Asfiled with the Securities and Exchange Commission on January 13, 2023
RegistrationNo. 333-
UNITEDSTATES
SECURITIESAND EXCHANGE COMMISSION
Washington,D.C. 20549
FORMS-1
REGISTRATIONSTATEMENT
UNDER
THESECURITIES ACT OF 1933
Mangoceuticals,Inc.
(ExactName of Registrant as Specified in Its Charter)
Texas | | 8099 | | 87-3841292 |
(State or Other Jurisdiction of Incorporation or Organization) | | (Primary Standard Industrial Classification Code Number) | | (I.R.S. Employer Identification Number) |
15110N. Dallas Parkway, Suite 600
Dallas, Texas 75248
(214)242-9619
(Address,Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
JacobD. Cohen
ChiefExecutive Officer
Mangoceuticals,Inc.
15110N. Dallas Parkway, Suite 600
Dallas, Texas 75248
(214)242-9619
(Name,Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
Copiesto:
David M. Loev, Esq. | | Spencer G. Feldman, Esq. |
John S. Gillies, Esq. | | Olshan Frome Wolosky LLP |
The Loev Law Firm, PC | | 1325 Avenue of the Americas |
6300 West Loop South, Suite 280 | | 15th Floor |
Bellaire, Texas 77401 | | New York, New York 10019 |
Telephone: (713) 524-4110 | | Telephone: (212) 451-2300 |
Approximatedate of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
Ifany of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under theSecurities Act of 1933, check the following box. ☐
Ifthis form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the followingbox and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.☐
Ifthis form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list theSecurities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Ifthis form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list theSecurities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicateby check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reportingcompany, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| | Emerging growth company | ☒ |
Ifan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complyingwith any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
TheRegistrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until theRegistrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effectivein accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such dateas the Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORYNOTE
ThisRegistration Statement contains two prospectuses, as set forth below.
| ● | Public Offering Prospectus. A prospectus to be used for the public offering of 1,250,000 shares of common stock of the registrant (not including shares of common stock issuable upon exercise of the underwriters’ over-allotment option) (the “Public Offering Prospectus”) through the underwriters named on the cover page of the Public Offering Prospectus. |
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| ● | Resale Prospectus. A prospectus to be used for the resale by the selling shareholders set forth therein of 4,690,000 shares of common stock of the registrant (the “Resale Prospectus”). |
TheResale Prospectus is substantially identical to the Public Offering Prospectus, except for the following principal items:
| ● | they contain different front cover pages and back cover pages; |
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| ● | all references in the Public Offering Prospectus to “this offering” or “this initial public offering” will be changed to “our initial public offering” and/or “the IPO,” defined as the underwritten initial public offering of our common stock, in the Resale Prospectus; |
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| ● | all references in the Public Offering Prospectus to “underwriters” will be changed to “underwriters of the IPO” in the Resale Prospectus; |
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| ● | they contain different “The Offering” sections; |
| | |
| ● | the Resale Prospectus includes a separate “Private Placement Offering” section; |
| | |
| ● | the section “Shares Eligible For Future Sale—Selling Shareholder Resale Prospectus” from the Public Offering Prospectus is deleted from the Resale Prospectus; |
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| ● | the “Underwriting” section from the Public Offering Prospectus is deleted from the Resale Prospectus and a “Plan of Distribution” section is inserted in its place; |
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| ● | the “Capitalization” and “Dilution” sections are deleted from the Resale Prospectus; |
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| ● | a “Selling Shareholders” section is included in the Resale Prospectus; |
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| ● | the “Legal Matters” section in the Resale Prospectus deletes the reference to counsel for the underwriters; and |
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| ● | they contain different back pages. |
Theregistrant has included in this registration statement a set of alternate pages after the outside back cover page of the Public OfferingProspectus, which we refer to as the Alternate Pages, to reflect the foregoing differences in the Resale Prospectus as compared to thePublic Offering Prospectus. The Public Offering Prospectus will exclude the Alternate Pages and will be used for the public offeringby the registrant. The Resale Prospectus will be substantially identical to the Public Offering Prospectus except for the addition orsubstitution of the Alternate Pages and will be used for the resale offering by the selling shareholders (it being understood that noneof the shares being registered for resale by the selling shareholders in the Resale Prospectus may be sold prior to the closing of ourinitial public offering under the Public Offering Prospectus, and only then in compliance with applicable laws, rules and regulations).
Theinformation in this preliminary prospectus is not complete and may be changed. We may not sell these securities nor may we accept offersto buy these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This preliminaryprospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where theoffer or sale is not permitted.
PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION, DATED JANUARY 13, 2023 |
1,250,000 Shares
Mangoceuticals,Inc.
CommonStock
Thisis a firm commitment initial public offering of shares of common stock of Mangoceuticals, Inc. Prior to this offering, there has beenno public market for our common stock. It is currently estimated that the initial public offering price per share will be between $3.00and $5.00 per share. We intend to list the common stock for trading on The Nasdaq Capital Market under the symbol “MNGO”If our common stock is not approved for listing on The Nasdaq Capital Market, we will not consummate this offering.
Aftercompletion of this offering, Cohen Enterprises, Inc., our largest single shareholder, controlled by Jacob D. Cohen, our Chairman andChief Executive Officer, will continue to own approximately 53.5% of our outstanding common stock. We are a “controlledcompany” as defined under Nasdaq Marketplace Rules and are eligible for certain exemptions from these rules, though we do not intendto rely on any such exemptions. See “Risk Factors – Jacob D. Cohen, our Chairman and Chief Executive Officer, beneficiallyowns greater than 50% of our outstanding common stock ” for more information.
Atthe same time as the offering set forth in this prospectus (the “Public Offering Prospectus”), we are registering the resaleof 4,690,000 shares of common stock, consisting of 2,690,000 outstanding shares of common stock and 2,000,000 sharesof common stock issuable upon the exercise of warrants to purchase common stock (the “Resale Prospectus”), under a separateprospectus.
Weare an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and, as such, mayelect to comply with certain reduced public company reporting requirements for future filings.
| | Per Share | | | Total | |
Initial public offering price | | $ | | | | $ | | |
Underwriting discounts and commissions(1) | | $ | | | | $ | | |
Proceeds to us, before expenses | | $ | | | | $ | | |
(1) | Please refer to the section entitled “Underwriting” for additional information regarding total underwriter compensation. We have agreed to pay the representative of the underwriters a non-accountable expense allowance equal to 1% of gross proceeds and reimburse the representative of the underwriters for its reasonable out-of-pocket expenses, including legal fees, up to $230,000. We have also agreed to issue warrants to the representative of the underwriters. |
Wehave granted the underwriters an option for a period of 45 days after the date of this prospectus to purchase up to 15% of the totalnumber of our shares of common stock to be offered by us pursuant to this offering (excluding shares of common stock subject to thisoption), solely for the purpose of covering over-allotments, at the initial public offering price less the underwriting discounts andcommissions.
Aninvestment in our common stock involves a high degree of risk. You should carefully consider the risk factors set forth under “RiskFactors,” beginning on page 12 of this prospectus before you make your decision to invest in our common stock.
Neitherthe Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon theaccuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
TheUnderwriter expects to deliver the shares of common stock against payment as set forth under “Underwriting,” on or about , 2023.
BousteadSecurities, LLC
Thedate of this prospectus is , 2023
TABLEOF CONTENTS
Glossaryof Industry Terms
Thefollowing are abbreviations, acronyms and definitions of certain terms used in this document, which are commonly used in our industry:
“API”means active pharmaceutical ingredients.
“cGMP”means current good manufacturing practice regulations promulgated by the FDA under the authority of the FFDCA. These regulations, whichhave the force of law, require that manufacturers, processors, and packagers of drugs, medical devices, some food, and blood take proactivesteps to ensure that their products are safe, pure, and effective.
“FFDCA”means the Federal Food, Drug and Cosmetic Act, which is a set of U.S. laws passed by Congress in 1938 giving authority to the FDA tooversee the safety of food, drugs, medical devices, and cosmetics.
“HIPAA”means the Health Insurance Portability and Accountability Act of 1996, which has the goal of making it easier for people to keep healthinsurance, protect the confidentiality and security of healthcare information and help the healthcare industry control administrativecosts.
“HITECH”means the Health Information Technology for Economic and Clinical Health Act.
“IU”means International Unit, which is a unit of measurement for the effect, not mass of a substance; the variance is based on the biologicalactivity or effect, for the purpose of easier comparison across similar forms of substances. IUs are used to measure the activity ofmany vitamins, hormones, enzymes, and drugs.
“Individuallyidentifiable health information” is defined by HIPPA to mean information that is a subset of health information, includingdemographic information collected from an individual, and: (1) is created or received by a health care provider, health plan, employer,or health care clearinghouse; and (2) relates to the past, present, or future physical or mental health or condition of an individual;the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual;and (a) that identifies the individual; or (b) with respect to which there is reasonable basis to believe the information can be usedto identify the individual.
“Mg”means milligrams.
“NCPDP”means the National Council for Prescription Drug Programs, which is an American National Standards Institute accredited, standards developmentorganization providing healthcare solutions.
“NPI”means National Provider Identifier, which is a Health Insurance Portability and Accountability Act (HIPAA) Administrative SimplificationStandard. The NPI is a unique identification number for covered health care providers.
“PII”means personal identifiable information.
“TSBP”means The Texas State Board of Pharmacy, which is the state agency responsible for the licensing/registration of Texas pharmacists, pharmacytechnicians, and pharmacies; for establishing regulations for pharmacy practice; and for disciplining licensees and registrants.
“URAC”means the Utilization Review Accreditation Commission, which is a review accreditation commission which offer health organizations anopportunity to have trained reviewers examine their operations and publicly ensure they are delivering care in a manner consistent withnational standards.
AboutThis Prospectus
Nodealer, salesperson or other individual has been authorized to give any information or to make any representation other than those containedin this prospectus in connection with the offer made by this prospectus and, if given or made, such information or representations mustnot be relied upon as having been authorized by us. This prospectus does not constitute an offer to sell or a solicitation of an offerto buy any securities in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making suchoffer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Neitherthe delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has beenno change in our affairs or that information contained herein is correct as of any time subsequent to the date hereof.
Forinvestors outside the United States: We and the underwriters have not done anything that would permit this offering or possessionor distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Personsoutside the United States who come into possession of this prospectus must inform themselves, and observe any restrictions relating to,the offering of the shares of our common stock and the distribution of this prospectus outside the United States.
Ourlogo and some of our trademarks and tradenames are used in this prospectus. This prospectus also includes trademarks, tradenames andservice marks that are the property of others. Solely for convenience, trademarks, tradenames and service marks referred to in this prospectusmay appear without the ®, ™ and SM symbols. References to our trademarks, tradenames and service marks are not intended toindicate in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable licensorsif any, nor that respective owners to other intellectual property rights will not assert, to the fullest extent under applicable law,their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationshipwith, or endorsement or sponsorship of us by, any other companies.
Themarket data and certain other statistical information used throughout this prospectus are based on independent industry publications,reports by market research firms or other independent sources that we believe to be reliable sources; and we have not commissionedany of the market or survey data that is presented in this prospectus. Industry publications and third-party research, surveys andstudies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guaranteethe accuracy or completeness of such information. We are responsible for all of the disclosures contained in this prospectus, and webelieve these industry publications and third-party research, surveys and studies are reliable. While we are not aware of any misstatementsregarding any third-party information presented in this prospectus, their estimates, in particular, as they relate to projections, involvenumerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussedunder the section entitled “Risk Factors” beginning on page 12 of this prospectus. These and otherfactors could cause our future performance to differ materially from our assumptions and estimates. Some market and other data includedherein, as well as the data of competitors as they relate to Mangoceuticals, Inc., is also based on our good faith estimates.
Unlessthe context otherwise requires, references in this prospectus to “we,” “us,” “our,” the “Company,”and “Mangoceuticals” refer to Mangoceuticals, Inc.
ProspectusSummary
Thissummary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that youshould consider before deciding to invest in our common stock. You should read this entire prospectus carefully, including the “RiskFactors” section, our historical financial statements and the notes thereto, each included elsewhere in this prospectus.
Overview
Weplan to connect consumers to licensed healthcare professionals through our recently launched website at www.MangoRX.com for theprovision of care via telehealth on our customer portal and plan to also provide access for customers to a licensed pharmacy for onlinefulfillment and distribution of certain medications that may be prescribed as part of telehealth consultations. To date, we have developedwhat we believe is a go-to-market strategy inclusive of product development, operations, marketing and advertising; however, we havenot produced a significant amount of products and have generated only nominal revenues to date.
Wehave identified men’s wellness telemedicine services and products as a growing sector in recent years and especially relatedto the areas of erectile dysfunction (“ED”) products. We have developed and are currently in the process ofpreparing to commercially market a new brand of ED product under the brand name “Mango.” This product isproduced at a compounding pharmacy and is available to patients on the determination of a prescribing physician that thecompounded drug is necessary for the individual patient. This product currently includes the following U.S. Food and DrugAdministration (“FDA”) approved ingredients: Tadalafil (the active ingredient in Cialis), Oxytocin and L-Arginine,an amino acid that is available as a dietary supplement; however, these FDA approvals do not mean that these ingredients willprove safe when combined into a single formulation to treat ED. We currently offer two dosage levels of our Mango ED product andanticipate doctors prescribing a dosage based on the needs and medical history of the patient. Our Mango ED product currentlyincludes the following ingredients: (1) Tadalafil (10 milligrams (mg)), Oxytocin (100 International units (IU)) and L-Arginine(50mg); and (2) Tadalafil (20mg), Oxytocin (100IU) and L-Arginine (50mg). Our Mango ED product has not been, and will not be,approved by the FDA and instead we plan to produce and sell our products, including our Mango ED product, under an exemptionprovided by Section 503A of the Federal Food, Drug, and Cosmetic Act, as discussed below.
Weare not aware of any clinical studies involving the administration of tadalafil sublingually at the doses we provide patients, or thecompounding of tadalafil, oxytocin, and L-arginine to treat ED, as is contemplated by our ED product. We are, however, aware of other companies that are currently selling oral disintegrating tablets for ED, including those using a combination of Tadalafil and Sildenafil (the active ingredient in Viagra). Additionally,because our Mango ED product is being specially compounded for the customer by a pharmacist with a physician’s prescription and because the ingredients for our Mango ED productwill be publicly disclosed, this product formula can be replicated by othercompanies.
Becauseour ED product has not been, and will not be, approved by the FDA, our product has not had the benefit of the FDA’s clinical trialprotocol which seeks to prevent the possibility of serious patient injury and death. If this were to occur, we could be subject to litigationand governmental action, which could result in costly litigation, significant fines, judgments or penalties.
Wecurrently anticipate using approximately $1.8 million of the net proceeds of this offering to finance the marketing and operational expensesassociated with the planned marketing of our Mango ED product. We launched our website in mid-November 2022. To date, we have sold only a small amount of products and generated only nominal revenues. We plan to market and seek to sell commercial quantities of our Mango ED product in the first quarter of 2023 following this offering
Mangohas been formulated as a Rapid Dissolve Tablet (“RDT”) using a sublingual (applied under the tongue) delivery system to bypassthe stomach and liver. It is a generally established principle that sublingual drug absorption through the oral mucosa is generallyfaster than drug absorption through the gastrointestinal tract. This is because sublingual drugs that are absorbed through the oralmucosa directly enter the systemic circulation, bypassing the gastrointestinal tract and first-pass metabolism in the liver (see H. Zhanget al., Oral mucosal drug delivery: clinical pharmacokinetics and therapeutic applications, 41 ClinPharmacokinet 661, 662 (2002). Though the active ingredients that comprise our Mango product are meant to treat ED –an issue that according to a 2018 study published in The Journal of Sexual Medicine has been estimated to affect over one-thirdof today’s men’s population (with prevalence increasing with age) – we are also aiming to brand ourselves as a lifestylecompany marketed to men seeking enhanced sexual vitality, performance, and overall mood and confidence. Mango is expected to be soldexclusively online via our recently launched website at www.MangoRX.com.
OurCustomer Portal
Ourcustomer platform connects consumers to licensed healthcare professionals through our recently launched website at www.MangoRX.comfor the provision of care via telehealth and also provides access for customers to our licensed pharmacy for online fulfillmentand distribution of certain medications that may be prescribed as part of a telehealth consultation. Additional features to this backendtechnology solution allow for the creation and management of customer accounts whereby customers will have the ability to login, viewand make changes to their respective accounts, including reviewing order history, tracking order shipments, requesting and ordering productrefills and making other profile changes such as shipping address and payment changes. Our portal is not unique to the industry and isnot anticipated to be difficult or costly to replicate or replace.
Thebackend technology solution will also house and manage all customer data providing us with additional key functionality, including toprovide customer service and support and data analytics for various marketing initiatives and reporting functions.
Wedo not anticipate selling any third-party products via our portal.
OurGrowth Strategy
Ourgrowth strategy includes the following key initiatives:
Utilizea variety of marketing channels using data analytics to attract customers
Weintend to market and advertise our Mango products on a variety of advertising mediums including social media, online search websites,television, radio, out-of-home, and other media channels, to the extent we are legally able to, and in compliance with applicable FDArules and requirements; however, due to such rules and requirements, we expect that we will be extremely limited in the content of theclaims and promotional statements that we will able to make regarding our products under applicable FDA regulations. We believe advertisingin a diversified set of media channels will be important to prevent overreliance on any single channel and to maximize the exposure ofour brand to our desired customers. We also intend to reach our customers through our own future social media accounts, press coverageand public relations, internally developed educational and lifestyle content, and through engagement of social media influencers, hiredand paid celebrities and talent, and physical brand advertising campaigns and in each case subject to applicable rules and regulations,which are expected to significantly limit the content of such marketing materials. We believe that this overall strategy will drive customer traffic to our platform, including direct type-in traffic and organic online search traffic.
Wealso intend to utilize a marketing strategy focused on analytics and data. We have designed our internal systems to measureconsumer behavior, including which types of consumers generate more revenue in their first purchase, generate more revenue over time,generate more gross profit from their purchases, and which types of consumers are most valuable over their lifetime. We also plan onmeasuring the effectiveness of our marketing budgets and the rate of return we generate from our marketing campaigns. We have retainedand plan on using an outside marketing and advertising firm to assist management in identifying marketing and advertising campaigns,media purchases and mediums, and seeking to drive a sufficient rate of return from our marketing and advertising budgets.
Investin our telemedicine platform to enable sales throughout the United States
Weplan to utilize both a synchronous and asynchronous approach through our telemedicine platform, connecting customers through our platformand contracted physicians and pharmacy. An asynchronous visit allows a physician to verify the patient’s identity, demographicsand collect the medical history online without needing to physically see or speak to the patient while a synchronous visit requires thedoctor to either speak directly to the patient and/or see the patient either via video conference or in person. As discussed above, weinitially plan to focus our sales in the 36 states where our related party pharmacy is licensed, with the goal of eventually undertakingsales across all 50 states, pending licensing approvals of our related party pharmacy.
Providesubscription plans for recurring revenue and introduction of new products
Weintend to provide our customers with an option to purchase our Mango products on a subscription basis. Subscription plans are expectedto provide an easy and convenient way for customers to get ongoing treatment while simultaneously providing us with predictability througha recurring revenue stream.
Forsubscription plans, we expect that customers will be able to select a desired timeframe in which to receive products, which we expectwill range from once every month to once every six months, depending on several factors. The customer will then be billed on a recurringbasis based on the selected timeframe and specified quantity of product, which will be shipped after each billing from our contractedpharmacy (Epiq Scripts (defined and discussed below)). Customers will be able to cancel subscriptions in between billing periodsto stop receiving additional products and reactivate subscriptions. Our integrated technology platform is expected to allow us toefficiently serve customers from customer discovery, through the purchase of products on our website, to connecting customers with medicalproviders for telehealth consultations (through our contracted physician network (which is contracted through Epiq Scripts(defined and discussed below)), to the fulfillment and delivery of orders (through our contracted pharmacy), and finally throughongoing management by medical providers (also through our contracted physician network). We expect that our platform will provideus cost advantages and efficiencies to offer customers affordable prices and generate increased revenues over time.
Weintend to launch new products over time and offer additional subscription-based offerings which we hope will result in growth in revenuethrough recurring revenue streams.
TheMarket for ED Products
Accordingto a January 2022 report published by VerifiedMarket Research, the Global Erectile Dysfunction Drugs Market size was valued at $3.63billion in 2020, mainly due to the increase in patient awareness and the early adoption of sedentary lifestyle. Verified MarketResearch also projects that the total Global Dysfunction Drugs Market size will contract to $2.95 billion in 2028. The expected reasonfor this contraction is poor patient compliance with erectile dysfunction drugs and the future availability of cost-effective imitationmedicines, as well as side effects of ED drugs. We do not anticipate our Mango ED drug suffering from these limitations, as we believeour product is easy to use and we plan to price our product competitively. Separately,Grand View Research, in a July 2022 report, projects that the U.S. market (where we initially plan to market our ED product) for erectiledysfunction drugs which is estimated at approximately $1.1 billion as of 2021, will increase at a 7.4% compound annual growth rate though2030.
Further,it is estimated that nearly 3-in-5 men questioned in the U.S. have suffered from erectile dysfunction, according to a survey reportedin February 2022 by LetsGetChecked, a leading at-home health screeningand insights company (based on research carried out by Opinium Research among 2,006 men in the U.S., 1,178 of whom had previously experiencederectile dysfunction, from February 7-10, 2020). According to that study, age isn’t that big a factor either, with 56% of men 18-34years old being affected, compared to 63% of those over the age of 55. The study also determined that most men blame psychological factorsfor ED – with 41% blaming stress, 34% blaming having “too much on their mind,” and 31% believing it is performance anxiety.
Competitionand Competitive Advantages
Weplan to mainly compete with other companies offering men’s wellness products, including Hims & Hers Health, Inc. and Roman.With our Mango product, we will also be competing against much larger pharmaceutical companies which offer ED brandeddrugs like Viagra (Pfizer) and Cialis (marketed by Lilly ICOS LLC, a joint venture between Eli Lilly and Company and ICOS Corporation)and their generic forms. These companies have much greater resources than we do and well-known brand names.
Ourfuture men’s wellness products will also likely need to compete against other traditional healthcare providers, pharmacies, andlarge retailers that sell non-prescription products.
Furthermore,we will need to compete with other companies, which have greater resources and a greater advertising budget, and which are also sellingTadalafil (or similar products) in an oral disintegrating tablet. For example, we are aware of other companiesthat are currently selling oral disintegrating tablets for ED, including those using a combination of Tadalafil and Sildenafil (the active ingredient in Viagra).
Weintend to compete against these competitors based on our branding, advertising, unique compounding, and delivery system (i.e.,our Mango product has been designed to be taken sublingually, rather than in pill form).
Relativeto other online direct to consumer telemedicine companies that are selling generic ED medication, we have priced our Mango EDproduct at a premium, due to the cost of compounding the product and the use of multiple ingredients. We are currently aware of ahandful of other direct to consumer companies that are also selling compounded ED medications and who are selling their products ata higher price than Mango’s current price. When comparing the current market for various pharmaceutical related EDproducts, we have attempted to position our pricing to be slightly above average as we anticipate marketing Mango to ademographic that will pay a premium what we believe to be a premium product relative to the competition for the treatment oferectile dysfunction.
RegulatoryEnvironment
Weplan to produce and sell our products, including our Mango ED product under an exemption provided by Section 503A ofthe Federal Food, Drug, and Cosmetic Act (“FFDCA Act”). Section 503A describes the conditions under which compounded humandrug products are exempt from the FFDCA Act sections on FDA approval, current good manufacturing practice (“cGMP”) requirements,and labeling with adequate directions for use. One of these conditions is that the drugs must be compounded based on the receipt of validpatient-specific prescriptions; another condition limits “copying” of FDA-approved products, which restricts compoundingdrugs that have the same active ingredients and route of administration as FDA-approved products that are commercially available. TheFDA also prohibits any marketing or promotional statements that are “false or misleading in any particular,” including makingany unsupported superiority claims against other products or the failure to disclose a material fact.
Notwithstandingthe above, under relevant FDA guidance, the FDA generally does not consider a compounded drug to be “essentially a copy”of a commercially available drug if the compounded drug has a different route of administration as compared with the approvedalternative, and our Mango ED product is for a different route of administration (e.g., sublingual). In addition, the FDAdoes not consider a compounded drug to be “essentially a copy” of a commercially available drug if the approved productcannot be used for the prescribed route of administration, which is available in the compounded version (which we believe it cannot,as discussed below). Finally, we do not expect that we will be deemed to have engaged in such “copying”, because ourMango ED product is based on a prescriber’s determination for each patient that the change associated with thecompounded product (our Mango ED product) produces for the patient a significant difference as compared with the commerciallyavailable drug product. Under relevant FDA guidance, the FDA does not consider a compounded drug “essentially a copy” ifa prescriber determines that there is a change, made for an identified individual patient, which produces for that patient asignificant difference from the commercially available product.
UnderSection 503A of the FFDCA Act, it is the prescribing practitioner who determines if a compounded drug is necessary for the identifiedpatient and whether the change associated with the compounded product produces for the patient a significant difference as compared withthe commercially available drug product. FDA’s guidance states that the FDA generally does not intend to question prescriber determinationsthat are appropriately documented. Our Mango ED compounded product has been formulated as a Rapid Dissolve Tablet using a sublingual(applied under the tongue) delivery system to bypass the stomach and liver. We believe this will offer a significant difference basedon the fact that the approved versions are not available in the same route of administration (i.e., sublingual). A sublingual formulationmay be able to meet the clinical needs of a particular patient who desires a more rapid onset of action compared to an FDA-approved oralformulation. In addition, because the prevalence of ED generally increases with age, older patients who may have difficulty swallowingan FDA-approved oral formulation may benefit from a sublingual formulation that dissolves under the tongue.
Compoundeddrugs, like our Mango ED product, are not FDA-approved. This means that the FDA does not verify the safety or effectiveness ofsuch drugs. Instead, consumers rely on the determination of a prescribing physician that the compounded drug is necessary for the individualpatient. Compounded drugs also lack an FDA finding of manufacturing quality before such drugs are marketed.
TheFDA has the authority to impose significant restrictions on products through regulations on advertising, promotional anddistribution activities. In particular, the FDA will object to any promotional activity (including through testimonials andsurrogates) that is “false or misleading in any particular,” including the failure to disclose material facts. Forexample, the FDA will expect adequate substantiation for an efficacy claim, which would require substantial evidence derived fromadequate and well-controlled clinical trials. We believe we can conduct truthful and nonmisleading promotional activities,including activities involving the use of testimonials and surrogates, with limited claims that do not require substantial evidencederived from adequate and well-controlled clinical trials and which do not include efficacy claims.
Weare also aware of data in the scientific literature supporting how the proposed combination of the compounds which make up our Mango ED product (i.e., tadalafil, oxytocin, and L-arginine) might be expected to perform in ED patients. Previousclinical studies (none of which we have paid for or undertaken ourselves) have suggested that tadalafil and L-arginine in combinationfor treatment of ED may be more effective than either compound alone—This is because L-arginine may increase nitric oxide, thatin turn may increase cyclic guanosine monophosphate, which has relaxation and vasodilation (dilatation of blood vessels) effects on smoothmuscle to assist in the treatment of ED. Furthermore, oxytocin is a neurotransmitter linked to increased levels of social interaction,well-being, and anti-stress effects and clinical studies suggest administration of oxytocin may stimulate certain aspects of social interaction,and may cause anti-anxiety and anti-stress effects.
Neitherwe, nor our representatives have had any conversations with the FDA staff regarding whether our Mango ED product can be soldpursuant to Section 503A of the FFDCA Act and future conversations with the FDA may result in the FDA staff raising issues with such sales pursuant to Section 503A of the FFDCA, requiring certain pre-requisites or changes to our current business plan, whichmay be costly or time consuming, and/or may result in us being prohibited from selling our Mango ED product pursuant to Section503A of the FFDCA Act.
OurContracted Telehealth Provider
Inmany states, including Texas where we are located, the corporate practice of medicine doctrine prohibits corporations from practicing medicine andfrom employing physicians to provide professional medical services. Many states that recognize this doctrine also prohibit physiciansfrom agreeing to share the fees they receive for professional services with unlicensed entities or individuals, a practice that is commonlyknown as “fee splitting.” The requirements for compliance with any applicable corporate practice of medicine and fee splittingrestrictions vary among the states. In Texas, for example, there is no statute that expressly prohibits fee splitting, but the corporatepractice of medicine doctrine has been interpreted to prohibit physicians from ceding control over their fee structures to corporateentities or giving a substantial portion of the fees received to corporate entities.
Inorder to comply with the corporate practice of medicine and fee splitting restrictions, we do not employ or directly contract with individualphysicians or physician groups, nor do we control their medical decision-making or charges. Rather, on August 1, 2022, we entered intoa Physician Services Agreement (the “Physicians Agreement”) with BrighterMD, LLC doing business as Doctegrity (“Doctegrity”),as discussed in further detail below under, which has agreed to make available to us, healthcare professionals, to allow them to provideclinical services directly to our future customers via telehealth. We plan to integrate these healthcare professionals to allow for telehealthconsultations and related services on our Mangoceuticals platform which has been developed and is complete. This platform is thebackbone of our business as it connects consumers with both the medical provider and the pharmacy for fulfillment. It is also thesystem that we will use to create marketing funnels for outgoing marketing, customer management and support, and analytics for futuresales.
PhysicianServices Agreement with Doctegrity
Pursuantto the Physicians Agreement, Doctegrity, which provides online telemedicine technology services and provides access to independentlycontracted licensed physicians and providers, agreed to (a) arrange for the services of a physician or, where appropriate, a mid-levelpractitioner with delegated authority from a physician, licensed in the appropriate state the practice of medicine will take place, whowill establish a physician/patient relationship with patients associated with our platform in accordance with the laws and regulationsof the appropriate state(s) and also provide physician review and assessment and quality control of our or related brands’advertising of services, medical questionnaires and related prescription requests; and (b) provide an asynchronous telehealth platform(and in certain cases, synchronous capabilities in certain U.S. states where and when available and applicable) which provides patientaccess to licensed physicians in the state from which the patient, who is participating under our platform, resides.
Wechose to contract with Doctegrity after reviewing and comparing the fees and services offered by similar telehealth platform companiesthat facilitate visits between health care professionalsand patients.
Aftera patient visits our website and submits a request for a consultation with a health care professional,Doctegrity will communicate the patient’s information to one of its affiliated physicians. Doctegrity and the physicianswill be responsible for conducting the telehealth consultation and any ongoing communication with the patient in accordance with applicablelaws. The physicians will make a determination, in their sole discretion, as to whether or not to prescribe our products (initiallyour Mango ED product) to potential customers. If the physicians prescribe our Mango ED product, then the customers will pay us for ourproducts. In turn, Epiq Scripts, LLC, pursuant to the Master Services Agreement discussed below, will be provided information on thecustomer and compounding of our product, will compound the product, and ship the product to customers using packaging and shipping materialswhich we supply.
Wewill pay Doctegrity for each physician visit conducted in response to request made by a patient on our website, regardless of whetherthe physician prescribes our product to the patient. The fee we pay Doctegrity is fixed, set in advance and was negotiated at arms’length after comparing the prices offered by similar services. We are not a party to any contracts between Doctegrity and any healthprofessionals or physician groups and do not control how Doctegrity reimburses these providers.
Althoughour arrangement with Doctegrity, as summarized above, is structured to comply with applicable laws, including those restricting the corporatepractice of medicine and fee splitting, there may be a risk that a state agency, now or in the future as these laws (and interpretationsof them) evolve, would conclude that the arrangement and fee structure between Doctegrity and its contracted physicians and/or our agreementwith Doctegrity violates the corporate practice of medicine doctrine and fee splitting restrictions in Texas or in another state wherea patient who uses our Mangoceuticals platform is located.
ThePhysicians Agreement has a term of one year subject to automatic one-year renewals unless and until terminated in accordance with thePhysicians Agreement, including by either party with 90 days’ prior written notice with or without cause and for cause with tendays’ written notice.
MasterServices Agreement with Epiq Scripts
OnSeptember 1, 2022, and effective on August 30, 2022, we entered into a Master Services Agreement with Epiq Scripts, LLC (“EpiqScripts”), which is 51%-owned by American International Holdings Corp (“American International”). Mr. Cohen, our Chairmanand Chief Executive Officer, serves as the Chief Executive Officer and a director of, and has voting control over, American International.As discussed under “Company Information and Formation,” our company was wholly-owned by American International untilApril 16, 2022, when control of our company was sold to Cohen Enterprises, which is owned by Mr. Cohen. Epiq Scripts is a newlyformed entity, having being formed in January 2022, and to date has only recently began compounding drugs for patients.
Pursuantto the Master Services Agreement and a related statement of work (“SOW”), Epiq Scripts agreed to provide pharmacy and relatedservices to us, we agreed to exclusively use Epiq Scripts as the provider of the Services (defined below) during the termof the agreement, so long as Epiq Scripts complies with the terms of the Master Services Agreement. The agreement also includes a 30-dayright of first refusal for Epiq Scripts to provide pharmacy services for any new product that Mango may introduce during the term ofthe agreement.
Pursuantto the SOW, Epiq Scripts agreed to provide for the online fulfillment, specialty compounding, packaging, shipping, dispensing and distribution(collectively, the “Services”) of products sold exclusively via our website that may be prescribed as part of a telehealthconsultation on our platform. Epiq Scripts also agreed to provide mail service pharmacy services to us on an exclusive basis during theterm of the SOW.
Weagreed to provide Epiq Scripts with all custom packaging materials, including but not limited to, individual sachet and/or blister packagingmaterials, outer box packaging, and any custom inserts and/or marketing information to accompany the prescription shipment, if any andto provide Epiq Scripts with quarterly sales forecasts to ensure Epiq Scripts has enough packaging materials on hand to cover a 90-dayperiod. We agreed to pay for all direct shipping, delivery and related courier costs and to provide Epiq Scripts with direct access toany online accounts to access and generate shipping labels for the fulfillment and delivery of our products.
TheSOW has a term through December 31, 2025, automatically renewable thereafter for successive one-year terms unless either party terminatesthe agreement at least 90 days before renewal thereof and the SOW is subject to the same termination rights of the parties as set forthin the Master Services Agreement (discussed below).
Pursuantto the SOW, we agreed to pay Epiq Scripts certain fixed rate fees for prescription fulfillment, processing and packaging (per prescription)and drug compounding (per pill), provided the per pill rate is reduced upon us exceeding 3,500 product packages per month.
Underthe Master Services Agreement, we are solely responsible for billing and collecting funds from our customers and Epiq Scripts is paidout of funds that we actually collect.
Wepaid Epiq Scripts a total of $60,000 upon our entry into the Master Services Agreement, comprising $45,000 as a one-time non-refundabletechnology systems setup and implementation fee and $15,000 as an upfront retainer to be credited future products sales.
TheMaster Services Agreement has a term of five years, automatically renewable to additional one-year terms thereafter unless either partyprovides the other notice of termination at least 90 days prior to the date of automatic renewal. The Master Services Agreement can beterminated (i) upon breach of the agreement by the other party, subject to a 90-day cure right, (ii) if a party enters into bankruptcyor fails to pay its debts as they become due, or (iii) if Epiq Scripts becomes unable to perform the services covered by the Master ServicesAgreement and any statements of work associated therewith.
Duringthe nine months ended September 30, 2022, and in conjunction with the Master Services Agreement and Statement of Work, the Company prepaidEpiq Scripts $15,000 as a retainer to be credited towards future product sales.
EpiqScripts is located in Texas, and has filed with the Utilization Review Accreditation Commission (“URAC”) to obtain its pharmacyaccreditation and obtained its first state license in the State of Texas in February 2022. Epiq Scripts currently has State Board ofPharmacy (or its equivalent) licenses to operate in 36 states: Alaska, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia,Hawaii, Idaho, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, NewJersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Virginia, Washington,West Virginia, Wisconsin, and Wyoming. and plans to eventually obtain licenses in all 50 states by the end of the firstquarter of 2023, with some state licenses easier to obtain and quicker to obtain than others. Although Epiq Scripts is physicallylocated in Texas, it can ship products to customers in each state in which it holds a license.
Asa result of the above, Epiq Scripts can currently only provide the Services to us in the 36 states described above, andwe will be unable to sell its products to any customers in any states other than those named above, until Epiq Scripts is ableto obtain licenses in other states and will thereafter be limited to selling products to customers only in the states in which Epiq Scriptsholds licenses.
Pre-IPOBridge Financing
InAugust 2022, we initiated a private placement of up to $2 million of units to accredited investors, with each unit consisting of oneshare of common stock and a warrant to purchase one share of common stock, at a price of $1.00 per unit. The warrants have a five-yearterm (from each closing date that units were sold) and an exercise price of $1.00 per share. If at any time after the six-month anniversaryof the issuance date, there is no effective registration statement registering, or no current prospectus available for the resale ofthe shares of common stock issuable upon exercise the warrants, the holder of the warrants may elect a cashless exercise of the warrants.Boustead Securities, LLC, the underwriter of this offering, served as the placement agent in connection with the private placement. Intotal, we sold an aggregate of 2,000,000 units for $2,000,000 to 23 accredited investors between August 16, 2022 and December 22,2022, the end date of the offering, pursuant to Regulation D under the Securities Act of 1933.
NovelCoronavirus (“COVID-19”)
AlthoughCOVID-19 has had a major impact on businesses around the world, to date, due to our limited operations, we have not experienced any negativeimpacts from COVID-19; however, the full extent to which COVID-19 will ultimately impact us depends on future unknowable developments,including the duration and spread of the virus, as well as potential new seasonal outbreaks, the efficacy of vaccines, and the willingnessof individuals to take such vaccines, all of which are uncertain and cannot be predicted.
SelectedRisks Associated with Our Company
Ourbusiness is subject to numerous risks and uncertainties, including those in the section entitled “Risk Factors”and elsewhere in this prospectus. These risks include, but are not limited to, the following:
| ● | We have a limited operating history, have produced only a limited amount of products and have generated only nominal revenues to date; |
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| ● | Our ability to execute our growth strategy and scale our operations and risks associated with such growth, and our ability to attract members and customers; |
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| ● | The effect of the COVID-19 pandemic, and governmental responses thereto on our operations, those of our vendors, our customers and members and the economy in general; |
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| ● | Risks associated with our ED product which has not been, and will not be, approved by the FDA and has not had the benefit of the FDA’s clinical trial protocolwhich seeks to prevent the possibility of serious patient injury and death; |
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| ● | Risks that the FDA may determine that the compounding of our planned products does not fall within the exemption from the FFDCA Act provided by Section 503A; |
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| ● | Risks associated with related party relationships and agreements; |
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| ● | The effect of data security breaches, malicious code and/or hackers; |
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| ● | Competition and our ability to create a well-known brand name; |
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| ● | Changes in consumer tastes and preferences; |
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| ● | Material changes and/or terminations of our relationships with key parties; |
| ● | Significant product returns from customers, product liability, recalls and litigation associated with tainted products or products found to cause health issues; |
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| ● | Our ability to innovate, expand our offerings and compete against competitors which may have greater resources; |
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| ● | Our significant reliance on related party transactions; |
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| ● | Our Chairman and Chief Executive Officer, Jacob D. Cohen, has majority voting control over the company which may deter some investors; |
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| ● | Our ability to prevent credit card and payment fraud; |
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| ● | Risks associated with inflation, and increases in interest rates and economic downturns, including potential recessions, as well as macroeconomic, geopolitical, health and industry trends, pandemics, acts of war (including the ongoing Ukraine/Russian conflict) and other large-scale crises; |
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| ● | The risk of unauthorized access to confidential information; |
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| ● | Our ability to protect our intellectual property and trade secrets, claims from third-parties that we have violated their intellectual property or trade secrets and potential lawsuits in connection therewith; |
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| ● | Our and our providers’ ability to comply with government regulations, changing regulations and laws, penalties associated with any non-compliance (inadvertent or otherwise), the effect of new laws or regulations, and our ability to comply with such new laws or regulations; |
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| ● | Our reliance on our current management and the terms of their employment agreements with us; |
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| ● | The outcome of future lawsuits, litigation, regulatory matters or claims; |
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| ● | Certain terms and provisions of our governing documents which may prevent a change of control, and which provide for indemnification of officers and directors, limit the liability of officers or directors, and provide for the board of director’s ability to issue blank check preferred stock; and |
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| ● | The anticipated volatile nature of the trading price of our common stock following this offering; dilution experienced by investors in the offering; and dilution which may be caused by future sales of securities. |
CompanyInformation and Formation
Ourprincipal executive offices are located at 15110 N. Dallas Parkway, Suite 600, Dallas, Texas 75248, and ourtelephone number is (214) 242-9619. Our principal website address is www.mangorx.com. The information on or accessible throughour website is not part of this prospectus.
TheCompany was formed as a Texas corporation on October 7, 2021. At the time of the formation of the Company, the Company was wholly-ownedby American International. Jacob D. Cohen, our Chairman and Chief Executive Officer, holds majority voting control over American Internationaland also serves as the Chief Executive Officer, President and a member of the Board of Directors of American International.
AmericanInternational formed the Company with the intent of focusing on developing, marketing and selling a variety of men’s wellness productsand services via a telemedicine platform.
OnJune 16, 2022, American International entered into and closed the transactions contemplated by a Stock Purchase Agreement (the “SPA”)with Cohen Enterprises, Inc. (“Cohen Enterprises”), which is owned by Mr. Cohen, the Chairman and Chief Executive Officerof the Company, and who is also the majority shareholder of the Company.
AmericanInternational determined to divest its interests in the Company in order to focus on developing its pharmacy business through its 51%ownership of Epiq Scripts, which entity the Company has entered into the Master Services Agreement with as discussed above.
