Q2 2024 NEXGEL Inc Earnings Call

August 14, 2024

Speaker Change: Nazibur Rahman, Adam Levy, Valter Pinto, Nexgel

Speaker Change: Music Music

Operator: Nazibur Rahman, Adam Levy, Nazibur Rahman, Adam Levy, Valter Pinto, [inaudible] Nazibur, Nexgel, Please stand by. Your program is about to begin. If you need audio assistance during today's program, please press star zero. Good afternoon.

Speaker Change: [inaudible]

Speaker Change: Please stand by, your program is about to begin. If you need audio assistance during today's program, please press star zero.

Operator: I will be your conference operator today. At this time I'd like to welcome everyone to Nexgel's second quarter, 2024 earnings conference call. I would now like to turn the call over to Valter Pinto, managing director of KCSA Strategic Communications for Introductions. Please go ahead.

Valter Pinto: Thank you, Operator. Good afternoon and welcome, everyone, to Nexgel's second quarter 2024 earnings conference call. I'm joined today by Adam Levy, Chief Executive Officer, and Adam Drapczuk, Chief Financial Officer. Before we begin, I'd like to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks, uncertainties, and other factors, for a detailed discussion of some of the ongoing risk, and Adam Levy, Valter Pinto, Nexgel, and Adam Levy, Valter Pinto, Nexgel.

Operator: Good afternoon and welcome everyone to Nexgel's second quarter 2024 earnings conference call.

Speaker Change: Thank you, Operator. Good afternoon, and welcome, everyone, to Nexgel's second quarter 2024 earnings conference call.

Operator: I'm joined today by Adam Levy, Chief Executive Officer, and Adam Drapsick, Chief Financial Officer.

Speaker Change: I'm joined today by Adam Levy, Chief Executive Officer, and Adam Drapczuk.

Speaker Change: Chief Financial Officer. Before we begin, I'd like to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act.

Speaker Change: of 1995, and actual results may differ materially due to a variety of risks, uncertainties, and other factors. For a detailed discussion of some of the ongoing risks, please visit www.cdc.gov.au.

Operator: For a detailed discussion of some of the ongoing risks and uncertainties in the company's business, I refer you to the press release issued this evening and filed with the SEC on Form K, as well as the company's reports filed periodically with the SEC.

Speaker Change: and uncertainties in the company's business are for you to the press release issue this evening and filed with the SEC on form AK as well as the company's reports filed periodically with the SEC.

Operator: The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law.

Speaker Change: The company desclaims any intention or obligations of date or advised any forward-looking statements, whether as a result of new information, future events or other wives, unless otherwise required by law. With that, my pleasure to turn the call over to Mr. Adam Levy. Adam, please go ahead.

Valter Pinto: With that, my pleasure to turn the call over to Mr. Adam Levy. Adam, please go ahead.

Valter Pinto: The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law. With that, it's my pleasure to turn the call over to Mr. Adam Levy. Adam, please go ahead.

Adam Levy: Thank you, Walter. And thank you, everyone, for joining us today to discuss our second quarter, 2024 financial and operating results. The second quarter of 2024 was a record revenue quarter for the company, totaling 1.44 million, an increase of 23.4% year over year and 13.8% sequentially. Brand-to-consumer products revenue was a key growth driver, totaling 968,000 as compared to 200,000. In June of 2023.

Adam Levy: Thank you, Valter, and thank you, everyone, for joining us today to discuss our second quarter 2024 financial and operating results. The second quarter of 2024 was a record revenue quarter for the company, totaling $1.44 million, an increase of 23.4% year-over-year and 13.8% sequentially. Brand-to-consumer products revenue with a key growth driver, totaling 968,000 as compared to 259,000 in June of 2020. Included in the year over year branded customer product revenue comparison is our kinkoderm product line which we inquired in December of 2023 and about half a quarter of contribution from our new acquisition of silly George. Tilly George offers its loyal customer base, a full product line of eye and eye-lash products, including hassle-free alternatives for eyelashes and eye-lash care, such as lash extensions, lash theorem, and various successors.

Adam Levy: Thank you, Valter, and thank you, everyone, for joining us today to discuss our second quarter 2024 financial and operating results.

Speaker Change: The second quarter of 2024 was a record revenue quarter for the company, totaling $1.44 million, an increase of 23.4% year-over-year and 13.8% sequentially.

Speaker Change: Branded Consumer Products revenue was a key growth driver totaling $968,000 as compared to $259,000 in June of 2023.

Adam Levy: Included in the year-over-year branded customer product revenue comparison is our kinkoderm product line, which we inquired in December of 2023, and about half a quarter of contribution from our new acquisition of Silly George. silly George offers its loyal customer base a full product line of eye and eyelash products, including hassle-free alternatives for eyelashes and eyelash care, such as lash extensions, lash theorem, and various successors. 3. Tilly George is predominantly sold direct to consumer, not only in the United States, but internationally as well. Tilly George has built a large social media following and consumer database, which includes 88,000 Facebook and 83,000 Instagram followers, as well as over 250,000 unique customer emails.

Speaker Change: Included in the year-over-year branded customer product revenue comparison is our CancoDerm product line, which we acquired in December of 2023, and about half a quarter of contribution from our new acquisition of Silly George.

Silly George: Chili George offers its loyal customer base a full product line of eye and eyelash products including hassle-free alternatives for eyelashes and eyelash care such as lash extensions, lash serum, and various accessories.

Adam Levy: Tilly George is predominantly sold direct-to-consumer, not only in the United States, but internationally as well. Tilly George has built a large social media following and consumer database, which includes 88,000 Facebook and 83,000 Instagram followers, as well as over 250,000 unique customer emails. When we acquired the brand, its revenue rate was approximately $2 million. Since then, we have launched new products, such as a new line of pop-on lashes, leveraging new gelash technology to create non-toxic, long-wear eyelash extensions that are easy to apply and remove and can last for five to ten days.

Speaker Change: Tilly George is predominantly sold direct-to-consumer not only in the United States but internationally as well.

Speaker Change: to the Georgia Filter Large Social Media following and Consumer Database, which includes 88,000 Facebook and 83,000 Instagram followers, as well as over 250,000 unique customer emails.

Adam Levy: When we acquired the brand, its revenue rate was approximately 2 million. Since then, we have launched new products such as a new line of pop-on-lashings, leveraging mutualized technology to create non-toxic, long-wear eyelash extensions that are easy to apply and remove and could last for 5 to 10 days. We also implemented new marketing strategies. We acquired Tilly George and May for 600,000 in cash, common stock, plus a future earnout. In short order and as a result of new products and marketing, as we announced in July, I am pleased to confirm Tilly George continues to perform well and that July sales alone were over 380,000 on Shopify only.

Speaker Change: When we acquired the brand, its revenue rate was approximately $2 million.

Speaker Change: Since then, we have launched new products, such as a new line of pop-on lashes, leveraging new gelash technology to create non-toxic, long-wear eyelash extensions that are easy to apply and remove and can last for five to ten days. We also implemented new marketing strategies.

Adam Levy: We also implemented new marketing strategies. We acquired Philly George in May for $600,000 in cash, common stock, plus a future earn out. In short order, and as a result of new products and marketing, as we announced in July, I am pleased to confirm Silly George continues to perform well and that July's sales alone were over 380,000, on Shopify only. While consumer products sales can fluctuate, we continue to be excited with our acquisition.

Speaker Change: We acquired Philly, Georgia in May for $600,000 in cash, common stock, plus a future earn-out.

