Exhibit 10.2


 


SECURITY AGREEMENT


 


THIS
SECURITY AGREEMENT (this "Agreement"), is entered into as of March 11, 2021 (the “Effective Date”),
by and between NEXGEL, INC., a Delaware corporation (the "Borrower"), and Auctus Fund, LLC, a Delaware limited
liability company (the "Secured Party"). All capitalized terms not otherwise defined herein shall the meanings
ascribed to them in that certain securities purchase agreement by and between Borrower and the Secured Party of even date (the
 "Securities Purchase Agreement") and Note (as defined below), as applicable.


 


RECITALS


 


WHEREAS,
the Secured Party has entered into the Securities Purchase Agreement, pursuant to which the Borrower issued that certain senior
secured promissory note in the principal amount of $1,500,000.00 (the “Note”) to the Secured Party on March
11, 2021;


 


WHEREAS,
the term "Secured Party" as used in this Agreement shall mean, collectively, all holders of the Note, including those
persons who become holders of Note subsequent to the date hereof; and


 


WHEREAS, this Agreement is being executed and delivered
by Borrower to secure the Note.


 


NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the parties
hereto hereby agrees as follows:


 


1.        
Obligations Secured. This Agreement secures, in part, the prompt payment and performance of all obligations of Borrower
under the Note, and all renewals, extensions, modifications, amendments, and/or supplements thereto (collectively, the "Secured
Obligations"). If, as of the date that is one hundred fifty (150) calendar days after the date of this Agreement, (i)
an Event of Default (as defined in this Agreement) has not occurred and (ii) the Borrower has complied in all material respects
with the terms of the Registration Rights Agreement (as defined in the Securities Purchase Agreement), and (iii) the Common Stock
(as defined in the Securities Purchase Agreement) is quoted or listed for trading on the OTCQB Marketplace, OTCQX, any tier of
the NASDAQ Stock Market, the New York Stock Exchange, or the NYSE American, then the security interest created in favor of the
Secured Party pursuant to this Agreement shall terminate.


 


		2.	Grant of Security.



 


a.                
Collateral. Borrower hereby grants, pledges, and assigns for the benefit of the Secured Party, and there is hereby created
in favor of the Secured Party, a security interest in and to all of Borrower' s right, title, and interest in, to, and under all
of the collateral set forth on Exhibit A hereto (collectively, "Collateral").


 


b.                 
Effective Date. This grant of security shall be effective as of the Effective Date.


 



    


     


    

 


c.                 
Subordination. The Note and the Secured Obligations shall not be subordinated, or junior in interest, to any other obligations
of Borrower.


 


d.                  
Filings to Perfect Security. The Borrower shall (and is hereby authorized to) file with the applicable filing office(s)
such financing statements, amendments, addenda, continuations, terminations, assignments and other records (whether or not executed
by Borrower) to perfect and to maintain perfected security interests in the Collateral by the Secured Party, including but not
limited to (a) promptly upon the execution of this Agreement, a Financing Statement on Form UCC-1 (the "Financing Statement'')
shall be filed with the Delaware Secretary of State and in all other applicable jurisdictions on behalf of the Secured Party with
respect to the Collateral. The Financing Statement shall designate the Secured Party as a Secured Party and Borrower as the debtor,
shall identify the security interest in the Collateral, and contain any other items required by law. The Secured Party shall have
the right (and is hereby authorized to) to file with the applicable filing office(s) such financing statements, amendments, addenda,
continuations, terminations, assignments and other records (whether or not executed by Borrower) to perfect and to maintain perfected
security interests in the Collateral by the Secured Party, including but not limited to a Financing Statement on Form UCC-1 with
the Delaware Secretary of State and in all other applicable jurisdictions with respect to the Collateral promptly upon the execution
of this Agreement.


 


The
Financing Statement shall contain a description of collateral consistent with the description set forth herein.