Pursuantto the SPA, American International sold 8,000,000 shares of the outstanding common stock of the Company which represented 80% of thethen outstanding shares of common stock of the Company, to Cohen Enterprises in consideration for $90,000, which was approximately thesame amount that had been advanced to the Company from American International through the date of the SPA ($89,200). Cohen Enterprisesalso acquired the right to be repaid the $89,200 advanced from American International to the Company, from the Company, pursuant to theterms of the SPA. As a result of the closing of the SPA, Cohen Enterprises increased its ownership of the Company to 90%, and AmericanInternational completely divested its interest in the Company.
Implicationsof Being an Emerging Growth Company
Asa company with less than $1.235 billion in revenue during our last fiscal year, we qualify as an “emerging growth company”under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we have elected to take advantageof reduced reporting requirements and are relieved of certain other significant requirements that are otherwise generally applicableto public companies. As an emerging growth company:
●we may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysisof Financial Condition and Results of Operations;
●we are exempt from the requirement to obtain an attestation and report from our auditors on whether we maintained effective internalcontrol over financial reporting under the Sarbanes-Oxley Act;
●we are permitted to provide less extensive disclosure about our executive compensation arrangements; and
●we are not required to give our shareholders non-binding advisory votes on executive compensation or golden parachute arrangements.
Wemay take advantage of these provisions until December 31, 2028 (the last day of the fiscal year following the fifth anniversaryof our initial public offering) if we continue to be an emerging growth company. We would cease to be an emerging growth company if wehave more than $1.235 billion in annual revenue, have more than $700 million in market value of our shares held by non-affiliates orissue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all ofthese reduced burdens. We have elected to provide two years of audited financial statements. Additionally, we have elected to take advantageof the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accountingstandards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer anemerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B)of the Securities Act.
ControlledCompany
JacobD. Cohen, our Chairman, Chief Executive Officer and principal shareholder (through an entity which he owns), currently controls approximately58.3% of the voting power of our capital stock (based on shares of common stock outstanding as of January 13, 2023) andwill control approximately 53.5% of the voting power of our capital stock upon completion of this offering, and we are thereforea “controlled company” as defined under Nasdaq Marketplace Rules. We do not currently intend to rely on the controlled companyexemptions provided under Nasdaq Marketplace Rules, which would otherwise permit us to rely on certain exemptions from corporate governancerules, including: (a) an exemption from the rule that a majority of our Board of Directors must be independent directors; (b) an exemptionfrom the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors;and (c) an exemption from the rule that our director nominees must be selected or recommended solely by independent directors. Notwithstandingthe above, we may rely on any or all of these “controlled company” exceptions in the future. We also do not plan to relyon any “phase-in” schedule allowed pursuant to applicable Nasdaq corporate governance rules associated with being a new publiccompany.
TheOffering
Common stock we are offering | | 1,250,000 shares (or 1,437,500 shares if the underwriters exercise their over-allotment option in full). |
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Over-allotment option | | We have granted to the underwriters an option to purchase up to an additional 187,500 shares of common stock (equal to 15% of the number of shares of common stock sold in the offering) from us, solely to cover over-allotments, if any, at the applicable public offering price less the underwriting discounts and commissions shown on the cover page of this prospectus. The underwriters may exercise this option in full or in part at any time and from time to time until 45 days after the date of this prospectus. |
Common stock outstanding immediately before this offering | | 13,715,000 shares |
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Common stock outstanding immediately after this offering | | 14,965,000 shares, or 15,152,500 shares if the over-allotment option is exercised in full. |
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Use of proceeds | | We expect to receive net proceeds from this offering of approximately $4.1 million (or approximately $4.8 million if the underwriters exercise in full their option to purchase 187,500 additional shares of our common stock), assuming an initial public offering price of $4 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses. We currently intend to use the net proceeds we receive from this offering to finance the marketing and operational expenses associated with the planned marketing of our Mango ED product, for general corporate purposes, including working capital, operating expenses, hiring additional personnel to build organizational talent and capital expenditures. In addition, we may use a portion of the net proceeds of this offering to finance future acquisitions or invest in complementary businesses, services, technologies, or intellectual property rights. However, we do not have any agreements or commitments with respect to any such acquisitions or investments at this time. See also “Use of Proceeds”. |
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Risk Factors | | The purchase of our common stock involves a high degree of risk. The common stock offered in this prospectus is for investment purposes only and currently no market exists for our common stock. Please refer to the section entitled “Risk Factors” before making an investment in our common stock. |
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Lock-up | | We, our directors, executive officers, and shareholders holding 5% or more of our outstanding common stock have agreed not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our securities for a period of 12 months following the closing of the offering of the shares, subject to certain exceptions and shareholders holding between 1% and 4.99% of our outstanding common stock have agreed not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our securities for a period of six months following the closing of the offering of the shares, subject to certain exceptions. Notwithstanding the above, now shares of common stock that are included in the Resale Prospectus are subject to such lock-up agreements. See “Underwriting” for more information. |
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Proposed trading symbol | | We have applied to list our common stock for trading on The Nasdaq Capital Market under the symbol “MNGO.” The approval of our listing on The Nasdaq Capital Market is a condition of closing this offering. However, no assurance can be given that our application will be approved and that our common stock will ever be listed on The Nasdaq Capital Market. If our application is not approved by The Nasdaq Capital Market, we will not be able to consummate the offering and will terminate the offering. |
Unlesswe indicate otherwise, all information in this prospectus:
| ● | is based on 13,715,000 shares of common stock issued and outstanding as of January 13, 2023; |
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| ● | assumes no exercise by the underwriters of their option to purchase up to an additional 187,500 shares of common stock to cover over-allotments, if any; |
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| ● | assumes no exercise of outstanding options to purchase 1,250,000 shares of common stock at an exercise price of $1.10 per share; |
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| ● | assumes no exercise of outstanding warrants to purchase 2,000,000 shares of common stock at an exercise price of $1.00 per share; |
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| ● | assumes no exercise of warrants to purchase shares of common stock issuable to the underwriter as underwriting consideration as discussed under “Underwriting”, below; and |
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| ● | excludes 1,850,000 shares of common stock reserved for future issuance under our 2022 Equity Incentive Plan. |
SummaryFinancial Data
Thefollowing table presents our summary historical financial data for the periods indicated. The summary historical financial data for theperiod from October 7, 2021 (Inception) through December 31, 2021 are derived from the audited financial statements included herein.The summary historical financial data for the nine months ended September 30, 2022 and the balance sheet data as of September30, 2022 are derived from the unaudited financial statements included herein.
Historicalresults are included for illustrative and informational purposes only and are not necessarily indicative of results we expect in futureperiods, and results of interim periods are not necessarily indicative of results for the entire year. You should read the followingsummary financial data in conjunction with “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” and our financial statements and related notes appearing elsewhere in this prospectus.
Statements of Operations Data: | | From October 7, 2021 (Inception) to December 31, 2021 | | | Nine Months Ended September 30, 2022 | |
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General and administrative expenses | | $ | 17,520 | | | $ | 1,319,727 | |
Interest expense | | | 181 | | | | 4,673 | |
Net loss | | $ | (17,701 | ) | | $ | (1,324,400 | ) |
| | September 30, 2022 | |
Balance Sheet Data: | | Actual | | | Pro Forma – Private Placement(1) | | | Pro Forma As Adjusted(2) | |
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Cash and cash equivalents | | $ | 873,491 | | | $ | 1,323,031 | | | $ | 5,515,031 | |
Total assets | | | 913,742 | | | | 1,363,282 | | | | 5,555,282 | |
Debt(3) | | | 89,200 | | | | 89,200 | | | | 89,200 | |
Working capital | | | 804,398 | | | | 1,273,411 | | | | 5,465,411 | |
Accumulated deficit | | | (1,342,101 | ) | | | (1,342,101 | ) | | | (1,342,101 | ) |
Total stockholders’ equity | | | 823,871 | | | | 1,272,207 | | | | 5,464,899 | |
(1)The Pro Forma – Private Placement column reflects the net proceeds $449,540 from the issuance of 499,500 shares of commonstock and warrants to purchase 499,500 shares of common stock in a private placement at a purchase price of $1.00 per unit which weresold in November and December 2022, after deducting the commissions and offering expenses payable by us.
(2)The Pro Forma As Adjusted column reflects the net proceeds from the sale of units described in footnote (1) above and assumes the saleof 1,250,000 shares of common stock in this offering, at $4.00 per share, the midpoint of the range set forth on the cover page hereof,less the underwriting discounts and commissions and estimated offering expenses payable by us. See also “Capitalization”,below.
(3) Represents notes payable from Jacob D. Cohen, ourChief Executive Officer.
RiskFactors
Investingin our common stock involves a high degree of risk. You should carefully consider each of the following risks, together with all otherinformation set forth in this prospectus, including the financial statements and the related notes, before making a decision to buy ourcommon stock. If any of the following risks actually occurs, our business could be harmed. In that case, the trading price of our commonstock could decline, and you may lose all or part of your investment.
RisksRelated to our Operating History and Need for Funding
Wewere recently formed, have a limited operating history and have generated only limited revenues to date and there is no assurancethat we can generate revenues or sell any commercial amount of our products in the future.
Wewere only recently formed and have limited operating history. We launched our website in mid-November 2022. To date we have sold onlya small amount of products and generated only nominal revenues. We plan to market and seek to sell commercial quantities of our MangoED product in the first quarter of 2023 following this offering. There is no assurance that we can generate commercial revenuesor sell any of its products in the marketplace, and even if revenues are generated there is no assurance that we can generatesufficient net income to support its operations.
Theseconditions raise substantial doubt about our ability to continue as a going concern for the next twelve months. The accompanying financialstatements have been prepared in accordance with accounting principles generally accepted in the United States of America on a goingconcern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly,the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities thatmight be necessary should we be unable to continue as a going concern. The financial statements included herein alsoinclude a going concern footnote from our auditors.
Sincewe have a limited operating history, it is difficult for potential investors to evaluate our business and our business is in a relativelynew consumer product segment, which is difficult to forecast.
Ourlimited operating history in the health and wellness industry may hinder our ability to successfully meet our objectives and makes itdifficult for potential investors to evaluate our business or prospective operations. As an early-stage company, we are subject to allthe risks inherent in the financing, expenditures, operations, regulatory compliance, complications and delays inherent in a new business.Accordingly, our business and success face risks from uncertainties faced by developing companies in a competitive environment. The likelihoodof our success must be considered in light of the problems, expenses, difficulties, regulatory challenges, complications and delays frequentlyencountered in connection with the formation of a new business, the development of a new strategy and the competitive environment inwhich we will operate. There can be no assurance that our efforts will be successful or that we will ultimately be able to attainprofitability.
Additionally,our industry segment is relatively new, and is constantly evolving. As a result, there is a lack of available information with whichto forecast industry trends or patterns. There is no assurance that sustainable industry trends or preferences will develop that willlead to predictable growth or earnings forecasts for individual companies or the industry segment as a whole. We are also unable to determinewhat impact future governmental regulation may have on trends and preferences or patterns within our industry segment.
Wewill need additional capital which may not be available on commercially acceptable terms, if at all, and this raises questions aboutour ability to continue as a going concern.
Weneed capital to support our operations and to commercialize our current Mango erectile dysfunction (“ED”) product.We may also require additional funding in the future to support our operations, expand our product line, pay expenses, or expand or completeacquisitions. The most likely source of future funds presently available to us will be through the sale of equity capital or debt. Anysale of share capital will result in dilution to existing shareholders. Furthermore, we may incur debt in the future, and may not havesufficient funds to repay our future indebtedness or may default on our future debts, jeopardizing our business viability.
Wemay not be able to borrow or raise additional capital in the future to meet our needs or to otherwise provide the capital necessary toexpand our operations and business, which might result in the value of our securities decreasing in value or becoming worthless. Additionalfinancing may not be available to us on terms that are acceptable. Consequently, we may not be able to proceed with our intended businessplans. Obtaining additional financing contains risks, including:
| ● | additional equity financing may not be available to us on satisfactory terms and any equity we are able to issue could lead to dilution for current shareholders; |
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| ● | loans or other debt instruments may have terms and/or conditions, such as interest rate, restrictive covenants and control or revocation provisions, which are not acceptable to management or our directors; |
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| ● | the current environment in capital markets combined with our capital constraints may prevent us from being able to obtain adequate debt financing; and |
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| ● | if we fail to obtain required additional financing to commercialize our products and grow our business, we would need to delay or scale back our business plan, reduce our operating costs, or delay product launches, each of which would have a material adverse effect on our business, future prospects, and financial condition. |
Additionally,we may have difficulty obtaining additional funding, and we may have to accept terms that would adversely affect our shareholders. Forexample, the terms of any future financings may impose restrictions on our right to declare dividends (provided that none are currentlyplanned) or on the manner in which we conduct our business. Additionally, lending institutions or private investors may impose restrictionson a future decision by us to make capital expenditures, acquisitions or significant asset sales. If we are unable to raise additionalfunds, we may be forced to curtail or even abandon our business plan.
RisksRelated to Our Business Activities
Wemay not be able to successfully commercialize our Mango ED product or any other potential future men’s wellnessproducts.
Wemay not be able to effectively commercialize our Mango erectile dysfunction (“ED”) product or any other potentialfuture men’s wellness products. If we are unable to successfully commercialize our Mango ED product or successfully develop, produce, launch and commercialize any other potential future men’s wellness products, our ability to generate product sales will be severely limited,which will have a material adverse impact on our business, financial condition, and results of operations.
Weexpect to face intense competition, often from companies with greater resources and experience than we have.
Thehealth, wellness, and telemedicine industries are highly competitive and subject to rapid change. The industries continue to expand andevolve as an increasing number of competitors and potential competitors enter the market. Many of these competitors and potential competitorshave substantially greater financial, technological, managerial and research and development resources and experience than we have. Weplan to mainly compete with other companies offering men’s wellness products, including Hims & Hers Health, Inc. and Roman;and with our Mango ED product, we will also be competing against much larger pharmaceutical companies who offer ED branded drugslike Viagra (Pfizer) and Cialis (marketed by Lilly ICOS LLC, a joint venture between Eli Lilly and Company and ICOS Corporation) andtheir generic forms. The majority of these competitors and potential competitors have more experience than we have in the developmentof health and wellness services and products. In addition, our planned services and products will compete with service and product offeringsfrom large and well-established companies that have greater marketing and sales experience and capabilities than we or the parties withwhich we contract have. If we are unable to compete successfully, we may be unable to grow and sustain our revenue.
Webelieve that our ability to compete depends upon many factors both within and beyond our control, including:
| ● | our marketing efforts; |
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| ● | the flexibility and variety of our product offerings relative to our competitors, and our ability to timely launch new product initiatives; |
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| ● | the quality and price of products offered by us and our competitors; |
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| ● | our reputation and brand strength relative to our competitors; |
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| ● | customer satisfaction; |
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| ● | the size and composition of our customer base; |
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| ● | the convenience of the experience that we provide; |
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| ● | our ability to comply with, and manage the costs of complying with, laws and regulations applicable to our business; and |
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| ● | our ability to cost-effectively source and distribute the products we offer and to manage our operation. |
Manycompetitors also have longer operating histories, and will have larger fulfillment infrastructures, greater technical capabilities, fastershipping times, lower-cost shipping, lower operating costs, greater financial, marketing, institutional and other resources and largerconsumer bases than we do. These factors may also allow our competitors to derive greater revenue and profits from their existing consumerbases, acquire consumers at lower costs or respond more quickly than we will be able to, to new or emerging technologies and changesin product trends and consumer shopping behavior. These competitors may engage in more extensive research and development efforts, enteror expand their presence in any or all of the ecommerce or retail channels where we plan to compete, undertake more far-reaching marketingcampaigns, and adopt more aggressive pricing policies, which may allow them to build larger consumer bases or generate revenue from theirexisting consumer bases more effectively than we will be able to. As a result, these competitors may be able to offer comparable or substituteproducts to consumers at similar or lower costs. This could put pressure on us to lower our prices, resulting in lower revenue and marginsor cause us to lose market share even if we lower prices.
Furthermore,companies with greater resources or more well-known brand names may attempt to compete with us, and as a result, we may lose currentor potential customers and may be unable to generate sufficient revenues to support our operations, any one of which could have a materialadverse effect on our ability to grow and our results of operations.
Wecannot be certain that we will successfully compete with larger competitors that have greater financial, sales, technical and other resources.Companies with greater resources may acquire our competitors or launch new products, and they may be able to use their resources andscale to respond to competitive pressures and changes in consumer preferences by reducing prices or increasing promotional activities,among other things.
Ifwe fail to successfully provide a good customer experience, including by developing new product offerings, our ability to attractmembers and customers may be materially adversely affected.
Ourability to obtain customers and retain future customers, attract customers and increase customer engagement with us will depend in parton our ability to successfully implement and improve our customer experience, including by continuing to create and introduce new productofferings, improving upon and enhancing our existing product offerings and strengthening our customers interactions with our brand andproducts. If new or enhanced product offerings are unsuccessful, we may be unable to attract or retain customers and our operating resultscould be materially adversely affected. Furthermore, new or shifting customer demands, tastes or interests, superior competitive offeringsor a deterioration in our product offering quality or our ability to bring new or enhanced product offerings to market quickly and efficientlycould negatively affect the attractiveness of our products and the economics of our business and require us to make substantial changesto and additional investments in our product offerings or business model.
Wemay expend our limited resources to pursue particular products or services and may fail to capitalize on products or services that maybe more profitable or for which there is a greater likelihood of success.
Becausewe have limited financial and managerial resources, we must focus our efforts on particular service programs and products. As a result,we may forego or delay pursuit of opportunities with other services or products that later prove to have greater commercial potential.Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.Any such failure could result in missed opportunities and/or our focus on products or services with low market potential, which wouldharm our business and financial condition. Our current use of proceeds is specifically focused on, among other things, branding, marketingand selling Mangoceuticals’ ED product, and does not include and capital allocated for future products or services anticipatedto be sold in the future under the ‘Mango’ label and brand.
Wehave entered into a Master Services Agreement and Statement of Work with Epiq Scripts, LLC, which entity is currently licensed to providepharmacy services in only 36 states.
Asdescribed in greater detail under “Business—Master Services Agreement with Epiq Scripts,” we have entered into a MasterServices Agreement and SOW for Epiq Scripts, a related party, to provide us pharmacy and compounding services. Epiq Scripts has filedwith the Utilization Review Accreditation Commission (“URAC”) to obtain its pharmacy accreditation and has State Board ofPharmacy (or its equivalent) licenses in 36 states: Alaska, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Hawaii,Idaho, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New Jersey,New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Virginia, Washington,West Virginia, Wisconsin, and Wyoming. It is also in the process of applying for additional state licenses and plans to eventuallyobtain licenses in all 50 states by the end of the first quarter of 2023, with some state licenses easier to obtain and quickerto obtain than others. As a result of the above, Epiq Scripts can currently only provide the Services to us in the 36 statesdescribed above, and we will be unable to sell its products to any customers in any states other than those 36 states,until Epiq Scripts is able to obtain licenses in other states and is limited to selling products to customers only in the states in whichEpiq Scripts holds licenses.
TheMaster Services Agreement does not address product liability claims which may result in us bringing legal claims or actions against EpiqScripts to attempt to seek indemnification or contribution for product liability claims.
Eachparty to the Master Services Agreement agreed to indemnify, defend, and hold harmless the other and the other party’s officers,directors, shareholders, employees, and agents from and against any and all nonparty claims, or actions for damages, liabilities (includingstrict liability), penalties, costs and expenses (including reasonable legal fees, expenses and costs) to the proportionate extent causedby (1) the negligence or willful misconduct of the indemnitor or any of its employees or agents in connection with the performance ofthe agreement, or (2) any breach of any representation, warranty or covenant under the agreement by the indemnitor or any of its employeesor agents. Additionally, the parties agreed that neither party will be liable to the other for special, incidental, or exemplary damages,subject to certain limited exceptions. The Master Services Agreement does not address product liability claims or assign any rights ofindemnification or contribution in connection therewith. As a result, in the event of product liability claims, we may be forced to bringlegal claims or actions against Epiq Scripts to attempt to seek indemnification or contribution for product liability claims, to theextent that we are sued in connection with such claims and Epiq Scripts isn’t sued or that we are found primarily liable for suchclaims. Such claims may be costly, time consuming, and may not ultimately result in a favorable outcome to us, all of which mayhave an adverse effect on the value of our securities.
Weplan to exclusively rely on Epiq Scripts, a new formed entity with a limited operating history, for our pharmacy compounding services.
Asdisclosed herein, we have entered into a Material Agreements—Master Services Agreement with Epiq Scripts, a related party, to operateas our sole and exclusive licensed pharmacy to compound our Mango ED to customers, assuming such Mango ED product isprescribed by physicians pursuant to our agreement with Doctegrity. Epiq Scripts was only formed in January 2022, and to date has onlyrecently began compounding drugs for patients. We face risks relying on a newly formed pharmacy with limited operations. Those risksinclude risks that Epiq Scripts will not be able to follow applicable regulatory guidelines relating to, will not be able to timely orcost effectively complete, or may not correctly, fulfill, specialty compound, package, ship, dispense and/or distribute our MangoED product. If Epiq Scripts is not able to scale its operations to meet the demand of our operations, or is unable to undertake any ofthe actions described above, our business may be materially and adversely affected, we may need to find a new partner pharmacy, whichmay charge us more money for its services or may not have as favorable contract terms, we may be delayed or prevented from selling our Mango ED product, and may face fines, penalties or litigation. In the event of the occurrence of any of the above, the valueof our securities may decline in value or become worthless.
Ourbusiness depends on our brand, and any failure to maintain, protect or enhance our brand, including as a result of events outside ourcontrol, could materially adversely affect our business.
Webelieve our future success depends on our ability to maintain and grow the value of the “Mango” brand. Maintaining, promotingand positioning our brand and reputation will depend on, among other factors, the success of our marketing and merchandising effortsand our ability to provide a consistent, high-quality customer experience. Any negative publicity, regardless of its accuracy, couldmaterially adversely affect our business. Brand value is based in large part on perceptions of subjective qualities, and any incidentthat erodes the loyalty of our customers, including adverse publicity or a governmental investigation or litigation, could significantlyreduce the value of our brand and significantly damage our business.
Thevalue of our brand also depends on effective customer support to provide a high-quality customer experience, which requires significantpersonnel expense. If not managed properly, this expense could impact our profitability. Failure to manage or train our own or outsourcedcustomer support representatives properly, or our inability to hire sufficient customer support representatives could result in lower-qualitycustomer support and/or increased customer response times, compromising our ability to handle customer complaints effectively.
Ourability to gain and increase market acceptance and generate commercial revenues will be subject to a variety of risks, many of which areout of our control.
OurMango ED product and any other potential future men’s wellness products may not gain or increase market acceptanceamong physicians, patients, healthcare payors or the medical community. We believe that the degree of market acceptance and our abilityto generate commercial revenues from such products will depend on a number of factors, including:
| ● | our ability to expand the use of our products through targeted patient and physician education; |
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| ● | competition and timing of market introduction of competitive products; |
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| ● | quality, safety and efficacy in the approved setting; |
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| ● | prevalence and severity of any side effects, including those of the components of our products; |
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| ● | emergence of previously unknown side effects, including those of the generic components of our products; |
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| ● | potential or perceived advantages or disadvantages over alternative treatments; |
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| ● | the convenience and ease of purchasing the product, as perceived by potential patients; |
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| ● | strength of sales, marketing and distribution support; |
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| ● | price, both in absolute terms and relative to alternative treatments; |
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| ● | the effectiveness of any future collaborators’ sales and marketing strategies; |
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| ● | the effect of current and future healthcare laws; |
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| ● | availability of coverage and reimbursement from government and other third-party payors; |
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| ● | recommendations for prescribing physicians to complete certain educational programs for prescribing drugs; |
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| ● | the willingness of patients to pay out-of-pocket in the absence of government or third-party coverage; and |
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| ● | product labeling, product insert, or new studies or trial requirements of the FDA or other regulatory authorities. |
OurMango ED and/or future products may fail to achieve market acceptance or generate significant revenue to achieve sustainable profitability.In addition, our efforts to educate the medical community and third-party payors on the safety and benefits of our drugs may requiresignificant resources and may not be successful.
Wemay be unable to scale our operations fast enough to bring down our cost of sales and generate revenues sufficient to support our operations.
Webelieve that in general, the faster we are able to scale up our operations, the lower our cost of sales, as a percentage of revenue,will be, as we believe that certain economics of scale exist with our operations. If we are unable to grow our business fast enough totake advantage of these economies of scale, our operations may suffer, and we may not be profitable.
Economicdownturns or a change in consumer preferences, perception and spending habits could limit consumer demand for our products andnegatively affect our future business.
Theproducts that we plan to sell in the future (including our Mango ED product) may be adversely affected from time to time by economic downturns that impact consumerspending, including discretionary spending. Future economic conditions such as employment levels, business conditions, housing starts,market volatility, interest rates, inflation rates, energy and fuel costs and tax rates, or our actions in response to these conditions,such as price increases, could reduce consumer spending or change consumer purchasing habits.
Ourperformance depends significantly on factors that may affect the level and pattern of consumer spending in the markets in which we operate.Such factors include consumer preference, consumer confidence, consumer income, consumer perception of the safety and quality of ourfuture products and shifts in the perceived value for our products relative to alternatives. A general decline in the consumption ofour future products could occur at any time as a result of change in consumer preference, perception, confidence and spending habits,including an unwillingness to pay a premium or an inability to purchase our products due to financial hardship or increased price sensitivity,which may be exacerbated by the effects of the COVID-19 pandemic, inflationary pressures and economic uncertainty. If consumer preferencesshift away from our future products, our business, financial condition and results of operations could be adversely affected.
Thesuccess of our products depend on a number of factors including our ability to accurately anticipate changes in market demandand consumer preferences, our ability to differentiate the quality of our future products from those of our competitors, and the effectivenessof our marketing and advertising campaigns for our products. We may not be successful in identifying trends in consumer preferences anddeveloping products that respond to such trends in a timely manner. We also may not be able to effectively promote our products by ourmarketing and advertising campaigns and gain market acceptance. If our products fail to gain market acceptance, are restricted by regulatoryrequirements or have quality problems, we may not be able to fully recover costs and expenses incurred in our operation, and our business,financial condition, results of operations and prospects could be adversely affected.
Wewill rely upon independent third-party transportation providers for all of our product shipments and will be subject to increased shippingcosts as well as the potential inability of our third-party transportation providers to deliver on a timely basis.
Wewill rely upon independent third-party transportation providers for all of our product shipments, including shipments from our relatedparty pharmacy to our customers. Our utilization of these third party delivery services for shipments is subject to risks which may impacta shipping company’s ability to provide delivery services that adequately meet our shipping needs, including risks related to employeestrikes, labor and capacity constraints, port security considerations, trade policy changes or restrictions, military conflicts, actsof terrorism, accidents, natural disasters and inclement weather. Any interruption in service provided by our shipping companies couldcause temporary disruptions in our business, a loss of sales and profits, and other material adverse effects. In addition, we are subjectto increased shipping costs when fuel prices increase, as we use expedited means of transportation such as air freight. If we changethe shipping company we use, we could face logistical difficulties that could adversely affect deliveries, and we would incur costs andexpend resources in connection with such change.
Thefailure of our physician services provider, Doctegrity, to attract and retain physicians in a competitive labor market could limit ourability to execute our growth strategy, resulting in a slower rate of growth.
Ourwellness business will depend on the ability of our future contracted telemedicine services provider(s) to continue to recruitand retain a sufficient number of qualified licensed doctors. Although we expect such provider(s) will have an effective recruitmentprocess, there is no assurance that such provider(s) will be able to secure arrangements with sufficient numbers of licensed doctorsor retain the services of such practitioners. If our provider(s) experience delays or shortages in obtaining access to qualified physicians,we would be unable to operate and may be forced to seek alternative arrangements which could be more costly or may be forced to suspendour business operations.
Ifwe are unable to maintain or enter into future agreements with suppliers or our suppliers fail to supply us with our Mango EDproduct ingredients or any other potential future men’s wellness products, we may experience delays in selling our products.
Wemay not be successful in maintaining or entering into new supply agreements on reasonable terms or at all or that we or our supplierswill be able to obtain or maintain the necessary regulatory approvals or state and federal controlled substances registrations for currentor potential future suppliers in a timely manner or at all. If we are unable to obtain a sufficient quantity of active pharmaceuticalingredients manufactured at a facility that is registered and listed with the FDA and required to produce products, there could be adelay in producing products, which could adversely affect our product sales and operating results materially, which could significantlyharm our business. This has not occurred to date.
Wecurrently do not have any manufacturing facilities and intend to rely on third parties for the supply of the products, as well as forthe supply of materials. However, we cannot be certain that we or our suppliers will be able to obtain or maintain the necessary regulatoryapprovals or registrations for these suppliers in a timely manner or at all.
Ourbusiness is exposed to risks associated with credit card and other online payment chargebacks and fraud.
Amajority of our revenue is expected to be processed through credit cards and other online payments. If we experience refunds or chargebacks,our processors could require us to create reserves, increase fees or terminate contracts with us, which would have an adverse effecton our financial condition. Our failure to limit fraudulent transactions conducted on our website, such as through the use of stolencredit card numbers, could also subject us to liability and adversely impact our reputation. Under credit card association rules, penaltiesmay be imposed at the discretion of the association for inadequate fraud protection. Any such potential penalties would be imposed onour credit card processor by the association. However, we face the risk that we may fail to maintain an adequate level of fraud protectionand that one or more credit card associations or other processors may, at any time, assess penalties against us or terminate our abilityto accept credit card payments or other form of online payments from customers, which would have a material adverse effect on our business,financial condition and operating results.
Wecould also incur significant fines or lose our ability to give customers the option of using credit cards to pay for our products ifwe fail to follow payment card industry data security standards, even if there is no compromise of customer information. Although weplan to operate in compliance with payment card industry data security standards, it is possible that at times we may not be in fullcompliance with these standards. Accordingly, we could be fined, which could impact our financial condition, or our ability to acceptcredit and debit cards as payment could be suspended, which would cause us to be unable to process payments using credit cards. If weare unable to accept credit card payments, our business, financial condition and operating results may be adversely affected.
Inaddition, we could be liable if there is a breach of the payment information. Online commerce and communications depend on the securetransmission of confidential information over public networks. We will rely on encryption and authentication technology to authenticateand secure the transmission of confidential information, including cardholder information. However, this technology may not prevent breachesof the systems we use to protect cardholder information. In addition, some of our contracting parties may also collect or possess informationabout our customers, and we may be subject to litigation or our reputation may be harmed if our contracting parties fail to protect ourcustomers’ information or if they use it in a manner inconsistent with our policies and practices. Data breaches can also occuras a result of non-technical issues. Under contracts with processors, if there is unauthorized access to, or disclosure of, credit cardinformation we store, we could be liable to the credit card issuing banks for their cost of issuing new cards and related expenses.
Securitybreaches, loss of data and other disruptions could compromise sensitive information related to our business or customers, or preventus from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.
Inthe ordinary course of our business, we will collect, store, use and disclose sensitive data, including health information and othertypes of PII. We will also process and store, and use additional third parties to process and store, confidential and proprietary informationsuch as intellectual property and other proprietary business information, including that of our customers, providers and contractingparties.
Securitybreaches of this infrastructure, including physical or electronic break-ins, computer viruses, attacks by hackersand similar breaches, and employee or contractor error, negligence or malfeasance, can create system disruptions, shutdowns or unauthorizeddisclosure or modifications of information, causing sensitive, confidential or proprietary information to be accessed or acquired withoutauthorization or to become publicly available. Because of the nature of the sensitive, confidential and proprietary information thatwe expect to collect, store, transmit, and otherwise process, the security of our technology platform and other aspects of our services,including those provided or facilitated by our third-party service providers, will be important to our operations and business strategy.Measures taken to protect our systems, those of our third-party service providers, or sensitive, confidential and proprietary informationthat we or our third-party service providers process or maintain, may not adequately protect us from the risks associated with the collection,storage and transmission of such information. A security breach or privacy violation that leads to disclosure or unauthorized use ormodification of, or that prevents access to or otherwise impacts the confidentiality, security, or integrity of, sensitive, confidential,or proprietary information we or our third-party service providers maintain or otherwise process, could harm our reputation, compel usto comply with breach notification laws, and cause us to incur significant costs for remediation, fines, penalties, notification to individualsand governmental authorities, implementation of measures intended to repair or replace systems or technology and to prevent future occurrences,potential increases in insurance premiums, and forensic security audits or investigations. As a result, a security breach or privacyviolation could result in increased costs or loss of revenue.
Anyactual or suspected security breach or other compromise of our security measures or those of our third-party vendors, whether as a resultof hacking efforts, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering or otherwise,could harm our reputation and business, damage our brand and make it harder to retain existing customers or acquire new ones, requireus to expend significant capital and other resources to address the breach, and result in a violation of applicable laws, regulationsor other legal obligations. Our insurance policies may not cover, or may not be adequate to reimburse us for, losses caused by any suchsecurity breach.
Werely on email and other messaging services to connect with our existing and potential customers. Our customers may be targeted by partiesusing fraudulent spoofing and phishing emails to misappropriate passwords, payment information or other personal information or to introduceviruses through Trojan horse programs or otherwise through our customers’ computers, smartphones, tablets or other devices. Despiteour efforts to mitigate the effectiveness of such malicious email campaigns through product improvements, spoofing and phishing may damageour brand and increase our costs. Any of these events or circumstances could materially adversely affect our business, financial conditionand operating results.
Wemay experience fluctuations in our tax obligations and effective tax rate, which could adversely affect our business, results of operations,and financial condition.
Weare subject to taxes in every jurisdiction in which we operate. We record tax expense based on current tax liabilities and our estimatesof future tax liabilities, which may include reserves for estimates of probable settlements of tax audits. At any one-time, multipletax years are subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authoritiesmay affect the ultimate settlement of these issues. Further, our effective tax rate in a given financial statement period may be materiallyimpacted by changes in tax laws, changes in the mix and level of earnings by taxing jurisdictions, or changes to existing accountingrules or regulations. Fluctuations in our tax obligations and effective tax rate could adversely affect our business, results of operations,and financial condition.
Ifwe become subject to product liability claims, we may be required to pay damages that exceed our insurance coverage, if any.
Our products will be subject to risks for product liability claims due to inherent potential side effects. We may be unable to obtainor maintain product liability coverage. A product liability claim in excess of, or excluded from, our insurance coverage which currentlycovers exposure to product liability claims, both technology products and physical products, would have to be paid out of cash reservesand could have a material adverse effect upon our business, financial condition and results of operations. Product liability insuranceis expensive even with large self-insured retentions or deductibles, difficult to maintain, and current or increased coverage may notcontinue to be available on acceptable terms, if at all.
Ifwe cannot successfully defend ourselves against a product liability claim, we may incur substantial liabilities. Regardless of meritor eventual outcome, liability claims may result in:
| ● | injury to our reputation; |
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| ● | costs of defending the claim and/or related litigation; |
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| ● | cost of any potential adverse verdict; |
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| ● | substantial monetary awards to patients or other claimants; and |
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| ● | the inability to commercialize our products. |
Damagesawarded in a product liability action could be substantial and could have a negative impact on our financial condition. Whether or notwe were ultimately successful in product liability litigation, such litigation would consume substantial amounts of our financial andmanagerial resources, and might result in adverse publicity, all of which would impair our business.
Forexample, a 2014 study published in The Journal of the American Medical Association determined that Sildenafil (the active ingredientin Viagra) may be associated with a higher risk of developing melanoma. The study evaluated data from more than 25,000 men who used Sildenafiland found that Sildenafil use was significantly associated with an increased risk of subsequent melanoma, after consideringother risk factors. It is possible that the ingredients we plan to use in our Mango ED product or any other products we sell in the futurecould be found in the future to result in increases in the likelihood of developing cancer or other diseases, which could subject usto litigation, penalties or recalls, all of which could have a material adverse effect on our operations and cause the value of our securitiesto decline in value or become worthless.
Disruptionsin our data and information systems could harm our reputation and our ability to run our business.
Wewill rely extensively on data and information systems for our supply chain, financial reporting, human resources and various other operations,processes and transactions. Furthermore, a significant portion of the communications between us, our suppliers and customers depend oninformation technology. Our data and information systems are subject to damage or interruption from power outages, computer and telecommunicationsfailures, computer viruses, security breaches (including breaches of our transaction processing or other systems that could result inthe compromise of confidential customer data), catastrophic events, data breaches and usage errors by our employees or third-party serviceproviders. Our data and information technology systems may also fail to perform as we anticipate, and we may encounter difficulties inadapting these systems to changing technologies or expanding them to meet the future needs of our business. If our systems are breached,damaged or cease to function properly, we may have to make significant investments to fix or replace them, suffer interruptions in ouroperations, incur liability to our customers and others or face costly litigation, and our reputation with our customers may be harmed.We will also rely on third parties for a majority of our data and information systems, including for third-party hosting and paymentprocessing. If these facilities fail, or if they suffer a security breach or interruption or degradation of service, a significant amountof our data could be lost or compromised and our ability to operate our business and deliver our product offerings could be materiallyimpaired. In addition, various third parties, such as our suppliers and payment processors, also rely heavily on information technologysystems, and any failure of these systems could also cause loss of sales, transactional or other data and significant interruptions toour business. Any material interruption in the data and information technology systems we rely on, including the data or informationtechnology systems of third parties, could materially adversely affect our business, financial condition and operating results.
RisksRelated to Legal, Regulatory and Government
Wewill incur significant costs to ensure compliance with U.S. and Nasdaq reporting and corporate governance requirements.
Wewill incur significant costs associated with our public company reporting requirements and with applicable U.S. and Nasdaq corporategovernance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC and Nasdaq.We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to makesome activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficultand more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits andcoverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us toattract and retain qualified individuals to serve on our Board of Directors or as executive officers.
Ifwe fail to comply with government laws and regulations it could have a materially adverse effect on our business.
Thehealth care industry is subject to extensive federal, state and local laws and regulations relating to licensure, conduct of operations,ownership of facilities, addition of facilities and services, payment for services and prices for services that are extremely complexand for which, in many instances, the industry does not have the benefit of significant regulatory or judicial interpretation. We willexercise care in structuring our arrangements with physicians and other referral sources to comply in all material respects with applicablelaws. We will also take such laws into account when planning future marketing and other activities, and expect that our operations willbe in compliance with applicable law. The laws, rules and regulations described above are complex and subject to interpretation. In theevent of a determination that we are in violation of such laws, rules or regulations, or if further changes in the regulatory frameworkoccur, any such determination or changes could have a material adverse effect on our business. There can be no assurance however thatwe will not be found in noncompliance in any particular situation.
Separately,Federal law limits compounded drugs that are “essentially copies” of commercially available FDA approved drugs, includingthose with the same route of administration. If our Mango ED product, or any future products we may choose to market in the future aredeemed to be “essentially copies” of commercially available FDA approved drugs we would be prohibited from compounding suchdrugs and would be unable to sell our Mango ED drug or future products. If that were to occur, we would need to change ourbusiness plan which would require substantial additional expenses and would have a material adverse effect on our cash flows and thevalue of our securities.
Marketingactivities for our Mango ED product are subject to strict governmental regulation whichmay limit our ability to market or promote such product.
Ourbusiness model depends on qualifying for certain statutory exemptions for drugs that are compounded by pharmacies in accordance withapplicable requirements. Pharmacy compounding is also subject to state oversight and regulation. Federal requirements include obtainingindividual prescriptions establishing that the compounded drug is necessary for each drug prescribed for each of our customers. Federallaw also limits compounded drugs that are “essentially copies” of commercially available FDA approved drugs, includingthose with the same route of administration. These restrictions will limit our ability to market compounded drugs that have the sameactive ingredients and route of administration as FDA-approved drugs, unless the compounded version offers a significant difference thatthe prescriber determines is necessary for each individual patient.
TheFDA also has the authority to impose significant restrictions on approved products through regulations on advertising, promotionaland distribution activities. In particular, the FDA will object to any promotional activity (including through testimonials andsurrogates) that is “false or misleading in any particular,” including the failure to disclose material facts. Forexample, the FDA will expect adequate substantiation for an efficacy claim, which would require substantial evidence derived fromadequate and well-controlled clinical trials. We believe we can conduct truthful and nonmisleading promotional activities,including activities involving the use of testimonials and surrogates, with limited claims that do not require substantial evidencederived from adequate and well-controlled clinical trials and which do not include efficacy claims. If our products (including our Mango ED product) are marketed incontradiction with FDA laws and regulations, the FDA may issue warning letters that require specific remedial measures to be taken,as well as an immediate cessation of the impermissible conduct, resulting in adverse publicity. The FDA may also require that allfuture promotional materials receive prior agency review and approval before use. Certain states have also adopted regulations andreporting requirements surrounding the promotion of pharmaceuticals. Failure by us or any of our collaborators to comply with staterequirements may affect our ability to promote or sell future products in certain states. This, in turn, could have a materialadverse impact on our financial results and financial condition and could subject us to significant liability, including civil andadministrative remedies as well as criminal sanctions.
Theserestrictions may be more burdensome for compounded products as compared with FDA approved products because the latter have substantialevidence of safety and effectiveness, which will limit our ability to compete against the sale of comparable FDA-approved products.
Evolvinggovernment regulations and enforcement activities may require increased costs or adversely affect our results of operations.
Ouroperations may be subject to direct and indirect adoption, expansion or reinterpretation of various laws and regulations. Compliancewith these evolving laws, regulations and interpretations may require us to change our practices at an undeterminable and possibly significantinitial monetary and annual expense. These additional monetary expenditures may increase future overhead, which could have a materialadverse effect on our results of operations. There could also be laws and regulations applicable to our business that we have not identifiedor that, if changed, may be costly to us, and we cannot predict all the ways in which implementation of such laws and regulations mayaffect us.