Speaker Change: In short order, and as a result of new products and marketing, as we announced in July , I am pleased to confirm Silly George continues to perform well, and that July sales alone were over 380,000, on Shopify only.

Adam Levy: While consumer products sales can fluctuate, we continue to be excited with our acquisition.

Speaker Change: While consumer product sales can fluctuate, we continue to be excited with our acquisition. Additionally, we are only just now releasing our pop-on lashes on Amazon.

Adam Levy: Additionally, we are only just now releasing our pop-on lashes on Amazon. In the contract manufacturing side of our business, we completed the expansion of our capacity in Texas to support the new client relationships that we have. We doubled our square footage and invested in state-of-the-art automated machinery and related clean room facilities. During the quarter, we had some remaining capital expenditures related to this expansion in the amount of $209,000 and expect that number to be minimal in the back half of the year now that we have completed the expansion. Due to our expansion in the quarter, revenue was impacted as we shut down the facility for a period of time to move equipment and validate it prior to restarting operations.

Adam Levy: During the quarter we had some remaining capital expenditures related to this expansion in the amount of $209,000 and expect that number to be minimal in the back half of the year now that we have completed the expansion. Due to our expansion in the quarter, Revenue was impacted as we shut down the facility for a period of time to move equipment and validate it prior to restarting operations. We expect Revenue to be more normalized going forward in Q3 and Q4.

Speaker Change: In the contract manufacturing side of our business, we completed the expansion of our capacity in Texas to support the new client relationships that we have. We doubled our square footage and invested in state-of-the-art automated machinery and related clean room facilities.

Speaker Change: During the quarter, we had some remaining capital expenditures related to this expansion in the amount of $209,000 and expect that number to be minimal in the back half of the year now that we have completed the expansion.

Speaker Change: Due to our expansion in the quarter, revenue was impacted as we shut down the facility for a period of time to move equipment and validate it prior to restarting operations. We expect revenue to be more normalized going forward in Q3 and Q4.

Adam Levy: We expect revenue to be more normalized going forward in Q3 and Q4. Our relationship with Stata continues to progress well. We recently announced our first product, HISTASOLV, which is sold as days in Europe. This is Europe's number one selling Diamine Oxidase enzyme supplement, generating well over 20 million in annualized revenues to treat histamine food intolerance, which can cause migraines, headache, gut issues, and skin conditions. We have just lost HISTASOLV on Amazon and our marketing campaign starting this month.

Adam Levy: Our relationship with Stata continues to progress well. We recently announced our first product, HISTASOLV, which is sold as days in Europe. This is Europe's number one selling diamine oxidase enzyme supplement, generating well over $20 million in annualized revenues to treat histamine food intolerance, which can cause migraines, headache, gut issues, and skin conditions.

Speaker Change: Our relationship with Stata continues to progress well. We recently announced our first product, Histasolv, which is sold as Deicin in Europe .

Speaker Change: This is Europe's number one selling diamine oxidase enzyme supplement, generating well over $20 million in annualized revenues to treat histamine food intolerance, which can cause migraines, headache, gut issues, and skin conditions.

Adam Levy: We have just lost Chistosolv on Amazon and our marketing campaign starting this month. Subsequent to the quarter, we announced a supply agreement with Sintas Corporation, a leading provider of corporate identity uniforms, first aid, and safety products and services to over one million businesses across North America. To distribute our flagship product, SilverSignal. Pintos will distribute SilverSeal to its customers in many sectors, such as hospitality and public service.

Speaker Change: We have just launched Dissolve on Amazon and our marketing campaign starting this month.

Adam Levy: Subsequent to the quarter, we announced a supply agreement with Stata's Corporation, a leading provider of corporate identity uniforms, first aid, and safety products and services to over 1 million businesses across North America. To distribute our flagship products, Silver Seal. Stata will distribute Silver Seal to its customers in many sectors such as hospitality and public service. As a hospital-grade hydrogel dressing for wounds and burns, the employees of Stata's customers are the ideal target audience for this product. This partnership is significant to us not only for the associated revenue, but also for Silver Seal's brand awareness. We expect the first order of Silver Seal to be delivered during the fourth quarter of 2024.

Speaker Change: Subsequent to the quarter, we announced a supply agreement with Sintas Corporation, a leading provider of corporate identity uniforms, first aid, and safety products and services to over 1 million businesses across North America, to distribute our flagship product, Silver Seal.

Speaker Change: Syntos will distribute SilverSeal to its customers in many sectors such as hospitality and public service.

Adam Levy: At the hospital grade Hydrogel Dressing for wounds and burns, the employees of Sintossus customers are the ideal target audience for this product. This partnership is significant to us not only for the associated revenue, but also for the Silver Field brand awareness. We expect the first order of Silver Seal to be delivered during the fourth quarter of 2024. We recently issued revenue guidance for the third quarter of $2.2 million, an increase of 83% year over year, and for the fourth quarter of $2.6 million, an increase of over 140% year over year.

Speaker Change: As a hospital-grade hydrogel dressing for wounds and burns, the employees of Sintasas Customers are the ideal target audience for this product. This partnership is significant to us not only for the associated revenue, but also for Silver Seal's brand awareness.

Speaker Change: We expect the first order of Silver Seal to be delivered during the fourth quarter of 2024.

Adam Levy: We recently issued revenue guidance for the third quarter of 2.2 million, an increase of 83% year over year, and for the fourth quarter of 2.6 million, an increase of over 140% year over year. A revenue guidance still does not incorporate any revenue from our partnership with AVI and the exclusive supplier of gel pads for their exotic rapid acoustic pulse device for reduced cellulite appearance. We still expect revenues to start in Q1 of 2025, and we continue to work closely with their team on the launch. At this higher expected quarterly revenue level in Q3 and Q4, we are getting very close to achieving our goal of generating positive cash flow from operations.

Speaker Change: We recently issued revenue guidance for the third quarter of 2.2 million, an increase of 83% year-over-year, and for the fourth quarter of 2.6 million, an increase of over 140% year-over-year.

Adam Levy: Our revenue guidance still does not incorporate any revenue from our partnership with AbbVie as the exclusive supplier of gel pads for their Rosonic Rapid Acoustic Pulse device for reduced cellulite appearance. We still expect revenues to start in Q1 of 2025, and we continue to work closely with their team on the launch. At this higher expected quarterly revenue level in Q3 and Q4, we are getting very close to achieving our goal of generating positive cash flow from operations.

Speaker Change: Our revenue guidance still does not incorporate any revenue from our partnership with AbbVie as the exclusive supplier of gel pads for their Rosonic Rapid Acoustic Pulse device for reduced cellulite appearance.

Speaker Change: We still expect revenues to start in Q1 of 2025 and we continue to work closely with their team on the launch.

Speaker Change: At this higher expected quarterly revenue level in Q3 and Q4, we are getting very close to achieving our goal of generating positive cash flow from operations.

Adam Levy: Lastly, earlier this week, we completed a financing led by insiders for gross proceeds of 1.11 million at attractive terms. This financing will replenish our balance sheet with the investment dollars we spent for Silly George and also provide us with working capital to buy inventory and increase the marketing spend for the brand.

Adam Levy: Lastly, earlier this week, we completed a financing led by insiders for gross proceeds of $1.11 million at attractive terms. This financing will replenish our balance sheet with the investment dollars we spent on silly George and also provide us with working capital to buy inventory and increase the marketing spend for the brand. With that, I would like to turn the call over to our CFO, Adam Drapczuk. Thank you, Adam.

