748

 Custom and White Label Finished Goods

 -

 Branded Consumer Products

 1,242

 -

 1,242

 Other income

 Total revenue

 2,102

 1,987

 4,089

 Cost of sales

 1,911

 1,559

 3,470

 Operating expenses

 3,604

 4,096

 Loss from operations

 $
 ( 3,413
)

 $
 ( 64
)

 $
 ( 3,477
)

 For
Year Ended December 31, 2022 ($ in thousands)

 Nexgel

 CG Labs

 Total

 Revenue

 Contract Manufacturing

 $
 1,033

 $
 -

 $
 1,033

 Custom and White Label Finished Goods

 -

 Branded Consumer Products

 -

 Other income

 -

 Total revenue

 2,048

 -

 2,048

 Cost of sales

 1,792

 -

 1,792

 Operating expenses

 3,604

 -

 3,604

 Loss from operations

 $
 ( 3,348
)

 $
 -

 $
 ( 3,348
)

 As of December 31, 2023 ($ in thousands)

 Nexgel

 CG Labs

 Total

 Assets:

 Current assets:

 Cash

 $
 2,458

 $

 $
 2,700

 Accounts receivable, net

 1,319

 Prepaid expenses and other current assets

 Total current assets

 3,418

 1,634

 5,052

 Goodwill

 1,128

 -

 1,128

 Intangibles

 Property and equipment, net

 1,499

 Operating lease – right of use asset

 1,543

 1,855

 Other assets

 -

 Total Assets

 $
 7,204

 $
 2,751

 $
 9,955

 Liabilities
 and Stockholders' Equity

 Current
 liabilities:

 Accounts
 payable

 $

 $

 $
 1,233

 Accrued
 expenses and other current liabilities

 revenue

 -

 Current
 portion of note payable

 Warrant liability

 -

 Contingent consideration liability

 -

 Operating lease liability, current
portion

 Total current liabilities

 1,464

 1,085

 2,549

 Operating lease liability, net of current portion

 1,438

 1,727

 Notes payable, net of current portion

 Total liabilities

 $
 3,174

 $
 1,615

 $
 4,789

 5.
 Acquisition

 Kenkoderm
Acquisition

 On
December 1, 2023, the Company closed a transaction related to an Asset Purchase Agreement dated November 30, 2023 (the "Purchase
Agreement") with Olympus Trading Company, LLC, a Virginia limited liability company (the "Seller"), whereby the Company
purchased all assets related to the Seller's skincare line focused on reducing symptoms associated with psoriasis operating under
the tradename "Kenkoderm" ("Kenkoderm acquisition").

 Under
the terms of the Kenkoderm acquisition, the Company paid the Seller a cash payment of $ 546,500.
Additionally, the Company shall pay the Seller a cash earn-out of the same amount each quarter, payable in the subsequent month
flowing quarter end, of $ 136,625.
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
Purchase Agreement and the transaction contemplated thereby were not subject to approval by the shareholders of the Company. The Purchase
Agreement contains standard representations and warranties regarding the Seller and the Kenkoderm business and certain limited representations
and warranties regarding the Company. The Purchase Agreement also contains indemnification provisions for the benefit of the Company
and the Seller. Neither the Company nor the Seller shall be liable for more than the Purchase Price under the indemnification provisions
except in the case of fraud or willful misconduct. The Seller and the Seller's President and owner agreed to 3-year non-compete
provisions as part of the Purchase Agreement.

 F- 16

 The
provisional fair value of the purchase consideration issued to the Seller was allocated to the net tangible assets acquired. The Company
accounted for the Kenkoderm 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 Company. The fair value of the net assets acquired was approximately $ 169 thousand. The excess of the aggregate fair value of
the net tangible assets has been allocated to goodwill.

 The
table below shows a preliminary analysis for the Kenkoderm acquisition ($ in thousands):

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

 Other liabilities

 -

 Net tangible assets acquired

 $

 Total net assets acquired

 $

 Consideration paid

 Preliminary goodwill

 $

 Non-controlling
Interest in Joint Venture – CG Labs

 On
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. As of December 31, 2023, the Company has contributed its full $ 500,000
commitment.

 The
JV is considered to be a VIE and we have consolidated the JV.

 F- 17

 The
recorded assets acquired and liabilities assumed in connection with the formation of CG Labs based on their estimated fair values as
of the March 1, 2023. The preliminary purchase price allocation is as follow ($ in thousands):

of Business Acquisitions

 Provisional purchase consideration at preliminary fair value:

 Cash contributed by the Company

 $

 Noncontrolling interest portion of CG Labs contributed business

 Amount of consideration

 $
 1,000

 Assets acquired and liabilities assumed at preliminary fair value

 Cash contributed by the Company

 Fixed assets

 Product/technology related intangibles

 Marketing related intangibles

 Net tangible assets acquired

 $
 1,000

 Total net assets acquired

 $
 1,000

 Consideration paid

 1,000

 Preliminary goodwill

 $
 -

 The
allocation of the purchase price to identifiable assets is based on the preliminary valuations performed to determine the fair value
of the net assets as of the acquisition date. The measurement period for the valuation of net assets acquired ends as soon as information
on the facts and circumstances that existed as of the acquisition dates becomes available, but not to exceed 12 months following the
acquisition date. Adjustments in purchase price allocations may require a change in the amounts allocated to net assets acquired during
the periods in which the adjustments are determined.