Additionally,the introduction of new products may require us to comply with additional, yet undetermined, laws and regulations. Compliance may requireobtaining appropriate federal, state, or local licenses or certificates, increasing our security measures and expending additional resourcesto monitor developments in applicable rules and ensure compliance. The failure to adequately comply with these future laws and regulationsmay delay or possibly prevent our products from being offered to customers, which could have a material adverse effect on our business,financial condition, and results of operations.
Failureto comply with federal, state and foreign laws and regulations relating to privacy, data protection and consumer protection, or the expansionof current or the enactment of new laws or regulations relating to privacy, data protection and consumer protection, could adverselyaffect our business and our financial condition.
Avariety of federal, state and foreign laws and regulations govern the collection, use, retention, sharing and security of consumer data.Laws and regulations relating to privacy, data protection and consumer protection are evolving and subject to potentially differing interpretations.These requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict withother rules or our practices. As a result, our practices may not comply with all such laws, regulations, requirements and obligations.Any failure, or perceived failure, by us to comply with any federal, state or foreign privacy or consumer protection-related laws, regulations,industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject orother legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and mayresult in claims, investigations, proceedings or actions against us by governmental entities or others or other liabilities or requireus to change our operations.
Wewill collect, store, process, and use personal information and other customer data, and will rely on third parties that are not directlyunder our control to manage certain of these operations and to collect, store, process and use payment information. Our customers’personal information may include names, addresses, phone numbers, email addresses, payment card data, and payment account information,as well as other information. Due to the volume and sensitivity of the personal information and data we and these third parties willmanage, the security features of our information systems are critical. If our security measures, some of which will be managed by thirdparties, are breached or fail, unauthorized persons may be able to access sensitive customer data, including payment card data. If weor our independent service providers or business partners experience a breach of systems that collect, store or process our members’and customers’ sensitive data, our brand could be harmed, sales of our products could decrease, and we could be exposed to claims,losses, administrative fines, litigation or regulatory and governmental investigations and proceedings. Any such claim, investigation,proceeding or action could hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings,distract our management, increase our costs of doing business, result in a loss of customers and suppliers and may result in the impositionof monetary penalties and administrative fines. Depending on the nature of the information compromised, we may also have obligationsto notify users, law enforcement, or payment companies about the incident and may need to provide some form of remedy, such as refunds,for the individuals affected by the incident.
Privacylaws, rules, and regulations are constantly evolving in the United States and abroad and may be inconsistent from one jurisdiction toanother. We expect that new industry standards, laws and regulations will continue to be proposed regarding privacy, data protectionand information security in many jurisdictions, including the California Consumer Privacy Act of 2018, which went effective January 1,2020, the California Consumer Privacy Rights Act, which goes effective on January 1, 2023, the Colorado Privacy Act, which goes effectiveon July 1, 2013 and the Virginia Consumer Data Protection Act, which goes effective January 1, 2023. We cannot yet determine the impactsuch future laws, regulations and standards may have on our business. Complying with these evolving obligations is costly. For instance,expanding definitions and interpretations of what constitutes “personal data” (or the equivalent) within the UnitedStates and elsewhere may increase our compliance costs. Any failure to comply could give rise to unwanted media attention and other negativepublicity, damage our customer and consumer relationships and reputation, and result in lost sales, claims, administrative fines, lawsuitsor regulatory and governmental investigations and proceedings and may harm our business and results of operations.
OurMango ED product has not been, and will not be, approved by the FDA. The use of such product may cause serious side effectswhich could subject us to material litigation, damages and penalties.
Our Mango ED product has not been, and will not be, approved by the FDA. It will be compounded using bulk drug substances and assuch, will be exempt from specific FDA approval, provided that it is compounded in accordance with statutory requirements. Because compoundeddrugs are not FDA-approved, the FDA does not verify their safety, effectiveness, or quality before they are marketed. In addition, poorcompounding practices can result in serious drug quality problems, such as contamination or a drug that contains too much or too littleactive ingredient, among other possible quality deficiencies.
Weare not aware of any clinical studies involving the administration of tadalafil sublingually at the doses we intend to providepatients, or the compounding of tadalafil, oxytocin, and L-arginine to treat ED, as is contemplated by our EDproduct. Because our ED product hasnot been, and will not be, approved by the FDA our product has not had the benefit of the FDA’s clinical trial protocol whichseeks to prevent the possibility of serious patient injury and death. If this were to occur, we could be subject to litigationand governmental action, which could result in costly litigation, significant fines, judgments or penalties. For example, in October2012, a pharmacy in Massachusetts shipped compounded drugs that were contaminated with a fungus throughout the country, and thesedrugs were injected into patients’ spines and joints. More than 750 people in 20 states developed fungal infections, and morethan 60 people died. This type of action could have a significant negative impact on our brand name, results of operations and cashflows, and result in us having to cease selling products, curtailing our business plan, or seeking bankruptcy protection.
Themain ingredients of our Mango ED product are publicly disclosed and separately our Mango ED product is being specially compounded forthe customer by a pharmacist with a physician’s prescription, and as a result, our Mango ED product formula can be replicated by other companies.
Asdescribed in this prospectus, our Mango ED product is made up of the following ingredients: Tadalafil (the active ingredient in Cialis),Oxytocin and L-Arginine, an amino acid that is available as a dietary supplement; however, these FDA approvals do not mean that theseingredients will prove safe when combined into a single formulation to treat ED. We currently offer two dosage levels of our Mango EDproduct and anticipate a prescribing doctor prescribing a dosage based on the needs and medical history of the patient. Our Mango EDproduct currently includes the following ingredients: (1) Tadalafil (10mg), Oxytocin (100IU) and L-Arginine (50mg); and (2) Tadalafil(20mg), Oxytocin (100IU) and L-Arginine (50mg). Additionally, because our Mango ED product is being specially compoundedfor the customer by a pharmacist with a physician’s prescription and because the ingredients for our Mango ED product will be publiclydisclosed, this product formula can be replicated by other companies. As a result, competitors,including those with greater resources, marketing, and brand recognition, may compete against us in the future using our exact productingredients or variations thereof. We may be unable to distinguish our Mango ED product from copycat products and may not be able todifferentiate our product from competitors in the marketplace. As a result, we may fail to obtain a significant market share, or maylose any market share we may obtain in the future, may be unable to compete with competitors, and may be forced to abandon or curtailour business plan, which could cause the value of our shares to decline in value or become worthless.
OurED product needs to be compounded by licensed pharmacists who are subject to risks regarding applicable exemptionsfrom the Federal Food, Drug, and Cosmetic Act.
Section503A of the Federal Food, Drug, and Cosmetic Act (“FFDCA”) describes the conditions under which compounded human drug productsare exempt from the FFDCA sections on FDA approval prior to marketing, current good manufacturing practice (“cGMP”) requirements,and labeling with adequate directions for use. One of these conditions is that the drugs must be compounded based on the receipt of validpatient-specific prescriptions. Our ED product needs to be compounded by licensed pharmacists, after being prescribed by a licensedphysician. Licensed pharmacists who compound drug products in accordance with Section 503A of the FFDCA are not required to comply withCGMP requirements and the drugs that they compound are not required to be approved by the FDA, provided that the compounding complieswith applicable requirements. Therefore, the FDA is often not aware of potential problems with compounded drug products or compoundingpractices unless it receives a complaint, such as a report of a serious adverse event or visible contamination. As such, the compoundingof our products will be subject to limited FDA oversight, which could lead to such products not being compounded safely and couldlead to product recalls and litigation which could have a significant negative impact on our brand name, results of operations and cashflows, and result in us having to cease selling products, curtailing our business plan, or seeking bankruptcy protection. Neither we,nor our representatives have had any conversations with the FDA staff regarding whether our Mango ED product can be sold pursuantto Section 503A of the FFDCA Act and future conversations with the FDA may result in the FDA staff raising issues with such salespursuant to Section 503A of the FFDCA, requiring certain pre-requisites or changes to our current business plan, which may be costlyor time consuming, and/or may result in us being prohibited from selling our Mango ED product pursuant to Section 503A of theFFDCA Act. We also face risks that the compounding of our products do not fall within the exemption from the FFDCA provided bySection 503A thereof. For example, if the FDA determined that any of our products are essentially a copy of an FDA approved product,we would be severely limited in our ability to compound such a product. If that any of the above were to apply, we may need to changeour business plan or compounding activities, which could force us to curtail our business plan or expend significant additional resourcesto obtain FFDCA or FDA approval for our products.
Notwithstandingthe above, under relevant FDA guidance, the FDA generally does not consider a compounded drug to be “essentially a copy”of a commercially available drug if the compounded drug has a different route of administration as compared with the approved alternative,and we anticipate that our Mango ED product will be for a different route of administration (e.g., sublingual). In addition,we do not expect that we will be deemed to have engaged in such “copying”, because our Mango ED product will be basedon a prescriber’s determination for each patient that the change associated with the compounded product (our Mango ED product)produces for the patient a significant difference as compared with the commercially available drug product. Under relevant FDA guidance,the FDA does not consider a compounded drug “essentially a copy” if a prescriber determines that there is a change, madefor an identified individual patient, which produces for that patient a significant difference from the commercially available product.
Healthcare services, including arrangements with health care professionals, are heavily regulated at the state level, and the laws and regulationsmay be changed or subject to new interpretations.
Eachstate separately licenses health care professionals and determines when and under what conditions they may interact with and provideservices to patients. Telehealth consultations initiated through our platform must be offered in accordance with the laws and regulationsof the state where a patient is located, which may include laws that restrict the corporate practice of medicine and fee splitting. Eachstate’s laws are subject to legislative and regulatory changes, as well as judicial interpretations, and future changes or interpretationsof state laws restricting the corporate practice of medicine and fee splitting could adversely affect the permissibility of (a) our relationshipwith Doctegrity; and/or (b) Doctegrity’s relationship with its contracted physicians. If our relationship with Doctegrity and/orDoctegrity’s relationship with its contracted physicians needed to be restructured in light of any such adverse changes or interpretations,that restructuring could negatively affect our ability to connect consumers with medical providers in certain states, and thus thosecustomers’ ability to ultimately receive our products.
Wedo not have a pharmacy and will depend on a related party to compound our Mango product and other potential future men’s wellnessproducts.
Wewill rely on a related party pharmacy for the manufacture of our Mango product and any other potential future men’s wellnessproducts and we cannot assure you that they will be successful. This subjects us to a number of risks, including the following:
| ● | we may not be able to control the commercialization of our products, including the amount, timing and quality of resources that our contracting parties may devote to our products; |
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| ● | our contracting parties may experience financial, regulatory or operational difficulties, which may impair their ability to fulfill their contractual obligations; |
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| ● | business combinations or significant changes in a contracting parties’ business strategy may adversely affect a contracting party’s willingness or ability to perform their obligations under any arrangement; |
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| ● | legal disputes or disagreements may occur with one or more of our contracting parties or between our contracting parties and our suppliers or former contracting parties; and |
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| ● | a contracting party could independently move forward with a competing product developed either independently or in collaboration with others, including with one of our competitors. |
Ifany of our contracting parties fail to fulfill their future contractual obligations, our business may be negatively affected and we mayreceive limited or no revenues under our agreements with them. See also the risk factor, “The related party pharmacy we haveentered into an agreement with may not receive licenses in all of the 50 United States to provide national coverage for us to sell ourMango ED product and future products” below.
Ouruse and disclosure of personally identifiable information, including health information, is subject to federal and state privacy andsecurity regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result insignificant liability or reputational harm and, in turn, a material adverse effect on our client base and revenue.
Numerousstate and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability andintegrity of personally identifiable information, or PII, including protected health information, or PHI. These laws and regulationsinclude the Health Information Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health InformationTechnology for Economic and Clinical Health Act, or HITECH, and their implementing regulations (referred to collectively as “HIPAA”).HIPAA establishes a set of basic national privacy and security standards for the protection of PHI. HIPAA requires us to develop andmaintain policies and procedures with respect to PHI that is used or disclosed, including the adoption of administrative, physical andtechnical safeguards to protect such information. HIPAA imposes mandatory penalties for certain violations. Penalties for violationsof HIPAA and its implementing regulations start at $100 per violation and are not to exceed $50,000 per violation, subject to a cap of$1.5 million for violations of the same standard in a single calendar year. However, a single breach incident can result in violationsof multiple standards. HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts are able to awarddamages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right ofaction allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of carein state civil suits such as those for negligence or recklessness in the misuse or breach of PHI. In addition, HIPAA mandates that theSecretary of Health and Human Services, or HHS, conduct periodic compliance audits of HIPAA covered entities or business associates forcompliance with the HIPAA Privacy and Security Standards. It also tasks HHS with establishing a methodology whereby harmed individualswho were the victims of breaches of unsecured PHI may receive a percentage of the Civil Monetary Penalty fine paid by the violator. HIPAAfurther requires that patients be notified of any unauthorized acquisition, access, use or disclosure of their unsecured PHI that compromisesthe privacy or security of such information, with certain exceptions related to unintentional or inadvertent use or disclosure by employeesor authorized individuals. HIPAA specifies that such notifications must be made “without unreasonable delay and in no case laterthan 60 calendar days after discovery of the breach.” If a breach affects 500 patients or more, it must be reported to HHS withoutunreasonable delay, and HHS will post the name of the breaching entity on its public web site. Breaches affecting 500 patients or morein the same state or jurisdiction must also be reported to the local media. If a breach involves fewer than 500 people, the covered entitymust record it in a log and notify HHS at least annually.
Numerousother federal and state laws protect the confidentiality, privacy, availability, integrity and security of PII, including PHI. Theselaws in many cases are more restrictive than, and may not be pre-empted by, the HIPAA rules and may be subject to varying interpretationsby courts and government agencies, creating complex compliance issues for us and our clients and potentially exposing us to additionalexpense, adverse publicity and liability.
Becauseof the extreme sensitivity of the PII we store and transmit, the security features of our technology platform are very important. Ifour security measures are breached or fail, unauthorized persons may be able to obtain access to sensitive client data, including HIPAA-regulatedPHI. As a result, our reputation could be severely damaged, adversely affecting client confidence. In addition, we could face litigation,damages for contract breach, penalties and regulatory actions for violation of HIPAA and other applicable laws or regulations and significantcosts for remediation, notification to individuals and for measures to prevent future occurrences. Any potential security breach couldalso result in increased costs associated with liability for stolen assets or information, repairing system damage that may have beencaused by such breaches, incentives offered to clients in an effort to maintain our business relationships after a breach and implementingmeasures to prevent future occurrences, including organizational changes, deploying additional personnel and protection technologies,training employees and engaging third-party experts and consultants.
RisksRelated to Related Party Relationships and Transactions and Our Management
Wedepend heavily on our senior management, including our Chief Executive Officer, who may have a conflict of interest. The ability of certainkey employees to devote adequate time to us is critical to the success of our business, and failure to do so may adversely affectour revenues and as a result could materially adversely affect our business, financial condition and results of operations. We do not currently hold any key man insurance on our management.
Wemust retain the services of our key employees and strategically recruit and hire new talented employees. Our future business and resultsof operations depend in significant part upon the continued contributions of our senior management personnel, particularly our ChiefExecutive Officer and Chairman, Jacob D. Cohen. Mr. Cohen currently serves as the Chief Executive Officer and director of American InternationalHoldings Corp., and as Chief Executive Officer of Ronin Equity Partners, Inc., a private investment company, and in various positionswith other entities and groups. Mr. Cohen currently spends approximately 75% of his time on company matters. As a result, Mr. Cohen dedicatesonly a portion of his professional efforts to our business and operations, and there is no contractual obligation for him to spend aspecific amount of his time with us. Mr. Cohen may not be able to dedicate adequate time to our business and operations and we couldexperience an adverse effect on our operations due to the demands placed on him from his other professional obligations. Such involvementin other businesses may therefore present a conflict of interest regarding decisions he makes for us or with respect to the amountof time available for us. If we lose his services or if he fails to perform in his current position, or if we are not able toattract and retain skilled personnel as needed, our business could suffer. Significant turnover in our senior management could significantlydeplete our institutional knowledge held by our existing senior management team. We depend on the skills and abilities of these key personnelin managing our operations, product development, marketing and sales aspects of our business, any part of which could be harmed by turnoverin the future.
Wedo not currently have any key person life insurance policies on our executive officers. Key man insurance provides financial assistanceto a business suffering loss after a key employee dies.
Movingforward, should the services of Mr. Cohen be lost for any reason, we will incur costs associated with recruiting replacementsand any potential delays in operations which this may cause. If we are unable to replace such individual with a suitably trained alternativeindividual(s), we may be forced to scale back or curtail our business plan.
Separately,if our executive officers do not devote sufficienttime towards our business, we may never be able to effectuate our business plan.
Wehave engaged and in the future plan to engage in transactions with related parties and such transactions present possible conflictsof interest that could have an adverse effect on us.
Wehave entered, and may continue to enter, into transactions with related parties for financing, corporate, business development and operationalservices. Included in such transactions is a Master Services Agreement and Statement of Work with Epiq Scripts, LLC, a related partywhich is majority owned and controlled by American International Holdings Corp., which entity Mr. Cohen controls and serves as its ChiefExecutive Officer and director, as discussed in greater detail below under “Business—MaterialAgreements—Master Services Agreement with Epiq Scripts,” for pharmacy and compounding services.Such transactions may not have been/may not be, entered into on an arm’s-length basis, and we may have achieved more or less favorableterms because such transactions were entered into with our related parties. This could have a material effect on our business, resultsof operations and financial condition. Such conflicts could cause an individual in our management to seek to advance his or her economicinterests or the economic interests of certain related parties above ours. Further, the appearance of conflicts of interest created byrelated party transactions could impair the confidence of our investors.
Weexpect to be significantly reliant on related party relationships.
Wehave entered into a Master Services Agreement and Statement of Work with Epiq Scripts, LLC, a related party which is majority owned andcontrolled by American International Holdings Corp., which entity Mr. Cohen controls and serves as its Chief Executive Officer and director,as discussed in greater detail below under “Business—Material Agreements—MasterServices Agreement with Epiq Scripts,” for pharmacy and compounding services.. In the event that relationship was terminated,our costs may increase, and we may be unable to effectively obtain the services currently provided by Epiq Scripts,LLC. We also anticipate entering into other related party relationships in the future. While we believe that all related party agreementswill be on arms-length terms, such significant related party relationships may be perceived negatively by potential shareholders or investors.Our significant related party relationships and transactions, the terms of such relationships and transactions, and/or the terminationof any such relationships or transactions, may have a material adverse effect on our results of operations moving forward and/or createconflicts of interest or perceived conflicts of interest which may have a material adverse effect on the value of our securities.
Therelated party pharmacy we have entered into an agreement with may not receive licenses in all of the 50 United States to provide nationalcoverage for us to sell our Mango ED product and future products.
Wehave entered into a Master Services Agreement and Statement of Work with Epiq Scripts, LLC, a related party which is majority owned andcontrolled by American International Holdings Corp., which entity Mr. Cohen controls and serves as its Chief Executive Officer and director,as discussed in greater detail below under “Business—Material Agreements—MasterServices Agreement with Epiq Scripts,” for pharmacy and compounding services. Epiq Script’s ability to provide pharmacyservices in each state is subject to among other things, receipt of regulatory approvals and licenses in the states in which we planto operate. Currently Epiq Scripts holds State Board of Pharmacy (or its equivalent) licenses to operate in 36 states: Alaska,Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Minnesota,Mississippi, Missouri, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, RhodeIsland, South Dakota, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. Its failure to receive regulatoryapproval or licenses in the other states in which we hope to operate, or loss of such licenses in the future, may prohibit us from sellingour Mango products to customers that reside in those states limiting our ability to grow and compete with other companies that have thosecapabilities. Any of the above may have an adverse effect on our revenues, operations and cash flow and cause the value of our securitiesto decline in value or become worthless. We will also face related party conflicts associated with our engagement of Epiq Scripts, LLCas discussed in greater detail above.
JacobD. Cohen, our Chairman and Chief Executive Officer, beneficially owns greater than 50% of our outstanding common stock and will continueto exercise majority voting control over us after this offering, which will limit your ability to influence corporate matters and coulddelay or prevent a change in corporate control.
Mr.Cohen beneficially owns approximately 58.3% of the issued and outstanding shares of our common stock and will continue to holda majority of our issued and outstanding shares of common stock after this offering. As a result, he controls the shareholder vote. Asa result, he has the ability to influence matters affecting our shareholders and will therefore exercise control in determining the outcomeof all corporate transactions or other matters, including (i) making amendments to our certificate of formation; (ii) whether to issueadditional shares of common stock and preferred stock, including to himself; (iii) employment decisions, including compensation arrangements;(iv) whether to enter into material transactions with related parties; (v) election of directors; and (vi) any merger or significantcorporate transactions, including with himself or other related parties. Additionally, it will be difficult if not impossible for investorsto remove our current directors, which will mean they will remain in control of who serves as officers of the Company as well as whetherany changes are made in the Board of Directors. As a potential investor in the Company, you should keep in mind that even if you ownshares of our common stock and wish to vote them at annual or special shareholder meetings, your shares will likely have littleeffect on the outcome of corporate decisions. Because Mr. Cohen controls the vote on all shareholder matters, investors may find it difficultto replace our management if they disagree with the way our business is being operated. The interests of Mr. Cohen may not coincide withour interests or the interests of other shareholders.
Mr.Cohen acquired his shares of common stock for substantially less than the price of the shares of common stock being acquired in thisoffering, and may have interests, with respect to his common stock, that are different from those of investors in this offering and theconcentration of voting power held by Mr. Cohen may have an adverse effect on the price of our common stock.
Inaddition, this concentration of ownership might adversely affect the market price of our common stock by: (1) delaying, deferring orpreventing a change of control of our Company; (2) impeding a merger, consolidation, takeover or other business combination involvingour Company; or (3) discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our Company.
JacobD. Cohen, our Chairman and Chief Executive Officer, beneficially owns greater than 50% of our outstanding shares of common stock, whichwill cause us to be deemed a “controlled company” under the rules of Nasdaq.
Mr.Cohen, individually, currently controls approximately 58.3% of the voting power of our capital stock and will control approximately53.5% of the combined voting power of our capital stock upon completion of this offering, assuming an offering size as set forthon the cover page hereof. As a result, Mr. Cohen, our Chairman and Chief Executive Officer, owns more than 50% of our outstanding shares(and will continue to own more than 50% of our outstanding shares upon consummation of the offering). As such, we are a “controlledcompany” under the rules of Nasdaq. Under these rules, a company of which more than 50% of the voting power is held by an individual,a group or another company is a “controlled company” and can elect to be exempt from certain corporate governance requirements,including requirements that:
| ● | a majority of the Board of Directors consist of independent directors; |
| ● | the board maintain a nominations committee with prescribed duties and a written charter; and |
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| ● | the board maintain a Compensation Committee with prescribed duties and a written charter and comprised solely of independent directors. |
Asa “controlled company,” we may elect to rely on some or all of these exemptions, although we do not currently intend to takeadvantage of any of these exemptions. Accordingly, should the interests of Mr. Cohen differ from those of other shareholders, and/orwe choose to take advantage of the “controlled company” exemptions, other shareholders may not have the same protectionsafforded to shareholders of companies that are subject to all of the Nasdaq corporate governance standards. Even if we do not avail ourselvesof these exemptions in the future, our status as a controlled company could make our common stock less attractive to some investors orotherwise harm our stock price. If we choose to take advantage of the exemptions under the rules of Nasdaq relating to “controlledcompanies” in the future, you will not have the same protections afforded to shareholders of companies that are subject to allof the corporate governance requirements of Nasdaq.
Potentialcompetition from our existing executive officers, after they leave their employment with us, and subject to the non-compete terms oftheir employment agreements, could negatively impact our profitability.
Althoughour Chief Executive Officer, Jacob D. Cohen, and our President and Chief Operating Officer, Jonathan Arango, are prohibited from competingwith us while they are employed with us and for twelve months thereafter (subject to the terms of, and exceptions set forth in, theiremployment agreements with the Company), none of such individuals will be prohibited from competing with us after such twelve-month periodends. Accordingly, any of these individuals could be in a position to use industry experience gained while working with us to competewith us. Such competition could distract or confuse customers, reduce the value of our intellectual property and trade secrets, or reduceour future revenues, earnings or growth prospects.
RisksRelated to Intellectual Property
Weoperate in an industry with the risk of intellectual property litigation. Claims of infringement against us may hurt our business.
Wemust protect the proprietary nature of the intellectual property used in our business. There can be no assurance that trade secrets andother intellectual property will not be challenged, invalidated, misappropriated or circumvented by third parties.
Additionally,our success depends, in part, upon non-infringement of intellectual property rights owned by others and being able to resolve claimsof intellectual property infringement without major financial expenditures or adverse consequences. Participants that own, or claim toown, intellectual property may aggressively assert their rights. From time to time, we may be subject to legal proceedings and claimsrelating to the intellectual property rights of others. Future litigation may be necessary to defend us by determining the scope, enforceability,and validity of third-party proprietary rights or to establish its proprietary rights. Our competitors have substantially greater resourcesand are able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time. Inaddition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us.Regardless of whether claims that we are infringing patents or other intellectual property rights have any merit, these claims are time-consumingand costly to evaluate and defend and could:
| ● | cause delays or stoppages in providing products; |
| ● | divert management’s attention and resources; |
| ● | require technology changes to our products that would cause our Company to incur substantial cost; |
| ● | subject us to significant liabilities; and |
| ● | require us to cease some or all of our activities. |
Inaddition to liability for monetary damages, which may be tripled and may include attorneys’ fees, or, in some circumstances, damagesagainst clients, we may be prohibited from developing, commercializing, or continuing to provide some or all of our products unless weobtain licenses from, and pay royalties to, the holders of the patents or other intellectual property rights, which may not be availableon commercially favorable terms, or at all.
RisksRelated to the Telehealth Operations of Our Contracting Parties
Thetelehealth business of our telehealth provider could be adversely affected by ongoing legal challenges or by new state actionsrestricting the ability to provide telehealth services in certain states.
Ourbusiness plan contemplates the use of telehealth providers to provide telehealth consultations and related services on our Mangoceuticalsplatform, which connects users/customers with third-party health care providers and Epiq Scripts, LLC, our related party pharmacy.We have entered into an agreement with Doctegrity, as discussed herein, pursuant to which Doctegrity has agreedto provide clinical services directly to our future customers via telehealth. Through these arrangements, the professionalsor professional entities will be responsible for the practice of medicine and control of the clinical decision-making.
Ourability to conduct business operations in each state is dependent upon the state’s treatment of medicine under such state’slaws, and rules and policies governing the practice of physician supervised services, which are subject to changing political, regulatoryand other influences.
Wewill be dependent on our contracted parties to maintain appropriate telehealth licenses to be able to provide telehealth services toour potential customers and prescribe them our products, which are required to be prescribed by licensed physicians. In the event weare not able to maintain relationships with telehealth providers, state licensing laws make it harder, more costly or impossible to providetelehealth services, or our customers are otherwise unable to obtain prescriptions for our products, we may be unable to sell products,which could result in us having to curtail our business plan or cease operating.
Ourcontracting parties’ telehealth business could be adversely affected by ongoing legal challenges to their business model or bynew state actions restricting their ability to provide the full range of services in certain states.
Theability of our contracted parties’ telehealth operations in each state is dependent upon the state’s treatment of medicineunder such state’s laws, rules and policies governing the practice of physician supervised services, which are subject to changingpolitical, regulatory and other influences. In the event our contracted parties are unable to provide telehealth services for any reason,it would have a material adverse effect on our ability to sell products and in turn our revenues and operating results.
RisksRelated to Our Governing Documents and Texas Law
OurCertificate of Formation, Bylaws and Texas law provides for indemnification of officers and directors at our expense andlimit the liability of our directors, which may result in a major cost to us and hurt the interests of our shareholders because corporateresources may be expended for the benefit of officers or directors.
OurCertificate of Formation, Bylaws and Texas law provide for us to indemnify and hold harmless, to the fullest extent permittedby applicable law, each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened,pending or completed action, suit or proceeding by reason of the fact that he or she is or was a director or officer of the Company or,while a director or officer of the Company, is or was serving at the request of the Company as a director, officer, employee or agentof another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respectto an employee benefit plan. Our Certificate of Formation, also provides that the personal liability of our directorsshall be eliminated to the fullest extent permitted by the Texas Business Organizations Code, as such may be amended or supplemented.These indemnification obligations and limitations of liability may result in a major cost to us and hurt the interests of our shareholdersbecause corporate resources may be expended for the benefit of officers or directors.
Wehave been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against publicpolicy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification for liabilitiesarising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controllingperson in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connectionwith our activities, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to acourt of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the SecuritiesAct and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likelyto be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the marketand price for our shares.
Wehave established preferred stock which can be designated by our Board of Directors without shareholder approval.
Wehave 10,000,000 shares of preferred stock authorized.The shares of our preferred stock may be issued from time to time in one or more series, each of which shall have a distinctivedesignation or title as shall be determined by our Board of Directors prior to the issuance of any shares thereof. The preferredstock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optionalor other special rights and such qualifications, limitations or restrictions thereof as adopted by the Board of Directors. Because theBoard of Directors is able to designate the powers and preferences of the preferred stock without the vote of a majority of ourshareholders, our shareholders will have no control over what designations and preferences our preferred stock will have.The issuance of shares of preferred stock or the rights associated therewith, could cause substantial dilution to our existing shareholders.Additionally, the dilutive effect of any preferred stock which we may issue may be exacerbated given the fact that such preferred stockmay have voting rights and/or other rights or preferences which could provide the preferred shareholders with substantial voting controlover us and/or give those holders the power to prevent or cause a change in control, even if that change in control might benefit ourshareholders. As a result, the issuance of shares of preferred stock may cause the value of our securities to decrease.
Anti-takeoverprovisions in our Certificate of Formation and our Bylaws, as well as provisions of Texas law, might discourage, delay orprevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.
OurCertificate of Formation, Bylaws and Texas law contain provisions that may discourage, delay or prevent a merger, acquisitionor other change in control that shareholders may consider favorable, including transactions in which you might otherwise receive a premiumfor your shares of our common stock. These provisions may also prevent or delay attempts by our shareholders to replace or remove ourmanagement. Our corporate governance documents include provisions:
| ● | requiring advance notice of shareholder proposals for business to be conducted at meetings of our shareholders and for nominations of candidates for election to our Board of Directors; |
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| ● | authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock; and |
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| ● | providing indemnification to, our directors and officers. |
Theexistence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in thefuture for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood thatyou could receive a premium for your common stock in an acquisition.
RisksRelated to Our Securities and this Offering
Ourcommon stock prices may be volatile and could decline substantially following this offering.
Themarket price of our common stock may be highly volatile and subject to wide fluctuations. Our financial performance, government regulatoryaction, tax laws, interest rates, and market conditions in general could have a significant impact on the future market price of ourcommon stock.
Someof the factors that could negatively affect or result in fluctuations in the market price of our common stock include:
| ● | actual or anticipated variations in our quarterly operating results; |
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| ● | changes in market valuations of similar companies; |
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| ● | adverse market reaction to the level of our indebtedness; |
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| ● | additions or departures of key personnel; |
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| ● | actions by shareholders; |
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| ● | speculation in the press or investment community; |
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| ● | general market, economic, and political conditions, including an economic slowdown or dislocation in the global credit markets; |
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| ● | our operating performance and the performance of other similar companies; |
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| ● | changes in accounting principles; and |
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| ● | passage of legislation or other regulatory developments that adversely affect us or our industry. |
Theoffering price per share of our common stock offered under this prospectus may not accurately reflect the value of your investment.
Theoffering price per share of our common stock offered by this prospectus was negotiated between us and the underwriters. Factors consideredin determining the price of our common stock include:
| ● | the information set forth in this prospectus and otherwise available to the Representative; |
| ● | our prospects and the history and prospects for the industry in which we compete; |
| ● | an assessment of our management; |
| ● | our prospects for future revenue and earnings; |
| ● | the general condition of the securities markets at the time of this offering; |
| ● | the recent prices of, and demand for, shares sold by us prior to this offering; |
| ● | the recent market prices of, and demand for, publicly traded securities of generally comparable companies; and |
| ● | other factors deemed relevant by the Representative and us. |
Theoffering price may not accurately reflect the value of our common stock and may not be realized upon any subsequent disposition of theshares.
Thereis no guarantee that we will be able to comply with Nasdaq’s continued listing standards.
Asa condition to consummating this offering, our common stock must be listed for trading on The Nasdaq Capital Market. Notwithstandingthe listing of our common stock for trading on Nasdaq, there can be no assurance any broker will be interested in trading our securities.Therefore, it may be difficult to sell your shares of common stock if you desire or need to sell them. Our underwriters are not obligatedto make a market in our securities, and even they do make a market, they can discontinue market making at any time without notice. Neitherwe nor the underwriters can provide any assurance that an active and liquid trading market in our securities will develop or, if developed,that such market will continue.
Furthermore,there is no guarantee that we will be able to maintain our listing on The Nasdaq Capital Market for any period of time. Among the conditionsrequired for continued listing on The Nasdaq Capital Market, we must (i) maintain at least $2.5 million in shareholders’ equityor $500,000 in net income over the prior two years or two of the prior three years, (ii) have a majority of independent directors (subjectto certain “controlled company” exemptions, which we do not currently plan to take advantage of, as discussed in greaterdetail above under “Jacob D. Cohen, our Chairman and Chief Executive Officer, beneficially owns greater than 50% of our outstandingshares of common stock, which will cause us to be deemed a “controlled company” under the rules of Nasdaq.”), and(iii) maintain a stock price over $1.00 per share. Our shareholders’ equity may not remain above Nasdaq’s $2.5 million minimum,we may not generate over $500,000 of yearly net income moving forward, we may not be able to maintain independent directors (to the extentrequired), and we may not be able to maintain a stock price over $1.00 per share. Our failure to meet the continued listing standardsof Nasdaq may result in our securities being delisted from The Nasdaq Capital Market.
Theabsence of such a listing may adversely affect the acceptance of our common stock as currency or the value accorded by other parties.Further, if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities.These requirements could severely limit the market liquidity of our common stock and the ability of our shareholders to sell our commonstock in the secondary market. If our common stock is delisted by Nasdaq, our common stock may be eligible to trade on an over-the-counterquotation system, such as the OTCQB Market or OTC Pink Market, where an investor may find it more difficult to sell our securities orobtain accurate quotations as to the market value of our securities. In the event our common stock is delisted from Nasdaq in the future,we may not be able to list our common stock or warrants on another national securities exchange or obtain quotation on an over-the counterquotation system.
Wehave broad discretion in how we use the proceeds of this offering and may not use these proceeds effectively, which could affect ourresults of operations and cause our common stock to decline.
Wewill have considerable discretion in the application of the net proceeds of this offering. We intend to use the net proceeds from thisoffering for product development, marketing and advertising, and for working capital, and potentially for future acquisitions, althoughnone are currently planned. As a result, investors will be relying upon management’s judgment with only limited information aboutour specific intentions for the use of the net proceeds of this offering. We may use the net proceeds for purposes that do not yielda significant return or any return at all for our shareholders. In addition, pending their use, we may invest the net proceeds from thisoffering in a manner that does not produce income or that loses value.
Ifour stock price fluctuates after the offering, you could lose a significant part of your investment.
Themarket price of our common stock could be subject to wide fluctuations in response to, among other things, the risk factors describedin this prospectus, and other factors beyond our control, such as fluctuations in the valuation of companies perceived by investors tobe comparable to us. Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue toaffect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate tothe operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political, andmarket conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the marketprice of our common stock. In the past, many companies that have experienced volatility in the market price of their stock have beensubject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation againstus could result in substantial costs and divert our management’s attention from other business concerns, which could seriouslyharm our business.
Ifsecurities or industry analysts do not publish research or reports about us, or if they adversely change their recommendations regardingour common stock, then our stock price and trading volume could decline.
Thetrading market for our common stock will be influenced by the research and reports that industry or securities analysts publish aboutus, our industry and our market. If no analyst elects to cover us and publish research or reports about us, the market for our commonstock could be severely limited and our stock price could be adversely affected. As a small-cap company, we are more likely than ourlarger competitors to lack coverage from securities analysts. In addition, even if we receive analyst coverage, if one or more analystsceases coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn couldcause our stock price or trading volume to decline. If one or more analysts who elect to cover us issue negative reports or adverselychange their recommendations regarding our common stock, our stock price could decline.
Purchasersin this offering will experience immediate and substantial dilution in net tangible book value.
Becausethe price per share of our common stock being offered is higher than the book value per share of our common stock, you will suffer substantialdilution in the net tangible book value of the common stock you purchase in this offering. Based on the assumed public offering priceof $4.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and the pro formanet tangible book value of the common stock of $0.10 per share as of September 30, 2022, if you purchase shares of common stock in thisoffering, you will suffer dilution of $3.60 per share in the net tangible book value of the common stock, which will be $0.40per share following the offering (on a pro forma, as adjusted basis). See “Dilution” below fora more detailed discussion of the dilution you will incur if you purchase our common stock in the offering.
Futuresales of our common stock, other securities convertible into our common stock, or preferred stock could cause the market value of ourcommon stock to decline and could result in dilution of your shares.
OurBoard of Directors is authorized, without your approval, to cause us to issue additional shares of our common stock or to raise capitalthrough the creation and issuance of preferred stock, other debt securities convertible into common stock, options, warrants and otherrights, on terms and for consideration as our Board of Directors in its sole discretion may determine. Additionally, pursuant to theResale Prospectus, we are registering the resale of an aggregate of 4,690,000 shares of common stock, which shares of common stockwill be available for immediate resale in the public market (assuming the exercise of warrants to purchase 2,000,000 of such shares).Sales of substantial amounts of our common stock or of preferred stock could cause the market price of our common stock to decrease significantly.We cannot predict the effect, if any, of future sales of our common stock, or the availability of our common stock for future sales,on the value of our common stock. Sales of substantial amounts of our common stock by large shareholders, or the perception that suchsales could occur, may adversely affect the market price of our common stock.
Inaddition, in connection with this offering, we, our directors, executive officers, and shareholders holding 5% or more of our outstandingcommon stock have agreed not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise disposeof any of our securities for a period of 12 months following the closing of the offering of the shares, subject to certain exceptionsand shareholders holding between 1% and 4.99% of our outstanding common stock have agreed not to offer, issue, sell, contract to sell,encumber, grant any option for the sale of or otherwise dispose of any of our securities for a period of six months following the closingof the offering of the shares, subject to certain exceptions. Notwithstanding the above, now shares of common stock that are includedin the Resale Prospectus are subject to such lock-up agreements. The Representative of the underwriters may, at any time, release,or authorize us to release, as the case may be, all or a portion of our common stock subject to the foregoing lock-up provisions. Ifthe restrictions under the lock-up provisions of the lock-up agreements entered into in connection with this offering are waived, sharesof our common stock may become available for sale into the market, subject to applicable law, which could reduce the market price forour common stock.
Wehave no intention of declaring dividends in the foreseeable future.
Thedecision to pay cash dividends on our common stock rests with our Board of Directors and will depend on our earnings, unencumbered cash,capital requirements and financial condition. We do not anticipate declaring any dividends in the foreseeable future, as we intend touse any excess cash to fund our operations. Investors in our common stock should not expect to receive dividend income on their investment,and investors will be dependent on the appreciation of our common stock to earn a return on their investment.
Theissuance and sale of common stock upon exercise of outstanding warrants may cause substantial dilution to existing shareholders and mayalso depress the market price of our common stock. Outstanding warrants to purchase shares of our common stock have cashless exercise rights.
Asof the date of this prospectus, we had a total of 2,000,000 warrants outstanding each with an exercise price of $1.00 per shareand term ranging from August 16, 2027 through December 22, 2027. If the holders of the warrants choose to exercise the warrants,it will cause substantial dilution to the then holders of our common stock. If exercises of the warrants and sales of such shares issuableupon exercise thereof take place, the price of our common stock may decline. In addition, the common stock issuable upon exercise ofthe warrants may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there isa greater supply of a company’s stock in the market than there is demand for that stock. When this happens the price of ourstock will decrease, and any additional shares which shareholders attempt to sell in the market will only further decrease the shareprice. If the share volume of our common stock cannot absorb shares sold by the warrant holders, then the value of our common stock willlikely decrease.
Eachof the warrants discussed above allow for cashless exercise rights. In a ‘cashless exercise’, the holder reduces the numberof shares of common stock issuable upon exercise of the warrants in amount equal to the aggregate value of the exercise price of theexercised warrants. For example, if our common stock was trading at $10 per share and a holder desires to exercise warrants to purchase100 shares of common stock with an exercise price of $1.00 per share on a cashless basis, the number of shares of common stock issuableto the holder upon such exercise would be reduced by 10 shares, equal in value to $100 ($10 per share x 10 shares), and the holder wouldreceive 90 shares of common stock upon such exercise. We do not receive any cash upon a cashless exercise and as such, while a cashlessexercise reduces the dilution which would otherwise exist upon a warrant exercise, it is also not as beneficial to us, as it does notbring in any new investment proceeds. Additionally, holders of warrants with cashless exercise provisions may be more likely to exercisetheir warrants as they do not have to come out of pocket with any cash exercise payments.
GeneralRisk Factors
Ourindustry and the broader U.S. economy have experienced higher than expected inflationary pressures during 2022 related to continued supplychain disruptions, labor shortages and geopolitical instability, and if these conditions persist, our business, results of operationsand cash flows could be materially and adversely affected.
2022has seen significant increases in the costs of labor and certain materials and equipment, and longer lead times for such materials andequipment, as a result of availability constraints, supply chain disruption, increased demand, labor shortages associated with a fullyemployed U.S. labor force, high inflation and other factors. Supply and demand fundamentals have been further aggravated by disruptionsin global energy supply caused by multiple geopolitical events, including the ongoing conflict between Russia and Ukraine. Recent supplychain constraints and inflationary pressures may in the future adversely impact our operating costs, as a result, our business, financialcondition, results of operations and cash flows could be materially and adversely affected.