Speaker Change: Lastly, earlier this week we completed a financing led by insiders for gross proceeds of 1.11 million at attractive terms. This financing will replenish our balance sheet with the investment dollars we spent for Silly George and also provide us with working capital to buy inventory and increase the marketing spend for the brand.

Adam Drapczuk: With that, I would like to turn the call over to our CFO, Adam Drapczuk. Adam?

Speaker Change: With that, I would like to turn the call over to our CFO , Adam Drapczuk, Adam.

Adam Drapczuk: Thank you, Adam. Today, I'll review financial highlights of our second quarter of 2024 results. For the quarter ended June 30, 2024, revenue totaled 1.44 million, an increase of 273,000 or 23.4 percent, as compared to 1,117,000 for the quarter ended June 30, 2023. The increase in revenue was driven by sales growth in brandy consumer products, including approximately 45 days of revenue from Silly George, partially offset by a decrease in contract manufacturing. Contract manufacturing was impacted by CGN's move into its new facility and will normalize and grow in Q3 and Q4. Gross profit totaled $410,000 for the three-month ended June 30, 2024, compared to a gross profit of $175,000 for the three-month ended June 30, 2023.

Adam Drapczuk: Today I'll review financial highlights of our second quarter 2024 results, for the quarter ended June 30, 2024. Revenue totaled $1.44 million, an increase of $273,000, or 23.4%, as compared to $1,117,000 for the quarter ended June 30, 2023. The increase in revenue was driven by sales growth in branded consumer products, including approximately 45 days of revenue from Silly George, partially offset by a decrease in contract manufacturer. Contract manufacturing was impacted by CGN's move into its new facility and will normalize and grow in Q3 and Q4.

Adam Drapczuk: Thank you, Adam. Today I'll review financial highlights of our second quarter 2024 results.

Adam Drapczuk: The quarter ended June 30th, 2024.

Adam Drapczuk: Revenue totaled $1.44 million, an increase of $273,000, or 23.4%, as compared to $1,117,000 for the quarter ended June 30, 2023.

Speaker Change: The increase in revenue was driven by sales growth in branded consumer products, including approximately 45 days of revenue from Silly George, partially offset by a decrease in contract manufacturing.

Speaker Change: Contract manufacturing was impacted by CGN's move into its new facility and will normalize and grow in Q3 and Q4.

Adam Drapczuk: Gross Profit told $410,000 for the three months ended June 30, 2024, compared to a gross profit of $175,000 for the three months ended June 30, 2023. The increase of $235,000 in gross profit year-over-year was primarily due to the increase in branded consumer products.

Speaker Change: Gross profit totaled $410,000 for the three months ended June 30, 2024, compared to a gross profit of $175,000 for the three months ended June 30, 2023.

Adam Drapczuk: The increase of 235,000 in gross profit year-over-year was primarily due to the increase in brandy consumer products. Gross profit margin for the second quarter of 2024 was 28.5 percent, compared to a gross margin for the second quarter of 2023 of 15 percent, and a gross profit margin of 21.9 percent in the first quarter of 2024. Cost of revenues increased by 38,000 or 3.8 percent to 1,330,000 for the three-month ended June 30, 2024, as compared to 992,000 for the three-month ended June 30, 2023. The increase in cost of revenues is primarily aligned with sales of branded consumer products, partially offset by a decrease in cost of revenues from lower contract manufacturing revenue.

Speaker Change: The increase of $235,000 in gross profit year over year was primarily due to the increase in branded consumer products.

Adam Drapczuk: Gross profit margin for the second quarter of 2024 was 28.5%, compared to a gross margin for the second quarter of 2023 of 15%, and a gross profit margin of 21.9% in the first quarter of 2024, cost of revenues increased by 38,000 or 3.8% to $1,030,000, for the three months ended June 30, 2024. As compared to $992,000 for the three months ended June 30, 2023. The increase in cost of revenues is primarily aligned with sales of branded consumer products, partially offset by a decrease in cost of revenues from lower contract manufacturers. Dowling, General, and Administrative Expenses increased by 506,000 or 57.4% to $1,390,000 for the three months ended June 30, 2024, as compared to $882,000 for the three months ended June 30, 2023.

Speaker Change: Gross profit margin for the second quarter of 2024 was 28.5%, compared to a gross margin for the second quarter of 2023 of 15%, and a gross profit margin of 21.9% in the first quarter of 2024.

Speaker Change: Cost of revenues increased by $38,000 or 3.8% to $1,030,000.

Adam Drapczuk: The increase in selling, general, and administrative expenses, primarily attributable to an increase in advertising, marketing, and Amazon, attributable to promotion related to KinkoDerm and Silly George. We expect these costs to increase in Q3 with a full quarter of silly George revenue and with further growth in branded consumer products. Research and development expenses increased by $21,000 to $76,000 for the three months ended June 30, 2024, from $55,000 for the three months ended June 30, 2023.

Speaker Change: for the three months ended June 30, 2024, as compared to 992,000 for the three months ended June 30, 2023.

Speaker Change: The increase in cost of revenues is primarily aligned with sales of branded consumer products, partially offset by a decrease in cost of revenues from lower contract manufacturing revenue.

Adam Drapczuk: Delling, general, and administrative expenses increased by 506,000 or 57.4 percent to 1,390,000 for the three-month ended June 30, 2024, as compared to 882,000 for the three-month ended June 30, 2023. The increase in selling, general, and administrative expenses is primarily attributable to an increase in advertising, marketing, and Amazon fees attributable to promotion related to Kinkoderm and Silly George. We expect these costs to increase in Q3 with a full quarter of Silly George revenue and with further growth in brandy consumer products. Research and development expenses is increased by $21,000 to $76,000 for the three months ended June 30, 2024, from $55,000 for the three months ended June 30, 2023.

Speaker Change: Selling, general, and administrative expenses increased by $506,000 or 57.4%.

Speaker Change: to $1,390,000 for the three months ended June 30, 2024, as compared to $882,000 for the three months ended June 30, 2023.

Speaker Change: The increase in selling, general, and administrative expenses is primarily attributable to an increase in advertising, marketing, and Amazon fees, attributable to promotion related to Kinko Derm and Silly George.

Speaker Change: We expect these costs to increase in Q3 with a full quarter of Silly George revenue and with further growth in branded consumer products.

Speaker Change: Research and development expenses increased by $21,000 to $76,000 for the three months ended June 30, 2024, from $55,000 for the three months ended June 30, 2023.

Adam Drapczuk: Net loss for the three months ended June 30, 2024, with $979,000 as compared to a net loss of $642,000 in the three months ended June 30, 2023. As of June 30, 2024, the company had a cash balance of approximately $1.1 million. Subsequent to the end of the quarter, the company closed on a registered direct offering of 1.11 million led by insiders. The use of proceeds for the financing is for working capital and the immediate requirement for additional inventory and marketing to meet the higher than expected demand for the Silly George brand products. The company believes it has sufficient cash and marketable securities to operate its business plan into 2025.

Adam Drapczuk: Net loss for the three months ended June 30, 2024 was $979,000, as compared to a net loss of $642,000 in the three months ended June 30, 2023. As of June 30, 2024, the company had a cash balance of approximately $1.1 million. Subsequent to the end of the quarter, the company closed on a registered direct offering of $1.11 million, led by Insider. The use of proceeds for the financing is for working capital and the immediate requirement for additional inventory and marketing to meet the higher than expected demand for the Philly George brand product.