 The
unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations
are not intended to present actual results that would have been attained had the Kenkoderm acquisition and CG Labs JV
been completed as of January 1, 2022 or to project potential operating results as of any future date or for any future periods
($ in thousands except share and per share amounts):

of Unaudited Pro-Forma Results of Operations

 2023

 2022

 For the Year Ended

 2023

 2022

 Revenues, net

 $
 5,522

 $
 4,014

 Net loss allocable to common shareholders

 $
 ( 3,071
)

 $
 ( 4,634
)

 Net loss per share

 $
 ( 0.54
)

 $
 ( 0.83
)

 Weighted average number of shares outstanding

 5,671,842

 5,574,818

 F- 18

 6.
 Leases

 The
Company has an operating lease for a commercial manufacturing facility and administrative offices located in Langhorne, Pennsylvania
that runs through January 2031. There are two options that can extend the lease term for five years each. The exercise of the lease options
to renew is solely at the Company's discretion.

 The
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. The exercise of the lease options to renew is solely at the Company's
discretion.

 The
following table presents information about the amount and timing of the liability arising from the Company's operating lease as
of December 31, 2023 ($ in thousands):

of Future Minimum Lease Payments

 Maturity of Lease Liability

 Operating
 Lease
 Liability

 2024

 $

 2025

 2026

 2027

 2028

 Thereafter

 Total undiscounted operating lease payments

 $
 2,220

 Less: Imputed interest

 ( 260
)

 Present value of operating lease liability

 $
 1,960

 Weighted average remaining lease term

 7.4 years

 Weighted average discount rate

 3.0
 %

 Total
operating lease expense for the years ended December 31, 2023, and 2022, was $ 303 thousand and $ 246 thousand, respectively, and is recorded
in cost of goods sold and selling, general, and administrative expenses in the accompanying consolidated statements of operations.

 Supplemental
cash flows information related to leases was as follows:

of Supplemental Cash Flows Information Related to Leases

 2023

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

 Operating cash flows from operating lease

 $

 7.

consists of the following ($ in thousands):

of Inventory

 2023

 2022

 Raw materials

 $

 $

 Work-in-progress

 Finished goods

 Inventory, gross

 1,319

 Less: Inventory reserve for excess and slow moving inventory

 -

 -

 Total

 $
 1,319

 $

 Inventory is maintained at the Company's warehouses and at fulfillment
centers owned by Amazon, Walmart and CVS.
The Company builds its contract manufacturing products based on customer orders and immediately ships the products upon completion of
the production process.

 8.
 Property and Equipment, Net

 Property
and equipment consist of the following ($ in thousands):

of Property and Equipment

 Useful Life

 (Years)

 2023

 2022

 Machinery and equipment

 3 - 10

 $
 1,280

 $

 Office furniture and equipment

 3 - 10

 Leasehold improvements

 Construction in progress

 N/A

 Total property and equipment

 2,225

 1,315

 Less: accumulated depreciation and amortization

 ( 726
)

 ( 594
)

 Property and equipment, net

 $
 1,499

 $

 Depreciation
expense for the year ended December 31, 2023 and 2022 was $ 132 thousand and $ 99 thousand, respectively.

 F- 19

 9.
 Intangible Assets

 The
following provides a breakdown of identifiable intangible assets as of December 31, 2023 and 2022 ($ in thousands):

 Schedule of Breakdown of Identifiable Intangible Assets

 2023

 2022

 Product/Technology Related

 Identifiable intangible assets, gross

 $

 $

 Accumulated amortization

 ( 98
)

 ( 26
)

 Product/technology related identifiable intangible assets, net

 Marketing Related

 Customer related intangible asset, gross

 Tradename related intangible asset, gross

 Accumulated amortization

 ( 31
)

 ( 9
)

 Marketing related identifiable intangible assets, net

 Total identifiable intangible assets, net

 $

 $

 In
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.

 In
connection with the March 1, 2023 CG Labs JV, the Company identified intangible assets of $ 287 thousand representing technology related
and customer related intangibles.

 In
connection with the December 1, 2023 acquisition of Kenkoderm, the Company identified intangible assets of $ 113 thousand representing
technology related and customer related intangibles.

 These
assets are being amortized on a straight-line basis over their weighted average estimated useful life of 2.9 years and amortization expense
amounted to $ 94 and $ 13 thousand for the years ended December 31, 2023 and 2022, respectively.

 As
of December 31, 2023, the estimated annual amortization expense for each of the next five fiscal years is as follows ($ in thousands):

 Schedule of Estimated Annual Amortization Expense

 2024

 $

 2025

 2026

 2027

 2028

 Thereafter

 Total

 $

 F- 20

 10.
 Accrued Expenses and Other Current Liabilities

 Accrued
expenses and other current liabilities consist of the following ($ in thousands):

 Schedule of Accrued Expenses and Other Current Liabilities

 2023

 2022

 Salaries, benefits, and incentive compensation

 $

 $

 Franchise tax accrual

 -

 Margin line of credit

 -

 Other

 Total accrued expenses and other current liabilities

 $

 $

 11.
 Common Stock

 At
December 31, 2023, 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

 560,650

 Warrants to purchase common stock

 3,442,904

 Restricted stock units

 64,562

 12.
 Share-based Compensation

 The
2019 Plan provides for the granting of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights
("SARs"), restricted stock units, performance awards, dividend equivalent rights and other awards, which may be granted singly,
in combination, or in tandem, and which may be paid in cash, shares of common stock of the Company or a combination of cash and shares
of common stock of the Company. The Company initially reserved a total of 57,143 shares of the Company's common stock for awards
under the 2019 Plan. Effective as of May 26, 2020 and May 3, 2021, respectively, the Board approved an increase of the number of authorized
shares of common stock reserved under the 2019 Plan from 57,143 shares of common stock to 485,715 and from 485,715 shares of common stock
to 571,429 shares of common stock, all of which may be delivered pursuant to incentive stock options.