 


3.                
Transfers and Other Liens. Except as set forth herein or in the Note, Borrower shall not, without the prior written consent
of the Secured Party, at their sole and absolute discretion:


 


a.            Sell, transfer, assign, or dispose of (by operation of law or otherwise), any of the Collateral outside of the ordinary course
of business;


 


b.            Create or suffer to exist any lien, security interest, or other charge or encumbrance upon or with respect to any of the Collateral,
except the security interests created hereby; or


 


		c.	Permit any of the Collateral to be levied upon under any legal process.



 


Notwithstanding anything in
this Section 3 of this Agreement to the contrary, up and until fourteen calendar days from the Effective Date, the Borrower may
issue junior secured promissory notes in the total aggregate amount of up to $1,000,000.00 (the “Junior Notes”), on
the same terms and conditions of the Note, except that the rights and interests of the holder(s) of the Junior Notes must be fully
subordinated to the Secured Party’s rights and interests under the Note, the Purchase Agreement, this Agreement, and the
other related transaction document entered into between the Borrower and the Secured Party on or around the Effective Date. Accordingly,
prior to the issuance of any Junior Notes, the holder(s) of such Junior Notes shall enter into a subordination agreement with the
Secured Party in such form and substance that is acceptable to the Secured Party.


 


4.                 Representations
and Warranties. Borrower hereby represents and warrants to the Secured Party as follows: (a) to Borrower' s knowledge,
Borrower is the owner of the Collateral (or, in the case of after-acquired Collateral, at the time Borrower acquires rights
in the Collateral, will be the owner thereat) and that, except as expressly provided herein, no other person has (or, in the
case of after-acquired Collateral, at the time Borrower acquires rights therein, will have) any right, title, claim or
interest (by way of Lien or otherwise) in, against or to the Collateral; (b) to Borrower's knowledge, except as expressly
provided herein, upon the filing of a Financing Statement with the Delaware Secretary of State, the Secured Party (or in the
case of after-acquired Collateral, at the time Borrower acquires rights therein, will have) will have a perfected senior
security interest in the Collateral to the extent that a security interest in the Collateral can be perfected by such filing;
(c) all Accounts Receivable (as defined in Exhibit A) are genuine and enforceable against the party obligated
to pay the same; (d) Borrower has full power and authority to enter into the transactions provided for in this Agreement and
the Note; (e) this Agreement and the Note, when executed and delivered by Borrower, will constitute the legal, valid and
binding obligations of Borrower enforceable in accordance with their terms; (t) the execution and delivery by Borrower of
this Agreement and the Note and the performance and consummation of the transactions contemplated hereby and thereby do not
and will not violate Borrower's Certificate of Incorporation or Bylaws or any material judgment, order, writ, decree,
statute, rule or regulation applicable to Borrower (g) there does not exist any default or violation by Borrower of or under
any of the terms, conditions or obligations of (i) any indenture, mortgage, deed of trust, franchise, permit, contract,
agreement, or other instrument to which Borrower is a party or by which Borrower is bound, or (ii) any law, ordinance,
regulation, ruling, order, injunction, decree, condition or other requirement applicable to or imposed upon Borrower by any
law, the action of any court or any governmental authority or agency; and the execution, delivery and performance of this
Agreement will not result in any such default or violation; (h) there is no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand pending or, to the knowledge of Borrower, threatened which adversely affects Borrower' s
business or financial condition and there is no basis known to Borrower for any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand which could result in the same; and (i) this Agreement and the Note do not
contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements
contained in this Agreement and the Note not misleading.


 






    


     


    

 


5.                
Events of Default. For purposes of this Agreement, the term "Event of Default" shall mean and refer to any of
the following:


 


		a.	Failure of Borrower to perform or observe any covenant set forth in this
Agreement, or to perform or observe any other term, condition, covenant, warranty, agreement or other provision contained in this
Agreement;



 


		b.	Any representation or warranty made or furnished by Borrower in writing
in connection with this Agreement and the Note or any statement or representation made in any certificate, report or opinion delivered
pursuant to this Agreement or in connection with this Agreement is false, incorrect or incomplete in any material respect at the
time it is furnished; or



 


		c.	Occurrence of any other Event of Default as defined in the Note.