Speaker Change: Net loss for the three months ended June 30, 2024 was $979,000, as compared to a net loss of $642,000 in the three months ended June 30, 2023.

Speaker Change: As of June 30, 2024, the company had a cash balance of approximately $1.1 million.

Speaker Change: Subsequent to the end of the quarter, the company closed on a registered direct offering of $1.11 million, led by insiders.

Speaker Change: The use of proceeds for the financing is for working capital and the immediate requirement for additional inventory and marketing to meet the higher than expected demand for the Silly George brand products.

Adam Drapczuk: The company believes it has sufficient cash and marketable securities to operate its business plan into 2025. As of August 14, 2024, Nexgel had 6,324,266 shares of common stock outstanding, does not include the 444,000 shares of Common Stock we anticipate issuing in connection with our recent offer.

Speaker Change: The company believes it has sufficient cash and marketable securities to operate its business plan into 2025.

Adam Drapczuk: As of August 14, 2024, Next Shell had 6,324,266 shares of common stock outstanding, which does not include the 444,000 shares of common stock that we anticipate issuing in connection with our recent offering.

Speaker Change: As of August 14, 2024, NexGel had 6,324,266 shares of common stock outstanding.

Speaker Change: which does not include the 444,000 shares of common stock we anticipate issuing in connection with our recent offering.

Operator: I would now like to open the call for questions. Operator? Thank you, and ladies and gentlemen, if you would like to ask a question, please press the star followed by the one on your telephone keypads. You may remove yourself from the queue at any time by pressing Star 2. Once again, that is star 1 to ask a question. We'll pause for a moment to allow the questions to enter the queue.

Operator: I would now like to open the call for questions. Operator, Thank you. And ladies and gentlemen, if you would like to ask a question, please press the star followed by the one on your telephone keypads. You may remove yourself from the queue at any time by pressing star two.

Speaker Change: I would now like to open the call for questions. Operator?

Operator: Once again, that is star one to ask a question. We'll pause for a moment to allow the questions to enter the queue. We're going to take our first question while we wait from Bill Odenshaw from Kova Capital Partners. Please go ahead.

Speaker Change: Thank you. And ladies and gentlemen, if you would like to ask a question, please press the star followed by the 1 on your telephone keypads. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star 1 to ask a question. We'll pause for a moment to allow the questions to enter the queue.

Operator: We'll take our first question while we wait from Bill Odenshaw from COVA Capital Partners. Please go ahead.

Speaker Change: We'll take our first question while we wait from Bill Odenshaw from Kova Capital Partners. Please go ahead.

Bill Odenshaw: Hi, Adam.

Bill Odenshaw: Hi Adam and team. I have two questions. One's relative to the quarter and Silly George and just trying to get a little more clarity on it. In your press release, you said that Silly George did more than $380,000 in July in revenue, only on Shopify and not including Amazon. That's correct. You...

Bill Odenshaw: And then, team, I have two questions. One is relative to the quarter in Silly George and just trying to get a little more clarity on it. In your press release, you said that Silly George did more than $380,000 in July in revenues. Only on Shop, Shopify, and not including Amazon. So if you annualize that, I'm just trying to get an idea of your expectations of the secrecy of revenues. You annualize the $380,000, $4.5 million on the year. Your guidance for the third quarter is $2.2 million in sales, and guidance for the fourth quarter is $2.6 million in sales.

Speaker Change: In your press release, you said that Silly George did more than $380,000 in July in revenues.

Speaker Change: only on Shopify and not including Amazon.

Adam Levy: So if you annualize that, I'm just trying to get an idea of your expectations of the sequencity of revenues, if you annualize the $380,000, it's $4.5 million on the year. Your guidance for the third quarter is $2.2 million in sales, and Cadence with the fourth quarter is 2.6 minus 7. So, will this impact the second half of the year if July is indicative of what's going on in the business? How do you guys look at this?

Bill Odenshaw: That's correct. So if you annualize that, I'm just trying to get an idea of your expectations of the the sequencity of revenues, if you annualize the $380,000, it's $4.5 million on the year.

Speaker Change: Your guidance for the third quarter is $2.2 million in sales.

Speaker Change: and guidance for the fourth quarter is $2.6 million in sales.

Adam Levy: So, will this impact the second half of the year if it stays there? If July is indicative of what's going on in the business.

Speaker Change: So, will this impact the second half of the year if July is indicative of what's going on in the business?

Adam Levy: Adidas. Look at this. Consumer products are always tough. Thanks for the question. Consumer products are always tough because of their unpredictability. Right now, it appears very, very strong. We made those projections. We were at a lower run rate, and the run rate is growing. We are hopeful, and the reason we are going to increase our spend a little bit is because we believe there's an excellent chance that that product line continues to grow and will end up being an amazing acquisition. So, yeah, if it continues to grow with that pace, then we're probably going to perform really well in the second half.

Adam Levy: So, you know, consumer products are always tough. Thanks for the question, Billy. Consumer products are always tough because of their unpredictability.

Speaker Change: How do you guys look at this?

Speaker Change: So, you know, consumer products are always tough. Thanks for the question, Billy. Consumer products are always tough because of their unpredictability. Right now it appears very, very strong. When we made those projections, we were at a lower run rate, and the run rate is growing. We are hopeful, and the reason we are going to increase our spend a little bit is because we believe there is an excellent chance that that product line continues to grow, and will end up being an amazing acquisition. So yeah, if it continues to grow at that pace, then we are probably going to perform really well in the second half.

Adam Levy: Right now, it appears very, very strong. You know, when we made those projections, we were at a lower run rate, and the run rate is growing. We are hopeful, and the reason we are going to increase our spend a little bit is because we believe there's an excellent chance that that product line continues to grow and will end up being an amazing acquisition. So, yeah, if it continues to grow at that pace, then we're probably going to perform really well in the second half. Okay. And it's always in there for the consumer product, everybody.

Bill Odenshaw: Okay. And it's always an if with the consumer product, everybody. Yeah, I got it. I got it.

Bill Odenshaw: Yeah, I got it. I got it. And the second question's relative to Sintaz.

Speaker Change: [inaudible]

Speaker Change: Okay. That's always an if with a good tumor product though, buddy. Yeah, I got it. I got it. And the second question is relative to Syntos.

Bill Odenshaw: And the second question is relative to Sintas. When should we start to expect revenues from Sintas? And I'm not so much sure.

Adam Levy: So, when should we start to expect revenues of $10,000? And I'm not sure. Have you given any guidance or expectations as to what kind of dealers they could be? So, revenue from Syntos is going to start in the fourth quarter. In fact, the orders for the gel required for CG converting and packaging to make the product have already been placed with us, and that gel is already in production, but the products will ship in Q4.

Speaker Change: So, when should we start to expect revenues from CENTAS, and I'm not sure, have you, Caleb, have you given any guidance or expectations as to what kind of dealers could be?

Adam Levy: Have you calved? Have you given any guidance or expectations as to what kind of deal this could be? So revenue from Sintas is going to start in the fourth quarter. In fact, the orders for the gel required for CG converting and packaging to make the product have already been placed with us. And that gel is already in manufacture, but the products will ship in Q4. It is a very important part of our drive to try to become cashflow positive because, you know, while consumer product revenues are fantastic and our margins are very good, you know, because of the fixed costs, both the TGN and that next gel, contract manufacturing dollars actually mean more to the bottom line, almost three to one.