 On
March 23, 2023, the Board approved an additional 300,000
shares of common stock to be reserved under the 2019 Plan, such that total of number of shares underlying the Plan is 871,429
of which 609,687
shares have already been awarded or exercised. Subject to adjustments pursuant to the 2019 Plan, the maximum number of shares of
common stock with respect to which stock options or SARs may be granted to an executive officer during any calendar year is 14,286
shares of common stock.

 The
following table contains information about the 2019 Plan as of December 31, 2023:

 Schedule of Information about Incentive Plan

 Awards

 Awards

 Reserved for

 Awards

 Awards

 Available for

 Issuance

 Issued

 Grant

 2019 Plan (1)

 871,429

 649,833

 17,916

 221,596

 Awards issued in excess of 2019 Plan (2)

 -

 48,401

 48,401

 -

 (1)

 Includes
 incentive stock options and restricted stock units discussed below.

 (2)

 Includes
 shares of restricted common stock granted outside of the 2019 Plan to our Chief Executive Officer, Adam Levy.

 F- 21

 Incentive
stock options

 On
March 8, 2023, the Company granted a contractor an option to purchase up to 17,532
 shares of the Company's common stock at
a per share exercise price of $ 2.00
 under the Company's 2019 Plan. This option
award vests over a period of 12
 months. The options expired unexercised.

 On
August 17, 2023, the Company granted options to purchase up to 90,000 shares of the Company's common stock at a per share exercise
price of $ 2.05 to members of the Board of Directors, all of which vests over a period of one year with 25 % vested upon issuance.

 On
October 1, 2022, the Company appointed Dr. Neil Chesen to the Company's Scientific Advisory Board and in consideration for his
appointment to the board, the Company granted Dr. Chesen an option to purchase up to 65,000
shares of common stock at a per share exercise price of $ 2.00
under the Company's 2019 Long-Term Incentive Plan. A portion of the award, 15,000
options, fully vested as of the date of grant and the remaining 50,000
options are contingent upon certain sales based milestones being achieved. The options expire on December
31, 2023 if the milestones are not achieved prior to that date. Also on October 1, 2022, the Company issued a second option
grant to Dr. Chesen, to purchase up to 25,000
shares of common stock at a per share exercise price of $ 2.00
under the Company's 2019 Long-Term Incentive Plan and are fully contingent upon certain sales based milestones being achieved
with 18 months of commercial release. Also on October 1, 2022, the Company issued a third option grant to Dr. Chesen to purchase up
to 37,500
shares of common stock at a per share exercise price of $ 5.50
under the Company's 2019 Long-Term Incentive Plan and are fully contingent upon certain sales based milestones being achieved
within 36
months of commercial release. As of December 31, 2022 the new product has not launched. The product launched in August 2023.

 On
October 1, 2022, the Company granted Dr. Leonard Nelson an option to purchase up to 30,000
 shares of the Company's common stock at
a per share price of $ 2.00
 under the Company's 2019 Long-Term Incentive
Plan. A portion of the award, 5,000
 options, fully vested as of the date of the grant
and the remaining 25,000
 options are contingent upon certain sales based
milestones being achieved. The options expire within 18
 months of commercial launch of a new product
if the milestones are not achieved prior to that date or 10
 years from the grant date, whichever comes first.
 The product launched in August 2023.

 On
October 1, 2022, the Company granted Dr. Leonard Nelson an option to purchase up to 37,500 shares of the Company's common stock
at a per share price of $ 5.50 under the Company's 2019 Long-Term Incentive Plan. The options are contingent upon certain sales
based milestones being achieved. The options expire within 36 months of commercial launch of a new product if the milestones are not
achieved prior to that date or 10 years from the grant date, whichever comes first. The product launched in August 2023.

 The
following table summarizes the Company's incentive stock option activity and related information for the years ended December 31,
2023 and 2022.

 Schedule of Incentive Stock Option Activity

 Weighted

 Weighted

 Contractual

 Number of

 Exercise

 Term in

 Options

 Price

 Years

 Outstanding at January 1, 2022

 434,939

 $
 1.678955

 8.56

 195,000

 3.3461538

 10.00

 —

 —

 —

 —

 —

 —

 Cancelled

 ( 100,001
)

 1.40000

 —

 Expired

 ( 5,001
)

 1.40000

 —

 Outstanding at December 31, 2022

 524,937

 $
 2.351416

 8.38

 117,532

 $
 2.06041

 10.00

 ( 3,295
)

 1.75

 —

 —

 —

 —

 Cancelled

 ( 69,854
)

 1.965823

 —

 Expired

 ( 8,670
)

 1.703222

 —

 Outstanding at December 31, 2023

 560,650

 $
 2.350742

 7.95

 Exercisable at December 31, 2023

 398,150

 $
 1.829884

 7.44

 F- 22

 As
of December 31, 2023 and 2022, vested outstanding stock options had $ 295 thousand and $ 124 thousand intrinsic value as the exercise price
is greater than the estimated fair value of the underlying common stock, respectively. As of December 31, 2023, there was no 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.

 The
Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award.
The service period is generally the vesting period. The following assumptions were used to calculate share-based compensation expense
for year ended December 31, 2023 and 2022:

 Schedule of Assumptions used in Share-based Compensation

 2023

 2022

 Volatility

 257.64 - 258.01
 %

 277.84
 %

 Risk-free interest rate

 4.21 - 4.42
 %

 4.06
 %

 Dividend yield

 0.0
 %

 0.0
 %

 Expected term

 5 - 5.50 years

 5.0 years

 The
Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting
employment termination behavior. Accordingly, the Company has elected to use the "simplified method" to estimate the expected
term of its share-based awards. The simplified method computes the expected term as the sum of the award's vesting term plus the
original contractual term divided by two.

