NexGel, Inc Common Stock Investor update

Thank you, Steve. Good afternoon, everyone. My name is Brian Kieser. I have the pleasure of holding the title of Interim Chief Executive Officer of NEXGEL, Inc. I appreciate everybody's patience, again, to reiterate what Steve said. Over the last 6 weeks, as we have done the strategic review of all of the business and our goal to determine the best path forward for NEXGEL and its shareholders. What we will discuss today will be really a proposed platform reorganization that our strategic review committee, along with our employees, have worked very hard on over the last 6 weeks. Before I begin, I do want to take a second to mention how important the employees have been over these last few months since this transaction with Celularity took place.

I can tell you that we have a very hardworking, very dedicated team and they have gone above and beyond to try and do everything they can to work with us and help us develop what we think could be a very successful plan for NEXGEL going forward. So, a public thank you to all of our team members at NEXGEL. So where were we versus where we are now, versus where we go tomorrow? Traditionally, NEXGEL was a high-quality hydrogel manufacturer and had a medical device pipeline. However, it looks to me and appears to us that NEXGEL drifted into non-medical, non-healthcare related lines and focused more on over-the-counter consumer products. We believe that those product lines have created a misalignment and a disconnect between the operational needs of the hydrogel business, legacy business, and the needs and requirements of the over-the-counter business.

Because of that, we feel like in order for NEXGEL to focus on a growth path, that we need to transform NEXGEL from an over-the-counter products line into a medical device line, a biomedical innovation line, and a company that can scale in those areas. The transformation that we are talking about started with the acquisition of a diverse portfolio of licenses from Celularity, and the portfolio of products really centered around regenerative biomaterials and focused on skin grafts, skin substitutes, and products that can be used both in wound care and in surgical settings. Many of you may know that I came into the NEXGEL orbit as an initial investor in that transaction through Fountainhead Life Sciences and one of our subsidiaries, Sequence LifeScience. We committed $6.5 million of our investment towards innovation, training, manufacturing, and supporting NEXGEL.

Our goal was to become a strategic partner with NEXGEL, supporting the manufacture and the economics of the products that were acquired in the Celularity transaction. We have done a great job. I think NEXGEL has done a great job as well as Sequence, working through a lot of those strategic partnership opportunities, and I'll be talking about that a little bit later. That's only part of the goal that we're trying to get to. We see a vision for tomorrow for NEXGEL that creates a market-facing gateway for surgeon engagement, that creates a closed loop and experience for surgeons to innovate and create medical devices and biomedical innovation that will help patients. We want to create a single point of care and continuum of care portfolio, and we want to create diversified lines among clinical reimbursement verticals and reimbursement channels.

Our goal is to take NEXGEL fully into medical technology, medical device, biomedical innovation, and focus on improved patient outcomes and procedural excellence within a clinical setting. Why we are here, I guess, is the next thing we need to talk about. Again, the most recent transaction is the acquisition of the Celularity assets by NEXGEL, the licenses of several of the biomaterials, placental skin grafts, et cetera. Our original acquisition thesis did not materialize as we expected it to. The original expectations were for significant revenue growth, immediate profitability, a successful Bionx commercialization, existing reimbursement and clinical use pathways, and expansion through additional products. What actually occurred, though, is that revenue and margin expectations were not achieved. Customer products consume more capital than anticipated. Excuse me, consumer products consumed more capital than anticipated. Manufacturing and commercialization challenges disrupted execution.

The initial Bionx commercial structure added cost, and the existing organizational structure separated manufacturing profits from commercialization economics. What did work in our post-transaction with Celularity? Interfyl, one of the core products acquired, remains a stable revenue generator. Arthrex, one of our most stable customers, continues to bear fruit and be a strong and strategic relationship with NEXGEL, and we believe it presents multiple expansion opportunities. Our manufacturing tech transfer of technology to Sequence, which we believe will lower costs and improve margins, is occurring ahead of schedule. We recently launched an ocular business, and we believe that that opportunity is positioned for growth. We have reevaluated the hydrogel component of NEXGEL, and we believe that there are additional revenue opportunities that have been unrealized to date. We also believe there are opportunities to decrease costs and improve margins across the hydrogel line.

We've also scaled the Bionx leadership to an appropriate level and have found and secured the leadership talent needed to grow the Celularity products acquired by NEXGEL as we move forward. What didn't work? The consumer products just underperformed. Those products have been losing revenue, have been declining in revenue over the last several years. Margins continue to erode, and most of the consumer products are operating at a loss. Working capital was consumed much faster than expected, partly due to an increased Bionx personnel ledger as we first made the transition. We again scaled that back and have properly staffed the Bionx commercialization team for these products. The commercialization assumptions, the operating profits, and the sales opportunities of these products were misunderstood, and we discovered that early into the transaction.