Speaker Change: So, revenue from syntax is going to start in the fourth quarter, in fact, the orders for the gel required for CG converting and packaging to make the product have already been placed with us, and that gel is already in manufacture, but the products will ship in Q4.

Adam Levy: It is a very important part of our drive to try to become cash flow positive because while consumer product revenues are fantastic and our margins are very good, because of the fixed cost both at CGN and at Nexgel, contract manufacturing dollars actually mean more to the bottom line, almost 3 to 1. So, we're very excited about that revenue stream starting as well as another large customer that we recently onboarded. The Syntos opportunity is certainly in the fourth quarter multiple hundreds of thousands of dollars and it will continue with a reorder pattern and, as I said, it will be significant revenue. And I'm sorry, I had one last question.

Speaker Change: It is a very important part of our drive to try to become cashflow positive because

Speaker Change: you know, while consumer product revenues are fantastic and our margins are very good, you know, because of the fixed costs both at CGN and at Nexgel,

Speaker Change: Contract manufacturing dollars actually mean more to the bottom line, almost 3 to 1.

Adam Levy: So we're very excited about that revenue stream starting, as well as another large customer that we recently onboarded. The Sintas opportunity is certainly in the fourth quarter, multiple hundreds of thousands of dollars. And it will continue with a reorder pattern. And they said it will be significant revenue.

Speaker Change: So we're very excited about that revenue stream starting as well as another large customer that we recently onboarded. The CIMTAS opportunity is certainly in the fourth quarter multiple hundreds of thousands of dollars and it will continue with a reorder pattern and as I said it will be significant revenue.

Bill Odenshaw: And I'm sorry, one last question that's relative to Abby. So in your press release in July, you put these with the expectations of third quarter and fourth quarter revenue out. And you also stated that these expectations are without any revenues predicted from Abby.

Bill Odenshaw: It's relative to AbbVie. So in your press release in July, with the expectations for the third quarter of fourth quarter revenue out, you also stated that these expectations are without any revenues predicted from ABI.

Speaker Change: And I'm sorry, I had one last question. It's relative to Abbey. So in your press release in July,

Speaker Change: You put the expectations of third quarter and fourth quarter revenue out.

Speaker Change: and you also stated that these expectations are without any revenues predicted from AbbVie. Can you give us an idea

Adam Levy: Can you give us an idea where that, what the status is with Abby? And maybe as you can drill down the timing: first quarter, second quarter, what's kind of expecting? Yeah, so we can communicate with Abby regularly, although not as much since we're now done in the design lock, or original expectation with the revenues would start in Q3 right now. And then we did announce that, you know, Abby had a delay due to their console. And so the revenues, everything was delayed. The whole project launch was delayed six months. That puts us into revenues starting in Q1.

Adam Levy: where that, what the status is with Abby and, Maybe a little, if you can drill down the timing, first quarter, second quarter, what can I expect? Yeah, so we communicate with AbbVie regularly, although not as much since we're now done in DesignLock. Our original expectation was that revenues would start in Q3 right now. And then we did announce that AbbVie had a delay due to their console, and so the revenues, everything was delayed. The whole project launch was delayed six months.

Speaker Change: where that, what the status is with Abby, and maybe a little, if you can drill down on the timing, first quarter, second quarter, what you're kind of expecting.

Speaker Change: Yeah, so we communicate with AbbVie regularly, although not as much since we're now done in DesignLock. Our original expectation was that revenues would start in Q3 right now, and then we did announce that AbbVie had a delay due to their console, and so the revenues, everything was delayed. The whole project launch was delayed six months.

Adam Levy: That puts us into revenues starting in Q1. Now, that is the soft launch part. So the revenues will begin in Q1, and they will ramp as we move into Q2, and then full launch in Q3. But the revenues are decent and will start in Q1. So that's when we expect to have AbbVie become accretive to our bottom line. Perfect. Got it. Thanks, Flood.

Bill Odenshaw: Now that is the soft launch part. So the revenues will begin in Q1 and they will ramp as we move into Q2 and then full launch in Q3. But the revenues are decent and will start, you know, in Q1. So that's what we expected. Have Abby become accretive to our bottom line. Okay. Thank you.

Speaker Change: That puts us into revenue starting in Q1.

Speaker Change: Now, that is the soft launch part, so the revenues will begin in Q1 and they will ramp as we move into Q2 and then full launch in Q3. But the revenues are decent and will start in Q1. So that's when we expect to have Avdi become accretive to our bottom line.

Speaker Change: [inaudible]

Speaker Change: Perfect. Got it. Thanks, bud. Appreciate it.

Operator: Appreciate it. Thank you. Next, we're going to remind everyone that it's star one for a question and we'll next go to Eric Ramos with Titan Capital Management. Hi, Adams, I just wanted to say congrats on the quarter. And I have a few questions, if that's okay. One of them is kind of starting with the silly George.

Operator: Next, we're going to remind everyone of this star one for a question, and we'll next go to Eric Ramos with Titan Capital Management. Hi, Adam. I just wanted to say congrats on the quarter. And I have a few questions if that's okay.

Speaker Change: Okay.

Speaker Change: Thank you. Next we're going to remind everyone it is star 1 for a question and we'll next go to Eric Ramos with Titan Capital Management.

Eric Ramos: Hi, Adams. I just wanted to say congrats on the quarter, and I have a few questions, if that's okay. One of them is kind of starting with the silly George. You guys are obviously saying that you guys have really high win rate revenues with just Shopify.

Eric Ramos: One of them's kind of starting with the silly George. You guys are obviously saying that you guys have really high-winner at revenues with just Shopify. And I was kind of wondering how you expect that to evolve with the addition of Amazon. And then what you kind of think the growth margin looks like as you kind of start paying those seller views to Amazon as well. So that state kind of consumers I kind of decline. That's a great question. You know, the answer about how Amazon will affect the Shopify sales, quite frankly, is. I don't know.

Eric Ramos: You guys are obviously saying that you guys have really high win rate revenues with just Shopify. And I was kind of wondering how you expect that to evolve with the addition of Amazon. And then what you kind of think the growth margin looks like as you kind of start paying those seller fees to Amazon as well. Does that stay kind of consistent? Or is that kind of a decline?

Speaker Change: And I was kind of wondering how you expect that to evolve with the addition of Amazon and then what you kind of think the growth margin looks like as you kind of start paying those seller fees to Amazon as well. Does that stay kind of consistent or is that kind of a decline?

Adam Levy: So that's a great question. You know, the answer about how Amazon will affect the Shopify sales, quite frankly, is, I don't know. I've never seen a product go this big on Shopify before Amazon even existed.

Speaker Change: So that's a great question, you know the answer about how Amazon will affect the Shopify sales quite frankly is

Adam Levy: I've never seen a product go this big on Shopify before Amazon even existed. So overall, we anticipate Amazon to be accretive. What I don't know yet is of the shoppers and of the billing that we do for every dollar we do on Amazon. Are we stealing 25 cents from Shopify? Are we stealing 50 cents from Shopify? How does that break down? As far as the margins go, we look at both of them very similarly. And the biggest control that you have in direct-to-consumer business is your cost of advertising. And we just create an allowable on Amazon where the audience already exists.

Speaker Change: I don't know. I've never seen a product go this big on Shopify before Amazon even existed. So overall, we anticipate Amazon to be accretive. What I don't know yet is...