Weand the health and wellness industry in general may be adversely affected during periods of high inflation, primarily because of highershipping and product manufacturing costs. While we will attempt to pass on increases in our costs through increased sales prices, marketforces may limit our ability to do so. If we are unable to raise sales prices enough to compensate for higher costs, our future revenues,gross profit margin and revenues could be adversely affected.
Economicuncertainty may affect our access to capital and/or increase the costs of such capital.
Globaleconomic conditions continue to be volatile and uncertain due to, among other things, consumer confidence in future economic conditions,fears of recession and trade wars, the price of energy, fluctuating interest rates, the availability and cost of consumer credit, theavailability and timing of government stimulus programs, levels of unemployment, increased inflation, tax rates, and the war betweenUkraine and Russia which began in February 2022. These conditions remain unpredictable and create uncertainties about our ability toraise capital in the future. In the event required capital becomes unavailable in the future, or more costly, it could have a materialadverse effect on our business, future results of operations, and financial condition.
Ourbusiness may be materially and adversely disrupted by epidemics or pandemics in the future, including COVID-19.
Anepidemic, pandemic or similar serious public health issue, and the measures undertaken by governmental authorities to address it, couldsignificantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, and/or alongwith any associated economic and/or social instability or distress, have a material adverse impact on our financial statements.
OnMarch 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containmentand mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and several statesand municipalities have declared public health emergencies. Although COVID-19 has to date not had a material impact on our operations,should the COVID-19 public health effort re-intensify to such an extent that we cannot operate, if there are new government restrictionson our business and our customers, and/or an extended economic recession or significant inflation, we could be unable to produce significantrevenues and cash flows sufficient to conduct our business. Such a circumstance could, among other things, exhaust our available liquidity(and ability to access liquidity sources) and/or trigger an acceleration to pay a significant portion or all of our then-outstandingdebt obligations, which we may be unable to do.
Ourbusiness could be disrupted by catastrophic events and man-made problems, such as power disruptions, data security breaches, and terrorism.
Oursystems will be vulnerable to damage or interruption from the occurrence of any catastrophic event, including earthquake, fire, flood,or other weather event, power loss, telecommunications failure, software or hardware malfunction, cyber-attack, war, terrorist attack,or incident of mass violence, which could result in lengthy interruptions in access to our systems. In addition, acts of terrorism, includingmalicious internet-based activity, could cause disruptions to the internet or the economy as a whole. If our systems were to fail orbe negatively impacted as a result of a natural disaster or other event, our ability to provide products to customers would be impairedor we could lose critical data. We do not carry business interruption insurance sufficient to compensate us for the potentially significantlosses, including the potential harm to our business, financial condition and results of operations that may result from interruptionsin access to our platform as a result of system failures.
Ouroperations are subject to risks associated with ongoing and potential future global conflicts.
Currently,there is an ongoing conflict involving Russia and Ukraine and the war between the two countries continues to evolve as military activityproceeds and additional sanctions are imposed. The war is increasingly affecting economic and global financial markets and exacerbatingongoing economic challenges, including issues such as rising inflation and global supply-chain disruption. While we do not believe thisconflict currently has a material impact on our financial accounting and reporting, the degree to which we will be affected in the futurelargely depends on the nature and duration of uncertain and unpredictable events, and our business could be impacted. Furthermore, futureglobal conflicts or wars could create further economic challenges, including, but not limited to, increases in inflation and furtherglobal supply-chain disruption. Consequently, the ongoing Russia/Ukraine conflict and/or other future global conflicts could result inan increase in operating expenses and/or a decrease in any future revenue and could further have a material adverse effect on our resultsof operations and cash flow.
Globaleconomic conditions could materially adversely affect our business, results of operations, financial condition and growth.
Adversemacroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy,tighter credit, higher interest rates, high unemployment and currency fluctuations could materially adversely affect our operations,expenses, access to capital and the market for our products. In addition, consumer confidence and spending could be adverselyaffected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, declinesin income or asset values, changes to fuel and other energy costs, labor and healthcare costs and other economic factors.
Inaddition, uncertainty about, or a decline in, global or regional economic conditions could have a significant impact on our expectedfunding sources, suppliers and partners. Potential effects include financial instability; inability to obtain credit to finance operationsand purchases of our products; and insolvency.
Adownturn in the economic environment could also lead to limitations on our ability to issue new debt; reduced liquidity; and declinesin the fair value of our financial instruments. These and other economic factors could materially adversely affect ourbusiness, results of operations, financial condition and growth.
Wemay become party to litigation, mediation and/or arbitration from time to time given our product focus.
Wemay become party to regulatory proceedings, litigation, mediation and/or arbitration from time to time in the ordinary course of businesswhich could adversely affect our business. Monitoring and defending against legal actions, whether or not meritorious, can be time-consuming,divert management’s attention and resources and cause us to incur significant expenses. In addition, legal fees and costs incurredin connection with such activities may be significant and we could, in the future, be subject to judgments or enter into settlementsof claims for significant monetary damages. While we expect to have insurance in the future that may cover the costs and awards of certaintypes of litigation, the amount of our future insurance may not be sufficient to cover any costs or awards. Substantial litigation costsor an adverse result in any litigation may adversely impact our business, operating results or financial condition.
Higherlabor costs due to statutory and regulatory changes could materially adversely affect our business, financial condition and operatingresults.
Variousfederal and state labor laws, including new laws and regulations enacted in response to COVID-19, govern our relationships with our employeesand affect operating costs. These laws include employee classifications as exempt or non-exempt, minimum wage requirements, unemploymenttax rates, workers’ compensation rates, overtime, family leave, workplace health and safety standards, payroll taxes, citizenshiprequirements and other wage and benefit requirements for employees classified as non-exempt. As certain of our employees are paid atrates set at, or above but related to, the applicable minimum wage, further increases in the minimum wage could increase our labor costs.Significant additional government regulations could materially adversely affect our business, financial condition and operating results.
Failureto adequately manage our planned aggressive growth strategy may harm our business or increase our risk of failure.
Forthe foreseeable future, we intend to pursue an aggressive growth strategy for the expansion of our operations through increased marketing.Our ability to rapidly expand our operations will depend upon many factors, including our ability to work in a regulated environment,establish and maintain strategic relationships with suppliers, and obtain adequate capital resources on acceptable terms. Any restrictionson our ability to expand may have a materially adverse effect on our business, results of operations, and financial condition. Accordingly,we may be unable to achieve our targets for sales growth, and our operations may not be successful or achieve anticipated operating results.
Additionally,our growth may place a significant strain on our managerial, administrative, operational, and financial resources and our infrastructure.Our future success will depend, in part, upon the ability of our senior management to manage growth effectively. This will require usto, among other things:
| ● | implement additional management information systems; |
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| ● | further develop our operating, administrative, legal, financial, and accounting systems and controls; |
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| ● | hire additional personnel; |
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| ● | develop additional levels of management within our company; |
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| ● | locate additional office space; and |
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| ● | maintain close coordination among our operations, legal, finance, sales and marketing, and client service and support personnel. |
Asa result, we may lack the resources to deploy our services on a timely and cost-effective basis. Failure to accomplish any of these requirementscould impair our ability to deliver services in a timely fashion or attract and retain new customers.
Ifwe make any acquisitions, they may disrupt or have a negative impact on our business.
Ifwe make acquisitions in the future, we could have difficulty integrating the acquired company’s assets, personnel and operationswith our own. We do not anticipate that any acquisitions or mergers we may enter into in the future would result in a change of controlof the Company. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the effectexpansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disruptour ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitionsare accompanied by a number of inherent risks, including, without limitation, the following:
| ● | the difficulty of integrating acquired products, services or operations; |
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| ● | the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies; |
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| ● | difficulties in maintaining uniform standards, controls, procedures and policies; |
| ● | the potential impairment of relationships with employees and customers as a result of any integration of new management personnel; |
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| ● | the potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products to new and existing customers; |
| ● | the effect of any government regulations which relate to the business acquired; |
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| ● | potential unknown liabilities associated with acquired businesses or product lines, or the need to spend significant amounts to retool, reposition or modify the marketing and sales of acquired products or operations, or the defense of any litigation, whether or not successful, resulting from actions of the acquired company prior to our acquisition; and |
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| ● | potential expenses under the labor, environmental and other laws of various jurisdictions. |
Ourbusiness could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problemsencountered in connection with an acquisition, many of which cannot be presently identified. These risks and problems could disrupt ourongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.
Claims,litigation, government investigations, and other proceedings may adversely affect our business and results of operations.
Wemay be subject to actual and threatened claims, litigation, reviews, investigations, and other proceedings, including proceedings relatingto products offered by us and by third parties, and other matters. Any of these types of proceedings, may have an adverse effect on usbecause of legal costs, disruption of our operations, diversion of management resources, negative publicity, and other factors. The outcomesof these matters are inherently unpredictable and subject to significant uncertainties. Determining legal reserves and possible lossesfrom such matters involves judgment and may not reflect the full range of uncertainties and unpredictable outcomes. Until the final resolutionof such matters, we may be exposed to losses in excess of the amount recorded, and such amounts could be material. Should any of ourestimates and assumptions change or prove to have been incorrect, it could have a material effect on our business, consolidated financialposition, results of operations, or cash flows. In addition, it is possible that a resolution of one or more such proceedings, includingas a result of a settlement, could require us to make substantial future payments, prevent us from offering certain products or services,require us to change our business practices in a manner materially adverse to our business, requiring development of non-infringing orotherwise altered products or technologies, damaging our reputation, or otherwise having a material effect on our operations.
Wemay incur indebtedness in the future which could reduce our financial flexibility, increase interest expense and adversely impact ouroperations and our costs.
Wemay incur significant amounts of indebtedness in the future. Our level of indebtedness could affect our operations in several ways, includingthe following:
| ● | a significant portion of our cash flows is required to be used to service our indebtedness; |
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| ● | a high level of debt increases our vulnerability to general adverse economic and industry conditions; |
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| ● | covenants contained in the agreements governing our outstanding indebtedness limit our ability to borrow additional funds and provide additional security interests, dispose of assets, pay dividends and make certain investments; |
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| ● | a high level of debt may place us at a competitive disadvantage compared to our competitors that are less leveraged and, therefore, may be able to take advantage of opportunities that our indebtedness may prevent us from pursuing; and |
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| ● | debt covenants may affect our flexibility in planning for, and reacting to, changes in the economy and in our industry. |
Ahigh level of indebtedness increases the risk that we may default on our debt obligations. We may not be able to generate sufficientcash flows to pay the principal or interest on our debt, and future working capital, borrowings or equity financing may not be availableto pay or refinance such debt. If we do not have sufficient funds and are otherwise unable to arrange financing, we may have to sellsignificant assets or have a portion of our assets foreclosed upon which could have a material adverse effect on our business, financialcondition and results of operations.
CautionaryNote Regarding Forward-Looking Statements
Wemake forward-looking statements under the “Prospectus Summary,” “Risk Factors,”“Business,” “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” and in other sections of this prospectus. In some cases, you can identify these statements by forward-lookingwords such as “may,” “might,” “should,” “would,” “could,” “expect,”“plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,”“potential” or “continue,” and the negative of these terms and other comparable terminology. These forward-lookingstatements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our futurefinancial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions basedon our current expectations and projections about future events. There are important factors that could cause our actual results, levelof activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressedor implied by the forward-looking statements. In particular, you should consider the numerous risks and uncertainties described under“Risk Factors.”
Whilewe believe we have identified material risks, these risks and uncertainties are not exhaustive. Other sections of this prospectus describeadditional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive andrapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties,nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actualresults to differ materially from those contained in any forward-looking statements.
Althoughwe believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level ofactivity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completenessof any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Exceptas required by U.S. federal securities law, we are under no duty to update any of these forward-looking statements after the date ofthis prospectus to conform our prior statements to actual results or revised expectations, and we do not intend to do so.
Forward-lookingstatements include, but are not limited to, statements about:
| ● | our ability to obtain additional funding; |
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| ● | the continuing effect of COVID-19 on our planned operations, sales, and the market for our products; |
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| ● | our ability to build and maintain our brand; |
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| ● | cybersecurity, information systems and fraud risks and problems with our websites; |
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| ● | our ability to expand and grow our operations, and successfully market our planned; |
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| ● | changes in, and our compliance with, rules and regulations affecting our operations, sales, and/or our products; |
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| ● | shipping, production or manufacturing delays; |
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| ● | our ability to obtain and increase sales; |
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| ● | regulations we are required to comply with in connection with our operations, manufacturing, labeling and shipping; |
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| ● | competition from existing competitors or new competitors or products that may emerge; |
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| ● | our dependency on third-parties to prescribe and compound our planned ED product; |
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| ● | our ability to establish or maintain relations and/or relationships with third-parties; |
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| ● | potential safety risks associated with our Mango ED product, including the use of ingredients, combination of such ingredients and the dosages thereof; |
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| ● | the effects of high inflation, increasing interest rates and economic downturns, including potential recessions, as well as macroeconomic, geopolitical, health and industry trends, pandemics, acts of war (including the ongoing Ukraine/Russian conflict) and other large-scale crises; |
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| ● | our ability to protect intellectual property rights; |
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| ● | our ability to adequately support future growth; and |
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| ● | our ability to attract and retain key personnel to manage our business effectively. |
Wecaution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this prospectus in thecase of forward-looking statements contained in this prospectus.
Useof Proceeds
Weestimate that the net proceeds to us from the sale of our shares of common stock in this offering will be approximately $4.1 million,assuming an initial public offering price of $4.00 per share, the midpoint of the estimated price range set forth on the coverpage of this prospectus after deducting underwriting discounts and commissions and estimated offering expenses. Our net proceeds willincrease by approximately $0.7 million if the underwriters’ over-allotment option to purchase additional shares of commonstock is exercised in full (based on the same assumed offering price as described in the preceding sentence).
Wecurrently intend to use the net proceeds we receive from this offering for general corporate purposes, including working capital ($1,107,000,or approximately 27% of the net proceeds), to finance the marketing and operational expenses associated with the planned marketingof our Mango ED product (approximately $1,804,000, or 44% of the net proceeds), hiring additional personnel to build organizationaltalent ($902,000, or approximately 22% of the net proceeds) and capital expenditures for software development and maintenance($287,000, or approximately 7% of the net proceeds). In addition, we may use a portion of the net proceeds of this offeringto finance future acquisitions or invest in complementary businesses, services, technologies or intellectual property rights. However,we do not have any agreements or commitments with respect to any such acquisitions or investments at this time.
Pendingour use of the net proceeds as described above, we intend to invest the net proceeds in short-term bank deposits or interest-bearing,investment-grade securities.
A$0.50 increase (decrease) in the assumed initial public offering price of $4.00 per share of common stock would increase (decrease)the net proceeds to us from this offering by approximately $0.6 million, assuming the number of shares offered by us, as set forthon the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions.
Theforegoing represents our current intentions with respect to the use and allocation of the net proceeds of this offering based upon ourpresent plans and business conditions, but our management will have significant flexibility and discretion in applying the net proceeds.The occurrence of unforeseen events or changed business conditions could result in the application of the net proceeds of this offeringin a manner other than as described above.
DividendPolicy
Wehave never declared or paid any cash dividends on our capital stock. We currently intend to retain earnings, if any, to finance the growthand development of our business. We do not expect to pay any cash dividends on our common stock in the foreseeable future. Payment offuture dividends, if any, will be at the discretion of our Board of Directors and will depend on our financial condition, results ofoperations, capital requirements, restrictions contained in any financing instruments, provisions of applicable law and other factorsthe board deems relevant.
Capitalization
Thefollowing table sets forth our cash and capitalization as of September 30, 2022, on:
| ● | an actual basis; |
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| ● | a pro forma basis, after giving effect to the sale of 499,500 shares of common stock as part of the sale of 499,500 units, for an aggregate of $499,500 in November and December 2022 (the “November and December 2022 Private Placement”); and |
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| ● | a pro forma, as adjusted basis, after giving effect to (i) the November and December 2022 Private Placement; and (ii) the sale of 1,250,000 shares of our common stock in this offering at an assumed public offering price of $4.00 per share (the midpoint of the range set forth on the cover page of this prospectus), and our receipt of the estimated $4.1 million in net proceeds from this offering, after deducting underwriting commissions and estimated offering expenses payable by us. |
Youshould read this capitalization table together with “Use of Proceeds,” “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notesappearing elsewhere in this prospectus.
| | At September 30, 2022 (In thousands) | |
| | Actual | | | Pro Forma | | | Pro Forma As, Adjusted | |
Cash | | $ | 914 | | | $ | 1,323 | | | $ | 5,515 | |
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Stockholders’ deficit: | | | | | | | | | | | | |
Common stock (par value $0.0001 per share), 12,015,500, 12,515,500 and 13,515,500 shares issued and outstanding at September 30, 2022, on a an actual, pro forma and pro forma as adjusted basis, respectively | | | 1 | | | | 1 | | | | 1 | |
Additional paid-in capital | | | 2,165 | | | | 2,615 | | | | 6,807 | |
Accumulated deficit | | | (1,342 | ) | | | (1,342 | ) | | | (1,342 | ) |
Total stockholders’ equity | | | 824 | | | | 1,274 | | | | 5,466 | |
Total capitalization | | $ | 824 | | | $ | 1,274 | | | $ | 5,466 | |
A$0.50 increase (decrease) in the assumed initial public offering price of $4.00 per share of common stock, the midpoint of theestimated price range set forth on the cover page of this prospectus, would increase (decrease) each of our pro forma as adjusted cash,additional paid-in capital, total shareholders’ equity and total capitalization by approximately $0.6 million, and afterdeducting estimated underwriting discounts and commissions and estimated expenses of the offering.
Thenumber of shares of common stock to be outstanding after this offering is based on 12,015,500 shares outstanding as of September30, 2022, and does not give effect to:
| ● | 187,500 shares of common stock issuable to the representative of the underwriters upon the exercise of its option to purchase additional shares to cover over-allotments, if any; |
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| ● | any exercise of outstanding options to purchase 1,250,000 shares of common stock at an exercise price of $1.10 per share; |
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| ● | any exercise of outstanding warrants to purchase 2,000,000 shares of common stock at an exercise price of $1.00 per share (including 429,570 that were granted after September 30, 2022); and |
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| ● | any future awards under our 2022 Equity Incentive Plan. |
Dilution
Purchasersof our common stock in this offering will experience an immediate dilution of net tangible book value per share from the initial publicoffering price. Dilution in net tangible book value per share represents the difference between the amount per share paid by the purchasersof shares of common stock and the net tangible book value per share immediately after this offering.
Asof September 30, 2022, our net tangible book value was $0.8 million, or $0.07 per share of common stock. Net tangible book valueper share represents our total tangible assets, less our total liabilities, divided by the number of outstanding shares of our commonstock.
Thepro forma net tangible book value of our common stock as of September 30, 2022, giving effect to the sale of 499,500 shares of commonstock as part of 499,500 units for an aggregate of $499,500 in November and December 2022, pursuant to our private placement which salesclosed prior to the date of this prospectus, was approximately $1.3 million, or $0.10 per common stock share. Net tangible bookvalue per share represents our total tangible assets, less our total liabilities, divided by the number of outstanding shares of ourcommon stock.
Dilutionin net pro forma tangible book value per share of common stock represents the difference between the public offering price per shareof our common stock in this offering and the adjusted pro forma net tangible book value per share of our common stock after giving effectto this offering. After giving effect to the sale of shares of common stock in this offering at an assumed offering price of $4.00per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting underwriting commissionsand estimated offering expenses payable by us, our as pro forma adjusted net tangible book value would have been $5.4 million or $0.10per share. This represents an immediate increase in pro forma net tangible book value of $0.30 per share to our existing shareholdersand immediate dilution of $3.60 per share to new investors purchasing shares at the proposed public offering price. The followingtable illustrates the dilution in net tangible book value per share to new investors as of September 30, 2022:
Assumed initial public offering price per share of common stock | | | | | | $ | 4.00 | |
Net tangible book value per common stock share as of September 30, 2022 | | $ | 0.07 | | | | | |
Increase in net tangible book value per common stock attributable to the November and December 2022 Private Placement | | | 0.03 | | | | | |
Pro forma net tangible book value per common stock share as of September 30, 2022 | | | 0.10 | | | | | |
Increase in net tangible book value per share of common stock attributable to this offering | | $ | 0.30 | | | | | |
Pro forma, as adjusted net tangible book per common stock share as of September 30, 2022, after this offering | | | | | | $ | 0.40 | |
Dilution per common stock share to investors participating in this offering | | | | | | $ | (3.60 | ) |
Thedilution information discussed above is illustrative only and may change based on the actual initial public offering price and otherterms of this offering. A $0.50 increase (decrease) in the assumed initial public offering price of $4.00 per share of commonstock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) our pro formaadjusted net tangible book value per share after this offering by approximately $0.04 per share and increase (decrease) the dilutionto new investors by $0.46 per share, after deducting estimated underwriting discounts and commissions.
Ifthe underwriters exercise their option to purchase additional shares of common stock in full, the net tangible book value per share,as adjusted to give effect to this offering, would be $0.44 per share, and the dilution in net tangible book value per share toinvestors in this offering would be $3.56 per share.
Thenumber of shares of common stock to be outstanding after this offering is based on 12,015,500 shares outstanding as of September 30,2022, and does not give effect to:
| ● | 187,500 shares of common stock issuable to the Representative of the underwriters upon the exercise of its option to purchase additional shares to cover over-allotments, if any; |
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| ● | any exercise of outstanding options to purchase 1,250,000 shares of common stock at an exercise price of $1.10 per share; |
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| ● | any exercise of outstanding warrants to purchase 2,000,000 shares of common stock at an exercise price of $1.00 per share (including 429,570 which were granted after September 30, 2022); and |
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| ● | any future awards under our 2022 Equity Incentive Plan. |
Thefollowing table sets forth, as of September 30, 2022, the number of shares of common stock purchased from us, the total considerationpaid to us and the average price per share paid by the existing holders of our common stock and the price to be paid by new investorsin this offering at an assumed initial public offering price of $4.00 per share, the midpoint of the estimated price range setforth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offeringexpenses.
| | Shares Purchased | | | Total Consideration | | | Average Price Per Share | |
| | Number | | | Percent | | | Amount(1) | | | Percent | | | | |
Existing shareholders before this offering | | | 13,715,000 | | | | 91.6 | % | | $ | 2,007,000 | | | | 28.6 | % | | $ | 0.15 | |
Investors purchasing shares in this offering | | | 1,250,000 | | | | 8.4 | % | | $ | 5,000,000 | | | | 71.4 | % | | $ | 4.00 | |
Total | | | 14,965,000 | | | | 100.0 | % | | $ | 7,007,000 | | | | 100.00 | % | | $ | 0.47 | |
(1) Not including sharesissued for services rendered and including only shares paid for in cash.
Management’sDiscussion and Analysis of
FinancialCondition and Results of Operations
Thefollowing discussion should be read in conjunction with our financial statements and accompanying notes included elsewhere in this prospectus.The following discussion contains forward-looking statements regarding future events and the future results of the Company that are basedon current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptionsof the management of the Company. Words such as “expects,” “anticipates,” “targets,” “goals,”“projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,”variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statementsare only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual resultsmay differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute tosuch differences include, but are not limited to, those discussed elsewhere in this prospectus, particularly under “RiskFactors,” and in other reports we file with the SEC. See also “Cautionary Note Regarding Forward-LookingStatements.” The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reasonexcept as required by law. Factors that could cause or contribute to these differences include those discussed below and elsewhere inthis prospectus.
Thefollowing discussion is based upon our financial statements included elsewhere in this prospectus, which have been prepared in accordancewith U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgmentsthat affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingencies.
Introduction
OurManagement’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in additionto the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition,and cash flows. MD&A is organized as follows:
| ● | Plan of Operations. |
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| ● | Results of Operations. |
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| ● | Liquidity and Capital Resources. |
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| ● | Critical Accounting Policies and Estimates. |
Thisinformation should be read in conjunction with the financial statements and related notes included in the audited financial statementsbeginning under “Index to Financial Statements” in this prospectus.
Seealso “Glossary of Industry Terms” above for information on certain of the terms used below.
Planof Operations
Weare headquartered in Dallas, Texas and intend togrow our business both organically and through identifying acquisition targets over the next 12 months in the technology, healthand wellness space. Specifically, we plan to continue to make additional and ongoing technology enhancements to its platform,further develop, market and advertise additional men’s health and wellness related products on its telemedicine platform, and identifystrategic acquisitions that complement our vision. As these opportunities arise, we will determine the best method forfinancing such acquisitions and growth which may include the issuance of debt instruments, common stock, preferred stock, or a combinationthereof, all of which may result in significant dilution to existing shareholders.
Tosupport our existing operations or any future expansion of business, including the ability to execute our growth strategy, we must havesufficient capital to continue to make investments and fund operations. We have plans to pursue an aggressive growth strategy for theexpansion of operations through marketing to attract new customers for our Mango ED product, following this offering.
Weexpect that the proceeds from this offering plus our current cash will be sufficient to fund our operations and execute our growth strategy(as discussed above) for at least 12 months after the date of this prospectus. After this offering, we may seek additional funding throughequity financings, debt financings or other capital sources, including collaborations with other companies or other strategic transactions.We may not be able to obtain financing on acceptable terms or at all. The terms of any financing may adversely affect the holdings orrights of our shareholders. Although we continue to pursue these plans, there is no assurance that we will be successful in obtainingsufficient funding on terms acceptable to us to fund continued operations, if at all.
Resultsof Operations
We launched our website in mid-November 2022. To date, we have sold only a small amount of products and generated only nominal revenues. We plan to market and seek to sell commercial quantities of our Mango ED product in the first quarter of 2023, following this offering.
FromOctober 7, 2021 to December 31, 2021, we had general and administrative expenses of $17,250 and $181 of interest expense (which representedimputed interest on the related party loans discussed below under “Liquidity and Capital Resources”), which resulted in anet loss of $17,701 for the period.
Forthe nine months ended September 30, 2022, we had general and administrative expenses of $1,319,727 and $4,673 of interestexpense (which represented imputed interest on the related party loans discussed below under “Liquidity and Capital Resources”),which resulted in a net loss of $1,324,400 for the period. General and administrative expenses for the nine months ended September30, 2022, were mainly the result of marketing, product development, software development expenses and the compensation paid to additionalpersonnel hired during the period, including a total of $490,000 attributed to stock issued for services and $169,817 attributed to stock-basedcompensation from issuances of options and warrants, for a total of $659,817.
Liquidityand Capital Resources
On September30, 2022, we had $873,491 of cash on-hand, compared to $22,550 of cash on-hand of December 31, 2021. We also had $15,000of prepaid expenses, related party, relating to amounts funded to Epiq Scripts and $5,778 of prepaid rent as of September 30, 2022.We also had $2,531 of property and equipment and $16,942 of security deposit, representing the security deposit on our leased officespace, as September 30, 2022.
Asof September 30, 2022, the Company had total current liabilities of $89,871, consisting of notes payable to related parties of $89,200,as discussed in further detail below under “Related Party Loans and Advances”, and $671 of payroll tax liabilities.
Asof September 30, 2022, we had $913,742 in total assets, $89,871 in total liabilities (all current), working capitalof $804,398 and a total accumulated deficit of $1,342,101.
Wehave mainly relied on related party loans, as well as funds raised through the sale of securities, mainly through the private placementoffering discussed below, to support our operations since inception. We have primarily used our available cash to pay operating expenses.We do not have any material commitments for capital expenditures.
Wehave experienced recurring net losses since inception. We believe that we will continue to incur substantial operating expenses in theforeseeable future as we continue to invest to bring our Mango ED product to market and to attract customers, expand the product offeringsand enhance technology and infrastructure. These efforts may prove more expensive than we anticipate, and we may not succeed in generatingcommercial revenues or net income to offset these expenses. Accordingly, we may not be able to achieve profitability, and we may incursignificant losses for the foreseeable future. Our independent registered public accounting firm included an explanatory paragraph inits report on our financial statements as of, and for the year ended, December 31, 2021, describing the existence of substantial doubtabout our ability to continue as a going concern.
Tosupport our existing operations or any future expansion of business, including the ability to execute our growth strategy, we must havesufficient capital to continue to make investments and fund operations. We have plans to pursue an aggressive growth strategy for theexpansion of operations through marketing to attract new customers for our Mango ED product, following this offering.
CashFlows
| | From October 7, 2021 (Inception) to December 31, 2021 | | | Nine-months ended September 30, 2022 | |
Cash provided by (used in): | | | | | | | | |
Operating activities | | $ | (17,520 | ) | | $ | (696,958 | ) |
Investing activities | | | — | | | | 2,531 | |
Financing activities | | | 40,070 | | | | 1,550,430 | |
Net increase (decrease) in cash | | $ | 22,550 | | | $ | 850,941 | |
Netcash used in operating activities was $696,958 for the nine months ended September 30, 2022, which was mainly dueto $1,324,400 of net loss, offset by $490,000 of common stock issued for services and $169,817 of stock based compensationfrom issuances of options and warrants.
Netcash used in operating activities was $17,520 for the period from October 7, 2021 (Inception) through December 31, 2021, which was dueto $17,701 of net loss offset by $181 of imputed interest.
Netcash used in investing activities was $2,531 for the nine months ended September 30, 2022, due to the purchase of equipment.
Netcash provided by financing activities was $1,550,430 for the nine months ended September 30, 2022, which was mainlydue to $1,500,500 of sales of common stock, representing amounts raised in the 2022 Private Offering, discussed below and $75,000of notes payable from related parties, offset by $25,070 of repayment of related party notes payable.
Netcash provided by financing activities was $40,070 for the period from October 7, 2021 (Inception) through December 31, 2021, which wasdue to $39,270 of notes payable from related parties and offset by $800 of proceeds from the sale of stock.
RelatedParty Loans and Advances
OnDecember 10, 2021 and March 18, 2022, the Company received advances of $39,200 and $50,000, respectively, for a total of $89,200 fromits previous majority shareholder, American International, in order to cover various general and administrative expenses. The amountowed to American International was $39,200 as of December 31, 2021. Imputed interest equal to 8% per annum, or $181, was recorded againstthe related party advance as of December 31, 2021. Other than the imputed interest discussed above, the advances bear no interest andare due on demand upon the Company’s ability to repay the advances from either future revenues or investment proceeds. Pursuantto the terms of the June 16, 2022, SPA discussed above, on June 16, 2022, Cohen Enterprises also acquired the right to be repaid the$89,200 advanced from American International to the Company.
OnJune 29, 2022, Company received an advance of $25,000 from Cohen Enterprises in order to cover various general and administrativeexpenses. The Company repaid Cohen Enterprises $25,000 onAugust 18, 2022, bringing the total amount owed to Cohen Enterprises to $89,200 as of September 30, 2022. TheCompany recorded imputed interest equal to eight percent (8%) per annum, or $4,674, against the related party advances throughthe nine months ended September 30, 2022.
OnDecember 10, 2021, the Company received an advance of $70 from ZipDoctor, Inc., a wholly owned subsidiary of its then sole shareholder,American International, which was used to open and establish the Company’s bank account. The advance bears no interest and is dueon demand upon the Company’s ability to repay the advance from either future revenues or investment proceeds. The amount owed toZipDoctor was $70 as of December 31, 2021. Imputed interest equal to 8% per annum, or $0, was recorded against the related party advanceas of December 31, 2021. The amount was paid in full on May 24, 2022 and the amount owed to ZipDoctor was $0 as of September 30,2022.
JacobD. Cohen, the Company’s Chairman and Chief Executive Officer, has made his personal credit card available for purchases on behalfof the Company to cover various general and administrative expenses. Mr. Cohen has been repaid a total of $150,423 as of September30, 2022, for Company purchases made using his personal credit card.
2022Private Placement
InAugust 2022, the Company initiated a private placement of up to $2 million of units to accredited investors, with each unit consistingof one share of common stock and a warrant to purchase one share of common stock, at a price of $1.00 per unit. The warrants have a five-yearterm (from each closing date that units were sold) and an exercise price of $1.00 per share. If at any time after the six-month anniversaryof the issuance date, there is no effective registration statement registering, or no current prospectus available for the resale ofthe shares of common stock issuable upon exercise the warrants, the holder of the warrants may elect a cashless exercise of the warrants.Boustead Securities, LLC, the underwriter for this offering, served as the placement agent in connection with the private placement.In total, we sold an aggregate of 2,000,000 units for $2,000,000 to 23 accredited investors between August 16, 2022 and December 22,2022, the end date of the offering.
Needfor Future Funding
Asdiscussed above, our current capital resources, combined with the net proceeds from the offering, are expected to be sufficient for usto fund operations for the next 12 months. We may need funding in addition to the funding raised in this offering, to support our operationsin the future. We may also seek to acquire additional businesses or assets in the future, which may require us to raise funding. We currentlyanticipate such funding, if required, being raised through the offering of debt or equity. Such additional financing, if required, maynot be available on favorable terms, if at all. If debt financing is available and obtained, our interest expense may increase and wemay be subject to the risk of default, depending on the terms of such financing. If equity financing is available and obtained it mayresult in our shareholders experiencing significant dilution. If such financing is unavailable, we may be forced to curtail our businessplan, which may cause the value of our securities to decline in value.
CriticalAccounting Policies and Estimates
Thepreparation of the Company’s financial statements in accordancewith accounting principles generally accepted in the United States of America (“GAAP”) requires managementto make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses. Note2 – Summary of Significant Accounting Policies” to the audited financial statements included under “Index to FinancialStatements,” below describes the significant accounting policies used in the preparation of the financial statements. Certainof these significant accounting policies and estimates have a higher degree of inherent uncertainty and require significant judgments.
Acritical accounting policy is defined as one that is both material to the presentation of our financial statements and requires managementto make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations.Specifically, critical accounting estimates have the following attributes: (1) we are required to make assumptions about matters thatare highly uncertain at the time of the estimate; and (2) different estimates we could reasonably have used, or changes in the estimatethat are reasonably likely to occur, would have a material effect on our financial condition or results of operations.
Estimatesand assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experienceand on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as newevents occur, as additional information is obtained and as our operating environment changes. These changes have historically been minorand have been included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policiesand the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statementsare fairly stated in accordance with GAAP and present a meaningful presentation of our financial condition and results of operations.We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparationof our consolidated financial statements:
Share-BasedCompensation – Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic ofFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, which requires recognitionin the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instrumentsover the shorter of period the employee or director is required to perform the services in exchange for the award or the vesting period.ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-datefair value of the award. Pursuant to ASC 505-50, for share-based payments to non-employees, compensation expense is determined at the“measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached,the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair valueof the award at the reporting date. Additionally, we used this same methodology when determining the fair value of our restricted commonstock issuances to managers and other related parties.
Estimatingthe Fair Value of Common Stock - We are required to estimate the fair value of the common stock underlying our stock-based awardsand warrants when performing the fair value calculations using the Black-Scholes option pricing model. Because our common stock is notcurrently publicly traded, the fair value of the common stock underlying our stock options has been determined on each grant date byour board of directors, with input from management, considering our most recent private, third-party sale of common shares.
Ourdetermination of the fair value of stock options with time-based vesting on the date of grant utilizes the Black-Scholes option pricingmodel, and is impacted by our common stock price as well as other variables including, but not limited to, expected term that optionswill remain outstanding, expected common stock price volatility over the term of the option awards, risk-free interest rates and expecteddividends. Estimating the fair value of equity-settled awards as of the grant date using valuation models, such as the Black-Scholesoption pricing model, is affected by assumptions regarding a number of complex variables. Changes in the assumptions can materially affectthe fair value and ultimately how much stock-based compensation expense is recognized. These inputs are subjective and generally requiresignificant analysis and judgment to develop.
Warrants– In accordance with ASC 480, the Company classifies as equity any contracts that (i) require physical settlement or net-sharesettlement or (ii) gives the Company a choice of net-cash settlement in its own shares. The Company classifies as liabilities any contractsthat (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event isoutside the control of the Company) or (ii) give the counterparty a choice of net-cash settlement or settlement in shares.
TheCompany accounts for its currently issued warrants in conjunction with the Company’s ordinary shares in permanent equity. Thesewarrants are indexed to the Company’s stock and meet the requirements of equity classification as prescribed under ASC 815-40.Warrants classified as equity are initially measured at fair value, and subsequent changes in fair value are not recognized so long asthe warrants continue to be classified as equity. The value of the warrant is based on accepted valuation procedures and practices thatrely substantially on the third-party professional’s use of numerous assumptions and its consideration of various factors thatare relevant to the operation of the Company.
JOBSAct and Recent Accounting Pronouncements
TheJOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company”can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have electedto take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revisedaccounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are nolonger an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section7(a)(2)(B) of the Securities Act.
Wehave implemented all new accounting pronouncements that are in effect and may impact our financial statements and we do not believe thatthere are any other new accounting pronouncements that have been issued that might have a material impact on our financial position orresults of operations.
RecentlyIssued Accounting Pronouncements
Fromtime to time, new accounting pronouncements are issued by the FinancialAccounting Standards Board (“FASB”) that are adopted by the Company as of thespecified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective,will not have a material impact on the Company’s financial statements upon adoption.
InAugust 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivativesand Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)” (“ASU 2020-06”).ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertibleinstruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aimsto reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15,2023, and interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.
Business
Overview
Weconnect consumers to licensed healthcare professionals through our recently launched website at www.MangoRX.com for the provisionof care via telehealth through our customer portal and provide access for customers to a licensed pharmacy for online fulfillment anddistribution of certain medications that may be prescribed as part of telehealth consultations, including our Mango ED product.
We launched our website inmid-November 2022. To date, we have sold only a small amount of products and generated only nominal revenues. We plan to marketand seek to sell commercial quantities of our Mango ED product in the first quarter of 2023 following this offering.
Wehave identified men’s wellness telemedicine services and products as a growing sector in recent years and especially related tothe areas of erectile dysfunction (“ED”) products. We have developed and are currently in the process of preparingto commercially market a new brand of ED product under the brand name “Mango.” This product currently includesthe following FDA approved ingredients: Tadalafil (the active ingredient in Cialis), Oxytocin and L-Arginine, an amino acid thatis available as a dietary supplement; however, these FDA approvals do not mean that these ingredients will prove safe when combinedinto a single formulation to treat ED. We currently offer two dosagelevels of our Mango ED product and anticipate a prescribing doctor prescribing a dosage based on the needs and medicalhistory of the patient. Our Mango ED product currently includes the following ingredients: (1) Tadalafil (10mg), Oxytocin (100IU)and L-Arginine (50mg); and (2) Tadalafil (20mg), Oxytocin (100IU) and L-Arginine (50mg). Our Mango ED product has not been, and willnot be, approved by the FDA and instead we plan to produce and sell our products, including our Mango ED product, under an exemptionprovided by Section 503A of the FFDCA Act, as discussed below. Additionally, because our Mango ED product is being specially compoundedfor the customer by a pharmacist with a physician’s prescription and because the ingredients for our Mango ED product will be publiclydisclosed, this product formula can be replicated by other companies.
Weare not aware of any clinical studies involving (i) administration of tadalafil sublingually at the doses we provide patients, or (ii)compounding of tadalafil, oxytocin, and L-arginine to treat ED, as is contemplated by our Mango ED product; however, we expectthe potential safety risks associated with our Mango ED product will be comparable to the safety risks associated with oral formulationsof tadalafil approved by the FDA for the treatment of ED. We do not expect significant safety risks associated with L-arginine, as theFDA has recognized in its regulations that L-arginine may be safely added as a nutrient to foods. Clinical studies of intranasal oxytocinhave also found that oxytocin is generally safe and well-tolerated. Notwithstanding the above, because our Mango ED producthas not had the benefit of the FDA’s clinical trial protocol which seeks to prevent the possibility of serious patient injury anddeath. If this were to occur, we could be subject to litigation and governmental action, which could result in costly litigation, significantfines, judgments or penalties.
Wecurrently anticipate using approximately $1.8 million of the net proceeds of this offering to finance the marketing and operational expensesfor our Mango ED product. To date, we have designed certain product packaging for our Mango ED product, have engaged a pharmacy licensedin 36 states to compound and ship our Mango ED product (as discussed in further detail below under “—MaterialAgreements—Master Services Agreement with Epiq Scripts”), and have entered into an agreement witha physician network which has agreed to provide us telemedicine services, which are required in order for our customers to obtain prescriptionsfor our planned Mango product (as discussed in further detail below under “—Material Agreements—PhysicianServices Agreement with Doctegrity”).
Mangohas been formulated as a Rapid Dissolve Tablet (“RDT”) using a sublingual (applied under the tongue) delivery system to bypassthe stomach and liver. It is a generally established principle that sublingual drug absorption through the oral mucosa is generally fasterthan drug absorption through the gastrointestinal tract. This is because sublingual drugs that are absorbed through the oral mucosadirectly enter the systemic circulation, bypassing the gastrointestinal tract and first-pass metabolism in the liver (H. Zhang et al.,Oral mucosal drug delivery: clinical pharmacokinetics and therapeutic applications, 41 ClinPharmacokinet 661, 662 (2002)). Though theactive ingredients that comprise our Mango ED product are meant to treat ED – an issue that according to a 2018 study publishedin The Journal of Sexual Medicine has been estimated to affect over one-third of today’s men’s population (with prevalenceincreasing with age) – we are also aiming to brand ourselves as a lifestyle company marketed to men seeking enhanced sexual vitality,performance, and overall mood and confidence. Mango is expected to be sold exclusively online via our recently launched website at www.MangoRX.com.