The initial cost structure and actually current cost structure of the manufacturing and cost of these products are just not sustainable. Cost reductions are necessary, have been necessary, and have been implemented. But the cost reductions alone will not unlock the value of the assets that we have. In short, the current structure is not sustainable. Our primary constraints as of today are liquidity. Additional capital is required. Debt. The current operating business does not support the $15 million of debt burden. Profitability. The standalone economics of NEXGEL remain insufficient to support the current structure. Fragmentation. Management, manufacturing, regulatory, quality, and commercialization capabilities are distributed across separate entities. The strategic review identified a path to consolidate the regenerative medicine platform. The Fountainhead operating team and the Sequence LifeScience and NVISION Biomedical Technologies assets we believe can be integral to a proposed reorganization.

The status quo right now is limited liquidity, large debt burden, fragmented operations, and constrained access to growth capital. We believe that a reorganization could provide new capital, a recapitalized balance sheet, contributing operating assets from Fountainhead, consolidated management and infrastructure, and a platform positioned for future financing. I would like now to provide you what our vision is for NEXGEL and what we are trying to build for the future. We believe that we could create in a reorganization, combining all of the assets, an integrated life sciences ecosystem. We could create a surgeon-centric platform that shapes procedural excellence across clinical indications. It would connect innovation, training, manufacturing, and commercialization into one coordinated system, one entity. It would place the surgeon, the procedure, and the patient, rather than the product, at the center of the platform. Engagement and the ability to influence procedural excellence define the experience.

The platform is designed to advance procedural excellence, improve patient outcomes, advance standard of care, and enhance quality of life. We believe that we can create a scalable, high-touch experience where we can scale infrastructure while preserving personalized, trust-based surgeon relationships. We believe that we can create surgeon-led product development where healthcare providers across all disciplines use real-world clinical insight to guide product development, validation, and education. We believe we can reduce fragmentation and friction. We will integrate capabilities, accelerate learning and training, and reduce execution risk. We believe we can address many of the industry challenges and center an experience around patient outcomes and quality of life. So what would this look like when simplified? Fountainhead Life Sciences is a platform that provides innovation, manufacturing, and engagement through a series of entities. The engagement would come from the current NEXGEL commercialization team.

The innovation and manufacturing, the engine if you would come from NVISION Biomedical Technologies, Sequence LifeScience, and Lockhill Advanced Manufacturing Technologies, all members and subsidiaries of the Fountainhead Life Sciences platform. The experience tying it all together where innovation, manufacturing, and engagement come together to improve patient outcomes, elevate the standard of care, and elevate quality of life would be done at the Cadaver Lab housed here with Fountainhead Life Sciences. So what is Fountainhead Life Sciences and what are the subsidiaries of Fountainhead? What assets do they have that will help support this vision? NVISION Biomedical Technologies is an orthopedic medical device company that develops and manufactures spinal implants, lower extremity foot and ankle implants, and sports medicine implants.

It houses a complete engineering and design team, has its own internal prototyping capabilities, in-house intellectual property patent counsel, an entire quality and regulatory management team, and a robust product commercialization and sales team. NVISION has cleared over 35 products with the FDA and holds over 20 patents for medical devices in the orthopedic space. Sequence LifeScience, which many of you may know led the investment, is also a Fountainhead subsidiary. Sequence has 17 ISO Class 5 clean rooms, has ISO Class 7 lyophilization rooms, and three ISO Class 7 packaging rooms. Sequence also has a full R&D wet lab doing research on human tissue, placental tissue, stem cells, many advanced future cellular therapies. It has a staff of PhDs and scientists. It has its own quality and regulatory department. It has its own manufacturing and operational staff.

In addition to producing products that it sells and commercializes, it has a robust contract manufacturing and packaging business. Lockhill Advanced Manufacturing Technologies is also another asset that Fountainhead can bring to bear. Lockhill currently runs 10 polymer and resin printers, has post-processing, milling, and machining capabilities, has FDA regulatory and quality teams, and also is able to do contract manufacturing for third parties. Lockhill and NVISION are the leaders in lower extremity non-metal solutions for the foot and ankle, and have expanded their products into sports medicine and other extremities. The Cadaver Lab is a 2,500 sq ft, 12-station surgical suite and bioskills suite. It has a state-of-the-art classroom lecture hall that can accommodate 75 or more participants. It has another 750 sq ft overflow community classroom. The Cadaver Lab currently has contracts and trains EMTs, fire departments, using cadaver training for pre-emergency room trauma.