Adam Levy: So overall, we anticipate Amazon to be accretive. What I don't know yet is, of the shoppers and of the billing that we do, for every dollar we do on Amazon, are we stealing $0.25 from Shopify? Are we stealing $0.50 from Shopify? How does that break down?

Speaker Change: Of the shoppers and of the billing that we do, for every dollar we do on Amazon, are we stealing $0.25 from Shopify? Are we stealing $0.50 from Shopify? How does that break down?

Adam Levy: As far as the margins go, we look at both of them very similarly. And the biggest control that you have in direct-to-consumer business is your cost of advertising. And we just create an allowable on Amazon, where the audience already exists, that is a much lower advertising, I call it tolerable, ACoS and Taco, that allows for that extra commission that Amazon charges, so that the results are about the same. So we try to get the same margin on both Amazon and Shopify to make us kind of agnostic as to where the customer goes. We just want the customer journey to be as simple as possible.

Speaker Change: As far as the margins go, we look at both of them very similarly. And the biggest control that you have in direct-to-consumer business is your cost of advertising. And we just create an allowable on Amazon where the audience already exists.

Adam Levy: That is a much lower advertising. I call it tolerable ACOS and TACo that allows for that extra commission that Amazon charges so that the results are about the same. So we try to get the same margin on both Amazon and Shopify to make us kind of agnostic as to where the customer goes. We just want the customer journey to be as simple as possible. But as far as cannibalistic and Amazon will be, I'm not sure I've never seen it before. Did that answer your question? Yeah, no definitely.

Speaker Change: that is a much lower advertising, I call it tolerable, ACOS and TACO.

Speaker Change: that allows for that extra commission that Amazon charges, so that the results are about the same.

Speaker Change: So we try to get the same margin on both Amazon and Shopify to make us kind of agnostic as to where the customer goes. We just want the customer journey to be as simple as possible. But as far as how cannibalistic Amazon will be, I'm not sure. Never seen it before.

Eric Ramos: But as far as how cannibalistic Amazon will be, I'm not sure, never seen it before. Did that answer your question? Yeah, no definitely. And then another thing, I was kind of curious about the, of the Rishanic agreement.

Eric Ramos: I don't know how much you're able to share, but can you maybe give us your kind of baseline expectations for pricing for treatment as well as kind of the amount of treatments you expect to see on, you know, like a daily monthly yearly basis for each of these machines. So we don't really know how many treatments there will be other than some internal projections of demand which are under NDA 4 that we got from AV and of course the success of the machine is going to determine that.

Eric Ramos: And then the other thing, I was kind of curious about the Avi-Rasonic agreement. I don't know how much you're able to share, but can you maybe give us your baseline expectations for pricing for treatment, as well as the amount of treatments you have to expect to see on a daily, monthly, yearly basis for each of these machines? So we don't really know how many treatments there will be other than some internal projections of demand which are under NDA4 that we got from Avi and of course the success of the machine is going to determine that.

Speaker Change: Did that answer your question?

Speaker Change: Yeah, no, definitely. And then another thing, I was kind of curious about the Avvi-Rasonic agreement. I don't know how much you're able to share, but can you maybe give us your kind of baseline expectations for pricing for treatment, as well as kind of the amount of treatments you expect to see on either like a daily, monthly, yearly basis for each of these machines?

Operator: Good afternoon and welcome everyone to Nexgel's second quarter, 2024 earnings conference call.

Operator: I'm joined today by Adam Levy, chief executive officer, and Adam Drapsick, chief financial officer.

Operator: Before we begin, I'd like to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the safe harbor of the private securities litigation reform act of 1995. And as a result, it made different materially due to a variety of risks. Uncertainties and other factors. For a detailed discussion of some of the ongoing risks and uncertainties in the company's business, I refer you to the press release issued this evening and filed with the SEC on Forma K, as well as the company's reports filed periodically with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless otherwise required by law.

Speaker Change: So we don't really know how many treatments there will be other than some internal projections of demand which were under NDA for that That you know, we got from AbbVie and of course the success of the machine is going to determine that

Adam Levy: I can't tell you that these are large pads. They're eight by eight pads. Each procedure uses at least two of them. And depending on the packaging choice that Avi has selected, it's somewhere between the range of $3.50 to $5 a pad, so double that per treatment. That's really helpful. And then are you able to give any kind of insight into what you think the gross margins on those kind of sales are known like? Yeah, so the gross margins kind of flow through two places because we treat CG converting and packaging, or CGN as I call it, as an arms-length transaction.

Eric Ramos: I can tell you that these are large pads, they're 8x8 pads, each procedure uses at least two of them and depending on the packaging choice that AV has selected it's somewhere it's somewhere between the range of $3.50 to $5.00 a pad so double that per tree.

Speaker Change: I can tell you that these are large pads. They're 8x8 pads. Each procedure uses at least two of them. And depending on the packaging choice that AbbVie has selected, it's somewhere between the range of $3.50 to $5.00 a pad. So double that per treatment.

Adam Levy: That's really helpful. And then are you able to give any kind of insight into what you think the gross margins on those kind of sales are and all type? Yeah, so the gross margins kind of flow through two places, because we treat CG, converting and packaging, or CGN, as I call it, as a arm's length transaction. You know, they're going to have margins much like, you know, medical device contract manufacturing in that 30, 35, you know, 40% range, somewhere between 30 and 40. And but they're buying the gel from us. So we also make additional margin on that. So it's not unreasonable to expect greater than 50% margin overall.

Speaker Change: That's really helpful. And then are you able to give any kind of insight into what you think the gross margins on those kind of sales journals like?

Operator: With that, my pleasure to turn the call over to Mr. Adam Levy. Adam, please go ahead. Thank you, Walter.

Speaker Change: Yeah, so the gross margins kind of flow through two places because we treat

Speaker Change: CG, Converting and Packaging, or CGN, as I call it, as a arm's length transaction. They're going to have margins much like medical device contract manufacturing in that 30, 35, 40% range somewhere between 30 and 40.

Adam Levy: And thank you, everyone, for joining us today to discuss our second quarter, 2024 financial and operating results. The second quarter of 2024 was a record revenue quarter for the company, totaling 1.44 million, an increase of 23.4% year over year and 13.8% sequentially. Brand-to-consumer products revenue was a key growth driver, totaling 968,000 as compared to 200,000. In June of 2023. Included in the year over year branded customer product revenue comparison is our kinkoderm product line, which we inquired in December of 2023, and about half a quarter of contribution from our new acquisition of silly George, silly George offers its loyal customer base, a full product line of eye and eyelash products, including hassle-free alternatives for eyelashes and eyelash care, such as lash extensions, lash theorem, and various successors.

Adam Levy: You know, they're going to have margins much like medical device contract manufacturing in that 30, 35, 40 percent range, somewhere between 30 and 40. But they're buying the gel from us. So we also make additional margin on that. So it's not unreasonable to expect greater than 50 percent margin overall. Joshua, it's really helpful.

Speaker Change: and but they're buying the gel from us so we also make additional margin on that so it's not unreasonable to expect greater than 50% margin overall.

Eric Ramos: Gosh, that's really helpful. I think that's all I had. Thank you guys so much. Thank you. Thank you. And ladies and gentlemen, that is star one for a question.

Operator: I think that's all I had. Thank you guys so much. Thank you. Thank you, ladies and gentlemen. That is star one for a question. We'll pause for a moment.

Speaker Change: Gosh, that's really helpful. I think that's all I had. Thank you guys so much.