 


6.                 Remedies.
Upon the occurrence and during the continuance of an Event of Default (subject to the notice and cure provisions provided for
herein, if any), each Secured Party shall have the rights of a secured creditor under the Uniform Commercial Code of the
applicable jurisdiction, all rights granted by the Note, this Agreement and by law, including the right to require Borrower
to assemble the Collateral and make it available to the Secured Party at a place to be designated by Borrower. The rights and
remedies provided in this Agreement and the Note are cumulative and may be exercised independently or concurrently, and are
not exclusive of any other right or remedy provided at law or in equity. No failure to exercise or delay by the Secured Party
in exercising any right or remedy under this Agreement or the Note shall impair or prohibit the exercise of any such rights
or remedies in the future or be deemed to constitute a waiver or limitation of any such right or remedy or acquiescence
therein. Every right and remedy granted to the Secured Party under this Agreement and the Note or by law or in equity may be
exercised by any Secured Party at any time and from time to time.


 



    


     


    

 


		7.	Further Assurances. Borrower agrees that, from time to time, at its own expense, it will:



 


		a.	Protect and defend the Collateral against all claims and demands of all persons
at any time claiming the same or any interest therein, and preserve and protect Secured Party's security interest in the Collateral.



 


		b.	Promptly execute and deliver to Secured Party all instruments and documents,
and take all further action necessary or desirable, as any Secured Party may reasonably request to (i) continue, perfect, or protect
any security interest granted or purported to be granted hereby, and (ii) enable a Secured Party to exercise and enforce any of
Secured Party's rights and remedies hereunder with respect to any Collateral.



 


		c.	Permit a Secured Party's representatives to inspect and make copies of all
books and records relating to the Collateral, wherever such books and records are located, and to conduct an audit relating to
the Collateral at any reasonable time or times.



 


8.                
Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party to be notified, (b) when sent by confirmed telex, e-mail or facsimile if sent during normal business
hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All communications shall be sent as follows:


 


If to the Borrower, to:


 


NEXGEL, INC.


2150 Cabot Blvd West, Suite B


Langhorne, PA 19047


E-mail: alevy@nexgel.com


 


If to the Secured Party:


 


Auctus Fund, LLC


545 Boylston Street, 2nd Floor


Boston, MA 02116


 


or to such other address or telecopy number as the
party to whom notice is to be given may have furnished to the other party in writing in accordance herewith.


 


10.                Amendments
and Waivers. No modification, amendment or waiver of any provision of, or consent required by, this Agreement, nor any consent
to any departure herefrom, shall be effective unless it is in writing and signed by each of the parties hereto. Such modification,
amendment, waiver or consent shall be effective only in the specific instance and for the purpose for which given.


 






    


     


    

 


11.            
Exclusivity and Waiver of Rights. No failure to exercise and no delay in exercising on the part of any party, any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other right, power or privilege. The rights and remedies herein provided are cumulative and are not exclusive
of any other rights or remedies provided by law.


 


12.            
Invalidity. Any term or provision of this Agreement shall be ineffective to the extent it is declared invalid or unenforceable,
without rendering invalid or enforceable the remaining terms and provisions of this Agreement.


 


13.           
Headings. Headings used in this Agreement are inserted for convenience only and shall not affect the meaning of any term
or provision of this Agreement.


 


14.           
Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original instrument,
but all of which collectively shall constitute one and the same agreement.


 


15.           
Assignment. This Agreement and the rights and obligations hereunder shall not be assignable or transferable by the any of
the parties without the prior written consent of the Secured Party, at their sole and absolute discretion.


 


16.            
Survival. Unless otherwise expressly provided herein, all representations warranties, agreements and covenants contained
in this Agreement shall survive the execution hereof and shall remain in full force and effect until the Note is fully repaid and
extinguished in its entirety.


 


17.           
Miscellaneous. This Agreement shall inure to the benefit of each of the parties hereto and all their respective successors
and permitted assigns. Nothing in this Agreement is intended or shall be construed to give to any other person, firm or corporation
any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained.


