Mangoceuticals, Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter and nine months ended September 30, 2023; filed October 27, 2023. The unaudited financial statements are presented under U.S. GAAP. Mangoceuticals operates an online telemedicine platform offering compounded erectile-dysfunction products under the Mango brand.
Financial Results and Position
| Metric | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | Comparable 2022 Period |
|---|---|---|---|
| Revenue | $245,160 | $487,119 | $0 |
| Gross profit | $144,589 | $288,918 | $0 |
| Gross margin | Approximately 59.0% | Approximately 59.3% | Not meaningful |
| General and administrative expenses | $1,944,049 | $6,939,761 | $991,825 and $1,319,727 |
| Loss from operations | $(1,799,460) | $(6,650,843) | $(991,825) and $(1,319,727) |
| Net loss | $(1,799,460) | $(6,644,370) | $(994,915) and $(1,324,400) |
| Basic and diluted loss per share | $(0.11) | $(0.45) | $(0.10) and $(0.13) |
- Marketing and advertising expense was $720,531 for the quarter and $1,633,528 for the nine months. Stock-based compensation included in general and administrative expenses was $151,592 for the quarter and $1,367,134 for the nine months.
- Cash used in operating activities was $5,299,634 for the nine months, compared with $696,958 in the 2022 period. Investing cash use was $3,519.
- Financing activities provided $5,857,040, principally from $5.0 million of IPO proceeds and $1,024,500 from warrant exercises, partially offset by repayment of $167,460 of notes payable and related-party advances.
- Cash and cash equivalents were $1,236,747 at September 30, 2023, versus $682,860 at December 31, 2022.
- Total assets were $1,595,505, total liabilities were $240,684, and stockholders’ equity was $1,354,821. The accumulated deficit was $8,660,126.
- The Company had no outstanding notes payable or related-party loan balances at September 30, 2023. Operating lease liabilities totaled $143,424, including $61,917 classified as current.
- Common shares outstanding increased to 16,789,500 at September 30, 2023 from 13,365,000 at December 31, 2022. The filing reports 17,039,500 shares outstanding as of October 27, 2023.
Material Changes Versus the Prior Comparable Period
- Revenue began in November 2022; 2023 revenue was $245,160 for the quarter and $487,119 year to date, compared with no revenue in the 2022 periods.
- Gross profit was positive, but substantially higher operating expenses caused significant operating and net losses.
- Nine-month general and administrative expense increased to $6.94 million from $1.32 million, driven primarily by marketing, stock-based compensation, salaries, legal and professional fees, consulting, and software development.
- Nine-month operating cash burn increased to $5.30 million from $0.70 million, while financing shifted toward the March 2023 IPO and warrant exercises.
- The Company repaid the $89,200 related-party advance on April 4, 2023 and paid off the $78,260 equipment note during March 2023.
- At September 30, 2023, 1,063,000 warrants remained outstanding and 1,400,000 stock options were outstanding, creating potential future dilution.
Guidance, Outlook, Risks, and Unusual Items
- Management intends to continue marketing Mango ED products, enhance its technology platform, develop additional men’s wellness products, and consider acquisitions if funding permits. No quantitative revenue or profitability guidance was provided.
- Management states that current capital resources are not sufficient to fund operations for the next 12 months and anticipates raising additional debt or equity. Additional financing may be unavailable or may dilute existing shareholders.
- The Company has recurring losses, substantial operating cash burn, limited operating history, and an accumulated deficit. The filing references the prior auditor’s going-concern explanatory paragraph.
- Mango ED products are compounded, are not FDA-approved, and depend on compliance with Section 503A requirements, patient-specific prescriptions, state pharmacy licensing, and applicable telehealth regulations. The filing notes that the safety and efficacy of the product formulation have not been established through FDA clinical trials.
- Epiq Scripts, a pharmacy 51% owned and controlled by CEO and Chairman Jacob D. Cohen, is the Company’s related-party pharmacy provider. The Company relies substantially on Epiq Scripts for compounding, fulfillment, packaging, shipping, and distribution. The amended agreement includes exclusivity, right-of-first-refusal, notice, and potential non-use fee provisions.
- Epiq Scripts was licensed in 47 states and the District of Columbia at the filing date; expansion is dependent on obtaining additional licenses.
- The Company reported no current material litigation and no known data breaches. Material risks include product liability, regulatory action, privacy and cybersecurity incidents, competition, payment fraud, supply and shipping disruptions, related-party conflicts, and loss of key personnel.
- Mangoceuticals stated that it was not in compliance with Nasdaq continued-listing standards because stockholders’ equity was below $2.5 million and its stock price had recently traded below $1.00. Delisting could impair liquidity, financing access, and shareholder value.
- Subsequent events included the issuance of 50,000 shares to the CFO under an October 1 consulting agreement and the issuance of 200,000 restricted shares to Luca Consulting on October 10, 2023, valued at $120,000.
Investor Verification Checklist
- Verify the Company’s financing needs, expected cash runway, and ability to raise additional capital without substantial dilution.
- Assess whether revenue growth and gross margins can scale sufficiently to offset marketing, personnel, stock-based compensation, public-company, and technology costs.
- Review the FDA, state pharmacy, telehealth, product-safety, and Section 503A compliance status of the Mango ED product.
- Examine the terms and economic effects of the related-party Epiq Scripts agreement, including exclusivity, non-use fees, licensing coverage, and potential conflicts of interest.
- Monitor Nasdaq remediation efforts, stock-price compliance, stockholders’ equity, and potential delisting.
- Quantify potential dilution from the 1,063,000 outstanding warrants, 1,400,000 options, restricted-stock issuances, and any future equity financing.
- Reconcile the reported September 30 share count with the October 27, 2023 share count and subsequent equity issuances.