Operator: We'll pause for a moment. And with no further questions in the queue, we're going to turn the call back to Mr. Adam Levy for final remarks. Thank you, Operator, and thanks, everybody, for joining the call. You know, we've worked very hard in Q1 and Q2 to sort of set ourselves up for success in Q3 and Q4, and I think everything that we've built towards will come to fruition in Q3 and Q4. So we're very anxious and excited to get there and get to the results from those quarters because we've done a lot of work and made a lot of investments to get us to this point.

Speaker Change: Thank you.

Speaker Change: Thank you. And ladies and gentlemen, that is star one for a question. We'll pause for a moment.

Operator: Some would know further questions. Thank you.

Adam Levy: We're going to turn the call back to Mr. Adam Levy for final remarks. Thank you, operator. And thanks, everybody, for joining the call. You know, we've worked very hard in Q1 and Q2 to sort of set ourselves up for success in Q3 and Q4. And I think everything that we've built towards will come to fruition in Q3 and Q4. So we're very anxious and excited to get there and get to the results from those quarters because we've done a lot of work and that made a lot of investments to get us to this point. So thank you all for staying with us and supporting the company.

Speaker Change: [inaudible]

Speaker Change: And with no further questions in the queue, we're going to turn the call back to Mr. Adam Levy for final remarks.

Adam Levy: So I thank you all for staying with us and supporting the company, and hopefully you'll be impressed by what actually happens in Q3 and Q4. Thank you. That does conclude today's program. Thank you for your participation. You may disconnect at any time.

Adam Levy: Thank you, Operator, and thanks, everybody, for joining the call. You know, we worked very hard in Q1 and Q2 to sort of set ourselves up for success in Q3 and Q4, and I think everything that we've built towards

Adam Levy: 3. Tilly George is predominantly sold direct to consumer, not only in the United States, but internationally as well. Tilly George is built a large social media following and consumer database, which includes 88,000 Facebook and 83,000 Instagram followers, as well as over 250,000 unique customer emails. When we acquired the brand, its revenue rate was approximately 2 million. Since then, we have launched new products such as a new line of pop-on-lashings, leveraging mutualized technology to create non-toxic, long-ware eyelash extensions that are easy to apply and remove and could last for 5 to 10 days.

Adam Levy: will come to fruition in Q3 and Q4. So we're very anxious and excited to get there and get to the results from those quarters because we've done a lot of work and made a lot of investments to get us to this point. So I thank you all for staying with us and supporting the company and hopefully you will be impressed by what actually happens in Q3 and Q4.

Operator: And hopefully you will be impressed by what actually happens in Q3 and Q4. Thank you.

Operator: That does conclude today's program. Thank you for your participation. You may disconnect it any time.

Adam Levy: Thank you.

Speaker Change: That does conclude today's program. Thank you for your participation. You may disconnect at any time.

Operator: Thank you so much. cht, and Adam Levy. Thank you. Thank you, and Adam Levy. Thank you. And I'm glad to be here. Thank you. Thank you. Jeff Smith

Speaker Change: i

Speaker Change: ["The Language of overlooked明?" means '' summary of uncorrected, glassy matter of material that is youuriably grossly wrong?' The witness's name is Asahina Obyaki, a sister of Asahina Obyaki, caught partially blind. The argument makes it even more clear that she is lying. She's lying but the suggestion is on the driver.)

Adam Levy: We also implemented new marketing strategies. We acquired Tilly George and May for 600,000 in cash, Common Stock, plus a future earnout. In short order and as a result of new products and marketing, as we announced in July, I am pleased to confirm Tilly George continues to perform well and that July sales alone were over 380,000 on Shopify only. While consumer products sales can fluctuate, we continue to be excited with our acquisition. Additionally, we are only just now releasing our pop-on-lashes on Amazon.

Adam Levy: In the contract manufacturing side of our business, we completed the expansion of our capacity in Texas to support the new client relationships that we have. We doubled our square footage and invested in state-of-the-art automated machinery and related clean room facilities. During the quarter, we had some remaining capital expenditures related to this expansion in the amount of $209,000 and expect that number to be minimal in the back half of the year now that we have completed the expansion.

Adam Levy: Due to our expansion in the quarter, revenue was impacted as we shut down the facility for a period of time to move equipment and validate it prior to restarting operations. We expect revenue to be more normalized going forward in Q3 and Q4. Our relationship with Stata continues to progress well. We recently announced our first product, HISTASOLV, which is sold as days in in Europe. This is Europe's number one selling Diamine Oxidase enzyme supplement, generating well over 20 million in annualized revenues to treat histanine food intolerance, which can cause migraines, headache, gut issues, and skin conditions. We have just lost HISTASOLV on Amazon and our marketing campaign starting this month.

Adam Levy: We recently issued revenue guidance for the third quarter of 2.2 million, an increase of 83% year over year, and for the fourth quarter of 2.6 million, an increase of over 140% year over year. A Revenue Guidance still does not incorporate any revenue from our partnership with AVI and the exclusive supplier of gel pads for their exotic rapid acoustic pulse device for reduced cellulite appearance. We still expect revenues to start in Q1 of 2025, and we continue to work closely with their team on the launch. At this higher expected quarterly revenue level in Q3 and Q4, we are getting very close to achieving our goal of generating positive cash flow from operations.

Adam Drapczuk: With that, I would like to turn the call over to our CFO, Adam Drapczuk. Adam? Thank you, Adam.

Adam Drapczuk: Today, I'll review financial highlights of our second quarter of 2024 results. For the quarter-ended June 30, 2024, revenue totaled 1.44 million, an increase of 273,000 or 23.4 percent, as compared to 1,117,000 for the quarter-ended June 30, 2023. The increase in revenue was driven by sales growth in brandy consumer products, including approximately 45 days of revenue from Silly George, partially offset by a decrease in contract manufacturing. Contract manufacturing was impacted by CGN's move into its new facility and will normalize and grow in Q3 and Q4.

Adam Drapczuk: Gross profit totaled $410,000 for the three-month-cended June 30, 2024, compared to a gross profit of 175,000 for the three-month-cended June 30, 2023. The increase of 235,000 in gross profit year-over-year was primarily due to the increase in brandy consumer products. Gross profit margin for the second quarter of 2024 was 28.5 percent, compared to a gross margin for the second quarter of 2023 of 15 percent, and a gross profit margin of 21.9 percent in the first quarter of 2024.

Adam Drapczuk: Cost of revenues increased by 38,000 or 3.8 percent to 1,330,000 for the three-month-cended June 30, 2024, as compared to 992,000 for the three-month-cended June 30, 2023. The increase in cost of revenues is primarily aligned with sales of branded consumer products, partially offset by a decrease in cost of revenues from lower contract manufacturing revenue.

Adam Drapczuk: Delling, general, and administrative expenses increased by 506,000 or 57.4 percent to 1,390,000 for the three-month-cended June 30, 2024, as compared to 882,000 for the three-month-cended June 30, 2023. The increase in selling, general, and administrative expenses is primarily attributable to an increase in advertising, marketing, and Amazon fees attributable to promotion related to kinkoderm and silly George. We expect these costs to increase in Q3 with a full quarter of silly George revenue and with further growth in brandy consumer products. Research and development expenses is increased by $21,000 to $76,000 for the three months ended June 30, 2024, from $55,000 for the three months ended June 30, 2023.