OurContracted Telehealth Provider
Inmany states, including Texas where we are located, the corporate practice of medicine doctrine prohibits corporations from practicing medicine andfrom employing physicians to provide professional medical services. Many states that recognize this doctrine also prohibit physiciansfrom agreeing to share the fees they receive for professional services with unlicensed entities or individuals, a practice that is commonlyknown as “fee splitting.” The requirements for compliance with any applicable corporate practice of medicine and fee splittingrestrictions vary among the states. In Texas, for example, there is no statute that expressly prohibits fee splitting, but the corporatepractice of medicine doctrine has been interpreted to prohibit physicians from ceding control over their fee structures to corporateentities or giving a substantial portion of the fees received to corporate entities.
Inorder to comply with corporate practice of medicine and fee splitting restrictions, we do not employ or directly contract with individualphysicians or physician groups, nor do we control their medical decision-making or charges. Rather, on August 1, 2022, we entered intoa Physician Services Agreement (the “Physicians Agreement”) with BrighterMD, LLC doing business as Doctegrity (“Doctegrity”),as discussed in further detail below under, which has agreed to make available to us, healthcare professionals, to allow them to provideclinical services directly to our future customers via telehealth. We plan to integrate these healthcare professionals to allow for telehealthconsultations and related services on our Mangoceuticals platform which has been developed and is complete. This platform is thebackbone of our business as it connects consumers with both the medical provider and the pharmacy for fulfillment. It is also thesystem that we will use to create marketing funnels for outgoing marketing, customer management and support, and analytics for futuresales.
Throughour Physician Services Agreement with Doctegrity (as defined below), the healthcare professionals are responsible for the practice ofmedicine and control of the clinical decision-making.
OurRelated Party Pharmacy
Asdiscussed in greater detail below under “—Material Agreements—Master ServicesAgreement with Epiq Scripts,” we have entered into an exclusive Master Services Agreement and statement of work with Epiq Scripts,LLC (“Epiq Scripts”), for its specialty compounding and packaging capabilities, fulfillment, and distribution of certainprescription products available through our platform. These prescription products include our Mango ED product. EpiqScripts is a related party because it is 51% owned by American International Holdings Corp. (“AMIH”), in which our Chairmanand Chief Executive Officer, Jacob D. Cohen, serves as its CEO, director, and controlling shareholder. Epiq Scripts is a new formedentity, being registered in January 2022, and to date has only recently began compounding drugs for patients.
EpiqScripts is currently fully licensed with the Texas State Board of Pharmacy (“TSBP”) and further has State Board of Pharmacy(or its equivalent) licenses from 35 other states: Alaska, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Hawaii,Idaho, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New Jersey,New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Virginia, Washington, West Virginia,Wisconsin and Wyoming., with the intent of obtaining the remaining 14 state licenses by the end of the first quarterof 2023. Epiq Scripts has obtained its National Provider Identifier (“NPI”) numberand is now a member of the National Council for Prescription Drug Programs (“NCPDP”), a standards development organization.Additionally, Epiq Scripts has applied for the highest level of accreditation with the Utilization Review Accreditation Commission(“URAC”), a Washington DC-based healthcare accrediting organization that establishesquality standards for the entire healthcare industry. Until Epiq Scripts receives licenses in the other 14 states, we willbe limited to selling our Mango ED product in only the states in which Epiq Scripts holds licenses. Although Epiq Scripts is physicallylocated in Texas, it can ship products to customers in each state in which it holds licenses.
Asa result of the above, Epiq Scripts can currently only provide services to the Company in those 36 states described above andthe Company will be unable to sell its products to any customers in any states other than those listed above, until Epiq Scripts is ableto obtain licenses in other states and will thereafter be limited to selling products to customers only in the states in which Epiq Scriptsholds licenses.
OurCustomer Portal
Ourcustomer platform connects consumers to licensed healthcare professionals through our recently launched website atwww.MangoRX.com for the provision of care via telehealth and will also provide access for customers to our licensed pharmacy foronline fulfillment and distribution of certain medications that may be prescribed as part of telehealth consultations. Additionalfeatures to this backend technology solution allow for the creation and management of customer accounts whereby customers will havethe ability to login, view and make changes to their respective accounts. These changes include, but are not limited to, reviewingorder history, tracking order shipments, requesting and ordering product refills and making other profile changes such as shippingaddress and payment changes. Our portal is not unique to the industry and is not anticipated to be difficult or costly to replicateor replace.
Thebackend technology solution will also house and manage all customer data allowing the Company with additional key functionality, includingbut not limited to, providing customer service and support and data analytics for various marketing initiatives and reporting functions.
Wedo not anticipate selling any third-party products via our portal.
OurGrowth Strategy
OurPlanned Marketing Strategy
Weintend to market and advertise our Mango products on a variety of advertising mediums including, but not limited to, social media, onlinesearch websites, television, radio, out-of-home, and other media channels, to the extent we are legally able to, and in compliance withapplicable FDA rules and requirements. However, due to such rules and requirements, we expect that we will be extremely limited in thecontent of the claims and promotional statements that we will able to make regarding our products under applicable FDA regulations. Webelieve advertising in a diversified set of media channels will be important to prevent overreliance on any single channel and to maximizethe exposure of our brand to our desired customers. We also intend to reach our customers through our own future social media accounts,press coverage and public relations, internally developed educational and lifestyle content, and through engagement of social media influencers,hired and paid celebrities and talent, and physical brand advertising campaigns, in each case funding permitting, and in each case subjectto applicable rules and regulations, which are expected to significantly limit the content of such marketing materials. We believe thatthis overall strategy will drive significant customer traffic to our platform, including direct type-in traffic and organic online searchtraffic.
Wealso intend to utilize a marketing strategy focused on analytics and data. We are designing our internal systems to measure consumerbehavior, including which types of consumers generate more revenue in their first purchase, generate more revenue over time, generatemore gross profit from their purchases, and which types of consumers are most valuable over their lifetime. We also plan on measuringthe effectiveness of our marketing budgets and the rate of return we generate from our marketing campaigns. We have retained and planon using an outside marketing and advertising firm to assist management in identifying marketing and advertising campaigns, media purchasesand mediums, and seeking to drive a sufficient rate of return from our marketing and advertising budgets.
PlannedTiming of Commercial Marketing Launch of our Mango ED Product
Welaunched our website in mid-November 2022. To date, we have sold only a small amount of products and generated only nominal revenues. We plan to market and seek to sell commercial quantities of our Mango ED product in the first quarter of 2023 followingthis offering. Through our Physician Services Agreement, the healthcare professionals are responsible for thepractice of medicine and control of the clinical decision-making. Our Mango ED product has not been, and will not be, approved bythe FDA and instead we plan to produce and sell our products, including our Mango ED product under an exemptionprovided by Section 503A of the FFDCA Act.
PlannedGeographic Sales and Availability
Weplan to utilize both a synchronous and asynchronous approach through our telemedicine platform, connecting customers through our platformand contracted physicians and pharmacy. An asynchronous visit allows a physician to verify the patient’s identity, demographicsand collect the medical history online without needing to physically see or speak to the patient. A synchronous visit requires the doctorto either speak directly to the patient and/or see the patient either via video conference or in person. As discussed above, we initiallyplan to focus our sales in the 36 states where our related party pharmacy is licensed, with the goal of eventually undertakingsales across all 50 states, pending licensing approvals of our related party pharmacy.
PlannedSubscriptions
Weintend to provide our customers with an option to purchase our Mango products on a subscription basis. Subscription plans are expectedto provide an easy and convenient way for customers to get ongoing treatment while simultaneously providing the Company with predictabilitythrough a recurring revenue stream.
Forsubscription plans, we expect that customers will be able to select a desired timeframe in which to receive products, which we expectwill range from once every month to once every six months. The customer will then be billed on a recurring basis based on the selectedtimeframe and specified quantity of product, which will be shipped after each billing from our contracted pharmacy (Epiq Scripts).Customers will be able to cancel subscriptions in between billing periods to stop receiving additional products and reactivate subscriptions.Our integrated technology platform is expected to serve customers from customer discovery, through the purchase of products on ourwebsite, to connecting customers with medical providers for telehealth consultations (through our contracted physician network),to the fulfillment and delivery of orders (through our contracted pharmacy), and finally through ongoing management by medicalproviders (also through our contracted physician network). We expect that our platform will provide us cost advantages and efficienciesto offer customers affordable prices and generate increased revenues over time.
Weintend to launch new products over time and offer additional subscription-based offerings which we hope will result in growth in revenuethrough recurring revenue streams.
Competitionand Competitive Advantages
Weplan to mainly compete with other companies offering men’s wellness products, including Hims & Hers Health, Inc. and Roman;and with our Mango ED product, we will also be competing against much larger pharmaceutical companies who offer ED branded drugslike Viagra (Pfizer) and Cialis (marketed by Lilly ICOS LLC, a joint venture between Eli Lilly and Company and ICOS Corporation) andtheir generic forms. These companies have much greater resources than we do and well-known brand names.
Ourfuture men’s wellness products will also likely need to compete against other traditional healthcare providers, pharmacies, andlarge retailers that sell non-prescription products.
Furthermore,we will need to compete with other companies, which are expected to have greater resources and a greater advertising budget, andwhich may sell Tadalafil (and similar drugs) in an oral disintegrating tablet. For example, we are aware of competitors currentlyselling oral disintegrating tablets for ED, including those using a combination of Tadalafil and Sildenafil (the active ingredient inViagra). Additionally, because our Mango ED product is being specially compoundedfor the customer by a pharmacist with a physician’s prescription and because the ingredients for our Mango ED product will be publiclydisclosed, this product formula can be replicated by other companies.
Weintend to compete against these competitors based on our branding, advertising, unique compounding, and product delivery system (i.e.,our Mango ED product has been designed to be taken sublingually, rather than in pill form).
Relativeto other online direct to consumer telemedicine companies that are selling generic ED medication, we have priced our Mango EDproduct at a premium, due to the cost of compounding the product and the use of multiple ingredients. We are currently aware of ahandful of other direct to consumer companies that are also selling compounded ED medications and who are selling their products ata higher price than Mango’s current price. When comparing the current market for various pharmaceutical related EDproducts, we have attempted to position our pricing to be slightly above average as we anticipate marketing Mango to ademographic that will pay a premium for what we believe to be a premium product relative to the competition for the treatment oferectile dysfunction.
TheMarket for ED Products
Accordingto a January 2022 report published by VerifiedMarket Research, the Global Erectile Dysfunction Drugs Market size was valued at $3.63billion in 2020, mainly due to theincrease in patient awareness and the early adoption of sedentary lifestyle. VerifiedMarket Research also projects that the total Global Dysfunction Drugs Market size will contract to $2.95 billion in 2028. Theexpected reason for this contraction is poor patient compliance with erectile dysfunction drugs and the future availability ofcost-effective imitation medicines, as well as side effects of ED drugs. We do not anticipate our Mango ED drug suffering from theselimitations, as we believe our product is easy to use and we plan to price our product competitively. Separately, Grand ViewResearch, in a July 2022 report, projects that the U.S. market (where we initially plan to market our ED product) for erectiledysfunction drugs estimated at approximately $1.1 billion as of 2021, will increase at a 7.4% compound annual growth rate though2030.
Itis also estimated that nearly 3-in-5 men in the US have suffered from erectile dysfunction, according to a survey reported in February2022, by LetsGetChecked, aleading at-home health screening and insights company (based on research carried out by Opinium Research among 2,006 men in the USA,1,178 of whom had previously experienced erectile dysfunction, from February 7-10, 2020). According to that study, age isn’t thatbig a factor either, with 56% of men 18-34 years old being affected, compared to 63% of those over the age of 55. The study also determinedthat most men blame psychological factors for ED – with 41% blaming stress, 34% blaming having “too much on their mind,”and 31% believing it is performance anxiety.
RegulatoryEnvironment
Weplan to produce and sell our products, including our Mango ED product under an exemption provided by Section 503A ofthe Federal Food, Drug, and Cosmetic Act (“FFDCA Act”). Section 503A describes the conditions under which compounded humandrug products are exempt from the FFDCA Act sections on FDA approval, prior to marketing, current good manufacturing practice (“cGMP”)requirements and labeling with adequate directions for use. One of these conditions is that the drugs must be compounded based on thereceipt of valid patient-specific prescriptions; another condition limits “copying” of FDA-approved products, which restrictscompounding drugs that have the same active ingredients and route of administration as FDA-approved products that are commercially available.The FDA also prohibits any marketing or promotional statements that are “false or misleading in any particular,” includingmaking any unsupported superiority claims against other products or the failure to disclose a material fact.
Notwithstandingthe above, under relevant FDA guidance, the FDA generally does not consider a compounded drug to be “essentially a copy”of a commercially available drug if the compounded drug has a different route of administration as compared with the approved alternative,and we anticipate that our Mango ED product will be for a different route of administration (e.g., sublingual). In addition,the FDA does not consider a compounded drug to be “essentially a copy” of a commercially available drug if the approved productcannot be used for the prescribed route of administration, which is available in the compounded version (which we believe it cannot,as discussed below). Finally, we do not expect that we will be deemed to have engaged in such “copying”, because our Mango ED product will be based on a prescriber’s determination for each patient that the change associated with the compoundedproduct (our Mango ED product) produces for the patient a significant difference as compared with the commercially available drug product.Under relevant FDA guidance, the FDA does not consider a compounded drug “essentially a copy” if a prescriber determinesthat there is a change, made for an identified individual patient, which produces for that patient a significant difference from thecommercially available product.
UnderSection 503A of the FFDCA Act, it is the prescribing practitioner who determines if a compounded drug is necessary for the identifiedpatient and whether the change associated with the compounded product produces for the patient a significant difference as compared withthe commercially available drug product. FDA’s guidance states that FDA generally does not intend to question prescriber determinationsthat are appropriately documented. Our Mango ED compounded product has been formulated as a Rapid Dissolve Tablet using a sublingual(applied under the tongue) delivery system to bypass the stomach and liver. We believe this will offer a significant difference basedon the fact that the approved versions are not available in the same route of administration (i.e., sublingual). A sublingual formulationmay be able to meet the clinical needs of a particular patient who desires a more rapid onset of action compared to an FDA-approved oralformulation. In addition, because the prevalence of ED generally increases with age, older patients who may have difficulty swallowingan FDA-approved oral formulation may benefit from a sublingual formulation that dissolves under the tongue.
Compoundeddrugs, like our Mango ED product, are not FDA-approved. This means that the FDA does not verify the safety or effectiveness ofsuch drugs. Instead, consumers rely on the determination of a prescribing physician that the compounded drug is necessary for the individualpatient. Compounded drugs also lack an FDA finding of manufacturing quality before such drugs are marketed.
TheFDA has the authority to impose significant restrictions on products through regulations on advertising, promotional anddistribution activities. In particular, the FDA will object to any promotional activity (including through testimonials andsurrogates) that is “false or misleading in any particular,” including the failure to disclose material facts. Forexample, the FDA will expect adequate substantiation for an efficacy claim, which would require substantial evidence derived fromadequate and well-controlled clinical trials. We believe we can conduct truthful and nonmisleading promotional activities,including activities involving the use of testimonials and surrogates, with limited claims that do not require substantial evidencederived from adequate and well-controlled clinical trials and which do not include efficacy claims.
Weare also aware of data in the scientific literature supporting how the proposed combination of the compounds which we anticipate willmake up our Mango ED product (i.e., tadalafil, oxytocin, and L-arginine) might be expected to perform in ED patients. Previous clinicalstudies (none of which we have paid for or undertaken ourselves) have suggested that tadalafil and L-arginine in combination for treatmentof ED may be more effective than either compound alone (see L. Gallo et al., The Daily Therapy With L-Arginine 2,500 mg and Tadalafil5 mg in Combination and in Monotherapy for the Treatment of Erectile Dysfunction: A Prospective, Randomized Multicentre Study, 8Sex Med 178, 184 (June 2020) – finding that in general, combination therapy withtadalafil and L-Arginine was superior to monotherapies for the treatment of ED; and M. Abu El-Hamd & E. Mohammed Hegazy, Comparisonof the clinical efficacy of daily use of L-arginine, tadalafil and combined L-arginine with tadalafil in the treatment of elderly patientswith erectile dysfunction, 52 Andrologia e13640, 3 (Aug. 2020) (“Hamdand Hegazy”) – finding that the combined daily use of L-arginine with tadalafil therapy for elderly male patients with EDcould significantly increase Sexual Health Inventory for Men (SHIM) scores and levels of total testosterone in comparison to L-arginine,or tadalafil alone)—This is because L-arginine may increase nitric oxide, that in turn may increase cyclic guanosine monophosphate,which has relaxation and vasodilation (dilatation of blood vessels) effects on smooth muscle to assist in the treatment of ED (seeHamd and Hegazy paper). Furthermore, oxytocin is a neurotransmitter linked to increased levels of social interaction, well-being,and anti-stress effects and clinical studies suggest administration of oxytocin may stimulate certain aspects of social interaction,and may cause anti-anxiety and anti-stress effects (see Hamd and Hegazy paper).
Neitherwe, nor our representatives have had any conversations with the FDA staff regarding whether our Mango ED product can be soldpursuant to Section 503A of the FFDCA Act and future conversations with the FDA may result in the FDA staff raising issues with such sales pursuant to Section 503A of the FFDCA, requiring certain pre-requisites or changes to our current business plan, whichmay be costly or time consuming, and/or may result in us being prohibited from selling our Mango ED product pursuant to Section503A of the FFDCA Act.
GovernmentRegulation
We,as are many other companies, are also subject to environmental laws, rules and regulations which could affect our operations, includingthose disclosed below.
Physicianswho provide professional clinical services via telehealth must, inmost instances, hold a valid license to provide the applicable professional services in the state in which the patient is located. Assuch, the physicians provided to us through our relationship with BrighterMD, LLC dba Doctegrity, discussed below under “—MaterialAgreements—Physician Services Agreement with Doctegrity,” will be required to be licensedunder applicable state law.
Toqualify for the exemptions under section 503A of the FFDCA Act, among other requirements, a drug must be compounded by a licensed pharmacistor a licensed physician that does not compound regularly or in inordinate amounts any drug products that are essentially copies of acommercially available drug product. As discussed below under “—Material Agreements—MasterServices Agreement with Epiq Scripts,” we have entered into an agreement with Epiq Scripts, a related party, to provide uscompounding and other pharmacy services.
Our operations are subject to extensivegovernment regulation, from the entry into agreements with physicians or groups of physicians to provide telehealth services to our potentialcustomers, to the marketing and promotion of our products, the creation of our products, and the sale of our products throughlicensed pharmacists.
Someof the rules and regulations we expect to be subject to include:
FederalAnti-Kickback Statute
TheFederal Anti-Kickback Statute (42 U.S.C. § 1320a-7b) is broadly worded and prohibits the knowing and willful offer, payment, solicitationor receipt of any form of remuneration in return for, or to induce, (i) the referral of a person covered by Medicare, Medicaid or othergovernmental programs, (ii) the furnishing or arranging for the furnishing of items or services reimbursable under Medicare, Medicaidor other governmental programs or (iii) the purchasing, leasing or ordering or arranging or recommending purchasing, leasing or orderingof any item or service reimbursable under Medicare, Medicaid or other governmental programs. In addition, a person or entity does notneed to have actual knowledge of this statute or specific intent to violate it to have committed a violation. Moreover, the governmentmay assert that a claim including items or services resulting from a violation of the Anti-Kickback Statute constitutes a false or fraudulentclaim for purposes of the False Claims Act, we do not expect to apply to our operations as we do not plan to seek payment for our servicesfrom the federal government. Violations of the Anti-Kickback Statute can result in exclusion from Medicare, Medicaid or other governmentalprograms as well as civil and criminal penalties and fines. Imposition of any of these remedies could have a material adverse effecton our business, financial condition and results of operations.
Wedo not anticipate our current anticipated operations will be subject to the Anti-Kickback Statute as we do not plan to seek reimbursementunder a federal health care program.
U.S.Food and Drug Administration (“FDA”) Regulation
TheFDA regulates product promotion and noncompliance and this could result in the FDA requesting that we modify our product promotion orsubject us to regulatory and/or legal enforcement actions, including the issuance of a warning letter, injunction, seizure, civil fine,and criminal penalties. Other federal, state or foreign enforcement authorities also monitor product promotion and have the authorityto levy significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement, ifviolations of applicable law or regulations occur. We also believe that the FDA will likely consider our compounded combination productto be different from previously FDA-approved products, and that the FDA will not likely allow us to rely on any FDA-approved labelingor prescribing information.
Riskof Litigation
Additionally,federal and state statutes provide for private causes of action to plaintiffs alleging misleading marketing claims, or otherwise makingallegations which are found to be in violation of such laws. As such, misleading promotional statements and practices can lead to litigationunder state consumer protection and unfair trade practices laws. To date, there has been a substantial amount of litigation under theselaws challenging the marketing and sale of compound drugs and we may face legal actions, and be subject to significant penalties, judgmentsand damages, if we are found to have violated these laws.
HealthInformation Privacy and Security Laws
NumerousU.S. state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability,integrity, and other processing of health information. We believe that, because of our operating processes, we are not a covered entityor a business associate under the Health Insurance Portability and Accountability Act and the implementing regulations (“HIPAA”),which establishes a set of national privacy and security standards for the protection of protected health information by health plans,healthcare clearinghouses, and certain healthcare providers, referred to as covered entities, and the business associates with whom suchcovered entities contract for services. Because we will need to use and disclose customers’ health and personal information inorder to provide our services, we expect to develop and maintain policies and procedures to protect that information in the future.
Inaddition to HIPAA, numerous other federal, state, and foreign laws and regulations protect the confidentiality, privacy, availability,integrity and security of health information and other types of personal information. These laws and regulations are often uncertain,contradictory, and subject to changing or differing interpretations. Additionally, these laws may be similar to or even more protectivethan, and may not be preempted by, HIPAA and other federal privacy laws. The privacy and data protection laws in many states in whichwe operate are more restrictive than HIPAA and/or may apply more broadly than HIPAA. In certain cases, it may be necessary to modifyour operations and procedures to comply with these more stringent state laws. Not only may some of these state laws impose finesand penalties upon violators, but also some, unlike HIPAA, may afford private rights of action to individuals who believe their personalinformation has been misused. We expect new laws, rules and regulations regarding privacy, data protection, and information securityto be proposed and enacted in the future; as state laws are changing rapidly.
Forexample, as of the date of this prospectus, five states—California, Colorado, Connecticut, Utah and Virginia—have enactedconsumer data privacy laws. The data privacy laws have a number of things in common with each other, including allowing residents ofthose states the right to access and delete their personal information and to opt-out of the sale of their personal information, amongothers. Other provisions require commercial websites or online services to post a privacy policy that describes the types of personalinformation collected, what information is shared with third parties, and how consumers can request changes to certain information. Ourcompliance with these and future rules may increase our operating and expenses and our failure to comply with these rules could subjectus to fines, penalties and litigation.
Inaddition to the above, proposed or new legislation and regulations could also significantly affect our business. There currently area number of proposals pending before federal, state, and foreign legislative and regulatory bodies.
ProductLiability
Asa distributor of men’s health and wellness products, the Company will face an inherent risk of exposure to product liability claims,regulatory action and litigation if its future products are alleged to have caused significant loss or injury. In addition, the saleof our products will involve the risk of injury to consumers due to tampering by unauthorized third parties or product contamination.Previously unknown adverse reactions resulting from human consumption of our products alone or in combination with other medicationsor substances could occur. We may be subject to various product liability claims, including, among others, that our future products causedinjury or illness, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactionswith other substances. A product liability claim or regulatory action against the Company could result in increased costs, could adverselyaffect our reputation with our clients and consumers generally, and could have a material adverse effect on our results of operationsand financial condition of the Company.
Forexample, a 2014 study published in The Journal of the American Medical Association determined that Sildenafil (the active ingredientin Viagra) may be associated with a higher risk of developing melanoma. The study evaluated data from more than 25,000 men who used Sildenafiland found that Sildenafil use was significantly associated with an increased risk of subsequent melanoma, after consideringother risk factors. It is possible that the ingredients we plan to use in our Mango ED product or any other products we sell in the futurecould be found in the future to result in increases in the likelihood of developing cancer or other diseases, which could subject usto litigation, penalties or recalls.
Insurance
Wehave an insurance policy in effect that includes customary coverage and protection for professional liability, general liability,employee benefits and protection against claims including technology products, services and against cyber security. Our insurancepolicy also covers exposure to product liability claims, including both technology product claims related to customer data breaches, copyright infringementand/or misrepresentation and fraud and any claims made in connection with any physical products and services sold through the Company’s website.
MaterialAgreements
PhysicianServices Agreement with Doctegrity
Pursuantto the Physicians Agreement, Doctegrity, which provides online telemedicine technology services and provides access to independentlycontracted licensed physicians and providers, agreed to (a) arrange for the services of a physician or, where appropriate, a mid-levelpractitioner with delegated authority from a physician, licensed in the appropriate state the practice of medicine will take place, whowill establish a physician/patient relationship with patients associated with the Company’s platform in accordance with the lawsand regulations of the appropriate state(s) and also provide physician review and assessment and quality control of the Company’sor related brands’ advertising of services, medical questionnaires and related prescription requests; and (b) provide an asynchronoustelehealth platform (and in certain cases, synchronous capabilities in certain U.S. states where and when available and applicable) whichprovides patient access to licensed physicians in the state from which the patient, who is participating under our platform, resides.
Wechose to contract with Doctegrity after reviewing and comparing the fees and services offered by similar telehealth platform companiesthat facilitate visits between health care professionals and patients.
Aftera patient visits our website and submits a request for a consultation with a health care professional,Doctegrity will communicate the patient’s information to one of its affiliated physicians. Doctegrity and the physicianswill be responsible for conducting the telehealth consultation and any ongoing communication with the patient in accordance with applicablelaws. The physicians will make a determination, in their sole discretion, as to whether or not to prescribe our products (initiallyour Mango ED product) to potential customers. If the physicians prescribe our Mango ED product, then the customers will pay us for ourproducts. In turn, Epiq Scripts, LLC, pursuant to the Master Services Agreement discussed below, will be providedinformation on the customer and compounding of our product, will compound the product, and ship the product to customers using packagingand shipping materials which we supply.
Wewill pay Doctegrity for each physician visit conducted in response to request made by a patient on our website, regardless of whetherthe physician prescribes our product to the patient. The fee we pay Doctegrity is fixed, set in advance and was negotiated at arms’length after comparing the prices offered by similar services. We are not a party to any contracts between Doctegrity and any healthprofessionals or physician groups and do not control how Doctegrity reimburses these providers.
Althoughour arrangement with Doctegrity, as summarized above, is structured to comply with applicable laws, including those restricting the corporatepractice of medicine and fee splitting, there may be a risk that a state agency, now or in the future as these laws (and interpretationsof them) evolve, would conclude that the arrangement and fee structure between Doctegrity and its contracted physicians and/or our agreementwith Doctegrity violates the corporate practice of medicine doctrine and fee splitting restrictions in Texas or in another state wherea patient who uses our Mangoceuticals platform is located.
ThePhysicians Agreement has a term of one year subject to automatic one-year renewals unless and until terminated in accordance with thePhysicians Agreement, including by either party with 90 days’ prior written notice with or without cause and for cause withten days’ written notice.
ThePhysicians Agreement requires us and Doctegrity to maintain certain minimum levels of insurance, and contains customary representationsand warranties, force majeure provisions and confidentiality obligations. Pursuant to the Physicians Agreement, each party is requiredto indemnify and hold harmless the other party, its affiliates and representatives, from and against any third party claims, liabilities,damages, judgments or other losses (including reasonable attorneys’ fees) imposed upon or incurred by them arising out of or asa result of: (i) any acts or omissions by or the willful misconduct of the other party, its affiliates or representatives in connectionwith the performance of any of their respective obligations under the agreement; and (ii) any material breach of the agreement by theother party, or its affiliates or representatives; except to the extent that such losses arising pursuant to (i) and/or (ii), arise fromthe bad faith, willful misconduct or gross negligence of the party seeking indemnification. The Physicians Agreement also includes customarylimitation of liability language, whereby each party waived any liability from the other for any indirect, incidental, exemplary, punitiveor consequential damages.
Doctegrity’sphysicians will be tasked with determining whether patients seeking Mango ED products are eligible to be prescribed our Mango ED productwith the sole purpose of the telemedicine engagement being for the determination, in the physician’s sole judgment, of whetherthe patient is qualified to obtain a prescription for the Mango ED product. Doctegrity’s physicians are required to electronicallysend prescriptions to Epiq Scripts (the Company’s designated and accredited pharmacy partner), which financial relationship isrequired to be disclosed in writing to the patient via the Terms and Conditions listed on the Company’s website, including informedconsent, and also informing the patient that the prescription will be sent to the Company’s designated pharmacy partner. Doctegrity’sphysicians will not be able to prescribe any other ED medications, other than Mango ED, to patients seeking ED medical treatment throughour customer portal.
Theagreement also includes certain covenants restricting our operations, restricting us and our owners, directors, officers, and managers,during the term of the agreement and for 12 months thereafter from providing to or for any customer any services or products, solutions,of the type provided by Doctegrity, using confidential information received during the term of the agreement.
MasterServices Agreement with Epiq Scripts
OnSeptember 1, 2022, and effective on August 30, 2022, we entered into a Master Services Agreement with Epiq Scripts, LLC (“EpiqScripts”), which is 51%-owned by American International. Mr. Cohen, our Chairman and Chief Executive Officer, serves as the ChiefExecutive Officer and a director of, and has voting control over, American International. As discussed above under “Business—Formationand Transfer of Control,” the Company was wholly-owned by American International until April 16, 2022, when control of theCompany was sold to Cohen Enterprises, which is owned by Mr. Cohen.
Pursuantto the Master Services Agreement and a related statement of work (“SOW”), Epiq Scripts agreed to provide pharmacy and relatedservices to the Company, the Company agreed to exclusively use Epiq Scripts as the provider of the Services (defined below) during theterm of the agreement, so long as Epiq Scripts complies with the terms of the Master Services Agreement. The agreement also includesa 30 day right of first refusal for Epiq Scripts to provide pharmacy services for any new product that Mango may introduce during theterm of the agreement.
Pursuantto the SOW, Epiq Scripts agreed to provide for the online fulfillment, specialty compounding, packaging, shipping, dispensing and distribution(collectively, the “Services”) of products sold exclusively via our website that may be prescribed as part of a telehealthconsultation on our platform. Epiq Scripts also agreed to provide mail service pharmacy services to us on an exclusive basis during theterm of the SOW.
Weagreed to provide Epiq Scripts with all custom packaging materials, including but not limited to, individual sachet and/or blister packagingmaterials, outer box packaging, and any custom inserts and/or marketing information to accompany the prescription shipment, if any andto provide Epiq Scripts with quarterly sales forecasts to ensure Epiq Scripts has enough packaging materials on hand to cover a 90 dayperiod. We agreed to pay for all direct shipping, delivery and related courier costs and to provide Epiq Scripts with direct access toany online accounts to access and generate shipping labels for the fulfillment and delivery of our products.
TheSOW has a term through December 31, 2025, automatically renewable thereafter for successive one-year terms unless either party terminatesthe agreement at least 90 days before renewal thereof and the SOW is subject to the same termination rights of the parties as set forthin the Master Services Agreement (discussed below).
Pursuantto the SOW, we agreed to pay Epiq Scripts certain fixed rate fees for prescription fulfillment, processing and packaging (per prescription)and drug compounding (per pill), provided the per pill rate is reduced upon us exceeding 3,500 product packages per month.
Underthe Master Services Agreement, we are solely responsible for billing and collecting funds from our customers and Epiq Scripts is paidout of funds that we actually collect.
Wepaid Epiq Scripts a total of $60,000 upon our entry into the Master Services Agreement, comprising $45,000 as a one-time non-refundabletechnology systems setup and implementation fee and $15,000 as an upfront retainer to be credited future products sales.
TheMaster Services Agreement has a term of five years, automatically renewable to additional one-year terms thereafter unless either partyprovides the other notice of termination at least 90 days prior to the date of automatic renewal. The Master Services Agreement can beterminated (i) upon breach of the agreement by the other party, subject to a 90-day cure right, (ii) if a party enters into bankruptcyor fails to pay its debts as they become due, or (iii) if Epiq Scripts becomes unable to perform the services covered by the Master ServicesAgreement and any statements of work associated therewith.
Paymentsunder the Master Services Agreement are due within 15 days after the end of each month during which collections are received. The MasterServices Agreement contains customary confidentiality obligations, record retention provisions, audit rights, and representations andwarranties of the parties. Each party to the Master Services Agreement agreed to indemnify, defend, and hold harmless the other and theother party’s officers, directors, shareholders, employees, and agents from and against any and all nonparty claims, or actionsfor damages, liabilities (including strict liability), penalties, costs and expenses (including reasonable legal fees, expenses and costs)to the proportionate extent caused by (1) the negligence or willful misconduct of the indemnitor or any of its employees or agents inconnection with the performance of the agreement, or (2) any breach of any representation, warranty or covenant under the agreement bythe indemnitor or any of its employees or agents. Additionally, the parties agreed that neither party will be liable to the other forspecial, incidental, or exemplary damages, subject to certain limited exceptions. The Master Services Agreement does not address productliability claims or assign any rights of indemnification or contribution in connection therewith.
Duringthe nine months ended September 30, 2022, and in conjunction with the Master Services Agreement and Statement of Work, the Company prepaidEpiq Scripts $15,000 as a retainer to be credited towards future product sales. Additionally, the Company has signed a lease agreementfor office space, effective October 1, 2022. The initial security deposit of $16, 942 and the first month’s rent payment of $5,778have been credited to prepaid expenses.
EpiqScripts has filed with the Utilization Review Accreditation Commission (“URAC”) to obtain its pharmacy accreditation andobtained its first state license in the State of Texas in February 2022. Epiq Scripts has State Board of Pharmacy (or its equivalent)licenses to operate in 36 states: Alaska, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana,Iowa, Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New Jersey, New Mexico, NewYork, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin,and Wyoming and plans to eventually obtain licenses in all 50 states by the end of the first quarter of 2023, with some statelicenses easier to obtain and quicker to obtain than others.
Asa result of the above, Epiq Scripts can currently only provide the Services to the Company in the 36 states described above, andthe Company will be unable to sell its products to any customers in any states other than those named above, until Epiq Scripts is ableto obtain licenses in other states and will thereafter be limited to selling products to customers only in the states in which Epiq Scriptsholds a license.
ConsultingAgreements
OnSeptember 6, 2022, we entered into a Consulting Agreement with PHX Global, LLC (“PHX”), which is owned by Peter “Casey”Jensen, who is a member of the Board of Directors of American International. Pursuant to the Consulting Agreement, PHX agreed to provideconsulting and general business advisory services as reasonably requested by the Company during the term of the agreement, which wasfor 12 months, unless otherwise earlier terminated due to breach of the agreement by either party, and the failure to cure such breach30 days after written notice thereof. In consideration for agreeing to provide the services under the agreement, the Company issued PHX50,000 shares of restricted common stock. The agreement contains customary confidentiality and non-solicitation provisions. We also agreedto include the shares issued to PHX in the Resale Prospectus, which shares of common stock are included therein.
OnSeptember 6, 2022, we entered into a Consulting Agreement with Ezekiel Elliott (“Elliott”), currently a professional footballplayer and the running back for the Dallas Cowboys, to provide consulting and general business advisory services as reasonably requestedby the Company during the term of the agreement, which is for 12 months unless otherwise earlier terminated due to breach of the agreementby either party and the failure to cure such breach 30 days after written notice thereof. In consideration for agreeing to provide theservices under the agreement, the Company issued Elliott 100,000 shares of restricted common stock. The agreement contains customaryconfidentiality and non-solicitation provisions. We also agreed to include the shares issued to Elliott in the Resale Prospectus, whichshares of common stock are included therein.
OnSeptember 15, 2022, we entered into a Consulting Agreement with David Sandler, an individual (“Sandler”), to provide consultingand general business advisory services as reasonably requested by the Company during the term of the agreement, which was for six months,unless otherwise earlier terminated due to breach of the agreement by either party, and the failure to cure such breach 30 days afterwritten notice thereof. In consideration for agreeing to provide the services under the agreement, the Company issued Sandler 10,000shares of restricted common stock. The agreement contains customary confidentiality and non-solicitation provisions. We also agreed toinclude the shares issued to Sandler in the Resale Prospectus, which shares of common stock are included therein.
OnSeptember 15, 2022, we entered into a Consulting Agreement with Hsiaoching Chou, an individual (“Chou”), to provide consultingand general business advisory services as reasonably requested by the Company during the term of the agreement, which was for six months,unless otherwise earlier terminated due to breach of the agreement by either party, and the failure to cure such breach 30 days afterwritten notice thereof. In consideration for agreeing to provide the services under the agreement, the Company issued Chou 5,000 sharesof restricted common stock. The agreement contains customary confidentiality and non-solicitation provisions. We also agreed to includethe shares issued to Chou in the Resale Prospectus, which shares of common stock are included therein.
OnSeptember 22, 2022, we entered into a service agreement with Greentree Financial Group, Inc. (“Greentree” and the “ServiceAgreement”). Pursuant to the Service Agreement, Greentree agreed to perform the following services: (a) bookkeeping services forthe Company for the period from October 1, 2022 through June 30, 2023; (b) advice and assistance to the Company in connection with theconversion of its financial reporting systems, including its projected financial statements, to a format that is consistent with UnitedStates Generally Accepted Accounting Principles (“US GAAP”); (c) assistance to the Company with compliance filings for thequarters ended September 30, 2022, March 31, 2023, June 30, 2023 and the year ended December 31, 2022, including the consolidation structureand entries as well as assistance with US GAAP footnotes; (d) reviewing, and providing advice to the Company on, all documents and accountingsystems relating to its finances and transactions, with the purpose of bringing such documents and systems into compliance with US GAAPor disclosures required by the SEC; and (e) providing necessary consulting services and support as a liaison for the Company to thirdparty service providers, including coordination amongst the Company and its attorneys, CPAs and transfer agent. Since February 2015,Mr. Eugene M. Johnston, our Chief Financial Officer (who was appointed October 1, 2022) has served as Audit Manager for Greentree.
TheCompany agreed to issue Greentree 100,000 shares of the Company’s restricted common stock upon the parties’ entry into theagreement, and to pay Greentree $50,000 in cash, payable as follows (a) $12,500 on or before September 30, 2022; (b) $12,500 on or beforeDecember 31, 2022; (c) $12,500 or before March 31, 2023; and (d) $12,500 on or before June 30, 2023. We also agreed to include the 100,000shares of common stock issued to Greentree in the Resale Prospectus, which shares of common stock are included therein, and to reimburseGreentree for its reasonable out-of-pocket expenses incurred in connection with Greentree’s activities under the agreement, includingthe reasonable fees and travel expenses for the meetings on behalf of the Company.
TheService Agreement continues in effect through August 14, 2023; provided that in the event the Company terminates the agreement priorto the end of the Term, the entire cash fee due during the term of the Service Agreement is immediate due and payable.
TheService Agreement includes customary indemnification obligations requiring the Company to indemnify Greentree and its affiliates withregard to certain matters.
OnNovember 1, 2022, we entered into a Consulting Agreement with White Unicorn, LLC (“White Unicorn”), to provide business advisoryservices related to product packaging, strategic marketing, branding, advertising and future product development as reasonably requestedby the Company during the term of the agreement, which is for 12 months unless otherwise earlier terminated due to breach of the agreementby either party and the failure to cure such breach 30 days after written notice thereof. In consideration for agreeing to provide theservices under the agreement, the Company issued White Unicorn 100,000 shares of restricted common stock. The agreement containscustomary confidentiality and non-solicitation provisions.
MasterServices Agreement with Global Career Networks
OnDecember 1, 2022, the Company entered into a Master Services Agreement with Global Career Networks, Inc. (“GCN”). Pursuantto the agreement, we agreed to issue GCN 100,000 shares of restricted common stock with registration rights (which are included in theResale Prospectus) and GCN agreed to assist us with a planned twitter marketing campaign The agreement has a one year term (providedthe individual project described therein has a six month term, beginning December 1, 2022), and may be renewed thereafter for additionalone year terms with the mutual approval of the parties. Either party may terminate the agreement at any time for any reason, with atleast 60 days’ notice, or upon the occurrence of any breach or default under the agreement, which remains uncured within 30 daysof written notice thereof, or if the non-terminating party is subject to bankruptcy. The agreement contains customary confidentiality,indemnification obligations, and limitations of liability.
IntellectualProperty
Webelieve that our ability to obtain and maintain intellectual property protection for our technology platform, preserve the confidentialityof our trade secrets, and operate without violating the intellectual property rights of others will be important to our success. We planto rely on a combination of patent (where applicable, provided we do not currently have any patents or pending patents), trademark, copyright,trade secret, including federal, state and common law rights in the United States and other countries, nondisclosure agreements, andother measures to protect our intellectual property. Despite any measures taken to protect our intellectual property, unauthorized partiesmay attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Our business is affectedby our ability to protect against misappropriation and infringement of our intellectual property and other proprietary rights.
Ourintellectual property includes the content of our websites, our registered domain names, our unregistered trademarks, and certain tradesecrets.
Wehave applied with the United States Patent and Trademark Office for a federal trademark for the word mark:
LegalProceedings
Thereare no pending or threatened legal proceedings involving our company. However, from time to time, we may become involved in various legalproceedings that arise in the ordinary course of business, principally personal injury and property casualty claims. Those claims, evenif lacking merit, could result in the expenditure by us of significant financial and managerial resources. We may become involved inmaterial legal proceedings in the future.
Employees
TheCompany is currently operated and managed by the Chief Executive Officer, Founder and Chairman, Jacob D. Cohen, and the Chief OperatingOfficer and Founder, Jonathan Arango. The Company utilizes the assistance of various independent contractors for administrative and technologydevelopment related services. We anticipate establishing a compensation program designed to align the compensation of our employees withperformance and to provide the proper incentives to attract, retain and motivate employees to achieve superior results in the future.The structure of our anticipated compensation program will balance incentives earnings for both short-term and long-term performancesuch as incentive bonuses and flexible schedules. The Company also intends to develop a culture of inclusion and diversity and placesa high value on diversity and inclusion. Our future success will depend partially on our ability to attract, retain and motivate qualifiedpersonnel. We are not a party to any collective bargaining agreements and have not experienced any strikes or work stoppages. We considerour relations with our employees to be satisfactory. Mr. Cohen and Mr. Arango are currently party to employment agreements with the Companyas discussed below under “Executive Compensation—Employment Agreements.”
