Business context and reporting period
This is Jupiter Wellness, Inc.’s Form 10-Q for the quarter and six months ended June 30, 2021; the filing does not identify BONK, INC. as the registrant. Jupiter develops and sells CBD wellness products, including sun-care products, and is developing topical therapeutic candidates. Its consolidated results include SRM Entertainment, acquired in November 2020.
Key financial metrics
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Revenue | $595,088 | $643,934 |
| Gross profit / margin | $181,175 / 30.4% | $206,569 / 32.1% |
| Net loss | $4,151,074 | $6,346,837 |
| Basic loss per share | $0.37 | $0.56 |
| Cash used in operating activities | $3,237,054 for the six months |
At June 30, cash was $3.94 million, current assets were $4.80 million, current liabilities were $2.61 million, and working capital was approximately $2.19 million. Total liabilities were $2.61 million. Convertible notes had $3.15 million principal outstanding and a $2.00 million net carrying value; the company also reported an $84,354 SBA loan.
Material changes versus prior comparable periods
- Quarterly revenue increased 30% from $457,667; six-month revenue increased 12% from $575,394. Gross profit nevertheless declined from $220,873 to $181,175 for the quarter and from $238,697 to $206,569 for the half year.
- Net loss widened from $433,375 to $4.15 million for the quarter and from $915,173 to $6.35 million for the half year. General and administrative expense reported for the half year rose to $6.73 million from $1.10 million; the filing attributes much of the cost increase to stock-based compensation, which totaled $3.66 million for the half year.
- Operating cash use increased from $849,345 in the first half of 2020 to $3.24 million in the first half of 2021. Cash declined by $321,200 from year-end 2020.
- Reported other income for the half year included a $669,200 gain from settlement and forgiveness of acquisition-related obligations. Interest expense included $458,849 of amortization of debt discounts and warrant discounts.
Outlook, commentary, risks and unusual items
- Management said COVID-19 had weakened demand for traditional products. Product development and clinical work continue; some development studies were delayed by the pandemic. The filing provides no numerical revenue or earnings guidance.
- The company reported substantial continuing expansion and development costs and said its auditors had raised going-concern doubt based on cash use and accumulated losses. After quarter-end, it completed an offering with net proceeds of $28.32 million; management said this provided sufficient capital and alleviated the going-concern issue. The company also repaid the $3.15 million convertible-note principal and $55,473 of accrued interest in July and August 2021.
- The post-quarter offering issued 11.07 million common shares and warrants to purchase up to 11.61 million shares at $2.79 per share. This materially increased potential dilution. Shares outstanding at August 13, 2021 were 22,927,465.
- A new five-year office lease began July 1, 2021, with stated annual payments rising from $180,456 to $233,653 over the primary term; a renewal option could extend the lease for three years.
- A securities-related lawsuit remained pending: the company’s motion to dismiss defendants’ amended counterclaims was filed June 25, 2021, and had not yet been opposed. Management said it was unaware of other pending or threatened litigation expected to materially affect the company.
- The company reported that disclosure controls were effective at June 30, 2021 and described remediation of previously disclosed internal-control weaknesses, including hiring experienced personnel and improving accounting processes and documentation.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is for Jupiter Wellness, Inc. (Nasdaq: JUPW/JUPWW), not BONK, INC.
- Review the offering’s final share and warrant terms, post-offering capitalization, and potential dilution from outstanding options and warrants.
- Assess cash burn against the company’s stated development plans and verify the post-quarter debt repayment and available liquidity.
- Examine the drivers and recurrence of stock-based compensation, debt-discount amortization, and the one-time $669,200 settlement gain.
- Track product-development, clinical and regulatory milestones, COVID-related demand effects, the pending litigation, and the commitments under the new lease.