 Based
on the lack of historical data of volatility for the Company's common stock, the Company based its estimate of expected volatility
on a weighted-average of the historical volatility of comparable public companies that manufacture similar products and are similar in
size, stage of life cycle, and financial leverage.

 Restrictive
stock awards

 Effective
as of January 3, 2023, the Company granted a restricted stock award of 37,037 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 30, 2022, all
of which shares vested monthly from January 3, 2023 through December 31, 2023. Under ASC 718, the Company has measured the value of the
 37,037 shares granted based on the closing price of the Company's stock at the grant date of the RSU Grant ($ 1.35 per share).

 Effective
as of August 1, 2022, the Company granted a restricted stock award of 84,750
 shares of the Company's common stock to
certain officers and employees, all of which shares vest in four equal installments on each of January 1, 2023, January 1, 2024, January
1, 2025 and January 1, 2026. Under ASC 718, the Company has measured the value of the 84,750
 shares granted based on a closing price of the
closing price of the Company's stock at the grant date of the RSU Grant ($ 1.82
 per share).

 Effective
as of January 1, 2022, the Company granted a restricted stock award of 11,364 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 November 4, 2021, all
of which shares vested monthly from January 1, 2022 through December 31, 2022. Under ASC 718, the Company has measured the value of the
 11,364 shares granted based on the closing price of the Company's stock at the grant date of the RSU Grant ($ 4.40 per share).

 Schedule of Restricted Stock Units Granted

 Number of

 Grant Date

 Units

 Outstanding at December 31, 2021

 —

 $
 —

 96,114

 1.61

 Exercised and converted to common shares

 ( 5,682
)

 4.40

 —

 —

 Outstanding at December 31, 2022

 90,432

 1.43

 37,037

 1.35

 Exercised and converted to common shares

 ( 50,157
)

 1.76522

 ( 12,750
)

 1.82

 Outstanding at December 31, 2023

 64,562

 $
 1.82

 Exercisable at December 31, 2023

 13,750

 $
 1.82

 Compensation
expense will be recognized ratably over the total vesting schedule. The Company will periodically adjust the cumulative compensation
expense for forfeited awards. As of December 31, 2023, there was $ 68 thousand unrecognized share-based compensation related to unvested
RSUs, which the Company expects to recognize through December 2026.

 Stock
based compensation and restricted stock vesting of $ 217 thousand and $ 298 thousand has been recorded for the year ended December 31,
2023 and 2022, respectively.

 F- 23

 The
following table shows a summary of common stock warrants for the years ended December 31, 2023 and 2022.

 Schedule of Common Stock Warrants

 Weighted

 Weighted

 Number of

 Exercise

 Contractual

 Price

 Term in Years

 Outstanding at December 31, 2021

 3,637,190

 $
 5.16281

 4.63

 —

 $
 —

 —

 —

 —

 —

 —

 —

 —

 Cancelled

 —

 —

 —

 Expired

 —

 —

 —

 Outstanding at December 31, 2022

 3,637,190

 $
 5.16281

 3.65

 —

 —

 —

 ( 109,720
)

 0.55

 —

 —

 —

 —

 Cancelled

 ( 84,566
)

 0.89

 —

 Expired

 —

 —

 —

 Outstanding at December 31, 2023

 3,442,904

 $
 5.414793

 2.87

 Exercisable at December 31, 2023

 3,442,904

 $
 5.414793

 2.87

 As
of December 31, 2023 and 2022, vested outstanding warrants had $ 0 and $ 114 thousand, respectively, intrinsic value as the exercise price
is greater than the estimated fair value of the underlying common stock.

 13.
 Notes Payable

 CG
Labs Notes Payable

 CG
Labs has entered into a $ 231
thousand promissory note agreement for certain equipment. The equipment was installed in December 2023. 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.

 CG
Labs has entered into a $ 242
thousand promissory note agreement for certain equipment. The funding advances of $ 84
thousand have been issued as of December 2023. 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.

 Economic
Injury Disaster Loan

 On
May 28, 2020, the Company entered into the standard loan documents required for securing a loan (the "EIDL Loan") from the
SBA under its Economic Injury Disaster Loan ("EIDL") assistance program in light of the impact of the COVID-19 pandemic on
the Company's business. Pursuant to that certain Loan Authorization and Agreement (the "SBA Loan Agreement"), the principal
amount of the EIDL Loan is up to $ 260,500, with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75 %
per annum. Installment payments, including principal and interest, are due monthly beginning May 28, 2021 (twelve months from the date
of the SBA Note) in the amount of $ 1,270. The balance of principal and interest is payable thirty years from the date of the SBA Note.
In connection therewith, the Company received an $ 8 thousand advance, which does not have to be repaid. On March 26, 2021, the SBA announced
that all EIDL loans issued in 2020 will start repayment 24 months from the date of the SBA Note. The SBA has since extended the repayment
start to 30 months from the date of the SBA Note. The Company made its first payment in December 2022. The balances of the principal
and accrued interest amounted to $ 277 thousand and $ 283 thousand as of December 31, 2023 and 2022, respectively.

 F- 24

 The
future annual principal amounts and accrued interest to be paid as of December 31, 2023 are as follows:

 Schedule of Debt Instruments

 Amount

 For the year ending December 31 ($ in thousands):

 2024

 $

 2025

 2026

 2027

 2028

 Thereafter

 Total

 $

 14.
 Convertible Notes Payable

 On
March 11, 2021, the Company issued Auctus Fund, LLC, a Delaware limited liability company a one-year senior secured convertible promissory
note in the principal amount of $ 1.68 million, which included $ 180 thousand of interest which was deemed fully earned as of the issuance
date (the "Auctus Note"). The Auctus Note was fully repaid (including all principal and interest) on March 15, 2022 with
a one-time cash payment of $ 1.68 million.