Properties
OnSeptember 28, 2022, and with an effective date of October 1, 2022, the Company entered into a Lease Agreement with Rox Trep Tollway,L.P. (the “Landlord”) to lease and occupy approximately 2,201 square feet of office space located at 15110 N. Dallas Parkway,Suite 600, Dallas, Texas 75248 to serve as the Company’s main headquarters (the “Lease Agreement”). The Lease Agreementhas a term of thirty-eight (38) months (through December 31, 2025) and has a monthly base rent of $0 for the second month; $5,778, or$31.50 per square foot, for months 1 and 3-18 and increases at the rate of $1 per square foot per annum thereafter until the end of thelease term (the “Base Rent”). In addition to the Base Rent, the Company is required to reimburse the landlord for its pro-ratashare of all real estate taxes and assessments, hazard and liability insurance and common area maintenance costs for the building atthe rate of 2.45% (the “Proportionate Rent”). Upon the execution of the Lease Agreement, the Company agreed to prepay thefirst full month’s Base Rent along with a security deposit equal to $16,942. The lease includes an option to extend the lease foran additional period of thirty-six (36) calendar months at market.
Webelieve our facilities are sufficient to meet our current needs and that suitable space will be available as and when needed. We do notown any real property.
Management
Setforth below is certain information regarding our directors and executive officers as of January 13, 2023:
Name | | Position | | Age | | Director Since |
Jacob D. Cohen | | Chief Executive Officer and Chairman | | 43 | | October 2021 |
Jonathan Arango | | President, Chief Operating Officer and Director | | 28 | | October 2021 |
Eugene M. Johnston | | Chief Financial Officer | | 59 | | — |
Lorraine D’Alessio | | Director | | 43 | | October 2022 |
Alex P. Hamilton | | Director | | 50 | | October 2022 |
Dr. Kenny Myers | | Director | | 56 | | October 2022 |
BusinessExperience
Thefollowing is a brief description of the education and business experience of our directors and executive officers.
JacobD. Cohen - Chief Executive Officer and Chairman
JacobCohen is a serial entrepreneur, corporate finance and executive management professional with over 20 years of investment banking andcapital markets experience having started and growing multiple companies in various industry sectors including marketing, advertising,healthcare, IT and financial services. Prior to founding the Company, Mr. Cohen was the co-founder and managing partner of several boutiqueinvestment bank and strategic advisory firms where he advised both early and later stage companies in raising capital in the form ofdebt and/or equity and in both private and public markets.
Priorto his experiences in investment banking, Mr. Cohen served as the Chief Financial Officer of The Renewed Group, Inc., a manufacturer,wholesaler and retailer of eco-friendly and sustainable apparel primarily made from recycled textiles and under the brand name REUSEJEANS from 2010 through the end of 2013. Further, Mr. Cohen served from 2008 through 2010 as Executive Vice President and Controllerof Metiscan, Inc., a publicly traded company, and as the President and Chief Executive Officer of one of its subsidiaries, ShorelineEmployment Services, Inc. During his tenure at Metiscan, Mr. Cohen was instrumental in restructuring, reorganizing and operating thecompany and its five subsidiaries, and successfully raised over $8 million in equity financing for growth capital. Mr. Cohen also spearheadedthe company’s financial audit process and managed its various filings with the SEC.
From2007 through 2008, Mr. Cohen served as the Chief Operating Officer of Artfest International, which he assisted in taking public at theend of 2007. Throughout his career, Mr. Cohen was involved in starting many new ventures, including The AdvertEyes Network, a digitalsignage advertising company where he served as founder and CEO. Other positions include investment advisor and institutional equity researchanalyst for Solomon Advisors and Huberman Financial, securities broker-dealers, from 2003 through 2005, and investment banker for AllegianceCapital, a middle market investment bank specializing on mergers and acquisitions, from 2005-2007. Mr. Cohen holds a Bachelor of Artsin International Economics and Finance from Brandeis University in Waltham, Massachusetts.
Mr.Cohen has served as Chief Executive Officer of the Company since October 2021, as a director from October 2021 to present, and as Chairmanfrom September 2022 to present. Mr. Cohen also currently serves as Chief Executive Officer and as a director of American InternationalHoldings Corp (“American International”), a publicly traded company which is the majority owner and parentto Epiq Scripts, LLC, and which is the former sole owner of the Company, having fully divested its ownership in June 2022, and as ChiefExecutive Officer of Ronin Equity Partners, Inc., a private investment company, which role he has held since August 2016. Mr. Cohen alsoserves the Chief Executive Officer of Cohen Enterprises, Inc., a private investment company, which position he has held since November2013.
Webelieve that Mr. Cohen’s extensive background in investment banking, public company management and corporate finance makes himwell qualified to serve on the Board of Directors.
JonathanArango – President, Chief Operating Officer and Director
JonathanArango is a Business Development Executive with more than 10 years of hands-on experience in pharmacy operations and management,business development, team management, and strategic relationship development. He has a history of driving significant revenue growthfor companies in multiple sectors. Mr. Arango participates in numerous ambitious ventures, spanning multiple industries such ase-commerce, medical & health, restaurants, and cryptocurrency.
Mr. Arango has served asthe President, Chief Operating Officer and director of the Company since October 2021. Prior to his appointment to the Company, Mr.Arango served as Chief Operating Officer of Murphy Rx LLC, a retail and specialty pharmacy based out of Murphy, Texas, which he previouslyowned, from June 2020 to March 2022. Prior to owning a pharmacy, Mr. Arango founded and served as CEO of Golden Heights Medical Consulting,a healthcare marketing agency that specialized in customer acquisition and medical ancillary services from February 2017 to January 2019.He also served as an independent contractor providing marketing and sales services from April 2015 to February 2017.
Beforeentering the healthcare industry, Mr. Arango ran an independent marketing and sales agency from 2013 to 2018 (A&J Marketing). A&JMarketing was contracted by multiple companies spanning different industries to generate and substantially scale revenue in multiplesectors. Industries included were Home Improvement, Oil & Gas, Health & Wellness, Professional Development, and E-commerce.
Webelieve that Mr. Arango’s extensive experience in the healthcare industry and e-commerce makes him well qualified to serve as amember of the Board of Directors.
EugeneM. Johnston – Chief Financial Officer
Mr.Johnston has served as Chief Financial Officer of the Company since October 2022. Since February 2015, Mr. Johnston has served as AuditManager for Greentree Financial Group, Inc., an accounting and auditing firm. From August 1999 to September 2014, Mr. Johnston servedas Chief Executive Officer of Peoplesway.com, Inc., a skincare and nutritional products company, and from August 1999to present, Mr. Johnston has served as a member of the Board of Directors of Peoplesway.com, Inc. From January 1999to July 1999, Mr. Johnston served as Chief Executive Officer of RMC Group, Inc., a skincare and nutritional products company. Prior tothat, from April 1987 to January 1989, Mr. Johnston served as Vice President of Sales Administration at WeCare Distributors, Inc., askincare and nutritional products company. Mr. Johnston received a Bachelor’s in Science in Business Administrationfrom the University of North Carolina Charlotte.
IndependentDirectors
LorraineD’Alessio, Esq., Director
Lorraine D’Alessio was elected as a director of the Company effective October 14, 2022. Since January 13, 2022, Ms. D’Alessio has served as a member of the Board of Directors and member of the Audit Committee of the Board of Directors of American International.
Since2010, Ms. D’Alessio has served as CEO and Managing Partner at D’Alessio Law Group, PLC, a law firm in Beverly Hills, Californiawhich provides immigration and entertainment law services. In that capacity, she has provided counsel to entertainment agencies, unions,private companies, academic institutions, tech startups, entrepreneurs and enterprises including: Next Models, Food Network, SubPac,Pepperdine University, ACTRA, New York Film Academy, Plug and Play, Expert Dojo, and 500 Startups.
Ms.D’Alessio was named the 2017 Leader in Law by the Los Angeles Business Journal and is the recipient of the 2018 Enterprising WomanAward. Since 2016, Ms. D’Alessio has also served on the board of directors of Artists for Change, a non-profit organization whichfocuses on creating high impact film, television, and multimedia projects to inspire individuals, organizations, and communities to bringabout positive social change.
From2005 to 2007, Ms. D’Alessio served as a policy analyst and advisor for the government of Ontario, Canada.
Ms.D’Alessio received her Bachelor’s degree in International Relations from the University of Toronto in 2005, a Master’sof Public Policy in Public Policy Administration from Queen’s University, in Kingston, Ontario in 2006, and a Juris Doctorate degreefrom Southwestern Law School in Los Angeles, California in 2010.
TheBoard of Directors believes that Ms. D’Alessio is well qualified to serve on the Board of Directors because of her legal expertiseand extensive knowledge of corporate governance and controls.
AlexP. Hamilton, Director
AlexP. Hamilton was elected as a director of the Company effective October 14, 2022.
InApril 2016, Mr. Hamilton founded Hamilton Laundry, a boutique laundromat that serves high-end luxury commercial companies, and has servedas its chief executive officer since then. He has also served as Chief Executive Officer of Hamilton Strategy Group, Inc., a consultingfirm, since November 2014. Mr. Hamilton is also the Co-Founder of Donald Capital LLC, a FINRA registered investment banking firm, andhas served as its president since May 2019. Since May 2021, Mr. Hamilton has served as a member of the Board of Directors, the Chairmanof the Audit Committee and member of the Corporate Governance and Nominating Committee of Addentax Group Corp. (ATXG:Nasdaq), an integratedservice provider focusing on garment manufacturing, logistics service, property management and subleasing, and epidemic prevention supplies.From February 2017 to July 2019, Mr. Hamilton served as Chief Financial Officer of Hemp Logic, Inc. From December 2018 to February 2019,Mr. Hamilton served as the Interim Chief Financial Officer of ChineseInvestors.com, Inc. From December 2020 to July 2021, Mr. Hamiltonserved as a non-executive Board Member, Chairman of the Audit Committee and Member of the Nominating and Compensation Committee of MeiwuTechnology Co., LTD (WNW:Nasdaq). Mr. Hamilton, served as the Chief Financial Officer and Director of CBD Biotech, Inc. from November2018 to February 2021. From January 2015 to May 2019, Mr. Hamilton served as Senior Managing Director of Consilium Global Research. FromNovember 2013 to November 2014, Mr. Hamilton was the president of Kei Advisors. From November 2012 to November 2013, Mr. Hamilton servedas Senior Director of FTI Consulting, a management consulting company. Prior to that, Mr. Hamilton served as managing director of EarlyBird Capital (August 2010 to September 2012) and Jesup & Lamont (July 2007 to February 2010), and as a Vice President of The BenchmarkCompany (February 2006 to July 2007). Mr. Hamilton holds his Series 7, 24 and 63 licenses. Mr. Hamilton received a Batchelor’sDegree in Economics from Brandeis University in Waltham, Massachusetts.
TheBoard of Directors believes that Mr. Hamilton is well qualified to serve on the Board of Directors because of his extensive businessknowledge, public company experience and experience serving in various positions with investment management firms.
Dr.Kenny Myers, Director
Dr.Kenny Myers was elected as a director of the Company effective October 14, 2022. Since January 13, 2022, Dr. Myers has served as amember of the Board of Directors and Audit Committee of American International.
SinceMarch 2020, Dr. Myers has served as VP of Business Development for Living Fit Nation, Inc., a corporate wellness provider which designsand implements customized employee health and wellness programs for corporations around the United States. From March 2012 to February2020, Dr. Myers worked as VP of Business Development at One Health Medical Systems, LLC, an integrated health services provider, wherehe was responsible for overseeing the planning, development and execution of the organization’s marketing and advertising initiatives.From May 1998 to March 2012, Dr. Myers was CEO of Texas Physicians Network, a healthcare management company where he was responsiblefor the marketing and management of several urgent care centers, medical clinics and other related healthcare facilities.
Dr.Myers received his Bachelor of Science degree in Microbiology from Oklahoma University in 1989, and a Doctor of Chiropractic Degree fromParker University in Dallas, Texas in 1996.
TheBoard of Directors believes that Dr. Myers is well qualified to serve on the Board of Directors because of his background in the healthservices industry and his experience in business marketing and development.
Termsof Office of Officers and Directors
Inaccordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one year after our firstfiscal year end following our listing on Nasdaq. The term of office of our directors will expire at our first annual meeting of shareholders,subject to re-nomination and reappointment to the board by our shareholders.
Ourofficers are appointed by the Board of Directors and serve at the discretion of the Board of Directors, rather than for specific termsof office. Our Board of Directors is authorized to appoint persons to the offices set forth in our Bylaws as it deems appropriate. OurBylaws provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President,Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices as may be determined by the Board of Directors.
Corporate Governance
FamilyRelationships among Directors and Officers
Thereare no family relationships among our directors and executive officers.
Arrangementsbetween Directors and Officers
Toour knowledge, there is no arrangement or understanding between any of our officers or directors and any other person, including directors,pursuant to which the officer was selected to serve as an officer or director.
Involvementin Certain Legal Proceedings
Noneof our executive officers or directors has been involved in any of the following events during the past ten years: (1) any bankruptcypetition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcyor within two years prior to that time; (2) any conviction in a criminal proceeding or being a named subject to a pending criminal proceeding(excluding traffic violations and minor offenses); (3) being subject to any order, judgment, or decree, not subsequently reversed, suspendedor vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting hisinvolvement in any type of business, securities or banking activities; (4) being found by a court of competent jurisdiction (in a civilaction), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law; (5)being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequentlyreversed, suspended or vacated, relating to an alleged violation of (i) any Federal or State securities or commodities law or regulation;(ii) any law or regulation respecting financial institutions or insurance companies, including, but not limited to, a temporary or permanentinjunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal orprohibition order, or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or(6) being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatoryorganization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section (1a)(40) of the CommodityExchange Act), or any equivalent exchange, association, entity, or organization that has disciplinary authority over its members or personsassociated with a member.
BoardLeadership Structure
OurBoard of Directors has the responsibility for selecting the appropriate leadership structure for the Company. In making leadership structuredeterminations, the Board of Directors considers many factors, including the specific needs of the business and what is in the best interestsof the Company’s shareholders. Our current leadership structure is comprised of a combined Chairman of the Board and Chief ExecutiveOfficer (“CEO”), Mr. Jacob D. Cohen. The Board of Directors believes that this leadership structure is the most effectiveand efficient for the Company at this time. Mr. Cohen possesses detailed and in-depth knowledge of the issues, opportunities, and challengesfacing the Company, and is thus best positioned to develop agendas that ensure that the Board of Directors’ time and attentionare focused on the most critical matters. Combining the Chairman of the Board and CEO roles promotes decisive leadership, fosters clearaccountability and enhances the Company’s ability to communicate its message and strategy clearly and consistently to our shareholders,particularly during periods of turbulent economic and industry conditions.
RiskOversight
Effectiverisk oversight is an important priority of the Board of Directors. Because risks are considered in virtually every business decision,the Board of Directors discusses risk throughout the year generally or in connection with specific proposed actions. The Board of Directors’approach to risk oversight includes understanding the critical risks in the Company’s business and strategy, evaluating the Company’srisk management processes, allocating responsibilities for risk oversight, and fostering an appropriate culture of integrity and compliancewith legal responsibilities. The directors exercise direct oversight of strategic risks to the Company.
TheAudit Committee reviews and assesses the Company’s processes to manage business and financial risk and financial reporting risk.It also reviews the Company’s policies for risk assessment and assesses steps management has taken to control significant risks.
OtherDirectorships
Nodirector of the Company is also a director of an issuer with a class of securities registered under Section 12 of the Exchange Act (orwhich otherwise are required to file periodic reports under the Exchange Act), except for our Chairman, Jacob D. Cohen, who also servesas a member of the Board of Directors (and as Chief Executive Officer) of American International Holdings Corp.; and Ms. D’Alessioand Dr. Meyers, who each also serve as members of the Board of Directors of, and as members of the Audit Committee of, American InternationalHoldings Corp. Since May 2021, Mr. Hamilton has served as a member of the Board of Directors, the Chairman of the Audit Committee andmember of the Corporate Governance and Nominating Committee of Addentax Group Corp.
Committeesof the Board
OurBoard of Directors has three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and CorporateGovernance Committee. Subject to phase-in rules and a limited exception, Nasdaq rules and Rule 10A-3 of the Exchange Act require thatthe Audit Committee of a listed company be comprised solely of independent directors, and Nasdaq rules require that the CompensationCommittee of a listed company be comprised solely of independent directors.
BoardCommittee Membership
Committeemembership of the Board of Directors is as follows:
| | Independent | | Audit Committee | | | Compensation Committee | | | Nominating and Corporate Governance Committee | |
Jacob D. Cohen(1) | | | | | | | | | | | | | | | |
Jonathan Arango | | | | | | | | | | | | | | | |
Lorraine D’Alessio | | | X | | | M | | | | M | | | | C | |
Alex P. Hamilton | | | X | | | C | | | | | | | | | |
Dr. Kenny Myers | | | X | | | M | | | | C | | | | M | |
(1)Chairman of Board of Directors.
C- Chairman of Committee.
M- Member.
AuditCommittee
Wehave established an Audit Committee of the Board of Directors. Ms.D’Alessio, Mr. Hamilton and Dr. Meyers serve as members of our Audit Committee, and Mr. Hamilton chairs the Audit Committee.Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least three members of the Audit Committee, allof whom must be independent. The Board of Directors has determined that each of Ms. D’Alessio, Mr. Hamilton and Dr. Meyersmeet the independent director standard under Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act.
TheBoard has determined that Mr. Hamilton, is an “auditcommittee financial expert” (as defined in the SEC rules) because he has the following attributes: (i) an understanding of generallyaccepted accounting principles in the United States of America (“GAAP”) and financial statements; (ii) the ability to assessthe general application of such principles in connection with accounting for estimates, accruals and reserves; (iii) experience analyzingand evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparableto the breadth and complexity of issues that can reasonably be expected to be raised by our financial statements; (iv) an understandingof internal control over financial reporting; and (v) an understanding of Audit Committee functions. Mr. Hamilton has acquiredthese attributes as a result of his significant experience serving on the Board of Directors of various private and public companiesand the Co-Founder and president of Donald Capital LLC, a FINRA registered investment banking firm.
Wehave adopted an Audit Committee Charter, which details the principal functions of the Audit Committee, including:
| ● | the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm engaged by us; |
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| ● | pre-approving all audit and permitted non-audit services to be provided by the independent registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; |
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| ● | setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations; |
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| ● | setting clear policies for audit partner rotation in compliance with applicable laws and regulations; |
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| ● | obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence; |
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| ● | reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and |
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| ● | reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
TheAudit Committee also has the sole authority, at its discretion and at our expense, to retain, compensate, evaluate and terminateour independent auditors and to review, as it deems appropriate, the scope of our annual audits, our accounting policies and reportingpractices, our system of internal controls, our compliance with policies regarding business conduct and other matters. In addition, theAudit Committee has the authority, at its discretion and at our expense, to retain special legal, accounting or other advisorsto advise the Audit Committee.
CompensationCommittee and Nominating and Corporate Governance Committee
Wehave established a Compensation Committee of the Board of Directors.Ms. D’Alessio and Dr. Meyers serve as members of our Compensation Committee. Under the Nasdaq listing standards and applicableSEC rules, we are required to have at least two members of the Compensation Committee, all of whom must be independent. Each of Ms. D’Alessioand Dr. Meyers are independent, and Dr. Meyer’s chairs the Compensation Committee.
Wehave adopted a Compensation Committee Charter, which details the principal functions of the Compensation Committee, including:
| ● | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, if any is paid by us, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
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| ● | reviewing and approving on an annual basis the compensation, if any is paid by us, of all of our other officers; |
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| ● | reviewing on an annual basis our executive compensation policies and plans; |
| ● | implementing and administering our incentive compensation equity-based remuneration plans; |
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| ● | assisting management in complying with our proxy statement and annual report disclosure requirements; |
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| ● | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees; |
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| ● | if required, producing a report on executive compensation to be included in our annual proxy statement; and |
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| ● | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Thecharter also provides that the Compensation Committee may, in its sole discretion, retain or obtain the advice of a compensationconsultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the workof any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any otheradviser, the Compensation Committee will consider the independence of each such adviser, including the factors required by Nasdaq andthe SEC.
Nominationsfor Directors
Wehave established a Nominating and Corporate Governance Committee.The members of our nominating and corporate governance are Ms. D’Alessio and Dr. Meyers and Ms. D’Alessio serves aschair of the Nominating and Corporate Governance Committee.
Theprimary purposes of our Nominating and Corporate Governance Committee are to assist the board in:
| ● | identifying, screening and reviewing individuals qualified to serve as directors and recommending to the Board of Directors candidates for nomination for election at the annual meeting of shareholders or to fill vacancies on the Board of Directors; |
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| ● | developing, recommending to the Board of Directors and overseeing implementation of our corporate governance guidelines; |
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| ● | coordinating and overseeing the annual self-evaluation of the Board of Directors, its committees, individual directors and management in the governance of the company; and |
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| ● | reviewing on a regular basis our overall corporate governance and recommending improvements as and when necessary. |
TheNominating and Corporate Governance Committee is be governed by a charter that complies with the rules of the Nasdaq.
OurNominating and Corporate Governance Committee will recommend to the Board of Directors candidates for nomination for election at theannual meeting of the shareholders. The Board of Directors will also consider director candidates recommended for nomination by our shareholdersduring such times as they are seeking proposed nominees to stand for election at the next annual meeting of shareholders (or, if applicable,a special meeting of shareholders).
Wehave not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess.In general, in identifying and evaluating nominees for director, the Board of Directors considers educational background, diversity ofprofessional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to representthe best interests of our shareholders.
DirectorIndependence
Nasdaqlisting standards require that a majority of our Board of Directors be independent. An “independent director” is definedgenerally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationshipwhich in the opinion of the company’s Board of Directors, would interfere with the director’s exercise of independent judgmentin carrying out the responsibilities of a director. Our Board of Directors has determined that all of ourdirectors, other than Mr. Cohen and Mr. Arango, are “independent directors” as defined in the Nasdaq listing standards andapplicable SEC rules. Our independent directors have regularly scheduled meetings at which only independent directors are present.
Inassessing director independence, the Board considers, among other matters, the nature and extent of any business relationships, includingtransactions conducted, between the Company and each director and between the Company and any organization for which one of our directorsis a director or executive officer or with which one of our directors is otherwise affiliated.
ShareholderCommunications with the Board
Ashareholder who wishes to communicate with our Board of Directors may do so by directing a written request addressed to our Secretary,15110 N. Dallas Parkway, Suite 600, Dallas, Texas 75248, who, upon receipt of any communication other thanone that is clearly marked “Confidential,” will note the date the communication was received, open the communication, makea copy of it for our files and promptly forward the communication to the director(s) to whom it is addressed. Upon receipt of any communicationthat is clearly marked “Confidential,” our Secretary will not open the communication, but will note the date the communicationwas received and promptly forward the communication to the director(s) to whom it is addressed.
Policyon Equity Ownership
TheCompany does not have a policy on equity ownership at this time.
Policyagainst Hedging
TheCompany recognizes that hedging against losses in Company shares may disturb the alignment between shareholders and executives that equityawards are intended to build; however, while ‘short sales’ are discouraged by the Company, the Company does not currentlyhave a policy prohibiting such transactions. We plan to implement a policy prohibiting such transactions in the future.
CompensationRecovery
Underthe Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), in the event of misconduct that results in a financial restatementthat would have reduced a previously paid incentive amount, we can recoup those improper payments from our Chief Executive Officer andChief Financial Officer (if any). The SEC also recently adopted rules which direct national stock exchanges to require listed companiesto implement policies intended to recoup bonuses paid to executives if the company is found to have misstated its financial results.We plan to implement a clawback policy in the future, once required, although we have not yet implemented such policy.
Codeof Ethics
Wehave adopted a Code of Ethical Business Conduct (“Code of Ethics”) that applies to all of our directors, officers and employees.We intend to disclose any amendments to our Code of Ethics and any waivers with respect to our Code of Ethics granted to our principalexecutive officer, our principal financial officer, or any of our other employees performing similar functions in a Current Report onForm 8-K.
Therehave been no waivers granted with respect to our Code of Ethics to any such officers or employees.
WhistleblowerProtection Policy
TheCompany adopted a Whistleblower Protection Policy (“Whistleblower Policy”) that applies to all of its directors, officers,employees, consultants, contractors and agents of the Company. The Whistleblower Policy has been reviewed and approved by the Board.
BoardDiversity
Whilewe do not have a formal policy on diversity, our Board of Directors considers diversity to include the skill set, background, reputation,type and length of business experience of our board members as well as a particular nominee’s contributions to that mix. Our Boardof Directors believes that diversity promotes a variety of ideas, judgments and considerations to the benefit of our Company and shareholders.
OnAugust 6, 2021, the Securities and Exchange Commission approved a proposed rule from Nasdaq on diversity of boards of directors of companieslisted on Nasdaq. Pursuant to the rule as approved (the “Diversity Rule”), any company newly listing on The Nasdaq CapitalMarket that was not previously subject to a substantially similar requirement of another national securities exchange, is required tohave, explain why it does not have, at least two Diverse (as defined below) directors by the later of: (a) two years from the date oflisting; or (b) the date the company files its proxy statement or its information statement (or, if the company does not file a proxy,in its Form 10-K) for the company’s second annual meeting of shareholders subsequent to the company’s listing; provided thatif the company has a board of five or fewer members it need only have, or explain why it does not have, one Diverse director. Unlessexempt from the rules as discussed below, at least one Diverse director must self-identify as female and at least one Diverse directormust self-identify as an underrepresented minority or as LGBTQ+ (unless we remain as a smaller reporting company, in which case bothDiverse directors may self-identify as female). “Diverse” means an individual who self-identifies as one or more of the following:female, LGBTQ+, or an underrepresented individual based on national, racial, ethnic, indigenous, cultural, religious or linguistic. We currently have one director who self-identifies as female.
ControlledCompany
JacobD. Cohen, our Chairman, Chief Executive Officer and principal shareholder (through an entity which he owns), currently controls approximately58.3% of the voting power of our capital stock (based on shares of common stock outstanding as of December 20, 2022 and will controlapproximately 53.5% of the voting power of our common stock upon completion of this offering, assuming an offering size as setforth on the cover page hereof, and we are therefore a “controlled company” as defined under Nasdaq Marketplace Rules. However,we do not currently intend to rely on the controlled company exemptions provided under Nasdaq Marketplace Rules, which would otherwisepermit us to rely on certain exemptions from corporate governance rules, including: (a) an exemption from the rule that a majority ofour Board of Directors must be independent directors; (b) an exemption from the rule that the compensation of our chief executive officermust be determined or recommended solely by independent directors; and (c) an exemption from the rule that our director nominees mustbe selected or recommended solely by independent directors. Notwithstanding the above, we may rely on any or all of these “controlledcompany” exceptions in the future. We also do not plan to rely on a “phase-in” schedule allowed pursuant to applicableNasdaq rules in connection with this offering.
Executiveand Director Compensation
ExecutiveCompensation Table
Thefollowing table sets forth information concerning the compensation of (i) all individuals serving as our principal executive officeror acting in a similar capacity for the period from October 7, 2021 (Inception) to December 31, 2022 (“PEO”), regardlessof compensation level; (ii) our two most highly compensated executive officers other than the PEO who were serving as executive officersfor the periods ended December 31, 2021 and 2022, if any (subject to the limitations below); and (iii) up to two additionalindividuals for whom disclosure would have been provided pursuant to paragraph (ii) but for the fact that the individual was not servingas an executive officer at December 31, 2021 or 2022 (collectively, the “Named Executive Officers”).
Name and Principal Position | | Fiscal Year | | | Salary ($) | | | Bonus ($) | | | Stock Awards ($)(1) | | | Option Awards ($)(1) | | | All Other Compensation ($)(2) | | | Total ($) | |
Jacob D. Cohen | | | 2022 | | | | 70,000 | | | | — | | | | — | | | | 462,750 | (5) | | | — | | | | 532,750 | |
CEO and Chairman(3) | | | 2021 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
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Jonathan Arango | | | 2022 | | | | 50,000 | | | | — | | | | — | | | | 308,500 | (6) | | | — | | | | 358,500 | |
COO and Director(3) | | | 2021 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
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Eugene M. Johnston | | | 2022 | | | | — | | | | — | | | | 150,000 | (7) | | | — | | | | — | | | | 150,000 | |
CFO(4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)In accordance with SEC rules, the amounts included in this column are the grant date fair value for awards granted in the fiscal yearsshown, computed in accordance with the stock-based compensation accounting rules that are a part of generally accepted accounting principlesin effect in the United States (as set forth in Financial Accounting Standards Board’s Accounting Standards Codification Topic718), but excluding the effect of any estimated forfeitures of such awards. The values in this column reflect the full grant date fairvalue of all equity awards granted during the year, although the awards are subject to vesting periods based on continued employment.
(2)Does not include perquisites and other personal benefits or property, unless the aggregate amount of such compensation is more than $10,000.No executive officer earned any non-equity incentive plan compensation or nonqualified deferred compensation during the periods reportedabove. No executive officer serving as a director received any compensation for services on the Board of Directors separate from thecompensation paid as an executive for the periods above.
(3)The Company was formed on October 7, 2021, and Mr. Cohen and Mr. Arango became officers of the Company effective on the date of formation.
(4) Mr. Johnston was appointed as Chief Executive Officer of the Company effective on October 1, 2022.
(5) On August 31, 2022, in consideration for agreeing to an employment agreement with the Company, Mr. Cohen received a sign-on bonusof options to purchase 750,000 shares of common stock of the Company, with an exercise price of $1.10 per share, with options to purchase250,000 shares vesting every twelve months that the agreement is in effect. The options have a term of five years.
(6) On August 31, 2022, in consideration for agreeing to an employment agreement with the Company, Mr. Arango received a sign-on bonusof options to purchase 500,000 shares of common stock of the Company, with an exercise price of $1.10 per share, with options to purchase166,666 shares vesting every twelve months that the agreement is in effect. The options have a term of five years.
(7)Effective on October 1, 2022, the Company granted Mr. Johnston 150,000 shares of the Company’s restricted stock which vest overa 6-month period at the rate of 25,000 shares per month with the first 25,000 shares vesting on November 1, 2022.
OutstandingEquity Awards at Fiscal Year-End
Thefollowing table sets forth information as of December 31, 2022 concerning outstanding equity awards for the executive officers namedin the Summary Compensation Table.
OutstandingEquity Awards at Fiscal Year-End
| | Option Awards | | Stock Awards(3) | |
Name | | Number of securities underlying unexercised options (#) exercisable | | Number of securities underlying unexercised options (#) unexercisable | | Option Exercise price ($) | | | Option expiration date | | Number of shares or units of stock that have not vested (#) | | | Market value of shares or units of stock that have not vested ($)(4) | |
Jacob D. Cohen | | — | | 750,000 | (1) | $ | 1.10 | | | 08/31/2027 | | | — | | | $ | — | |
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Jonathan Arango | | — | | 500,000 | (2) | $ | 1.10 | | | 08/31/2027 | | | — | | | $ | — | |
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Eugene M. Johnston | | — | | — | | $ | — | | | — | | | 100,000 | (3) | | $ | 100,000 | |
(1)On August 31, 2022, in consideration for agreeing to an employment agreement with the Company, Mr. Cohen received a sign-on bonus ofoptions to purchase 750,000 shares of common stock of the Company, with an exercise price of $1.10 per share, with options to purchase250,000 shares vesting every twelve months that the agreement is in effect. The options have a term of five years.
(2)On August 31, 2022, in consideration for agreeing to an employment agreement with the Company, Mr. Arango received a sign-on bonus ofoptions to purchase 500,000 shares of common stock of the Company, with an exercise price of $1.10 per share, with options to purchase166,666 shares vesting every twelve months that the agreement is in effect. The options have a term of five years.
(3)Effective on October 1, 2022, the Company granted Mr. Johnston 150,000 shares of the Company’s restricted stock which vest overa 6-month period at the rate of 25,000 shares per month with the first 25,000 shares vesting on November 1, 2022.
(4)Calculated by multiplying the number of shares shown in the table by $1.00, the fair market value of our common stock as of December31, 2022, as determined by management.
EmploymentAgreements
JacobD. Cohen, Chief Executive Officer
OnAugust 31, 2022, we entered into an Executive Employment Agreement with Jacob D. Cohen. The agreement, which provides for Mr. Cohen toserve as our Chief Executive Officer, was effective September 1, 2022, and has a term extending through September 1, 2025, provided thatthe agreement automatically renews for additional one-year terms thereafter in the event neither party provides the other at least 60days prior notice of their intention not to renew the terms of the agreement.
Pursuantto the terms of the agreement, Mr. Cohen’s annual compensation package currently includes (1) a base salary of $180,000 per year,subject to automatic annual increases of $60,000 each year the agreement is in place, and subject to further increases as determinedin the sole discretion of the Compensation Committee or the Board of Directors, and (2) a bonus payment to be determined in the solediscretion of the Compensation Committee or the Board of Directors in an annual targeted amount of 200% of his base salary (the “TargetedBonus”), subject to the compliance by Mr. Cohen with performance goals that may be established by the Compensation Committee orthe Board of Directors from time to time, provided no goals have been established to date, and that in the absence of performance goals,the amount of such bonus would be wholly determined in the discretion of the Compensation Committee or the Board of Directors. Mr. Cohenis also paid an automobile allowance of $1,500 per month during the term of the agreement and is eligible to participate in our stockoption plan and other benefit plans.
Inconsideration for agreeing to the terms of the agreement, Mr. Cohen received a sign-on bonus of options to purchase 750,000 shares ofcommon stock of the Company, with an exercise price of $1.10 per share, with options to purchase 250,000 shares vesting every twelvemonths that the agreement is in effect. The options have a term of five years.
Mr.Cohen’s compensation under his employment agreement may be increased from time to time, by the Compensation Committee, or the Boardof Directors (with the recommendation of the Compensation Committee), which increases do not require the entry into an amended employmentagreement. Mr. Cohen may also receive bonuses from time to time, in the discretion of the Board and/or Compensation Committee in cash,stock, or options.
Theagreement prohibits Mr. Cohen from competing against us during the term of the agreement and for a period of twelve months after thetermination of the agreement in any state and any other geographic area in which we or our subsidiaries provide Restricted Services orRestricted Products, directly or indirectly, during the twelve months preceding the date of the termination of the agreement. “RestrictedServices” means the or men’s wellness services and any other services and any other services that we or our subsidiarieshave provided or are researching, developing, performing and/or providing at any time during the two years immediately preceding thedate of termination, or which Mr. Cohen has obtained any trade secret or other confidential information about at any time during thetwo years immediately preceding the date of termination of the agreement. “Restricted Products” branded men’s wellnessproducts sold to consumers via a telemedicine platform and any other product and any other product, that we or our subsidiaries haveprovided or are researching, developing, manufacturing, distributing, selling and/or providing at any time during the two years immediatelypreceding the date the agreement is terminated, or which Mr. Cohen obtained any trade secret or other confidential information in connectionwith at any time during the two years immediately preceding the date of termination of the agreement.
Wemay terminate Mr. Cohen’s employment (a) for “cause” which means (i) Mr. Cohen materially breaches any obligation,duty, covenant or agreement under the agreement, which breach is not cured or corrected within thirty days of written notice thereoffrom the Company (except for breaches of the assignment of inventions or confidentiality/non-solicitation and non-compete provisionsof the agreement, which cannot be cured and for which the Company need not give any opportunity to cure); or (ii) Mr. Cohen commits anyact of misappropriation of funds or embezzlement; or (iii) Mr. Cohen commits any act of fraud; or (iv) Mr. Cohen is convicted of, orpleads guilty or nolo contendere with respect to, theft, fraud, a crime involving moral turpitude, or a felony under federal or applicablestate law; and, in the case of any of the above offenses, such offense casts reasonable doubt on Mr. Cohen’s ability to performhis duties going forward; (b) in the event Mr. Cohen suffers a physical or mental disability which renders him unable to perform hisduties and obligations for either 90 consecutive days or 180 days in any 12-month period; (c) for any reason without “cause”;(d) upon expiration of the initial term of the agreement (or any renewal) upon notice as provided above, or (e) at any time without cause.The agreement also automatically terminates upon the death of Mr. Cohen.
Mr.Cohen may terminate his employment (a) for “good reason” if there is (i) a material diminution in his authority, duties,or responsibilities; (ii) a material diminution in the authority, duties, or responsibilities of the supervisor to whom Mr. Cohen isrequired to report, including, if applicable, a requirement that Mr. Cohen report to an officer or employee of the Company rather thanreporting to the Board; (iii) a material breach by the Company of the agreement, or (iv) a material diminution in Mr. Cohen’s basesalary; provided, however, prior to any such termination by Mr. Cohen for “good reason,” Mr. Cohen must first advise us inwriting (within 90 days of the occurrence of such event) and provide us 30 days to cure, after which in the event we do not cure theissue leading to such “good reason” notice, Mr. Cohen has 30 days to resign for “good reason”); (b) for any reasonwithout “good reason”; and (c) upon expiration of the initial term of the agreement (or any renewal) upon notice as providedabove.
IfMr. Cohen’s employment is terminated due to his death or disability, Mr. Cohen or his estate is entitled to a lump sum cash severancepayment equal to the sum of (i) Mr. Cohen’s base salary accrued through the termination date; (ii) any unpaid cash bonus for theprior year that would have been paid had Mr. Cohen not been terminated prior to such payment; and (iii) Mr. Cohen’s Targeted Bonusfor the year of termination multiplied by the number of days in such year preceding the termination date divided by 365. Additionally,and notwithstanding anything to the contrary in any equity agreement, any unvested stock options or equity compensation held by Mr. Cohenshall vest and shall be exercisable until the earlier of (A) ninety days from the date of termination and (B) the latest date upon whichsuch stock options or equity would have expired by their original terms under any circumstances.
IfMr. Cohen’s employment is terminated pursuant to Mr. Cohen without “good reason” or his non-renewal of the agreement,or by the Company with cause, Mr. Cohen is entitled to his base salary accrued through the termination date and no other benefits otherthan continuation of health insurance benefits on the terms and to the extent required by COBRA, or such other similar law or regulationas may be applicable to the Mr. Cohen or the Company with respect to the Mr. Cohen. Additionally, any unvested stock options or equitycompensation held by Mr. Cohen shall immediately terminate and be forfeited (unless otherwise provided in the applicable award) and anypreviously vested stock options (or if applicable equity compensation) shall be subject to terms and conditions set forth in the applicableequity agreement, as such may describe the rights and obligations upon termination of employment of Mr. Cohen.
IfMr. Cohen’s employment is terminated by Mr. Cohen for “good reason” or by the Company without “cause” ordue to the Company’s non-renewal, (a) Mr. Cohen is entitled to his base salary accrued through the termination date and any unpaidcash bonus for the prior completed calendar year that would have been paid had Mr. Cohen not been terminated prior to such payment, plusa lump sum cash severance payment equal to the sum of (i) an amount equal to Mr. Cohen’s current annual base salary plus (ii) anamount equal to Mr. Cohen’s Targeted Bonus for the year containing the termination date (the “Severance Payment”);and (b) provided Mr. Cohen elects to receive continued health insurance coverage through COBRA, the Company will pay Mr. Cohen’smonthly COBRA contributions for health insurance coverage, as may be amended from time to time (less an amount equal to the premium contributionpaid by active Company employees, if any) for twelve months following the termination date (the “Health Payment”); provided,however, that if at any time Mr. Cohen is covered by a substantially similar level of health insurance through subsequent employmentor otherwise, the Company’s health benefit obligations shall immediately cease, and the Company shall have no further obligationto make the Health Payment. Additionally, and notwithstanding anything to the contrary in any equity agreement, any unvested stock optionsor equity compensation previously granted to the Mr. Cohen will vest immediately upon such termination and shall be exercisable by theMr. Cohen until the earlier of (A) ninety days from the date of termination and (B) the latest date upon which such stock options orequity would have expired by their original terms under any circumstances.
Asa condition to Mr. Cohen’s right to receive any Severance Payment, (A) Mr. Cohen must execute and deliver to the Company a writtenrelease in form and substance satisfactory to the Company, of any and all claims against the Company and all directors and officers ofthe Company with respect to all matters arising out of Mr. Cohen’s employment, or the termination thereof (other than claims forentitlements under the terms of the agreement or plans or programs of the Company in which Mr. Cohen has accrued a benefit); and (B)Mr. Cohen must not have breached any of his covenants and agreements under the Agreement relating to assignment of inventions and confidentiality,including the non-solicitation and non-compete provisions thereof, which shall continue following the Termination Date.
Ifa Change of Control (as defined below) occurs during the term of the agreement, or within six months after Mr. Cohen’s terminationof employment by him for good reason or by the Company without cause or upon non-renewal, the Company is required to pay Mr. Cohen, within60 days following the date of such Change of Control, a cash payment in a lump sum in an amount equal to (x) minus (y) where (x) equals3.0 times the sum of (a) the current annual base salary of the Mr. Cohen; and (b) the amount of the most recent cash bonus paid to theMr. Cohen (collectively (a) and (b), the “Change of Control Payment”) and (y) equals the amount of any severance paymentactually paid to Mr. Cohen in connection with a non-Change of Control termination, as discussed above). In the event the CompensationCommittee has not previously made a determination regarding cash bonus or the most recent cash bonus was zero, the “amount of themost recent cash bonus paid to the Mr. Cohen” is instead equal to “the targeted bonus for the year in which the Change inControl occurs.” Additionally, following a change of control termination, all outstanding stock options and other equity compensationheld by Mr. Cohen are exercisable by the Mr. Cohen pursuant to the terms thereof until the earlier of (A) ninety (90) days from his terminationdate and (B) the latest date upon which such stock options and other equity compensation would have expired by their original terms underany circumstances; provided any equity awards outstanding prior to the entry into the Executive Employment Agreement continue to be governedby the terms set forth in such award agreements.