 


18.            
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
(WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).


 


19.            
CONSENT TO JURISDICTION. Any action brought by either party against the other
arising out of or related to this agreement shall be commenced only in the state or federal courts located in the Commonwealth
of Massachusetts, except that all such disputes between the parties shall be subject to alternative dispute resolution through
binding arbitration at the Holder’s sole discretion and election (regardless of which party initiates the legal proceedings). 


 


20.             Attorneys'
Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party
in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of
such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.


 



    


     


    

 


21.            
Entire Agreement. This Agreement contains the entire agreement among the parties with respect to the transactions contemplated
by this Agreement and supersedes all prior agreements or understandings among the parties with respect to the subject matter hereof.


 


[SIGNATURE PAGE(S) FOLLOW]


 






    


     


    

 


IN WITNESS WHEREOF, this
Agreement has been executed as of the date first set written above.


 


	NEXGEL,
    INC.	 
	 	 
	By:	         	 
	Name: Adam Levy	 
	Title: Chief Executive Officer	 
	 	 
	AUCTUS FUND, LLC	 
	  	 
	By:	 	 
	Name: Lou Posner	 
	Title: Managing Director	 




 






    


     


    

 


EXHIBIT
A


COLLATERAL


 


Borrower
hereby grants, pledges, and assigns for the benefit of the Secured Party, and there is hereby created in favor of the Secured Party,
a security interest in and to all of Borrower's right, title, and interest in, to, and under all assets and all personal property
of Borrower and the Borrower’s subsidiaries, whether now or hereafter existing, or now owned or hereafter acquired, including
but not limited to the following (collectively, "Collateral"):


 


1.               
All accounts, chattel paper, contracts, contract rights, accounts receivable, tax refunds, note receivable, documents, other choses
in action and general intangibles, including, but not limited to, proceeds of inventory and returned goods and proceeds from the
sale of goods and services, and all rights, liens, securities, guaranties, remedies and privileges related thereto, including the
right of stoppage in transit and rights and property of any kind forming the subject matter of any of the foregoing ("Accounts
Receivable");


 


2.                
All time, savings, demand, certificate of deposit or other accounts in the name of Borrower and/or any subsidiary of the Borrower
or in which Borrower and/or any subsidiary of the Borrower has any right, title or interest, including but not limited to all sums
now or at any time hereafter on deposit, and any renewals, extensions or replacements of and all other property which may from
time to time be acquired directly or indirectly using the proceeds of any of the foregoing;


 


3.                
All inventory and equipment of every type or description wherever located, including, but not limited to all raw materials, parts,
containers, work in process, finished goods, goods in transit, wares, merchandise furniture, fixtures, hardware, machinery, tools,
parts, supplies, automobiles, trucks, other intangible property of whatever kind and wherever located associated with the Borrower's
and/or any subsidiary of the Borrower’s business, tools and goods returned for credit, repossessed, reclaimed or otherwise
reacquired by Borrower and/or any subsidiary of the Borrower;


 


4.                
All documents of title and other property from time to time received, receivable or otherwise distributed in respect of, exchange
or substitution for or addition to any of the foregoing including, but not limited to, any documents of title;


 


5.
               All know-how, information, permits, patents, copyrights, goodwill, trademarks, trade names, licenses and approvals held by Borrower
and/or any subsidiary of the Borrower, including all other intangible property of Borrower and/or any subsidiary of the Borrower;


 


6.                All
assets of any type or description that may at any time be assigned or delivered to or come into possession of Borrower and/or
any subsidiary of the Borrower for any purpose for the account of Borrower and/or any subsidiary of the Borrower or as to which
Borrower and/or any subsidiary of the Borrower may have any right, title, interest or power, and property in the possession or
custody of or in transit to anyone for the account of Borrower and/or any subsidiary of the Borrower, as well as all proceeds
and products thereof and accessions and annexations thereto; and


 


7.                All
proceeds (including but not limited to insurance proceeds) and products of and accessions and annexations to any of the foregoing.