Mangoceuticals(MGRX) - 2023 Q3 - Quarterly Report

markdown [PART I – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements for Q3 2023, showing initial revenue generation but a significant increase in net loss [Balance Sheets](index=5&type=section&id=Balance%20Sheets) Balance Sheet Comparison (Unaudited) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $1,236,747 | $682,860 | | Total Current Assets | $1,342,710 | $694,605 | | Total Assets | $1,595,505 | $1,003,287 | | **Liabilities & Equity** | | | | Total Current Liabilities | $159,176 | $260,577 | | Total Liabilities | $240,684 | $389,257 | | Total Stockholders' Equity | $1,354,821 | $614,030 | [Statements of Operations](index=6&type=section&id=Statements%20of%20Operations) Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Revenues | $245,160 | $487,119 | | Gross Profit | $144,589 | $288,918 | | Loss from Operations | ($1,799,460) | ($6,650,843) | | Net Loss | ($1,799,460) | ($6,644,370) | | Basic and Diluted Loss Per Share | ($0.11) | ($0.45) | - The company generated revenues in the three and nine months ended September 30, 2023, whereas it had no revenues in the comparable periods of 2022. However, **net loss significantly increased year-over-year**[14](index=14&type=chunk) [Statements of Changes in Stockholders' Equity](index=7&type=section&id=Statements%20of%20Changes%20in%20Stockholders'%20Equity) - Total stockholders' equity increased from **$614,030** at December 31, 2022, to **$1,354,821** at September 30, 2023[17](index=17&type=chunk)[18](index=18&type=chunk) - The increase in equity was primarily driven by the issuance of common stock for cash from the IPO (**$5,000,000**) and warrant exercises (**$1,024,500**), which was partially offset by the net loss for the period[17](index=17&type=chunk)[18](index=18&type=chunk) [Statements of Cash Flows](index=9&type=section&id=Statements%20of%20Cash%20Flows) Cash Flow Summary (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($5,299,634) | ($696,958) | | Net Cash Used in Investing Activities | ($3,519) | ($2,531) | | Net Cash Provided by Financing Activities | $5,857,040 | $1,550,430 | - The significant cash provided by financing activities in 2023 was primarily due to **$5.0 million** from the sale of common stock in the IPO and **$1.02 million** from the exercise of warrants[21](index=21&type=chunk) [Notes to Financial Statements](index=10&type=section&id=Notes%20to%20Financial%20Statements) - The company focuses on developing, marketing, and selling men's wellness products, specifically an erectile dysfunction (ED) product under the brand name "Mango," via a telemedicine platform[23](index=23&type=chunk) - In March 2023, the company completed an Initial Public Offering (IPO), selling **1,250,000 shares** of common stock at **$4.00 per share**, resulting in net proceeds of **$4.35 million**[24](index=24&type=chunk) - The company has a Master Services Agreement with Epiq Scripts, LLC, a related party, to provide pharmacy and compounding services for its products[46](index=46&type=chunk) - As of September 30, 2023, there were **1,400,000 stock options** and **1,063,000 warrants** outstanding[28](index=28&type=chunk)[109](index=109&type=chunk)[113](index=113&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, increased expenses, and liquidity challenges requiring additional funding [Overview](index=27&type=section&id=Overview) - The company operates a telehealth platform connecting consumers with licensed healthcare professionals and a pharmacy for the fulfillment of prescribed medications, focusing on men's wellness and erectile dysfunction (ED) with its "Mango" branded product[134](index=134&type=chunk)[135](index=135&type=chunk) - The "Mango" ED product is a compounded drug made from a proprietary combination of ingredients including Sildenafil or Tadalafil, Oxytocin, and L-Arginine. It is not FDA-approved but is produced under the pharmacy compounding exemption of Section 503A of the Federal Food, Drug, and Cosmetic Act[135](index=135&type=chunk) [Key Performance Indicators](index=28&type=section&id=Key%20Performance%20Indicators) Average Order Value (AOV) - Q3 2023 | Customer Type | AOV | | :--- | :--- | | Subscribing Customers | $130.27 | | Non-Subscribing Customers | $105.35 | Customer Breakdown - Q3 2023 | Customer Type | Percentage | | :--- | :--- | | Subscribing Customers | 11% | | Non-Subscribing Customers | 89% | [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Financial Results Summary | Metric | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Revenues | $245,160 | $487,119 | | Gross Profit | $144,589 | $288,918 | | General & Admin Expenses | $1,944,049 | $6,939,761 | | Net Loss | ($1,799,460) | ($6,644,370) | - The company began generating revenues in November 2022. The increase in general and administrative expenses in 2023 was primarily due to higher stock-based compensation, advertising and marketing, legal fees related to the IPO, and increased salaries