 On
September 2, 2021, the Company issued to certain holders one-year subordinated secured convertible promissory notes in the aggregate
principal amount of $ 1,814 thousand, which included $ 194 thousand of interest which was deemed fully earned as of the issuance date (the
"September 2 Notes"). On January 25, 2022, the Company repaid one of the September 2 Notes in full with a one-time cash payment
of $ 300 thousand of outstanding principal and accrued but unpaid interest. The Company incurred pre-payment penalty of $ 17 thousand with
respect to the repayment of the note and the remaining unamortized debt discount in the amount of $ 133 thousand was written off and both
amounts were recorded as a loss on extinguishment of debt of $ 150 thousand in accompany statement of operations during 2022. The repayment
extinguished the note in its entirety. On September 6, 2022, the outstanding balance on the remaining September 2 Notes' was repaid
in full which consisted of principal of $ 1,478 thousand.

 15. Warrant
Liability

 On
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, 34,285, 7,429, 7,286, 44,286, 35,714 and 114,286 warrants, respectively, as equity issuance consideration, in
connection with a private placement 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 to $ 5.25 per share at any time on or after their issuance date and on or prior to the
close of business 3 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. 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 statement of operations.

 On
September 6, 2022, the Company agreed to extend the September 10, 2019 and November 6, 2019 warrants an additional six months until March
9, 2023 and May 5, 2023, respectively. The warrants were remeasured as of September 6, 2022 and consequently resulted in a warrant modification
expense of $ 57 thousand.

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

 Schedule of Warrant Liability

 Warrant Liability

 Outstanding

 per Share

 Fair value as of year ended 12/31/2021

 265,305

 $

 Modification of warrants

 -

 Change in fair value of warrant liability

 -

 ( 133
)

 Fair value as of year ended 12/31/2022

 265,305

 Exercise of warrants

 ( 194,286
)

 ( 144
)

 Modification of warrants

 -

 Change in fair value of warrant liability

 -

 Fair value as of year ended 12/31/2023

 71,019

 $

 F- 25

 The
warrant liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair value includes various
assumptions about future activities and the Company's stock prices and historical volatility of Guideline Public Companies as inputs.

 16.
 Commitments and Contingencies

 Litigation

 The
Company may be subject to legal proceedings and claims that arise in the ordinary course of business. Management is not currently aware
of any matters that will have a material effect on the financial position, results of operations, or cash flows of the Company.

 Service
Agreement

 On
March 21, 2023, the Company entered into a Services Agreement with GlaxoSmithKline Consumer Healthcare Holdings (US) LLC ("Haleon")
to supply material for a consumer product to be developed and released in the future. There can be no guaranty that a consumer product
will be released or, if released, that it will be successful.

 17.
 Concentrations of Risk

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

 For
the year ended December 31, 2023, the Company had revenue from one customer that approximated 20 %
of total revenue. For the year ended December 31, 2022, the Company had revenue from one customer that approximated 29 %
of total revenue.

 The
Company had one customer with accounts receivable balances that approximated 69 % of total accounts receivable as of December 31, 2023.
The Company had three customers with accounts receivable balances that approximated 40 %, 22 % and 18 % of total accounts receivable as
of December 31, 2022.

 The
Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents and
marketable securities. Cash balances are maintained principally at major U.S. financial institutions and are insured by the Federal Deposit
Insurance Corporation ("FDIC") up to regulatory limits. Such cash balances are currently in excess of the FDIC insurance
limit of $ 250 thousand. As of December 31, 2023, the total amount exceeding such limit was $ 106 thousand. The Company 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.

 Marketable
securities are comprised of U.S. treasury bills with original maturities greater than three months. The Company has not experienced any
losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash, cash equivalents, and marketable
securities and performs periodic evaluations of the credit standing of such institutions.

 F- 26

 18.
 Related Party Transactions

 Convertible
Promissory Note

 On
September 2, 2021, the Company issued three Secured Convertible Promissory Notes to members of the board of directors in an aggregate
amounts of $ 150,000 to Mr. Stein, $ 150,000 to Mr. Stefansky (Bezalel Partners, LLC), and $ 50,000 to Dr. Zeldis as part of the September
2 Notes. The notes were repaid in full in 2022 (See Note 14).

 Advances

 Dr.
Jerome Zeldis, a member of the Company board of directors, has an outstanding balance due of $ 25,000 and $ 40,000 for services as of December
31, 2023 and 2022, respectively, included in accounts payable in the accompanying consolidated balance sheets.

 19.
 Income Taxes

 The
Company has established a full valuation allowance for its deferred tax assets based on management's belief that it is not more
likely than not that the related deferred tax assets will be realized. For the years ended December 31, 2023 and 2022, there was no income
tax expense or benefit.

 At
December 31, 2023 and 2022, the Company had no recorded tax liabilities for uncertain tax positions. The Company does not expect any
significant changes to the estimate amount of liabilities associated with uncertain tax positions in the next 12 months.