“Changeof Control” for the purposes of the agreement means: (a) any person obtaining beneficial ownership representing more than 50% ofthe total voting power represented by our then outstanding voting securities without the approval of not fewer than two-thirds of ourBoard of Directors; (b) a merger or consolidation of us whether or not approved by our Board of Directors, other than a merger or consolidationthat would result in our voting securities immediately prior thereto continuing to represent at least 50% of the total voting power outstandingimmediately after such merger or consolidation, (c) our shareholders approving a plan of complete liquidation or an agreement for thesale or disposition by us of all or substantially all of our assets, or (d) as a result of the election of members to our Board of Directors,a majority of the Board of Directors consists of persons who are not members of the Board of Directors on September 1, 2022, except inthe event that such slate of directors is proposed by a committee of the Board of Directors.
Theagreement contains standard assignment of inventions, indemnification and confidentiality provisions. Further, Mr. Cohen is subject tonon-solicitation covenants during the term of the agreement.
AlthoughMr. Cohen will be prohibited from competing with us while he is employed with us, he will only be prohibited from competing for twelvemonths after his employment with us ends pursuant to the agreement. Accordingly, Mr. Cohen could be in a position to use industry experiencegained while working with us to compete with us.
JonathanArango, President and Chief Operating Officer
OnAugust 31, 2022, we entered into an Executive Employment Agreement with Jonathan Arango. The agreement, which provides for Mr. Arangoto serve as our President and Chief Operating Officer, was effective September 1, 2022, and has a term extending through September 1,2025, provided that the agreement automatically extends for additional one-year terms thereafter in the event neither party providesthe other at least 60 days prior notice of their intention not to renew the terms of the agreement.
Pursuantto the terms of the agreement, Mr. Arango’s annual compensation package currently includes (1) a base salary of $120,000 per year,subject to annual increases of $30,000, each year the agreement is in place, and subject to further increases as determined in the solediscretion of the Compensation Committee or the Board of Directors, and (2) a bonus payment to be determined in the sole discretion ofthe Compensation Committee or the Board of Directors in an annual targeted amount of 200% of his base salary, subject to the complianceby Mr. Arango with performance goals that may be established by the Compensation Committee or the Board of Directors from time to time,provided no goals have been established to date, and that in the absence of performance goals, the amount of such bonus would be whollydetermined in the discretion of the Compensation Committee or the Board of Directors. Mr. Arango is also paid an automobile allowanceof $1,000 per month during the term of the agreement and is eligible to participate in our stock option plan and other benefit plans.
Fromtime to time the Compensation Committee or the Board of Directors may also pay or grant discretionary cash bonuses or equity bonusesto Mr. Arango in their discretion, or increase the targeted bonus or the base salary, which increases in target and/or base salary arenot required to be set forth in an amendment to the agreement.
Inconsideration for agreeing to the terms of the agreement, Mr. Arango received a sign-on bonus of options to purchase 500,000 shares ofcommon stock of the Company, with an exercise price of $1.10 per share, with options to purchase 166,666 shares vesting every twelvemonths that the agreement is in effect. The options have a term of five years.
Otherthan as discussed above, Mr. Arango’s employment, including, but not limited to required severance and change of control payments,is identical terms as Mr. Cohen’s agreement discussed above.
AlthoughMr. Arango will be prohibited from competing with us while he is employed with us, he will only be prohibited from competing for twelvemonths after his employment with us ends pursuant to the agreement. Accordingly, Mr. Arango could be in a position to use industry experiencegained while working with us to compete with us.
EugeneM. Johnston, Chief Financial Officer
OnOctober 1, 2022, the Company entered into an offer letter with Eugene M. Johnston (the “Offer Letter”). The Offer Letterprovided for Mr. Johnston to serve as the full-time Chief Financial Officer of the Company, reporting to the Company’s Board ofDirectors and Chief Executive Officer, for a term of 12 months from October 1, 2022 to September 30, 2023. Pursuant to the Offer Letter,the Company agreed to grant Mr. Johnston 150,000 shares of the Company’s restricted stock which vest over a 6-month period at therate of 25,000 shares per month with the first 25,000 shares vesting on November 1, 2022. Pursuant to the Offer Letter, Mr. Johnstonis eligible to participate in any of the Company’s future sponsored benefit plans, including but not limited to, health insurancebenefits, 401k, stock option or restricted stock grants, and other fringe benefits, once established, and no earlier than the first ofthe month following 105 days of Johnston’s start date. Mr. Johnston is also eligible to receive equity incentive grants or cashbonus awards as determined by the Company’s Board (or a committee of the Board) in their sole discretion from time to time. Theshares were valued at $1.00 per share for a total of $150,000.
Compensationof Directors
Thefollowing table sets forth compensation information with respect to our non-executive directors during our fiscal year ended December31, 2022. The compensation of our executive directors is included above under “Executive Compensation Table”.
Name | | Fees Earned or Paid in Cash ($)* | | | Stock Awards ($) (1) (2)(3) | | | All Other Compensation ($) | | | Total ($) | |
Lorraine D’Alessio | | $ | — | | | $ | 75,000 | | | $ | — | | | $ | 75,000 | |
Alex P. Hamilton | | $ | — | | | $ | 75,000 | | | $ | — | | | $ | 75,000 | |
Dr. Kenny Myers | | $ | — | | | $ | 75,000 | | | $ | — | | | $ | 75,000 | |
*The table above does not include the amount of any expense reimbursements paid to the above directors. No directors received any Non-EquityIncentive Plan Compensation or Nonqualified Deferred Compensation. Does not include perquisites and other personal benefits, or property,unless the aggregate amount of such compensation is more than $10,000.
(1)In accordance with SEC rules, the amounts included in this column are the grant date fair value for awards granted in the fiscal yearsshown, computed in accordance with the stock-based compensation accounting rules that are a part of generally accepted accounting principlesin effect in the United States (as set forth in Financial Accounting Standards Board’s Accounting Standards Codification Topic718), but excluding the effect of any estimated forfeitures of such awards. The values in this column reflect the full grant date fairvalue of all equity awards granted during the year, although the awards are subject to vesting periods based on continued employment.
(2) No specific board compensation policy has been adopted to date; however, on October 14, 2022, we entered into offer letterswith each of our three independent non-executive directors, Ms. D’Alessio, Mr. Hamilton and Dr. Meyers. Pursuant to the Offer Letters,each non-executive director agreed to serve as a member of our Board of Directors, and we agreed to grant each non-executive director75,000 shares of restricted common stock (the “Director Shares”). The Director Shares were issued under the Company’s2022 Equity Incentive Plan (the “Plan”), with the following vesting schedule: 1/3 of the Director Shares vested on October14, 2022, and the remaining Director Shares will vest annually in two increments on each of October 14, 2023 and 2024, subject to suchdirectors continuing to provide services to the Company on such dates, and subject to the Restricted Stock Award agreements entered intoto evidence such grants. The shares were valued at $1.00 per share for a total of $225,000.
(3)The aggregate number of stock options (exercisable and unexercisable) held by each non-employee director listed above as of December31, 2022 was as follows:
Name | | Stock Options (#) | |
Lorraine D’Alessio | | | 50,000 | |
Alex P. Hamilton | | | 50,000 | |
Dr. Kenny Myers | | | 50,000 | |
Nospecific board compensation policy has been adopted to date, however, we expect that our non-executive directors will be granted equitycompensation and paid cash, from time to time, for their services on the Board of Directors.
KeyMan Insurance
Wehave no key man insurance on any of our executive officers; however, we have agreed to obtain key man life insurance with an insurerrated at least AA or better in the most recent edition of “Best’s Life Reports” in the aggregate amount of $2,000,000on the life of Jacob D. Cohen, the Chief Executive Officer of the Company, prior to the closing of the offering.
2022Equity Incentive Plan
OnAugust 31, 2022, the Board of Directors and our majority shareholders adopted the Company’s 2022 Equity Incentive Plan (the “2022Plan”).
The2022 Plan provides an opportunity for any employee, officer, director or consultant of the Company, subject to limitations provided byfederal or state securities laws, to receive (i) incentive stock options (to eligible employees only); (ii) nonqualified stock options;(iii) stock appreciation rights; (iv) restricted stock awards; (v) restricted stock units; (vi) shares in performance of services; (vii)other awards of equity or equity based compensation; or (viii) any combination of the foregoing. In making such determinations, the Boardmay take into account the nature of the services rendered by such person, his or her present and potential contribution to the Company’ssuccess, and such other factors as the Board in its discretion shall deem relevant.
OnAugust 31, 2022, in consideration for agreeing to an employment agreement with the Company, Mr. Cohen received a sign-on bonus of optionsto purchase 750,000 shares of common stock of the Company, with an exercise price of $1.10 per share, with options to purchase 250,000shares vesting every twelve months that the agreement is in effect. The options have a term of five years. The fair value of the 750,000options on the grant date was $462,750 and as of September 30, 2022, the Company recognized $10,798 as stock-based compensation.
OnAugust 31, 2022, in consideration for agreeing to an employment agreement with the Company, Mr. Arango received a sign-on bonus of optionsto purchase 500,000 shares of common stock of the Company, with an exercise price of $1.10 per share, with options to purchase 166,666shares vesting every twelve months that the agreement is in effect. The options have a term of five years. The fair value of the 500,000options on the grant date was $308,500 and as of September 30, 2022, the Company recognized $7,198 as stock-based compensation.
OnOctober 1, 2022, the Company agreed to grant Eugene M. Johnston, its Chief Financial Officer, 150,000 shares of the Company’s restrictedstock which vest over a 6-month period at the rate of 25,000 shares per month with the first 25,000 shares vesting on November 1, 2022.
OnOctober 14, 2022, the Company issued 75,000 restricted shares of common stock to each of its three independent directors, which sharesvest 1/3 on October 14, 2022, with the remaining shares vesting in one-third increments on each of October 14, 2023 and 2024, subjectto such directors continuing to provide services to the Company on such dates, and subject to the Restricted Stock Award agreements enteredinto to evidence such grants.
On October14, 2022, the Company issued its Project Manager, Joan Arango, 25,000 shares of restricted common stock under the Plan. The shares wereissued to Ms. Arango as a bonus for services rendered to date. Ms. Arango is the sister of the Company’s President and Chief OperatingOfficer, Jonathan Arango. The shares were valued at $1.00 per share for a total of $25,000.
SharesAvailable Under the 2022 Plan; Evergreen Provision
Subjectto adjustment in connection with the payment of a stock dividend, a stock split or subdivision or combination of the shares of commonstock, or a reorganization or reclassification of the Company’s common stock, the aggregate number of shares of common stock whichmay be issued pursuant to awards under the 2022 Plan is the sum of (i) 3,500,000 shares, and (ii) an automatic increase on April 1stof each year for a period of nine years commencing on April 1, 2023 and ending on (and including) April 1, 2032, in an amount equal tothe lesser of (A) five percent (5%) of the total shares of common stock of the Company outstanding on the last day of the immediatelypreceding fiscal year (the “Evergreen Measurement Date”); and (B) 1,000,000 shares of common stock; provided, however, thatthe Board may act prior to April 1st of a given year to provide that the increase for such year will be a lesser number of shares ofcommon stock. This is also known as an “evergreen” provision. Notwithstanding the foregoing, no more than a total of 10,000,000shares of common stock (or awards) may be issued or granted under the 2022 Plan in aggregate, and no more than 10,000,000 shares of commonstock may be issued pursuant to the exercise of Incentive Stock Options.
Ifan award granted under the 2022 Plan entitles a holder to receive or purchase shares of our common stock, then on the date of grant ofthe award, the number of shares covered by the award (or to which the award relates) will be counted against the total number of sharesavailable for granting awards under the 2022 Plan. As a result, the shares available for granting future awards under the 2022 Plan willbe reduced as of the date of grant. However, certain shares that have been counted against the total number of shares authorized underthe 2022 Plan in connection with awards previously granted under such 2022 Plan will again be available for awards under the 2022 Planas follows: shares of our common stock covered by an award or to which an award relates which were not issued because the award terminatedor was paid in cash or any portion thereof that was forfeited or cancelled without the delivery of shares will again be available forawards, including, but not limited to shares forfeited to pay any exercise price or tax obligation.
Inaddition, shares of common stock related to awards that expire, are forfeited or cancelled or terminate for any reason without the issuanceof shares shall not be treated as issued pursuant to the 2022 Plan.
Theshares available for awards under the 2022 Plan will be authorized but unissued shares of our common stock or shares acquired in theopen market or otherwise.
Administration
TheCompany is the issuer (manager) of the 2022 Plan. The 2022 Plan is administered by either (a) the entire Board of Directors of the Company,or (b) the Compensation Committee; or (b) as determined from time to time by the Board of Directors (the “Administrator”).Subject to the terms of the 2022 Plan, the Administrator may determine the recipients, the types of awards to be granted, the numberof shares of our common stock subject to or the cash value of awards, and the terms and conditions of awards granted under the 2022 Plan,including the period of their exercisability and vesting. The Administrator also has the authority to provide for accelerated exercisabilityand vesting of awards. Subject to the limitations set forth below, the Administrator also determines the fair market value applicableto an award and the exercise or strike price of stock options and stock appreciation rights granted under the 2022 Plan.
TheAdministrator may also delegate to one or more executive officers the authority to designate employees who are not executive officersto be recipients of certain awards and the number of shares of our common stock subject to such awards. Under any such delegation, theAdministrator will specify the total number of shares of our common stock that may be subject to the awards granted by such executiveofficer. The executive officer may not grant an award to himself or herself.
Onor after the date of grant of an award under the 2022 Plan, the Administrator may (i) accelerate the date on which any such award becomesvested, exercisable or transferable, as the case may be, (ii) extend the term of any such award, including, without limitation, extendingthe period following a termination of a participant’s employment during which any such award may remain outstanding, or (iii) waiveany conditions to the vesting, exercisability or transferability, as the case may be, of any such award; provided, that the Administratorshall not have any such authority to the extent that the grant of such authority would cause any tax to become due under Section 409Aof the Internal Revenue Code (the “Code”).
Eligibility
Allof our employees (including our affiliates), non-employee directors and consultants are eligible to participate in the 2022 Plan andmay receive all types of awards other than incentive stock options. Incentive stock options may be granted under the 2022 Plan only toour employees (including our affiliates).
Noawards are issuable by the Company under the 2022 Plan (a) in connection with services associated with the offer or sale of securitiesin a capital-raising transaction; or (b) where the services directly or indirectly promote or maintain a market for the Company’ssecurities.
Limiton Non-Employee Director Compensation
Themaximum number of shares subject to awards granted during a single calendar year to any non-employee director, taken together with anycash fees paid during the compensation year to the non-employee director, in respect of the director’s service as a member of theBoard during such year (including service as a member or chair of any committees of the Board), will not exceed $500,000, or $1,000,000in the first year such non-employee director is appointed to the Board, or in the case of any non-employee chairperson of the Board,in total value (calculating the value of any such awards based on the grant date fair value of such awards for financial reporting purposes).Compensation will count towards this limit for the fiscal year in which it was granted or earned, and not later when distributed, inthe event it is deferred.
OptionTerms
Stockoptions may be granted by the Administrator and may be either non-qualified (non-statutory) stock options or incentive stock options.The Administrator, in its sole discretion, determines the exercise price of any options granted under the Plan which exercise price isset forth in the agreement evidencing the option, provided however that at no time can the exercise price be less than the $0.0001 parvalue per share of the Company’s common stock. Stock options are subject to the terms and conditions, including vesting conditions,set by the Administrator (and incentive stock options are subject to further statutory restrictions that will be set forth in the grantagreement for those options). The exercise price for all stock options granted under the 2022 Plan will be determined by the Administrator,except that no stock options can be granted with an exercise price that is less than 100% of the fair market value of the Company’scommon stock on the date of grant. Further, shareholders who own greater than 10% of the Company’s voting stock will not be grantedincentive stock options that have an exercise price less than 110% of the fair market value of the Company’s common stock on thedate of grant.
Theterm of all stock options granted under the 2022 Plan will be determined by the Administrator, but the term of an incentive stock optionmay not exceed 10 years (five years for incentive stock options granted to shareholders who own greater than 10% of the Company’svoting stock). Each stock option gives the grantee the right to receive a number of shares of the Company’s common stock upon exerciseof the stock option and payment of the exercise price. The exercise price may be paid in cash or if approved by the Administrator, sharesof the Company’s common stock. The Administrator may also permit other ways for a grantee to pay the exercise price.
Optionsgranted under the 2022 Plan may be exercisable in cumulative increments, or “vest,” as determined by the Administrator.
Incentivestock options granted under the 2022 Plan are intended to qualify as “incentive stock options” within the meaning of Section422 of the Internal Revenue Code of 1986, as amended, which we refer to as the Code. Nonqualified (non-statutory stock options) grantedunder the 2022 Plan are not intended to qualify as incentive stock options under the Code.
TheAdministrator may impose limitations on the transferability of stock options granted under the 2022 Plan in its discretion. Generally,a participant may not transfer a stock option granted under the 2022 Plan other than by will or the laws of descent and distributionor, subject to approval by the Administrator, pursuant to a domestic relations order. However, the Administrator may permit transferof a stock option in a manner that is not prohibited by applicable tax and securities laws. Options may not be transferred to a thirdparty financial institution for value.
Unlessthe terms of an optionholder’s stock option agreement, or other written agreement between us and the optionholder, provide otherwise,if an optionholder’s service relationship with us or any of our affiliates ceases for any reason other than disability, death,or cause, the optionholder may generally exercise any vested options for a period of three months following the cessation of service.This period may be extended in the event that exercise of the option is prohibited by applicable securities laws or the immediate saleof shares acquired upon exercise of the option is prohibited by our insider trading policy. If an optionholder’s service relationshipwith us or any of our affiliates ceases due to death, or an optionholder dies within a certain period following cessation of service,the optionholder or a beneficiary may generally exercise any vested options for a period of 18 months following the date of death. Ifan optionholder’s service relationship with us or any of our affiliates ceases due to disability, the optionholder may generallyexercise any vested options for a period of 12 months following the cessation of service. In the event of a termination for cause, optionsgenerally terminate upon the termination date. In no event may an option be exercised beyond the expiration of its term. Acceptable considerationfor the purchase of common stock issued upon the exercise of a stock option will be determined by the administrator and may include (i)cash, check, bank draft or money order; (ii) a broker-assisted cashless exercise; (iii) the tender of shares of our common stock previouslyowned by the optionholder; (iv) a net exercise of the option (to the extent allowed); or (v) other legal consideration approved by theadministrator.
Exceptas explicitly provided otherwise in a participant’s stock option agreement or other written agreement with us or one of our affiliates,the term “cause” is defined in the 2022 Plan to mean any event which would qualify as cause for termination under the participant’semployment agreement with the Company, or, if there is no such employment agreement, any of the following (i) the recipient’s dishoneststatements or acts with respect to the Company or any affiliate of the Company, or any current or prospective customers, suppliers, vendorsor other third parties with which such entity does business; (ii) the recipient’s commission of (A) a felony or (B) any misdemeanorinvolving moral turpitude, deceit, dishonesty or fraud; (iii) the recipient’s failure to perform the recipient’s assignedduties and responsibilities to the reasonable satisfaction of the Company which failure continues, in the reasonable judgment of theCompany, after written notice given to the recipient by the Company; (iv) the recipient’s gross negligence, willful misconductor insubordination with respect to the Company or any affiliate of the Company; or (v) the recipient’s material violation of anyprovision of any agreement(s) between the recipient and the Company relating to noncompetition, non-solicitation, nondisclosure and/orassignment of inventions.
RestrictedStock Unit Awards
Restrictedstock unit (RSU) awards are granted under restricted stock unit award agreements adopted by the administrator. Restricted stock unitawards may be granted in consideration for any form of legal consideration that may be acceptable to our Board of Directors and permissibleunder applicable law. A restricted stock unit award may be settled by cash, delivery of stock, a combination of cash and stock as deemedappropriate by the administrator, or in any other form of consideration set forth in the restricted stock unit award agreement. Additionally,dividend equivalents may be credited in respect of shares covered by a restricted stock unit award. Except as otherwise provided in theapplicable award agreement, or other written agreement between us and the recipient, restricted stock unit awards that have not vestedwill be forfeited once the participant’s continuous service ends for any reason.
RestrictedStock Awards
Restrictedstock awards are granted under restricted stock award agreements adopted by the administrator. A restricted stock award may be awardedin consideration for cash, check, bank draft or money order, past or future services to us, or any other form of legal considerationthat may be acceptable to our Board of Directors and permissible under applicable law. The administrator determines the terms and conditionsof restricted stock awards, including vesting and forfeiture terms. If a participant’s service relationship with us ends for anyreason, we may receive any or all of the shares of common stock held by the participant that have not vested as of the date the participantterminates service with us through a forfeiture condition or a repurchase right.
StockAppreciation Rights
Stockappreciation rights are granted under stock appreciation right agreements adopted by the administrator. The administrator determinesthe purchase price or strike price for a stock appreciation right, which generally will not be less than 100% of the fair market valueof our common stock on the date of grant. A stock appreciation right granted under our 2022 Plan will vest at the rate specified in thestock appreciation right agreement as determined by the administrator. Stock appreciation rights may be settled in cash or shares ofour common stock or in any other form of payment as determined by our Board of Directors and specified in the stock appreciation rightagreement.
Theadministrator determines the term of stock appreciation rights granted under our 2022 Plan, up to a maximum of 10 years. If a participant’sservice relationship with us or any of our affiliates ceases for any reason other than cause, disability, or death, the participant maygenerally exercise any vested stock appreciation right for a period of three months following the cessation of service. This period maybe further extended in the event that exercise of the stock appreciation right following such a termination of service is prohibitedby applicable securities laws. If a participant’s service relationship with us, or any of our affiliates, ceases due to disabilityor death, or a participant dies within a certain period following cessation of service, the participant or a beneficiary may generallyexercise any vested stock appreciation right for a period of 12 months in the event of disability and 18 months in the event of death.In the event of a termination for cause, stock appreciation rights generally terminate upon the termination date. In no event may a stockappreciation right be exercised beyond the expiration of its term.
PerformanceAwards
Our2022 Plan permits the grant of performance awards that may be settled in stock, cash or other property. Performance awards may be structuredso that the stock or cash will be issued or paid only following the achievement of certain pre-established performance goals during adesignated performance period. Performance awards that are settled in cash or other property are not required to be valued in whole orin part by reference to, or otherwise based on, our common stock.
Theperformance goals may be based on any measure of performance selected by our Board of Directors. The performance goals may be based oncompany-wide performance or performance of one or more business units, divisions, affiliates, or business segments, and may be eitherabsolute or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unlessspecified otherwise by our Board of Directors at the time the performance award is granted, our Board of Directors will appropriatelymake adjustments in the method of calculating the attainment of performance goals as follows: (i) to exclude restructuring and/or othernonrecurring charges; (ii) to exclude exchange rate effects; (iii) to exclude the effects of changes to generally accepted accountingprinciples; (iv) to exclude the effects of any statutory adjustments to corporate tax rates; (v) to exclude the effects of items thatare “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles;(vi) to exclude the dilutive effects of acquisitions or joint ventures; (vii) to assume that any business divested by us achieved performanceobjectives at targeted levels during the balance of a performance period following such divestiture; (viii) to exclude the effect ofany change in the outstanding shares of our common stock by reason of any stock dividend or split, stock repurchase, reorganization,recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributionsto common shareholders other than regular cash dividends; (ix) to exclude the effects of stock based compensation and the award of bonusesunder our bonus plans; (x) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to beexpensed under generally accepted accounting principles; and (xi) to exclude the goodwill and intangible asset impairment charges thatare required to be recorded under generally accepted accounting principles.
OtherStock Awards
Theadministrator may grant other awards based in whole or in part by reference to our common stock. The administrator will set the numberof shares under the stock award (or cash equivalent) and all other terms and conditions of such awards.
TaxWithholding Adjustments
Tothe extent provided by the terms of an option or other award, or otherwise agreed to by the Administrator, a participant may satisfyany federal, state or local tax withholding obligation relating to the exercise of such option, or award by a cash payment upon exercise,or in the discretion of the Administrator, by authorizing our company to withhold a portion of the stock otherwise issuable to the participant,by delivering already-owned shares of our common stock or by a combination of these means.
Changesto Capital Structure
Inthe event there is a specified type of change in our capital structure, such as a stock split, reverse stock split, or recapitalization,appropriate adjustments will be made to (i) the class and maximum number of shares reserved for issuance under our 2022 Plan, (ii) theclass and maximum number of shares by which the share reserve may increase automatically each year, (iii) the class and maximum numberof shares that may be issued on the exercise of ISOs, and (iv) the class and number of shares and exercise price, strike price, or purchaseprice, if applicable, of all outstanding stock awards.
CorporateTransactions
Inthe event of a corporate transaction (as defined in the 2022 Plan), unless otherwise provided in a participant’s stock award agreementor other written agreement with us or one of our affiliates or unless otherwise expressly provided by the administrator at the time ofgrant, any stock awards outstanding under our 2022 Plan may be assumed, continued or substituted for by any surviving or acquiring corporation(or its parent company), and any reacquisition or repurchase rights held by us with respect to the stock award may be assigned to thesuccessor (or its parent company). If the surviving or acquiring corporation (or its parent company) does not assume, continue or substitutefor such stock awards, then (i) with respect to any such stock awards that are held by participants whose continuous service has notterminated prior to the effective time of the corporate transaction, or current participants, the vesting (and exercisability, if applicable)of such stock awards will be accelerated in full (or, in the case of performance awards with multiple vesting levels depending on thelevel of performance, vesting will accelerate at 100% of the target level) to a date prior to the effective time of the corporate transaction(contingent upon the effectiveness of the corporate transaction), and such stock awards will terminate if not exercised (if applicable)at or prior to the effective time of the corporate transaction, and any reacquisition or repurchase rights held by us with respect tosuch stock awards will lapse (contingent upon the effectiveness of the corporate transaction); and (ii) any such stock awards that areheld by persons other than current participants will terminate if not exercised (if applicable) prior to the effective time of the corporatetransaction, except that any reacquisition or repurchase rights held by us with respect to such stock awards will not terminate and maycontinue to be exercised notwithstanding the corporate transaction.
Inthe event a stock award will terminate if not exercised prior to the effective time of a corporate transaction, the administrator mayprovide, in its sole discretion, that the holder of such stock award may not exercise such stock award but instead will receive a paymentequal in value to the excess (if any) of (i) the value of the property the participant would have received upon the exercise of the stockaward, over (ii) any per share exercise price payable by such holder, if applicable. In addition, any escrow, holdback, earn out or similarprovisions in the definitive agreement for the corporate transaction may apply to such payment to the same extent and in the same manneras such provisions apply to the holders of our common stock.
Changein Control
Stockawards granted under our 2022 Plan may be subject to acceleration of vesting and exercisability upon or after a change in control (asdefined in the 2022 Plan) as may be provided in the applicable stock award agreement or in any other written agreement between us orany affiliate and the participant, but in the absence of such provision, no such acceleration will automatically occur.
Repricing;Cancellation and Re-Grant of Stock Options or Stock Appreciation Rights
TheAdministrator has the right to effect, at any time and from time to time, subject to the consent of any participant whose award is materiallyimpaired by such action, (1) the reduction of the exercise price (or strike price) of any outstanding option or SAR; (2) the cancellationof any outstanding option or SAR and the grant in substitution therefor of (A) a new option, SAR, restricted stock award, RSU award orother award, under the 2022 Plan or another equity plan of the Company, covering the same or a different number of shares of common stock,(B) cash and/or (C) other valuable consideration (as determined by the Board); or (3) any other action that is treated as a repricingunder generally accepted accounting principles.
Duration;Termination of the 2022 Plan
OurBoard of Directors has the authority to amend, suspend, or terminate our 2022 Plan at any time, provided that such action does not materiallyimpair the existing rights of any participant without such participant’s written consent. Certain material amendments also requirethe approval of our shareholders. No incentive stock options may be granted after the tenth anniversary of the date our Board of Directorsadopted our 2022 Plan. No stock awards may be granted under our 2022 Plan while it is suspended or after it is terminated.
CurrentAvailable Shares
Asof the date of this prospectus, an aggregate of 1,850,000 shares is available for awards under the 2022 Plan.
CertainRelationships and Related Party Transactions
Exceptas discussed below or otherwise disclosed above under “Executive and Director Compensation,” whichinformation is incorporated by reference where applicable in this “Certain Relationships and Related Transactions”section, the following sets forth a summary of all transactions since October 7, 2021 (Inception), or any currently proposed transaction,in which the Company was to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of theaverage of the Company’s total assets at the fiscal year-end for December 31, 2021 and 2022, and in which any officer, director,or any shareholder owning greater than five percent (5%) of our outstanding voting shares, nor any member of the above referenced individual’simmediate family, had or will have a direct or indirect material interest (other than compensation described above under “Executiveand Director Compensation”). We believe the terms obtained or consideration that we paid or received, as applicable, in connectionwith the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable,in arm’s-length transactions.
RelatedParty Transactions
Issuancesand Sales of Securities
OnApril 6, 2022, the Company issued 1,000,000 shares of restricted common stock each to Mr. Cohen (the Company’s Chairman, ChiefExecutive Officer and majority shareholder) and Mr. Jonathan Arango (the Company’s President, Chief Operating Officer and greaterthan 5% shareholder), in consideration for services rendered as the Chief Executive Officer and President and Chief Operating Officer,respectively, of the Company. The shares were valued at $0.10 per share or a total of $100,000.
OnJune 22, 2022, the Company issued 250,000 shares of restricted common stock to The Loev Law Firm, PC, in consideration for legal servicesto be rendered, which vested upon issuance. David M. Loev, the Managing Partner, President and sole owner of The Loev Law Firm, PC, isthe brother-in-law of Jacob D. Cohen, our Chairman and Chief Executive Officer. These shares were valued at $0.10 per share or a totalof $25,000.
OnJune 16, 2022, American International entered into and closed the transactions contemplated by a Stock Purchase Agreement (the “SPA”),with Cohen Enterprises, Inc. (“Cohen Enterprises”), which entity is owned by Jacob D. Cohen, the Chairman and Chief ExecutiveOfficer of the Company, who is also the majority shareholder of the Company. Pursuant to the SPA, American International sold 8,000,000shares of the outstanding common stock of the Company which represented 80% of the then outstanding shares of common stock of the Company,to Cohen Enterprises in consideration for $90,000, which was approximately the same amount that had been advanced to the Company fromAmerican International through the date of the SPA ($89,200). Cohen Enterprises also acquired the right to be repaid the $89,200 advancedfrom American International to the Company, from the Company, pursuant to the terms of the SPA. As a result of the closing of the SPA,Cohen Enterprises increased its ownership of the Company to 90% (with the remaining 10% of Mangoceuticals being owned by Mr. Arango,as discussed above), and American International completely divested its interest in the Company.
InJune 2022, Cohen Enterprises sold an aggregate of 600,000 shares of our restricted common stock to third parties for $0.10 per shareor $60,000 in aggregate and 40,000 shares of our restricted common stock to a third party for $0.25 per share or $10,000 in aggregate.The shares were sold in private transactions to accredited investors.
OnJune 30, 2022, Cohen Enterprises gifted 360,000 restricted shares of common stock to Isaak Cohen, the father of Jacob D.Cohen.These shares were valued at $0.10 per share or $36,000.
OnAugust 31, 2022, in consideration for agreeing to an employment agreement with the Company, Mr. Cohen received a sign-on bonus of optionsto purchase 750,000 shares of common stock of the Company, with an exercise price of $1.10 per share, with options to purchase 250,000shares vesting every twelve months that the agreement is in effect. The options have a term of five years. The fair value of the 750,000options on the grant date was $462,750 and as of September 30, 2022, the Company recognized $10,798 as stock-based compensation.
OnAugust 31, 2022, in consideration for agreeing to an employment agreement with the Company, Mr. Arango received a sign-on bonus of optionsto purchase 500,000 shares of common stock of the Company, with an exercise price of $1.10 per share, with options to purchase 166,666shares vesting every twelve months that the agreement is in effect. The options have a term of five years. The fair value of the 500,000options on the grant date was $308,500 and as of September 30, 2022, the Company recognized $7,198 as stock-based compensation.
OnOctober 1, 2022, the Company agreed to grant Eugene M. Johnston, its Chief Financial Officer, 150,000 shares of the Company’s restrictedstock which vest over a 6-month period at the rate of 25,000 shares per month with the first 25,000 shares vesting on November 1, 2022.These shares were valued at $1.00 per share or a total of $25,000.
OnOctober 14, 2022, the Company issued 75,000 restricted shares of common stock to each of its three independent directors, which sharesvest 1/3 on October 14, 2022, with the remaining shares vesting in one-third increments on each of October 14, 2023 and 2024, subjectto such directors continuing to provide services to the Company on such dates, and subject to the Restricted Stock Award agreements enteredinto to evidence such grants. These shares were valued at $1.00 per share or a total of $225,000.
OnOctober 14, 2022, the Company issued its Project Manager, Joan Arango, 25,000 shares of restricted common stock under the Plan. The shareswere issued to Ms. Arango as a bonus for services rendered to date. Ms. Arango is the sister of the Company’s President and ChiefOperating Officer, Jonathan Arango. The shares were valued at $1.00 per share for a total of $25,000.
RelatedParty Agreements
OnSeptember 1, 2022, and effective on August 30, 2022, we entered into a Master Services Agreement with Epiq Scripts, LLC (“EpiqScripts”), which is 51%-owned by American International. Mr. Cohen, our Chairman and Chief Executive Officer, serves as the ChiefExecutive Officer and a director of, and has voting control over, American International. Pursuant to the Master Services Agreement anda related statement of work (“SOW”), Epiq Scripts agreed to provide for the online fulfillment, specialty compounding, packaging,shipping, dispensing and distribution (collectively, the “Services”) of products sold exclusively via our website that maybe prescribed as part of a telehealth consultation on our platform. Epiq Scripts also agreed to provide mail service pharmacy servicesto us on an exclusive basis during the term of the SOW. The Master Services Agreement and SOW are described in greater detail above under“Business—Material Agreements—Master Services Agreementwith Epiq Scripts.”
Duringthe nine months ended September 30, 2022, and in association with the Master Services Agreement and Statement of Work with Epiq Scripts,the Company prepaid Epiq Scripts $15,000 as a retainer to be credited towards future product sales.
OnAugust 31, 2022, Mr. Peter “Casey” Jensen, who is a member of the Board of Directors of American International, purchased25,000 units in our private placement, including 25,000 shares of common stock and warrants to purchase 25,000 shares of common stockwith an exercise price of $1.00 per share, for $25,000.
On September 6,2022, we entered into a Consulting Agreement with PHX Global, LLC, which is owned by Mr. Jensen. The Consulting Agreement is describedin greater detail above under “Business—Material Agreements—ConsultingAgreements.”
RelatedParty Loans and Advances
OnDecember 10, 2021 and March 18, 2022, the Company received advances of $39,200 and $50,000, respectively, for a total of $89,200 fromits previous majority shareholder, American International, in order to cover various general and administrative expenses. The amountowed to American International was $39,200 as of December 31, 2021. Imputed interest equal to 8% per annum, or $181, was recorded againstthe related party advance as of December 31, 2021. Other than the imputed interest discussed above, the advances bear no interest andare due on demand upon the Company’s ability to repay the advances from either future revenues or investment proceeds. Pursuantto the terms of the June 16, 2022, SPA discussed above, on June 16, 2022, Cohen Enterprises also acquired the right to be repaid the$89,200 advanced from American International to the Company. As of December 31, 2022, the total unpaid amount of the advance totaled$89,200.
OnJune 29, 2022, Company received an advance of $25,000 from Cohen Enterprises in order to cover various general and administrative expenses.The Company repaid Cohen Enterprises $25,000 on August 18, 2022, bringing the total amount owed to Cohen Enterprises to $89,200 as ofSeptember 30, 2022. The Company recorded imputed interest equal to eight percent (8%) per annum, or $4,674, against the related partyadvances through the nine months ended September 30, 2022.
OnDecember 10, 2021, the Company received an advance of $70 from ZipDoctor, Inc., a wholly owned subsidiary of its then sole shareholder,American International, which was used to open and establish the Company’s bank account. The advance bears no interest and is dueon demand upon the Company’s ability to repay the advance from either future revenues or investment proceeds. The amount owed toZipDoctor was $70 as of December 31, 2021. Imputed interest equal to 8% per annum, or $0, was recorded against the related party advanceas of December 31, 2021. The amount was paid in full on May 24, 2022 and the amount owed to ZipDoctor was $0 as of December 31,2022.
TheCompany’s Chief Executive Officer, Jacob D. Cohen, has made his personal credit card available for purchases on behalf of the Companyto cover various general and administrative expenses. Mr. Cohen has been repaid a total of $150,423 as of September 30,2022, for Company purchases made on his personal credit card.
Review,Approval and Ratification of Related Party Transactions
Givenour small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratificationof transactions, such as those described above, with our executive officers, directors and significant shareholders. However, all ofthe transactions described above were approved and ratified by our directors. In connection with the approval of the transactions describedabove, our directors took into account various factors, including his fiduciary duty to the Company; the relationships of the relatedparties described above to the Company; the material facts underlying each transaction; the anticipated benefits to the Company and relatedcosts associated with such benefits; whether comparable products or services were available; and the terms the Company could receivefrom an unrelated third party.
Movingforward, and prior to the effectiveness of the registration statement of which this prospectus forms a part, we intend to form an AuditCommittee which will review related party transactions to determine whether such transactions are fair to the Company and its shareholders.The Audit Committee of the Board of Directors of the Company will be tasked with reviewing and approving any issues relating to conflictsof interests and all related party transactions of the Company (“Related Party Transactions”). The Audit Committee, in undertakingsuch review and will analyze the following factors, in addition to any other factors the Audit Committee deems appropriate, in determiningwhether to approve a Related Party Transaction: (1) the fairness of the terms for the Company (including fairness from a financial pointof view); (2) the materiality of the transaction; (3) bids / terms for such transaction from unrelated parties; (4) the structure ofthe transaction; (5) the policies, rules and regulations of the U.S. federal and state securities laws; (6) the policies of the Committee;and (7) interests of each related party in the transaction.
TheAudit Committee will only approve a Related Party Transaction if the Audit Committee determines that the terms of the Related Party Transactionare beneficial and fair (including fair from a financial point of view) to the Company and are lawful under the laws of the United States.In the event multiple members of the Audit Committee are deemed a related party, the Related Party Transaction will be considered bythe disinterested members of the Board of Directors in place of the Committee.
Inaddition, our Code of Business Conduct and Ethics (described above under “Management—Codeof Ethics”), which is applicable to all of our employees, officers and directors, requires that all employees, officers anddirectors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests.
SecurityOwnership of Certain Beneficial Owners and Management
Thefollowing table sets forth certain information regarding the beneficial ownership of our common stock as of January 13, 2023 (the“Date of Determination”) by (i) each Named Executive Officer, as such term is defined above under “Executiveand Director Compensation,” (ii) each member of our Board of Directors, (iii) each person deemed to be the beneficial ownerof more than five percent (5%) of our common stock, and (iv) all of our executive officers and directors as a group. Unless otherwiseindicated, each person named in the following table is assumed to have sole voting power and investment power with respect to all sharesof our common stock listed as owned by such person.
Thecolumn titled “Beneficial Ownership—Percent Prior to Offering” is based on a total of 13,715,000 shares of ourcommon stock outstanding as of the Date of Determination. The column titled “Beneficial Ownership—Percent After Offering”is based on 14,965,000 shares of our common stock to be outstanding after this offering, which gives further effect to the issuanceof 1,250,000 shares of common stock in this offering and assumes no exercise of the underwriters’ option to purchase additionalshares to cover overallotments.
Beneficialownership is determined in accordance with the rules of the SEC and includes voting and/or investing power with respect to securities.These rules generally provide that shares of common stock subject to options, warrants or other convertible securities that are currentlyexercisable or convertible, or exercisable or convertible within 60 days of the Date of Determination, are deemed to be outstanding andto be beneficially owned by the person or group holding such options, warrants or other convertible securities for the purpose of computingthe percentage ownership of such person or group, but are not treated as outstanding for the purpose of computing the percentage ownershipof any other person or group.
Toour knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, as of the Dateof Determination, (a) the persons named in the table have sole voting and investment power with respect to all shares of common stockshown as beneficially owned by them, subject to applicable community property laws; and (b) no person owns more than 5% of our commonstock. Unless otherwise indicated, the address for each of the officers or directors listed in the table below is 15110 N. DallasParkway, Suite 600, Dallas, Texas 75248.
| | Number of CommonStock Shares | | | Beneficial Ownership | |
Name of Beneficial Owner | | Beneficially Owned | | | Percent Prior to Offering | | | Percent After Offering | |
Directors, Named Executive Officers and Executive Officers | | | | | | | | | | | | |
Jacob D. Cohen | | | 8,000,000 | (1) | | | 58.3 | % | | | 53.5 | % |
Jonathan Arango | | | 1,000,000 | (2) | | | 7.3 | % | | | 6.7 | % |
Eugene M. Johnston | | | 150,000 | (3) | | | 1.1 | % | | | 1.0 | % |
Lorraine D’Alessio | | | 75,000 | (4) | | | * | | | | * | |
Alex P. Hamilton | | | 75,000 | (4) | | | * | | | | * | |
Dr. Kenny Myers | | | 75,000 | (4) | | | * | | | | * | |
All executive officers and directors as a group (6 persons) | | | 9,375,000 | (1)(2) | | | 68.54 | % | | | 62.6 | % |
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5% Shareholders | | | | | | | | | | | | |
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None. | | | | | | | | | | | | |
*Less than 1%.