as operations expanded[145](index=145&type=chunk)[149](index=149&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2023, the company had **$1.24 million** in cash and **$1.2 million** in working capital[151](index=151&type=chunk)[152](index=152&type=chunk) - Management has concluded that current capital resources are **insufficient to fund operations for the next 12 months**, and the company will need to raise additional funding[154](index=154&type=chunk)[169](index=169&type=chunk) - The company raised approximately **$5 million** in gross proceeds from its IPO in March 2023 and **$2 million** from a private placement in 2022[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Exempt from market risk disclosures as a "smaller reporting company" under SEC regulations - As a "smaller reporting company," Mangoceuticals, Inc. is not required to provide the information for this item[175](index=175&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of September 30, 2023, with no material changes - Based on an evaluation as of September 30, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[176](index=176&type=chunk) - There were no changes in the company's internal control over financial reporting during the third quarter of 2023 that materially affected, or are reasonably likely to materially affect, internal controls[177](index=177&type=chunk) [PART II – OTHER INFORMATION](index=35&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal or governmental proceedings - The company is not currently a party to any material legal proceedings[180](index=180&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) Significant risks include funding, related-party reliance, non-FDA approved product, competition, and Nasdaq compliance - The company has a limited operating history, has experienced recurring net losses, and its current capital resources are **not sufficient to fund operations for the next 12 months**, raising questions about its ability to continue as a going concern[187](index=187&type=chunk)[188](index=188&type=chunk)[191](index=191&type=chunk) - The company's Mango ED product is not FDA-approved and has not undergone clinical trials, which exposes the company to risks of serious patient injury, litigation, and governmental action[256](index=256&type=chunk)[257](index=257&type=chunk) - The company is significantly reliant on related-party transactions, especially its Master Services Agreement with Epiq Scripts, LLC, a pharmacy **51% owned and controlled by the company's CEO**, Jacob D. Cohen[270](index=270&type=chunk)[272](index=272&type=chunk) - As of September 30, 2023, the company was **not in compliance with Nasdaq's continued listing standard** requiring at least **$2.5 million in stockholders' equity**, which could lead to delisting[305](index=305&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Discloses unregistered stock sale to a consultant and consistent use of $4.35 million IPO proceeds - On October 10, 2023, the company issued **200,000 shares** of restricted common stock to Luca Consulting for advisory services. This issuance was exempt from registration under Section 4(a)(2) of the Securities Act[341](index=341&type=chunk)[342](index=342&type=chunk) - The company confirms no material change in the use of the approximately **$4.35 million** in net proceeds from its March 2023 IPO, which are intended for product development, marketing, and working capital[344](index=344&type=chunk)[346](index=346&type=chunk) [Defaults Upon Senior Securities](index=70&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[349](index=349&type=chunk) [Mine Safety Disclosures](index=70&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[350](index=350&type=chunk) [Other Information](index=71&type=section&id=Item%205.%20Other%20Information) Adoption of a Clawback Policy on October 26, 2023, enables recovery of erroneously awarded incentive compensation - On October 26, 2023, the Board of Directors adopted a Policy for the Recovery of Erroneously Awarded Incentive Based Compensation (the "Clawback Policy") to comply with SEC Rule 10D-1 and Nasdaq Listing Rule 5608[353](index=353&type=chunk) - The policy mandates the recovery of excess incentive-based compensation from current and former executive officers received during the **three fiscal years** preceding an accounting restatement, regardless of fault[354](index=354&type=chunk) [Exhibits](index=71&type=section&id=Item%206.%20Exhibits) Provides a list of all exhibits filed with the Form 10-Q, including SOX certifications and the new Clawback Policy - The report includes a list of filed exhibits, such as the company's Certificate of Formation, Bylaws, various material contracts, and required certifications under the Sarbanes-Oxley Act[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk) - A key new exhibit filed is the "Policy for the Recovery of Erroneously Awarded Incentive-Based Compensation" (Clawback Policy)[358](index=358&type=chunk)