Jupiter Neurosciences Inc(US:JUNS)2024-12-23 21:46PART I—FINANCIAL INFORMATION Financial Statements (Unaudited) For the nine months ended September 30, 2024, Jupiter Neurosciences reported no revenue, a $0.91 million net loss, and $253 cash, with a $5.7 million working capital deficit and $24.5 million accumulated deficit, later improved by a $9.5 million net IPO for debt repayment Balance Sheet Summary (as of September 30, 2024) | Metric | Sep 30, 2024 (Unaudited) | Dec 31, 2023 | | :--- | :--- | :--- | | Cash | $253 | $28,478 | | Total Assets | $85,546 | $148,592 | | Total Liabilities | $5,836,542 | $5,949,946 | | Total Stockholders' Deficit | ($5,750,996) | ($5,801,354) | Statement of Operations Summary | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Research and Development | $91,911 | $239,458 | $291,655 | $710,063 | | General and Administrative | $401,636 | $1,202,669 | $1,341,271 | $2,625,066 | | Operating Loss | ($493,547) | ($1,442,127) | ($1,632,926) | ($3,335,129) | | Net Loss | ($591,021) | ($1,774,189) | ($911,998) | ($4,354,044) | | Net Loss Per Share (Basic & Diluted) | ($0.02) | ($0.07) | ($0.03) | ($0.16) | Cash Flow Summary (Nine Months Ended) | Metric | Sep 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($215,225) | ($319,816) | | Net cash provided by financing activities | $187,000 | $315,000 | | Net Change in Cash | ($28,225) | ($4,816) | | Cash at end of period | $253 | $59,615 | - Subsequent to the quarter end, on December 4, 2024, the company closed an initial public offering (IPO) selling 2,750,000 shares at $4.00 per share, generating gross proceeds of $11 million and net proceeds of approximately $9.5 million124127 Note 1 – Organization and Description of Business Jupiter Neurosciences is a clinical-stage pharmaceutical company developing JOTROL, a unique resveratrol platform for neuro-inflammation, targeting diseases like Parkinson's and Alzheimer's, and completed a fifteen-for-four forward stock split in June 2024 - The company's lead product candidate, JOTROL, is a unique resveratrol platform targeting neuro-inflammation for diseases including Parkinson's, Alzheimer's, Mucopolysaccharidoses Type 1, Friedreich's Ataxia, and MELAS21 - On June 14, 2024, the company increased its authorized common stock to 125,000,000 shares and effected a fifteen-for-four (15:4) forward stock split2627 Note 2 – Significant Accounting Policies Prepared under U.S. GAAP, the financial statements show a $0.91 million net loss for the nine months ended September 30, 2024, with a $5.7 million working capital deficit and $24.5 million accumulated deficit, and derivative liabilities are re-measured at fair value - As of September 30, 2024, the company had a working capital deficit of $5,680,342 and an accumulated deficit of $24,494,502, having incurred a net loss of $911,998 for the nine months then ended30 - Research and development expenses are expensed as incurred and totaled $291,655 and $710,063 for the nine months ended September 30, 2024, and 2023, respectively36 - The company measures its derivative liability related to convertible notes at fair value on a recurring basis, classified as Level 3 in the fair value hierarchy. The liability was $606,787 as of September 30, 2024, down from $1,505,398 at year-end 202347 Note 3 – Related Party Transactions The company relies on CEO loans for working capital ($0.23 million balance as of September 30, 2024), with executives historically receiving partial or no cash salaries, leading to accrued compensation, portions of which were forgiven for equity in 2023-2024 - The company's CEO has provided working capital loans, with a balance of $228,812 as of September 30, 202458 - In September and December 2023, employees and board members forgave a total of $4.8 million in accrued compensation in exchange for stock options and RSUs6162 - In March 2024, a former executive forgave $100,000 of accrued compensation for equity, resulting in a $40,000 gain for the company63 Note 5 – Convertible Debt and Derivative Liability The company held complex convertible notes with embedded derivatives; an April 2024 amendment to the Senior Secured Note removed its conversion feature, resulting in a $0.95 million gain, and all notes were later converted or repaid with IPO proceeds - In April 2024, an amendment to the Senior Secured Note removed its conversion option, leading to a recorded gain on debt modification of $951,86880 - The company recorded a gain on change in fair value of derivative liability of $9,885 for the three months ended Sep 30, 2024, compared to a loss of $34,086 in the same period of 202393 - The total balance of convertible notes and the Senior Secured Note was approximately $2.03 million as of September 30, 202485 Note 8 – Commitments and Contingencies The company has significant future financial commitments, including a $0.15 million convertible note settlement for a legal dispute, and licensing agreements requiring milestone payments (up to $0.6 million and $0.3 million) and royalties (5% and 1.5%) on net sales - A legal dispute with Tiberend Strategic Advisors was settled by issuing a $150,000 convertible promissory note in March 2023109 - The licensing agreement with Aquanova AG for JOTROL includes an annual fee of $75,000, milestone payments up to $600,000 upon marketing approvals, and a 5% royalty on net sales117 - The licensing agreement with Murdoch Children's Research Institute includes milestone payments up to $300,000 upon marketing approvals and a 1.5% royalty on net sales for a Friedreich's ataxia treatment119 Note 9 – Subsequent Events Critical post-September 30, 2024 events include the December 4, 2024 IPO, which raised $11 million gross proceeds, used to repay all outstanding senior secured and convertible debt, including Convertible Debt I ($0.11 million) converted into 227,447 common shares - On December 4, 2024, the company closed its IPO, raising gross proceeds of $11,000,000 and net proceeds of approximately $9.5 million124127 - Upon the IPO closing, Convertible Debt I was converted into 227,447 shares of common stock128 - In December 2024, the company fully repaid the Senior Secured Note ($2,102,797) and