 The
income tax (benefit) provision consists of the following:

 Schedule of Income Tax (Benefit) Provision

 2023

 2022

 For The Years Ended

 December 31

 2023

 2022

 Federal:

 Current

 $
 ( 617

)

 $
 ( 619

)

 State and local:

 Current

 ( 156

)

 ( 159
)

 Income tax provision

 $
 —

 $
 —

 For
the years ended December 31, 2023 and 2022, the expected tax benefit based on the statutory rate reconciled with the actual benefit is
as follows:

 Schedule of Effective Income Tax Rate Reconciliation

 2023

 2022

 For The Years Ended December 31,

 2023

 2022

 U.S. federal statutory rate

 21.0
 %

 21.0
 %

 State tax rate, net of federal benefit

 5.3
 %

 5.3
 %

 Permanent differences

 Non-deductible expenses

 ( 1.9
)%

 ( 9.7
)%

 Timing differences

 —

 —

 Change in valuation allowance

 ( 24.4
)%

 ( 16.6
)%

 Income tax provision

 —
 %

 —
 %

 For
the years ended December 31, 2023 and 2022, differences between the expected tax expense based on the federal statutory rate and the
actual tax expense is primarily attributable to the net losses incurred and the corresponding increase to the valuation allowance.

 F- 27

 As
of December 31, 2023 and 2022, the Company's deferred tax assets consisted of the effects of temporary differences attributable
to the following:

 Schedule of Deferred Tax Assets and Liabilities

 2023

 2022

 As
 of December 31,

 2023

 2022

 tax assets:

 Net
 operating loss carryforwards

 $

 4,882

 $

 4,112

 Other

 Total
 deferred tax assets

 4,891

 4,118

 Valuation
 allowance

 ( 4,891

)

 ( 4,118

)

 tax assets, net of valuation allowance

 $

 —

 $

 —

 As
of December 31, 2023 and 2022, the Company has approximately $ 18.6 million and $ 15.6 million of federal NOL carryovers, respectively,
which begin to expire in 2029 through 2036. Similarly, the subsidiary's Pennsylvania state returns reported state NOL carryovers
of approximately $ 18.6 million and $ 15.6 million, as of December 31, 2023 and 2022, respectively. However, these loss carryforwards on
a separate company basis may be subject to limitations on the amounts that may be utilized pursuant to Internal Revenue Code section
382 and applicable state law. Section 382 imposes significant limitations on the utilization of net operating losses after certain changes
of corporate ownership. The Company will need to determine the amount of loss carryforwards that may be utilized in the future as necessary.

 In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of
the deferred tax assets will be realized. The ultimate realization of the deferred tax assets is dependent upon the future generation
of taxable income during the years in which those temporary differences become deductible. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration
of all the evidence, both positive and negative, management has recorded a full valuation allowance against net deferred tax assets at
December 31, 2023 and 2022 because management has determined that it is more likely than not that these deferred tax assets will not
be realized.

 The
Company is subject to taxation in the U.S. and various states. Based on the history of net operating losses all jurisdictions and tax
years are open for examination until the operating losses are utilized or the statute of limitations expires. As of December 31, 2023
and 2022, the Company does not have any significant uncertain tax positions.

 20.
 Subsequent Events

 Management
of the Company has performed a review of events and transactions occurring after the consolidated balance sheet date to determine if
there were any such events or transactions requiring adjustment to or disclosure in the accompanying consolidated financial statements,
noting no such events or transactions other than the following.

 On
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 registered direct offering ("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 Market. The Company issued 485,782
shares of common stock and warrants to purchase up to 242,891
shares of common stock.

 Subject
to certain ownership limitations, each of the warrants will become exercisable on the Closing Date, will have 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 %.

 The
gross proceeds to the Company from the RDO are expected to be approximately $ 1.025
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.

 The
Company retained Alere Financial Partners, LLC (A division of Cova Capital Partners, LLC) to act as the placement agent for the RDO.
The Company agreed to pay 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, and upon the closing of the
RDO, the Company agreed to issue 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.

 F- 28

 Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 None.

 Item
9A. Controls and Procedures

 Disclosure
Controls and Procedures

 As
of December 31, 2023, we conducted an evaluation of the effectiveness of our "disclosure controls and procedures" ("Disclosure
Controls"), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our
chief executive officer and chief financial officer. There are inherent limitations to the effectiveness of any system of disclosure
controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving
their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer have concluded that our
Disclosure Controls and Procedures were effective as of December 31, 2023 at a reasonable level of assurance.

 Change
in Internal Control over Financial Reporting

 There
have been no changes in our internal control over financial reporting during the fiscal year ended December 31, 2023 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 Management's
Annual Report on Internal Control over Financial Reporting and Attestation Report of the Registered Accounting Firm

 This
Annual Report on Form 10-K does not include a report of management's assessment regarding internal control over financial reporting
due to a transition period established by rules of the SEC for newly public companies or an attestation report of the Company's
registered public accounting firm which is not required for non-accelerated filers.

 Item
9B. Other Information

 Not
applicable.

 Part
III.

 Item
10. Directors, Executive Officers and Corporate Governance.

 The
information required by this Item is set forth under the headings "Directors, Executive Officers and Corporate Governance"
and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's 2024 Proxy Statement to be filed with
the U.S. Securities and Exchange Commission ("SEC") within 120 days after December 31, 2023 in connection with the solicitation
of proxies for the Company's 2024 annual meeting of shareholders and is incorporated herein by reference.

 Item
11. Executive Compensation

 The
information required by this Item is set forth under the heading "Executive Compensation" and under the subheadings "Board
Oversight of Risk Management," "Compensation of Directors," "Director Compensation-2023" and "Compensation
Committee Interlocks and Insider Participation" under the heading "Directors, Executive Officers and Corporate Governance"
in the Company's 2024 Proxy Statement to be filed with the SEC within 120 days after December 31, 2023 and is incorporated herein
by reference.

 Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 The
information required by this Item is set forth under the headings "Security Ownership of Certain Beneficial Owners and Management"
and "Equity Compensation Plan Information" in the Company's 2024 Proxy Statement to be filed with the SEC within 120
days after December 31, 2023 and is incorporated herein by reference.

 Item
13. Certain Relationships and Related Transactions and Director Independence

 The
information required by this Item is set forth under the heading "Review, Approval or Ratification of Transactions with Related
Persons" and under the subheading "Board Committees" under the heading "Directors, Executive Officers and Corporate
Governance" in the Company's 2024 Proxy Statement to be filed with the SEC within 120 days after December 31, 2023 and is
incorporated herein by reference.

 Item
14. Principal Accountant Fees and Services.

 Our
independent public accounting firm is Turner Stone & Company, L.L.P., Dallas, Texas, PCAOB Auditor ID 76.

 The
information required by this Item is set forth under the subheadings "Fees Paid to Auditors" and "Policy on Audit Committee
Pre-Approval of Audit and Non-Audit Services Performed by the Independent Registered Public Accounting Firm" under the proposal
"Ratification of Appointment of Independent Registered Public Accounting Firm" in the Company's 2024 Proxy Statement
to be filed with the SEC within 120 days after December 31, 2023 and is incorporated herein by reference.

 Part
IV.

 Item
15. Exhibits and Financial Statement Schedules

 The
following documents are filed as part of this report:

 (1)
Financial Statements

 The
following financial statements are included herein:

 Report of Independent Registered Public Accounting Firm (PCAOB ID: 76)

 Consolidated Balance Sheets as of December 31, 2023 and 2022

 Consolidated Statements of Operations for the years ended December 31, 2023 and 2022

 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2023 and 2022

 Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022

 Notes to Consolidated Financial Statements

 (2)
Financial Statement Schedules

 None.

 (3)
Exhibits

 1.1

 Underwriting Agreement dated December 21, 2021 by and between NexGel, Inc. and Maxim Group LLC (incorporated by reference to Exhibit 1.1 to Form 8-K, filed with the SEC on December 27, 2021).

 2.1

 Form of Asset Contribution and Separation Agreement between Alliqua BioMedical, Inc. and AquaMed Technologies, Inc. (incorporated by reference to Exhibit 2.3 to Form S-1, filed with the SEC on January 9, 2019).

 2.2

 Form of Tax Matters Agreement between Alliqua BioMedical, Inc. and AquaMed Technologies, Inc. (incorporated by reference to Exhibit 2.4 to Form S-1, filed with the SEC on January 9, 2019).

 2.3

 Form of Bill of Sale and Assignment and Assumption Agreement between Alliqua BioMedical, Inc. and AquaMed Technologies, Inc. (incorporated by reference to Exhibit 2.5 to Amendment No. 1 to Form S-1, filed with the SEC on March 11, 2019).

 2.4

 Amendment No. 2, dated April 19, 2019, to Agreement and Plan of Merger (incorporated by reference to Exhibit 2.6 to Amendment No. 3 to Form S-1, filed with the SEC on April 19, 2019)

 3.1

 Certificate of Incorporation of AquaMed Technologies, Inc. (incorporated by reference to Exhibit 3.1 to Form S-1, filed with the SEC on January 9, 2019).

 3.2

 Certificate of Amendment to Certificate of Incorporation of AquaMed Technologies, Inc. (incorporated by reference to Exhibit 3.2 to Form S-1, filed with the SEC on January 9, 2019).

 3.3

 Amended and Restated Certificate of Incorporation of AquaMed Technologies, Inc. (incorporated by reference to Exhibit 3.3 to Amendment No. 1 to Form S-1, filed with the SEC on March 11, 2019).

 3.4

 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of AquaMed Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on November 14, 2019).

 3.5

 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of NexGel, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on May 29, 2020).

 3.6

 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of NexGel, Inc. (incorporated by reference to Exhibit 3.6 to Form S-1, filed with the SEC on December 2, 2021)

 3.7

 Amended and Restated Bylaws of AquaMed Technologies, Inc. (incorporated by reference to Exhibit 3.5 to Amendment No. 1 to Form S-1, filed with the SEC on March 11, 2019).

 4.1

 12% Senior Secured Promissory Note, dated March 11, 2021, issued to Auctus Fund, LLC (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on March 17, 2021).

 4.2

 First Common Stock Purchase Warrant, dated March 11, 2021, issued to Auctus Fund, LLC (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed with the SEC on March 17, 2021).

 4.3

 Second Common Stock Purchase Warrant, dated March 11, 2021, issued to Auctus Fund, LLC (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed with the SEC on March 17, 2021).

 4.4

 Form of 12% Subordinated Secured Promissory Note, dated September 2, 2021 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on September 8, 2021)

 4.5

 Form of Common Stock Purchase Warrant, dated September 2, 2021 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed with the SEC on September 8, 2021)

 4.6

 Warrant Agency Agreement (including form of Common Warrant) dated December 27, 2021 by and between NexGel, Inc. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 10.1 to Form 8-K, filed with the SEC on December 27, 2021).

 4.7

 Underwriter Warrant dated December 27, 2021 issued to Maxim Group LLC (incorporated by reference to Exhibit 4.1 to Form 8-K, filed with the SEC on December 27, 2021).

 4.8

 Form of Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on February 21, 2024).

 10.1

 Assignment and Amended and Restated Lease, dated as of January 25, 2002, by and between 2150 Cabot LLC, Embryo Development Corporation and Hydrogel Design Systems, Inc. (incorporated by reference to Exhibit 10.1 to Form S-1, filed with the SEC on January 9, 2019).