Adam Drapczuk: Net loss for the three months ended June 30, 2024 with $979,000 as compared to a net loss of $642,000 in the three months ended June 30, 2023. As of June 30, 2024, the company had a cash balance of approximately $1.1 million. Subsequent to the end of the quarter, the company closed on a registered direct offering of 1.11 million led by insiders. The use of proceeds for the financing is for working capital and the immediate requirement for additional inventory and marketing to meet the higher than expected demand for the silly George brand products. The company believes it has sufficient cash and marketable securities to operate its business plan into 2025.

Adam Drapczuk: As of August 14, 2024, next shell had $6,324,266 shares of common stock outstanding, which does not include the $444,000 shares of common stock, but we anticipate issuing in connection with our recent offering.

Operator: I would now like to open the call for questions.

Operator: Operator? Thank you, and ladies and gentlemen, if you would like to ask a question, please press the star followed by the one on your telephone keypads. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star 1 to ask a question. We'll pause for a moment to allow the questions to enter the queue.

Bill Odenshaw: We'll take our first question while we wait from Bill Odenshaw from COVA Capital Partners. Please go ahead. Hi, Adam. And then, team, I have two questions. One is relative to the quarter in silly George and just trying to get a little more clarity on it. In your press release, you said that silly George did more than $380,000 in July in revenues. Only on shop, Shopify, and not including Amazon. So if you annualize that, I'm just trying to get an idea of your expectations of the secrecy of revenues, you annualize the $380,000, $4.5 million on the year.

Bill Odenshaw: Your guidance for the third quarter is $2.2 million in sales, and guidance for the fourth quarter is $2.6 million in sales. So, will this impact the second half of the year if it stays there, if July is indicative of what's going on in the business? Adidas. Look at this.

Adam Levy: Consumer products are always tough, thanks for the question. Consumer products are always tough because of their unpredictability. Right now, it appears very, very strong. We made those projections. We were at a lower run rate and the run rate is growing. We are hopeful and the reason we are going to increase our spend a little bit is because we believe there's an excellent chance that that product line continues to grow and will end up being an amazing acquisition.

Adam Levy: So, yeah, if it continues to grow with that pace, then we're probably going to perform really well in the second half. Okay. And it's always an if with the consumer product, everybody. Yeah, I got it. I got it.

Adam Levy: And the second question is relative to Sintas. When should we start to expect revenues from Sintas? And I'm not so much sure. Have you calved? Have you given any guidance or expectations as to what kind of deal this could be? So revenue from Sintas is going to start in the fourth quarter. In fact, the orders for the gel required for CG converting and packaging to make the product have already been placed with us.

Adam Levy: And that gel is already in manufacture, but the products will ship in Q4. It is a very important part of our drive to try to become cashflow positive because, you know, while consumer product revenues are fantastic and our margins are very good, you know, because of the fixed costs, both the TGN and that next gel, contract manufacturing dollars actually mean more to the bottom line, almost three to one. So we're very excited about that revenue stream starting as well as another large customer that we recently onboarded. The Sintas opportunity is certainly in the fourth quarter multiple hundreds of thousands of dollars. And it will continue with a reorder pattern. And they said it will be significant revenue.

Adam Levy: And I'm sorry, one last question that's relative to Abby. So in your press release in July, you put these with the expectations of third quarter and fourth quarter revenue out. And you also stated that these expectations are without any revenues predicted from Abby. Can you give us an idea where that, what the status is with Abby? And maybe as you can drill down the timing first quarter, second quarter, what's kind of expecting?

Adam Levy: Yeah, so we can communicate with Abby regularly, although not as much since we're now done in the design lock, or original expectation with the revenues would start in Q3 right now. And then we did announce that, you know, Abby had a delay due to their console. And so the revenues, everything was delayed. The whole project launch was delayed six months. That puts us into revenues starting in Q1. Now that is the soft launch part.

Adam Levy: So the revenues will begin in Q1 and they will ramp as we move into Q2 and then full launch in Q3. But the revenues are decent and will start, you know, in Q1. So that's what we expected. Have Abby become accretive to our bottom one. Okay.

Operator: Thank you.

Eric Ramos: Next, we're going to remind everyone of this star one for a question, and we'll next go to Eric Ramos with Titan Capital Management. Hi, Adam. I just wanted to say congrats on the quarter. And I have a few questions if that's okay. One of them's kind of starting with the silly George. You guys are obviously saying that you guys have really high-winner at revenues with just Shopify. And I was kind of wondering how you expect that to evolve with the addition of Amazon.

Eric Ramos: And then what you kind of think the growth margin looks like as you kind of start paying those seller views to Amazon as well. So that state kind of consumers I kind of decline. That's a great question. You know, the answer about how Amazon will affect the Shopify sales quite frankly is. I don't know. I've never seen a product go this big on Shopify before Amazon even existed. So overall, we anticipate Amazon to be accretive.

Eric Ramos: What I don't know yet is of the shoppers and of the billing that we do for every dollar we do on Amazon. Are we stealing 25 cents from Shopify? Are we stealing 50 cents from Shopify? How does that break down? As far as the margins go, we look at both of them very similarly. And the biggest control that you have in direct to consumer business is your cost of advertising. And we just create an allowable on Amazon where the audience already exists.

Eric Ramos: That is a much lower advertising. I call it tolerable acos and taco that allows for that extra commission that Amazon charges so that the results are about the same. So we try to get the same margin on both Amazon and Shopify to make us kind of agnostic as to where the customer goes. We just want the customer journey to be as simple as possible. But as far as cannibalistic and Amazon will be, I'm not sure I've never seen it before. Did that answer your question? Yeah, no definitely.

Adam Levy: And then the other thing, I was kind of curious about the avi-rasonic agreement. I don't know how much you're able to share but can you maybe give us your baseline expectations for pricing for treatment as well as the amount of treatments you have to expect to see on a daily monthly yearly basis for each of these machines? So we don't really know how many treatments there will be other than some internal projections of demand which are under NDA4 that we got from avi and of course the success of the machine is going to determine that.

Adam Levy: I can't tell you that these are large pads. They're eight by eight pads. Each procedure uses at least two of them. And depending on the packaging choice that avi has selected, it's somewhere between the range of $3.50 to $5 a pad, so double that per treatment. That's really helpful. And then are you able to give any kind of insight into what you think the gross margins on those kind of sales are known like?

Adam Levy: Yeah, so the gross margins kind of flow through two places because we treat CG converting and packaging or CGN as I call it as a arms length transaction. You know, they're going to have margins much like medical device contract manufacturing in that 30, 35, 40 percent range somewhere between 30 and 40. But they're buying the gel from us. So we also make additional margin on that. So it's not unreasonable to expect greater than 50 percent margin overall. Joshua, it's really helpful.

Operator: I think that's all I had. Thank you guys so much. Thank you. Thank you, ladies and gentlemen, that is star one for a question. We'll pause for a moment. Some would know further questions. Thank you.

Adam Levy: We're going to turn the call back to Mr. Adam Levy for final remarks. Thank you, operator. And thanks everybody for joining the call. You know, we've worked very hard in Q1 and Q2 to sort of set ourselves up for success in Q3 and Q4. And I think everything that we've built towards will come to fruition in Q3 and Q4. So we're very anxious and excited to get there and get to the results from those quarters because we've done a lot of work and that made a lot of investments to get us to this point. So thank you all for staying with us and supporting the company. And hopefully you will be impressed by what actually happens in Q3 and Q4.

Operator: Thank you. That does conclude today's program. Thank you for your participation. You may disconnect it any time.

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