Convertible Debt III ($178,386) using IPO proceeds129130 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on developing JOTROL for neuro-inflammatory diseases, with a particular emphasis on Parkinson's Disease and a strategic expansion into South-East Asia. The financial review highlights a significant decrease in operating expenses in Q3 2024 due to salary reductions. The company's liquidity was critically low at quarter-end ($253 cash) but was substantially improved by a post-quarter IPO that raised ~$9.5 million net, enabling debt repayment and funding future operations, including a planned Phase II trial for Parkinson's Disease Overview The company is a clinical-stage pharmaceutical firm developing JOTROL, a unique resveratrol formulation for neuro-inflammatory conditions like Parkinson's and Alzheimer's, with a strategic focus on the South-East Asian market, believing JOTROL's formulation overcomes bioavailability issues - The company is primarily targeting Parkinson's Disease and Mild Cognitive Impairment/early Alzheimer's disease with its product candidate, JOTROL135 - A strategic focus has been placed on the South-East Asian market, driven by interest in resveratrol, recent patent approvals for JOTROL in Hong Kong and China, and new service agreements to accelerate development in the region139 - The company believes JOTROL's patented micellar formulation resolves the poor bioavailability and gastrointestinal side effects that have hindered the use of high-dose resveratrol140145 Results of Operations Operating expenses significantly decreased in Q3 and the first nine months of 2024 due to salary reductions; R&D expenses fell to $0.29 million, G&A to $1.34 million, and net loss narrowed to $0.9 million, influenced by a $0.95 million gain on debt extinguishment Comparison of Operating Expenses (Three Months Ended Sep 30) | Expense Category | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Research & Development | $91,911 | $239,458 | -61.6% | | General & Administrative | $401,636 | $1,202,669 | -66.6% | Comparison of Operating Expenses (Nine Months Ended Sep 30) | Expense Category | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Research & Development | $291,655 | $710,063 | -59.0% | | General & Administrative | $1,341,271 | $2,625,066 | -48.9% | - The decrease in operating expenses for both the three and nine-month periods is primarily attributed to the reduction of employee salaries that began in December 2023155159165 - For the nine months ended Sep 30, the company recorded a gain on extinguishment of debt of $951,868 in 2024, compared to a loss of $887,946 in 2023, significantly impacting the net loss comparison171 Liquidity and Capital Resources As of September 30, 2024, the company's financial position was strained with $253 cash and a $24.5 million accumulated deficit, historically funded by debt and equity, but dramatically improved by a December 4, 2024 IPO providing ~$9.5 million net proceeds for future operations - As of September 30, 2024, the company had cash and cash equivalents of only $253 and an accumulated deficit of $24,494,502172 - The company closed an IPO on December 4, 2024, receiving net proceeds of approximately $9.5 million, which is expected to fund operations for the foreseeable future173 - Management expects operating losses to continue and anticipates needing to raise substantial additional capital in the future to support clinical trials and commercialization174 Critical Accounting Policies Management identifies critical accounting policies requiring significant estimates, including research and development, stock-based compensation, clinical trial expenses, and the valuation of convertible notes with embedded derivative liabilities, with fair value determined using the Black-Scholes model and marked-to-market adjustments - Key critical accounting policies include Research and Development, Stock-Based Compensation, Clinical Trial Expenses, and Convertible Notes with Embedded Derivative Liabilities186187188189 - Stock-based compensation expense is calculated using the Black-Scholes option pricing model, which requires management assumptions about volatility, option term, and interest rates187 - Convertible notes with variable conversion options are treated as having embedded derivatives, which are recorded at fair value at issuance and marked-to-market at each balance sheet date189 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Jupiter Neurosciences is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide the information under this item190 Controls and Procedures The company's principal executive and financial officers concluded that disclosure controls and procedures were not effective as of September 30, 2024, with no material changes to internal control over financial reporting identified during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were not effective as of September 30, 2024192 - There were no changes in internal control over financial reporting during the quarter ended September 30, 2024, that materially affected, or are reasonably likely to materially affect, internal controls193 PART II—OTHER INFORMATION Legal Proceedings The company settled a legal dispute with Tiberend Strategic Advisors over a $0.13 million non-payment claim by issuing a $0.15 million convertible note, with no other material litigation currently pending - A dispute with Tiberend Strategic Advisors over a $130,400 claim was settled by issuing a $150,000 convertible note to Tiberend197 Other Items (Risk Factors, Unregistered Sales, Defaults, etc.) As a smaller reporting company, the company is not required to provide Risk Factors and reported no unregistered sales of securities, defaults upon senior securities, or mine safety disclosures, with no material changes to board nominee recommendation procedures - As a smaller reporting company, disclosure of Risk Factors is not required199 - The company reported no unregistered sales of securities, defaults upon senior securities, or mine safety issues during the period200 Exhibits This section lists exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act (Sections 302 and 906) and Inline XBRL data files