 10.2

 Amendment to Lease, dated as of February 23, 2007, by and between 2150 Cabot LLC and Hydrogel Design Systems, Inc. (incorporated by reference to Exhibit 10.2 to Form S-1, filed with the SEC on January 9, 2019).

 10.3

 Third Amendment to Lease, dated as of February 27, 2009, by and between Exeter 2150 Cabot, L.P and Hydrogel Design Systems, Inc. (incorporated by reference to Exhibit 10.3 to Form S-1, filed with the SEC on January 9, 2019).

 10.4

 Assignment and Assumption of Lease Agreement, dated as of February 27, 2009, by and among Exeter 2150 Cabot, L.P, Hydrogel Design Systems, Inc. and Aquamed Technologies, Inc. (incorporated by reference to Exhibit 10.4 to Form S-1, filed with the SEC on January 9, 2019).

 10.5

 Fourth Amendment to Lease, dated as of July 24, 2013, by and between Exeter 2150 Cabot, L.P and Aquamed Technologies, Inc. (incorporated by reference to Exhibit 10.5 to Form S-1, filed with the SEC on January 9, 2019).

 10.6

 Form of Stock Purchase Agreement between NexGel, Inc. and certain accredited investors (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the SEC on March 27, 2020).

 10.7

 Membership Interest Purchase Agreement dated May 29, 2020 by and among NexGel, Inc. and the members of Sport Defense LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the SEC on May 29, 2020).

 10.8

 Form of 2019 Incentive Plan (incorporated by reference to Exhibit 10.22 to Amendment No. 3 to Form S-1, filed with the SEC on April 19, 2019).

 10.9

 Form of Incentive Option Agreement under 2019 Incentive Plan (incorporated by reference to Exhibit 10.23 to Amendment No. 3 to Form S-1, filed with the SEC on April 19, 2019).

 10.10

 Form of Nonqualified Stock Option Agreement under 2019 Incentive Plan (incorporated by reference to Exhibit 10.24 to Amendment No. 3 to Form S-1, filed with the SEC on April 19, 2019).

 10.12

 Securities Purchase Agreement, dated March 11, 2021, between NexGel, Inc. and Auctus Fund, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on March 17, 2021).

 10.13

 Security Agreement, dated March 11, 2021, between NexGel, Inc. and Auctus Fund, LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on March 17, 2021).

 10.14

 Registration Rights Agreement, dated March 11, 2021, between NexGel, Inc. and Auctus Fund, LLC (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on March 17, 2021).

 10.15

 First Amendment to the Senior Secured Promissory Note, Warrants, and Securities Purchase Agreement (March 11, 2021) dated August 13, 2021 by and between NexGel. Inc. and Auctus Fund, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 10-Q filed with the SEC on August 16, 2021).

 10.16

 Form of Securities Purchase Agreement, dated September 2, 2021 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 8, 2021).

 10.17

 Form of Security Agreement, dated September 2, 2021 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on September 8, 2021).

 10.18

 Form of Security Agreement, dated September 2, 2021 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on September 8, 2021).

 10.19

 Form of Registration Rights Agreement, dated September 2, 2021 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC on September 8, 2021).

 10.20

 Form of Lock-Up Agreement, dated September 2, 2021 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed with the SEC on September 8, 2021).

 10.21

 Second Amendment to the Senior Secured Promissory Note, Warrants, and Securities Purchase Agreement (March 11, 2021) dated October 28, 2021 by and between NexGel. Inc. and Auctus Fund, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on November 3, 2021).

 10.22

 Third Amendment to the Senior Secured Promissory Note, Warrants, and Securities Purchase Agreement (March 11, 2021) dated December 10, 2021 by and between NexGel. Inc. and Auctus Fund, LLC (incorporated by reference to Exhibit 10.23 to Form S-1, filed with the SEC on December 10, 2021).

 10.23

 Asset Purchase Agreement dated November 30, 2023 between NexGel, Inc. and Olympus Trading Company, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on December 5, 2023).

 10.24

 2024 Executive Employment Agreement, dated December 26, 2023 by and between NexGel. Inc. and Adam Levy (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on December 29, 2023).

 21.1*

 Subsidiaries

 23.1*

 Consent of Turner, Stone & Company, L.L.P.

 31.1*

 Rule 13a-14(a) Certification of Principal Executive Officer

 31.2*

 Rule 13a-14(a) Certification of Principal Financial Officer

 32.1**

 Section 1350 Certification of Principal Executive Officer

 32.2**

 Section 1350 Certification of Principal Financial Officer

 97*

 NexGel, Inc. Policy for the Recovery of Erroneously Awarded Compensation, effective December 1, 2023.

 101.INS*

 101.SCH*

 101.CAL*

 101.DEF*

 101.LAB*

 101.PRE*

 Cover

 *
 Filed herewith.

 **
Furnished herewith.

 Signatures

 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

 NexGel,
 Inc.

 Date:

 By:

 /s/
 Adam Levy

 Adam
 Levy

 Chief
 Executive Officer and President

 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated as of the dates set forth below.

 Signature

 Date

 Title

 /s/
 Adam Levy

 Chief
 Executive Officer and President (Principal Executive Officer)

 Adam
 Levy

 /s/
 Adam Drapczuk III

 Chief
 Financial Officer (Principal Accounting and Financial Officer)

 Adam
 Drapczuk III

 /s/
 Steven Glassman

 Director

 Steven
 Glassman

 /s/
 Scott Henry

 Director

 Scott
 Henry

 /s/
 Nachum Stein

 Director

 Nachum
 Stein

 /s/
 Jerome B. Zeldis

 Director

 Jerome
 B. Zeldis