(1) | The shares of common stock are held in the name of Cohen Enterprises, Inc., which shares Mr. Cohen is deemed to beneficially own due to his ownership of 100% of Cohen Enterprises and his position as President thereof. Does not include shares of common stock issuable upon exercise of options to purchase 750,000 shares of common stock of the Company held by Mr. Cohen, with an exercise price of $1.10 per share, with options to purchase 250,000 shares vesting every twelve months with a term of five years, since none of such options are exercisable within 60 days of the Date of Determination. |
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(2) | Does not include shares of common stock issuable upon exercise of options to purchase 500,000 shares of common stock of the Company, with an exercise price of $1.10 per share, with options to purchase 166,666 shares vesting every twelve months with a term of five years, since none of such options are exercisable within 60 days of the Date of Determination. |
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(3) | The 150,000 shares of restricted common stock vest to Mr. Johnston at the rate of 25,000 shares per month with the first 25,000 shares vesting on November 1, 2022, subject to Mr. Johnston’s continued service with the Company. |
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(4) | The 75,000 shares of restricted common stock vest at the rate of 25,000 of such shares on October 14, 2022, with the remaining shares vesting in one-third increments on each of October 14, 2023 and 2024, subject to the holder’s continued service with the Company. |
Changeof Control
TheCompany is not aware of any arrangements which may at a subsequent date result in a change of control of the Company.
EquityCompensation Plan Information
Thefollowing table provides information as of December 31, 2022 regarding the Company’s 2022 Equity Incentive Plan, under which equitysecurities are authorized for issuance:
Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | | Weighted- average exercise price of outstanding options, warrants and rights | | | Number of securities available for future issuance under equity compensation plans (excluding those in first column) | |
Equity compensation plans approved by the security holders (1) | | | 1,275,000 | | | $ | 1.00 | | | | 1,850,000 | |
Equity compensation plans not approved by the security holders | | | — | | | | — | | | | — | |
Total | | | 1,275,000 | | | $ | 1.00 | | | | 1,850,000 | |
(1)Represents options issuable upon grants previously made under the Company’s 2022 Equity Incentive Plan, which is discussedunder “Executive and Director Compensation—2022 Equity Incentive Plan.”
Descriptionof Capital Stock
Thefollowing summary is a description of the material terms of our capital stock and is not complete. You should also refer to the Mangoceuticals,Inc. Certificate of Formation, as amended and Bylaws, which are included as exhibits to the registration statement of which this prospectusforms a part, and the applicable provisions of the Texas Business Organizations Code.
AuthorizedCapitalization
Thetotal number of authorized shares of our common stock is 200,000,000 shares, $0.0001 par value per share. The total number of “blankcheck” authorized shares of our preferred stock is 10,000,000 shares, $0.0001 par value per share. There are no shares of preferredstock currently outstanding.
CommonStock
VotingRights. Each share of our common stock is entitled to one vote on all shareholder matters. Shares of our common stock do notpossess any cumulative voting rights.
Exceptfor the election of directors, if a quorum is present, an action on a matter is approved if it receives the affirmative vote of the holdersof the majority of the shares entitled to vote on, and who voted for, against, or expressly abstained with respect to, the matter ata shareholders’ meeting of a corporation at which a quorum is present is the act of the shareholders, unless otherwise requiredby applicable law. The election of directors will be determined by a plurality of the votes cast in respect of the shares present inperson or represented by proxy at the meeting and entitled to vote, meaning that the nominees with the greatest number of votes cast,even if less than a majority, will be elected. The rights, preferences and privileges of holders of common stock are subject to, andmay be impacted by, the rights of the holders of shares of any series of preferred stock that we have designated, or may designate andissue in the future.
DividendRights. Each share of our common stock is entitled to equal dividends and distributions per share with respect to the commonstock when, as and if declared by our Board of Directors, subject to any preferential or other rights of any outstanding preferred stock.
Liquidationand Dissolution Rights. Upon liquidation, dissolution or winding up, our common stock will be entitled to receive pro rata ona share-for-share basis, the assets available for distribution to the shareholders after payment of liabilities and payment of preferentialand other amounts, if any, payable on any outstanding preferred stock.
NoPreemptive, Conversion, or Redemption Rights. Holders of our outstanding common stock have no preemptive, conversion, or redemptionrights. Shares of our common stock are not assessable. To the extent that additional shares of our common stock may be issued in thefuture, the relative interests of the then existing shareholders may be diluted.
FullyPaid Status. All outstanding shares of the Company’s common stock are validly issued, fully paid and non-assessable.
PreferredStock
OurBoard of Directors has the authority to issue undesignated shares of “blank check” preferred stock in one or more seriesand to fix the designation, relative powers, preferences and rights and qualifications, limitations or restrictions of all shares ofeach such series, including, without limitation, dividend rates, conversion rights, voting rights, redemption and sinking fund provisions,liquidation preferences and the number of shares constituting each such series, without any further vote or action by the stockholders.The issuance of additional preferred stock could decrease the amount of earnings and assets available for distribution to holders ofour common stock or adversely affect the rights and powers, including voting rights, of the holders of our common stock and could, amongother things, have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders.We have no present plans to issue any shares of preferred stock.
BusinessCombinations under Texas Law
Anumber of provisions of Texas law, our Certificate of Formation, as amended, and Bylaws could make it more difficult for the acquisitionof our company by means of a tender offer, a proxy contest or otherwise and the removal of incumbent officers and directors. These provisionsare intended to discourage coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire controlof our company to negotiate first with our Board of Directors.
Title2, Chapter 21, Subchapter M of the Texas Business Organizations Code (the “Texas Business Combination Law”) provides thata Texas corporation may not engage in specified types of business combinations, including mergers, consolidations and asset sales, witha person, or an affiliate or associate of that person, who is an “affiliated shareholder,” for a period of three years fromthe date that person became an affiliated shareholder, subject to certain exceptions (described below). An “affiliated shareholder”is generally defined as the holder of 20% or more of the corporation’s voting shares. The law’s prohibitions do not applyif the business combination or the acquisition of shares by the affiliated shareholder was approved by the Board of Directors of thecorporation before the affiliated shareholder became an affiliated shareholder; or the business combination was approved by the affirmativevote of the holders of at least two-thirds of the outstanding voting shares of the corporation not beneficially owned by the affiliatedshareholder, at a meeting of shareholders called for that purpose, not less than six months after the affiliated shareholder became anaffiliated shareholder.
Thislaw applies to Texas corporations which have more than 100 of record shareholders and which have not affirmatively elected to not begoverned by such law, we do not have more than 100 record shareholders and are not considered an “issuing public corporation”for purposes of this law. Separately, we have elected in our Certificate of Formation, as amended, to not be governed by the Texas BusinessCorporation Law. Notwithstanding the above, the Texas Business Combination Law does not apply to the following:
● | the business combination of an issuing public corporation: where the corporation’s original charter or bylaws contain a provision expressly electing not to be governed by the Texas Business Combination Law; or that adopts an amendment to its charter or bylaws, by the affirmative vote of the holders, other than affiliated shareholders, of at least two-thirds of the outstanding voting shares of the corporation, expressly electing not to be governed by the Texas Business Combination Law and so long as the amendment does not take effect for 18 months following the date of the vote and does not apply to a business combination with an affiliated shareholder who became affiliated on or before the effective date of the amendment; |
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● | a business combination of an issuing public corporation with an affiliated shareholder that became an affiliated shareholder inadvertently, if the affiliated shareholder divests itself, as soon as possible, of enough shares to no longer be an affiliated shareholder and would not at any time within the three-year period preceding the announcement of the business combination have been an affiliated shareholder but for the inadvertent acquisition; |
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● | a business combination with an affiliated shareholder who became an affiliated shareholder through a transfer of shares by will or intestacy and continuously was an affiliated shareholder until the announcement date of the business combination; or |
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● | a business combination of a corporation with its wholly owned Texas subsidiary if the subsidiary is not an affiliate or associate of the affiliated shareholder other than by reason of the affiliated shareholder’s beneficial ownership of voting shares of the corporation. |
Asdiscussed above, our Certificate of Formation, as amended, contains a provision expressly providing that we are not subject to the TexasBusiness Combination Law.
Anti-TakeoverProvisions of Our Charter Documents
OurCertificate of Formation, as amended, and Bylaws contain various provisions intended to promote the stability of our shareholder baseand render more difficult certain unsolicited or hostile attempts to take us over, that could disrupt us, divert the attention of ourdirectors, officers and employees and adversely affect the independence and integrity of our business. These provisions include:
● | Special Meetings of Shareholders — Our Bylaws provide that special meetings of the shareholders may only be called by our Chairman, our President, or upon written notice to our Board of Directors by our shareholders holding not less than 30% of our outstanding voting capital stock. |
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● | Bylaws — Our Bylaws may be amended by our Board of Directors alone. |
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● | Advance Notice Procedures — Our Bylaws establish an advance notice procedure for shareholder proposals to be brought before an annual meeting of our shareholders. At an annual meeting, our shareholders elect a Board of Directors and transact such other business as may properly be brought before the meeting. By contrast, at a special meeting, our shareholders may transact only the business for the purposes specified in the notice of the meeting. |
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● | No cumulative voting — Our Certificate of Formation, as amended, and Bylaws do not include a provision for cumulative voting in the election of directors. |
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● | Vacancies — Our Bylaws provide that vacancies on our Board may be filled by a majority of directors in office, although less than a quorum, and not by the shareholders. |
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● | Preferred Stock — Our Certificate of Formation, as amended, allows us to issue up to 10,000,000 shares of preferred stock. The undesignated preferred stock may have rights senior to those of the common stock and that otherwise could adversely affect the rights and powers, including voting rights, of the holders of common stock. In some circumstances, this issuance could have the effect of decreasing the market price of the common stock as well as having an anti-takeover effect. |
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● | Authorized but Unissued Shares — Our Board of Directors may cause us to issue our authorized but unissued shares of common stock in the future without shareholders’ approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock could render more difficult or discourage an attempt to obtain control of a majority of our common stock by means of a proxy contest, tender offer, merger or otherwise. |
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● | Action by Written Consent — Any action required or permitted to be taken by our common shareholders may be effected by written consent of the shareholders having not less than the minimum percentage of the vote required by the Texas Business Organizations Code for the proposed corporate action. |
Warrantsand Options
Asof the date of this offering, we have options to purchase 1,250,000 shares of common stock outstanding, which have an exercise priceof $1.10 per share and a term through September 1, 2027; and warrants to purchase 2,000,000 shares of common stock outstanding,which have an exercise price of $1.00 per share and terms ending between August 16, 2027 and December 22, 2027.
Limitationson Liability and Indemnification of Officers and Directors
Asauthorized by Chapter 8 of the Texas Business Organizations Code, we may indemnify our officers and directors (and our former officersand directors) against expenses incurred by such persons in connection with any (A) threatened, pending, or completed action or otherproceeding, whether civil, criminal, administrative, arbitrative, or investigative; (B) an appeal of an action or proceeding describedby (A); and (C) an inquiry or investigation that could lead to an action or proceeding described by (A), involving such persons in theircapacities as officers and directors, if it is determined in accordance with the Texas Business Organizations Code that: (1) the person:(A) acted in good faith; (B) reasonably believed: (i) in the case of conduct in the person’s official capacity, that the person’sconduct was in the enterprise’s best interests; and (ii) in any other case, that the person’s conduct was not opposed tothe enterprise’s best interests; and (C) in the case of a criminal proceeding, did not have a reasonable cause to believe the person’sconduct was unlawful; (2) with respect to expenses, the amount of expenses other than a judgment is reasonable; and (3) indemnificationshould be paid.
UnderTexas law, corporations may also purchase and maintain insurance or make other financial arrangements on behalf of any person who isor was a director or officer (or is serving at our request as a director or officer of another corporation) for any liability assertedagainst such person and any expenses incurred by him in his capacity as a director or officer.
Additionally,our Bylaws (“Bylaws”), state that we shall indemnify every (i) present or former director, advisory director or officer ofus, (ii) any person who while serving in any of the capacities referred to in clause (i) served at our request as a director, officer,partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership,joint venture, trust, employee benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant to authoritygranted by) the Board of Directors or any committee thereof to serve in any of the capacities referred to in clauses (i) or (ii) (eachan “Indemnitee”).
OurBylaws provide that we shall indemnify an Indemnitee against all judgments, penalties (including excise and similar taxes), fines, amountspaid in settlement and reasonable expenses actually incurred by the Indemnitee in connection with any proceeding in which he was, isor is threatened to be named as a defendant or respondent, or in which he was or is a witness without being named a defendant or respondent,by reason, in whole or in part, of his serving or having served, or having been nominated or designated to serve, if it is determinedthat the Indemnitee (a) conducted himself in good faith, (b) reasonably believed, in the case of conduct in his official capacity, thathis conduct was in our best interests and, in all other cases, that his conduct was at least not opposed to our best interests, and (c)in the case of any criminal proceeding, had no reasonable cause to believe that his conduct was unlawful; provided, however, that inthe event that an Indemnitee is found liable to us or is found liable on the basis that personal benefit was improperly received by theIndemnitee, the indemnification (i) is limited to reasonable expenses actually incurred by the Indemnitee in connection with the proceedingand (ii) shall not be made in respect of any proceeding in which the Indemnitee shall have been found liable for willful or intentionalmisconduct in the performance of his duty to us.
Exceptas provided above, the Bylaws provide that no indemnification shall be made in respect to any proceeding in which such Indemnitee hasbeen (a) found liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from anaction taken in the Indemnitee’s official capacity, or (b) found liable to us. The termination of any proceeding by judgment, order,settlement or conviction, or on a plea of nolo contendere or its equivalent, is not of itself determinative that the Indemnitee did notmeet the requirements set forth in clauses (a) or (b) above. An Indemnitee shall be deemed to have been found liable in respect of anyclaim, issue or matter only after the Indemnitee shall have been so adjudged by a court of competent jurisdiction after exhaustion ofall appeals therefrom. Reasonable expenses shall include, without limitation, all court costs and all fees and disbursements of attorneys’fees for the Indemnitee. The indemnification provided shall be applicable whether or not negligence or gross negligence of the Indemniteeis alleged or proven.
Neitherour Bylaws nor our Certificate of Formation include any specific indemnification provisions for our officers or directors against liabilityunder the Securities Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be permittedto directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has beenadvised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in theSecurities Act and is, therefore, unenforceable.
Listing
Wehave applied to list our common stock for trading on The Nasdaq Capital Market under the symbol “MNGO,” which listing isa condition to this offering. However, no assurance can be given that our application will be approved and that our common stock willever be listed on The Nasdaq Capital Market. If our application is not approved by The Nasdaq Capital Market, we will not be able toconsummate the offering and will terminate the offering.
TransferAgent
Thetransfer agent for our common stock is Worldwide Stock Transfer, LLC located at One University Plaza, Suite 505, Hackensack, NJ 07601.
SharesEligible for Future Sale
Futuresales of substantial amounts of common stock in the public market after this offering could adversely affect market prices prevailingfrom time to time and could impair our ability to raise capital through the sale of our equity securities. We are unable to estimatethe number of shares of common stock that may be sold in the future.
Priorto this offering, there has been no active market for our common stock. Future sales of substantial amounts of our common stock in thepublic market could adversely affect market prices prevailing from time to time.
Uponcompletion of this offering, assuming an offering size of 1,250,000 shares of common stock and an initial public offeringprice equal to $4.00 (the midpoint of the estimated price range set forth on the cover of this prospectus), we will haveoutstanding an aggregate of 14,965,000 shares of common stock. Of these outstanding shares of common stock, the 1,250,000shares of common stock sold in this offering and the 4,690,000 shares being registered pursuant to the Resale Prospectus (including2,000,000 shares of common stock issuable upon the exercise of outstanding warrants) will be freely transferable withoutrestriction or registration under the Securities Act, except for any shares purchased by any of our existing“affiliates,” as that term is defined in Rule 144 under the Securities Act. The remaining 11,025,000 shares ofcommon stock are “restricted securities” as defined in Rule 144. Restricted securities may be sold in the public marketonly if registered or if they qualify for an exemption from registration under Rules 144 or 701 of the Securities Act, as describedbelow. As a result of the contractual lock-up periods described below and the provisions of Rules 144 and 701, these shareswill be available for sale in the public market as follows:
Number of Shares | | | Date |
| 3,940,000 | (1) | | On the date of this prospectus. |
| 415,000 | | | At 90 days from the date of this prospectus. |
| 1,235,000 | | | At or after six months(2) from the date of this prospectus |
| 9,375,000 | | | At or after 12 months(3) from the date of this prospectus |
(1)Including 2,690,000 outstanding shares of common stock, the resale of which are included in the Resale Prospectus, but not including2,000,000 shares of common stock issuable upon the exercise of warrants, the resale of which shares are included in the Resale Prospectus.
(2)This six month period corresponds to the end of the lock-up period agreed to by holders of between 1%-4.99% of our outstanding commonstock (who are not officers or directors) described below under “Underwriting.”
(2)This 12 month period corresponds to the end of the lock-up period agreed to by our officers and directors and holders of more than 5%of our outstanding common stock described below under “Underwriting.”
Rule144
Ingeneral, under Rule 144, beginning 90 days after this offering, a person, or persons whose shares are aggregated, other than any affiliateof ours, who owns shares that were purchased from us or any affiliate of ours at least six months previously, is entitled to sell suchshares as long as current public information about us is available. In addition, our affiliates who own shares that were purchased fromus or any affiliate of ours at least six months previously are entitled to sell within any three-month period a number of shares thatdoes not exceed the greater of (1) one percent of our then-outstanding shares of common stock, which will equal approximately 138,405shares immediately after this offering, and (2) the average weekly trading volume of our common stock on The Nasdaq Capital Marketduring the four calendar weeks preceding the filing of a notice of the sale on Form 144, or, if no such notice is required, the dateof the receipt of the order to execute the sale. Sales under Rule 144 by our affiliates are also subject to manner of sale provisions,notice requirements in specified circumstances and the availability of current public information about us.
Furthermore,under Rule 144, a person who is not deemed to have been one of our affiliates at any time during the three months preceding a sale, andwho owns shares within the definition of “restricted securities” under Rule 144 that were purchased from us, or any affiliate,at least one year previously, would be entitled to sell shares under Rule 144 without regard to the volume limitations, manner of saleprovisions, public information requirements or notice requirements described above.
Weare unable to estimate the number of shares that will be sold under Rule 144 since this will depend on the market price for our commonstock, the personal circumstances of the shareholder and other factors.
Rule701
Ingeneral, under Rule 701, any of our employees, directors, officers, consultants or advisors who purchased shares from us in connectionwith a compensatory stock or option plan or other written agreement before the effective date of this offering is entitled to resellsuch shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding periodrequirement or other restrictions contained in Rule 144.
TheSEC has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirementsof the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after the date of this prospectus.
Noneof our outstanding shares of common stock were issued in consideration for compensation.
StockOptions and Warrants; Stock Plan
Asof the date of this offering, we have options to purchase 1,250,000 shares of common stock outstanding, which have an exercise priceof $1.10 per share and a term through September 1, 2027; and warrants to purchase 2,000,000 shares of common stock outstanding,which have an exercise price of $1.00 per share and terms from between August 16, 2027 and December 22, 2027.
Weintend to file a registration statement on Form S-8 under the Securities Act, which will register the shares of common stock underlyingthe options described above and an additional 1,850,000 shares of common stock for issuance in connection with future awardsunder our 2022 Equity Incentive Plan (see “Executive and Director Compensation— 2022Equity Incentive Plan,” above), as well as the shares of common stock issuable upon exercise of any options or restricted stockunits we may issue and/or grant prior to, or effective upon, the closing of the Offering. Subject to any vesting requirements, theseshares registered on Form S-8 will be eligible for resale in the public markets without restriction, subject to Rule 144 limitationsapplicable to affiliates, upon issuance/award in the future, subject to the 180 lock-up described below.
Lock-UpAgreements
Uponcompletion of this offering our directors, executive officers, and shareholders holding 5% or more of our outstanding common stockwill agree not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of oursecurities for a period of 12 months following the closing of the offering of the shares, subject to certain exceptions and shareholdersholding between 1% and 4.99% of our outstanding common stock will agree not to offer, issue, sell, contract to sell, encumber, grantany option for the sale of or otherwise dispose of any of our securities for a period of six months following the closing of the offeringof the shares, subject to certain exceptions. Notwithstanding the above, now shares of common stock that are included in the Resale Prospectusare subject to such lock-up agreements. The Representative may in its sole discretionand at any time without notice release some or all of the shares subject to lock-up agreements prior to the expiration of the period.When determining whether or not to release shares from the lock-up agreements, the Representative will consider, among other factors,the shareholder’s reasons for requesting the release, the number of shares for which the release is being requested and marketconditions at the time.
Underwriting
Inconnection with this offering, we expect to enter an underwriting agreement with Boustead Securities, LLC (which we refer to herein asthe “Representative”), as representative of the underwriters named in this prospectus, with respect to the common stock beingsold in this offering. Under the terms and subject to the conditions contained in the underwriting agreement, the Representative willagree to purchase from us on a firm commitment basis the respective number of shares of common stock at the public offering price lessthe underwriting discounts and commissions set forth on the cover page of this prospectus, and each of the underwriters has severallyagreed to purchase, and we have agreed to sell to the underwriters, at the public offering price per share less the underwriting discountsand commissions set forth on the cover page of this prospectus, the number of shares of common stock set forth opposite its name in thefollowing table.
Underwriters | | Number of Shares | |
Boustead Securities, LLC | | | | |
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Total | | | | |
Theshares of common stock sold by the underwriters to the public will initially be offered at the initial public offering price set forthon the cover page of this prospectus. Any shares of common stock sold by the underwriters to securities dealers may be sold at a discountfrom the initial public offering price not to exceed $[ ] per share. If all of the shares are not sold at the initial offeringprice, the Representative may change the offering price and the other selling terms. The Representative has advised us that the underwritersdo not intend to make sales to discretionary accounts. The underwriting agreement will provide that the obligations of the underwritersto pay for and accept delivery of the shares of common stock are subject to the passing upon certain legal matters by counsel and certainconditions such as confirmation of the accuracy of representations and warranties by us about our financial condition and operationsand other matters. The obligation of the underwriters to purchase the shares of common stock is conditioned upon the Company receivingapproval to list the shares of common stock for trading on The Nasdaq Capital Market.
Over-AllotmentOption
Ifthe underwriters sell more shares of common stock than the total number set forth in the table above, we have granted to the Representativean option, exercisable one or more times in whole or in part, not later than 45 days after the date of this prospectus, to purchase upto 187,500 additional shares of common stock at the public offering price less the underwriting discounts and commissions setforth on the cover page of this prospectus, constituting 15% of the total number of shares of common stock to be offered in this offering(excluding shares subject to this option). The Representative may exercise this option solely for the purpose of covering over-allotmentsin connection with this offering. This offering is being conducted on a firm commitment basis. Any shares of common stock issued or soldunder the option will be issued and sold on the same terms and conditions as the other shares of common stock that are the subject ofthis offering. If this option is exercised in full, the total proceeds to us will be $5.75 million before deduction of underwritingdiscounts and estimated offering expenses.
Discountsand Commissions; Expenses
Thefollowing table summarizes the public offering price and the underwriting discounts and commissions payable to the underwriters by usin connection with this offering (assuming both the exercise in full and non-exercise of the over-allotment option that we have grantedto the Representative):
| | Per Share | | | Total | |
| | Without Over-Allotment | | | With Over-Allotment | | | Without Over-Allotment | | | With Over-Allotment | |
Public offering price | | $ | | | | $ | | | | $ | | | | $ | | |
Underwriting discount payable by us | | $ | | | | $ | | | | $ | | | | $ | | |
Non-accountable expense payable by us | | $ | | | | $ | | | | $ | | | | $ | | |
Proceeds, before expenses, to us | | $ | | | | $ | | | | $ | | | | $ | | |
Thetotal expenses of the offering (not including the expenses of the selling shareholders), not including the underwriting discount andcommissions, are estimated at approximately $350,000 and are payable by us. We have agreed to pay the underwriters the following: (i) a non-accountable expense allowance equal to 1.0% of the gross proceeds forexpenses in connection with this offering; (ii) a cash discount of 7% of the gross proceeds from the sale of securities in this offering;and (iii) an accountable expense reimbursement of up to $230,000 for out-of-pocket expenses incurred in connection with this offering,including (a) up to $125,000 of the fees of the underwriters’ legal counsel, (b) $5,000 for background checks, (c) up to $50,000of due diligence and other expenses, (d) and up to $50,000 of out-of-pocket expenses of the underwriters. The Representative’sout-of-pocket expenses include, but are not limited to: road show and travel expenses and platform on-boarding expenses. Any out-of-pocketexpenses above $2,500 are to be pre-approved by the Company. As of the date of this prospectus, we have paid the Representative refundableadvances of $25,000, which will be applied against its and its legal counsel’s actual out-of-pocket accountable expenses. Suchadvance payments will be returned to us to the extent any portion of the advance is not actually incurred, in accordance with FINRA Rule5110(g)(4)(A).
Wehave been advised by the Representative that the underwriters propose to offer the common stock to the public at the public offeringprice set forth on the cover of this prospectus and to dealers at a price that represents a concession not in excess of $[●] pershare under the public offering price. After the offering, the Representative may change the public offering price and other sellingterms.
Representative’sWarrants
Wehave also agreed to issue to the Representative (or its permitted assignees) a warrant to purchase a number of shares of our common stockequal to 7% of the aggregate number of shares of common stock sold in this offering (the “Representative’s Warrant”).The Representative’s Warrant will be exercisable on a cashless basis at an exercise price equal to 125% of the public offeringprice of the shares sold in this offering. The Representative’s Warrant is exercisable commencing six months after the effectivedate of the registration statement of which this prospectus forms a part, in whole or in part, and will be exercisable for a period offive years from the effective date of the registration statement of which this prospectus forms a part. We have agreed to a one-timedemand registration of the shares of common stock underlying the Representative’s Warrant for a period of five years from the effectivedate of the registration statement. The Representative’s Warrant also provides for customary anti-dilution provisions and immediate“piggyback” registration rights with respect to the underlying shares of common stock during the five year periodcommencing from the effective date of the registration statement related to this offering. The Representative’s Warrant is notredeemable by us. The Representative’s Warrant and the shares of common stock issuable upon exercise of the warrant have been includedon the registration statement of which this prospectus forms a part. Pursuant to applicable FINRA rules, and in particular Rule 5110,the Representative’s Warrant (and underlying shares) issued to the Representative may not be sold, transferred, assigned, pledged,or hypothecated, or the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective dispositionof the securities by any person for a period of 180 days after the effective date of the registration statement related to this offering;provided, however, the Representative’s Warrant (and underlying shares) may be transferred to an underwriter’s officers,partners, registered persons or affiliates as long as the Representative’s Warrant (and underlying shares) remains subject to thelock-up.
Theregistration statement, of which this prospectus is a part, also registers for sale the 100,625 shares of common stock underlying theRepresentative’s Warrants that we intend to issue to the Representative in connection with this offering (which represents themaximum number of shares underlying such warrants issuable to the representative of the underwriters in the event the underwriter’soverallotment option is exercised).
Inconnection with the offering, the underwriters may purchase and sell shares in the open market. Purchases and sales in the open marketmay include short sales, purchases to cover short positions, which may include purchases pursuant to the over-allotment option, and stabilizingpurchases.
| ● | Short sales involve secondary market sales by an underwriter of a greater number of shares than they are required to purchase in the offering. |
| ● | “Covered” short sales are sales of shares in an amount up to the number of shares represented by the over-allotment option. |
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| ● | “Naked” short sales are sales of shares in an amount in excess of the number of shares represented by the over-allotment option. |
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| ● | Covering transactions involve purchases of shares either pursuant to the over-allotment option or in the open market after the distribution has been completed in order to cover short positions. |
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| ● | To close a naked short position, an underwriter must purchase shares in the open market after the distribution has been completed. A naked short position is more likely to be created if an underwriter is concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. |
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| ● | To close a covered short position, an underwriter must purchase shares in the open market after the distribution has been completed or must exercise the over-allotment option. In determining the source of shares to close the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. |
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| ● | Stabilizing transactions involve bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum. |
Purchasesto cover short positions and stabilizing purchases, as well as other purchases by an underwriter for its own account, may have the effectof preventing or retarding a decline in the market price of the common stock. They may also cause the price of the common stock to behigher than the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conductthese transactions in the over-the-counter market or otherwise. If the underwriters commence any of these transactions, they may discontinuethem at any time.
Indemnification
Wehave agreed to indemnify the Representative and the other underwriters against certain liabilities, including liabilities under the SecuritiesAct. If we are unable to provide this indemnification, we will contribute to payments that the Representative and the other underwritersmay be required to make for these liabilities.
Rightof First Refusal
TheRepresentative has the right of first refusal for 12 months following the consummation of this offering or the termination or expirationof the engagement with the Representative to act as financial advisor on at least equal economic terms on any public or private financing(debt or equity), merger, business combination, recapitalization or sale of some or all of our equity or our assets, whether in conjunctionwith another broker-dealer or on the Company’s own volition (collectively, “Future Services”). In the event that weengage the Representative to provide such Future Services, the Representative will be compensated consistent with the engagement agreementwith the Representative, unless we mutually agree otherwise. To the extent we are approached by a third party to lead any public or privatefinancing (debt or equity), merger, business combination, recapitalization or sale of some or all of our equity or assets, the Representativewill be notified of the transaction and be granted the right to exercise its right of first refusal to provide Future Services.
Lock-UpAgreements
Ourofficers, directors and greater than 5% shareholders have each agreed not to offer, sell, agree to sell, directly or indirectly,or otherwise dispose of any shares of our common stock for a period of 12 months following the closing of this offering and our shareholdersholding between 1% and 4.99% of our outstanding shares of common stock have each agreed not to offer, sell, agree to sell, directly orindirectly, or otherwise dispose of any shares of our common stock for a period of six months following the closing of this offering(the “Lock-Up Periods”), except that the shareholders are permitted to transfer shares so long as (a) the transfereeexecutes a lock-up agreement for the balance of the applicable Lock-Up Period, (b) the transfer is not a disposition for value,(c) the transfer is not required to be reported in any public report or filing with the SEC, and (d) the shareholder does not voluntarilyeffect any public filing or report regarding such transfer: (i) as a gift, (ii) to any immediate family member, (iii) if the shareholderis a business entity that transfers the shares to another entity that is an affiliate of the shareholder or if the shareholder is a businessentity that transfers the shares to its limited partners, members or shareholders, (iv) if the shareholder is a trust that transfersthe shares to a trust beneficiary, or (v) by will or other testamentary document or intestate succession, or by operation of law pursuantto a domestic order or in connection with a divorce settlement. Notwithstanding the foregoing, no shares of common stock that areincluded in the Resale Prospectus are subject to any lock-up agreement.
Further,the underwriters of this offering may engage in stabilization activities as described above. The Representative may in its sole discretionand at any time without notice release some or all of the shares subject to lock-up agreements prior to the expiration of the Lock-UpPeriods. When determining whether or not to release shares from the lock-up agreements, the Representative will consider, amongother factors, the security holder’s reasons for requesting the release, the number of shares for which the release is being requestedand market conditions at the time.
ElectronicOffer, Sale and Distribution of Common Stock
Aprospectus in electronic format may be made available on the websites maintained by the Representative. In addition, shares of commonstock may be sold by the Representative to securities dealers who resell our common stock to online brokerage account holders. Otherthan the prospectus in electronic format, the information on the Representative’s website and any information contained in anyother website maintained by the Representative is not part of the prospectus or the registration statement of which this prospectus formsa part, has not been approved and/or endorsed by us or the Representative in its capacity as Representative and should not be reliedupon by investors.
SellingRestrictions
Noaction has been taken in any jurisdiction (except in the United States) that would permit a public offering of our common stock, or thepossession, circulation or distribution of this prospectus or any other material relating to us or our common stock, where action forthat purpose is required. Accordingly, our common stock may not be offered or sold, directly or indirectly, and neither this prospectusnor any other offering material or advertisements in connection with our common stock may be distributed or published, in or from anycountry or jurisdiction except in compliance with any applicable rules and regulations of any such country or jurisdiction.
OfferRestrictions Outside the United States
Otherthan in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offeredby this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not beoffered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection withthe offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will resultin compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes areadvised to inform themselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus inany jurisdiction in which such an offer or a solicitation is unlawful. In particular, our common stock has not been qualified for distributionby prospectus in Canada and may not be offered or sold in Canada during the course of their distribution hereunder except pursuant toa Canadian prospectus or prospectus exemption.
CertainRelationships
Fromtime to time, the underwriters and/or their affiliates have provided, and may in the future provide, various investment banking and otherfinancial services for us for which services it has received and, may in the future receive, customary fees.
Exceptfor the services provided in connection with this offering and as described below, the underwriters have not provided any investmentbanking or other financial services during the 180-day period preceding the date of this prospectus.
InAugust 2022, the Company initiated a private placement of up to $2 million in units to accredited investors, with each unit consistingof one share of common stock and a warrant to purchase one share of common stock, at a price of $1.00 per unit (the “2022 PrivatePlacement”). The warrants have a five-year term (from each closing date that units were sold) and an exercise price of $1.00per share. If at any time after the six-month anniversary of the issuance date, there is no effective registration statement registering,or no current prospectus available for the resale of the shares of common stock issuable upon exercise the warrants, the holder of thewarrants may elect a cashless exercise of the warrants. The Representative, served as the placement agent in connection with the 2022Private Placement (the “Placement Agent”). In total, we sold an aggregate of 2,000,000 units for $2,000,000 to 23 accreditedinvestors between August 16, 2022 and December 22, 2022, the end date of the offering.
Inconnection with the 2022 Private Placement, we paid the Placement Agent a success fee of 7% of the gross purchase price of theunits sold in the 2022 Private Placement, which amounted to $140,000, and a 1% non-accountable expense allowance, which amountedto $20,000. Additionally, we granted the Placement Agent warrants to purchase 7% of the number of shares and warrants sold in the offering,totaling warrants to purchase 280,000 shares of common stock, with an exercise price of $1.00 per share, the shares of common stock issuableupon exercise of which warrants are being registered in the Resale Prospectus. The warrants granted to the Placement Agent have cashlessexercise rights (regardless of whether the shares underlying such warrants are registered) and a term of five years from their originalgrant date (a total of 56,000 warrants were granted to the Placement Agent on August 16, 2022; a total of 51,870 warrants were grantedto the Placement Agent on September 9, 2022, a total of 102,200 warrants were granted to the Placement Agent on September 21, 2022, atotal of 45,500 warrants were granted to Boustead on November 11, 2022, and a total of 24,430 warrants were granted to Boustead on December22, 2022). The private placement warrants will not be exercisable or convertible for more than five years from the commencementof this offering. Pursuant to applicable FINRA rules and, in particular, Rule 5110(e)(1), the private placement warrants may notbe sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transactionthat would result in the effective economic disposition of the securities for a period of 180 days beginning on the date of commencementof sales of this public offering; provided, however, the private placement warrants may be transferred to the Placement Agent’sofficers, partners, registered persons or affiliates as long as the warrants remain subject to the lock-up restriction above.
OnDecember 30, 2022, we entered into a Waiver of Warrant agreement with the Placement Agent, whereby it agreed to surrender all 280,000private placement warrants issued to it in connection with the 2022 Private Offering (the “Placement Agent Warrants”) forno consideration and it irrevocably waived any right or interest in the Placement Agent Warrants.
TheCompany agreed to indemnify the Placement Agent for certain liabilities, including certain liabilities under the Securities Act, or tocontribute to payments that the Placement Agent may be required to make in respect thereof.
Investorsin the private placement were provided piggy-back registration rights (with customary underwriter cutbacks) in connection with the sharesand shares of common stock issuable upon exercise of the warrants, which shares and shares underlying the warrants (including the PlacementAgent’s warrants) are included in the Resale Prospectus.
Listing
Inconnection with this offering, we have applied to have our common stock listed for trading on The Nasdaq Capital Market under the symbol“MNGO.” There is no assurance, however, that our common stock will be listed for trading on The Nasdaq Capital Marketor any other national securities exchange. The listing of our common stock on The Nasdaq Capital Market is a required condition to theclosing of this offering.
LegalMatters
Thevalidity of the securities offered by this prospectus will be passed upon for us by The Loev Law Firm, PC, Bellaire, Texas. David M.Loev, the Managing Partner, President and sole owner of The Loev Law Firm, PC, beneficially owns less than 2% of the outstandingshares of our common stock and is the brother-in-law of Jacob D. Cohen, our Chairman and Chief Executive Officer. Certain legal mattersin connection with this offering will be passed upon for the underwriters by Olshan Frome Wolosky LLP, New York, New York.
Experts
Thefinancial statements of Mangoceuticals, Inc. as of December 31, 2021 and for the period from October 7, 2021 (Inception) through December31, 2021, included in this prospectus and the registration statement have been audited by M&K CPAS, PLLC, Houston, Texas, independentregistered public accounting firm, as stated in their report dated July 1, 2022, which includes an explanatory paragraph regarding Mangoceuticals,Inc.’s ability to continue as a going concern, has been so included in reliance upon the report of such firm given upon their authorityas experts in accounting and auditing.
WhereYou Can Find More Information
Wehave filed with the SEC a registration statement on Form S-1 (File No. 333-[ ]) under the Securities Act, with respect tothe securities offered by this prospectus. This prospectus, which is part of the registration statement, omits certain information, exhibits,schedules and undertakings set forth in the registration statement. For further information pertaining to us and our common stock, referenceis made to the registration statement and the exhibits and schedules to the registration statement. Statements contained in this prospectusas to the contents or provisions of any documents referred to in this prospectus are not necessarily complete, and in each instance wherea copy of the document has been filed as an exhibit to the registration statement, reference is made to the exhibit for a more completedescription of the matters involved.
Youmay read registration statements and certain other filings made with the SEC electronically are publicly available through the SEC’swebsite at https://www.sec.gov. The registration statement, including all exhibits and amendments to the registration statement, hasbeen filed electronically with the SEC. If you do not have internet access, requests for copies of such documents should be directedto Jacob D. Cohen, the Company’s Chief Executive Officer, at Mangoceuticals, Inc., 15110 N. Dallas Parkway, Suite 600,Dallas, Texas 75248.
Uponcompletion of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act and, accordingly,will file annual reports containing financial statements audited by an independent public accounting firm, quarterly reports containingunaudited financial data, current reports, proxy statements and other information with the SEC. You will be able to inspect and copysuch periodic reports, proxy statements and other information at the SEC’s public reference room, and the website of the SEC referredto above.
Indexto Financial Statements
AuditedFinancial Statements
UnauditedFinancial Statements
REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Tothe Board of Directors and Shareholders of Mangoceuticals, Inc.,
Opinionon the Financial Statements
Wehave audited the accompanying balance sheet of Mangoceuticals, Inc. (the Company) as of December 31, 2021, and the related statementsof operations, changes in stockholders’ deficit, and cash flows for the period from October 7, 2021 (inception) to the period thenended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statementspresent fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operationsand its cash flows for the period from October 7, 2021 (inception) to the period then ended in conformity with accounting principlesgenerally accepted in the United States of America.
GoingConcern
Theaccompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note6 to the financial statements, the Company has suffered a net loss from start-up operations, which raises substantial doubt about itsability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 6. The financial statementsdo not include any adjustments that might result from the outcome of this uncertainty.
Basisfor Opinion
Thesefinancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
Weconducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtainreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Companyis not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinionon the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Ouraudits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to erroror fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regardingthe amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and the significantestimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits providea reasonable basis for our opinion.
CriticalAudit Matters
Thecritical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicatedor required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financialstatements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit mattersdoes not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical auditmatter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.
Dueto the net loss for the year, The Company evaluated the need for a going concern. Auditing management’s evaluation of a going concerncan be a significant judgement given the fact that the Company uses the management estimates on future revenues and expenses which arenot able to be substantiated.
Asdiscussed in Note 6, the Company has a going concern due to the net loss during the year ended December 31, 2021. To evaluate the appropriatenessof the going concern, we examined and evaluated the financial information along with management’s plans to mitigate the going concernand management’s disclosure on going concern.
/s/M&K CPAS, PLLC
M&KCPAS, PLLC
Wehave served as the Company’s auditor since 2022
Houston,TX
July1, 2022
MANGOCEUTICALS,INC.
BalanceSheet
December31, 2021
(Audited)
| | December 31, 2021 | |
| | | |
ASSETS | | | | |
Cash and Cash Equivalents | | $ | 22,550 | |
TOTAL CURRENT ASSETS | | | 22,550 | |
TOTAL ASSETS | | $ | 22,550 | |
| | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | | | | |
| | | | |
CURRENT LIABILITIES | | | | |
Notes Payable from Related Parties | | | 39,270 | |
TOTAL CURRENT LIABILITIES | | | 39,270 | |
TOTAL LIABILITIES | | | 39,270 | |
STOCKHOLDERS’ DEFICIT | | | | |
Common stock (par value $0.0001, 200,000,000 shares authorized, of which 8,000,000 shares issued and outstanding as of December 31, 2021) | | | 800 | |
Additional paid in capital | | | 181 | |
Retained Earnings | | | (17,701 | ) |
TOTAL STOCKHOLDERS’ DEFICIT | | | (16,720 | ) |
| | | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | | $ | 22,550 | |
Theaccompanying notes are an integral part of these financial statements.
MANGOCEUTICALS,INC.
Statementof Operations
FromOctober 7, 2021 (inception) to December 31, 2021
(Audited)
| | From October 7, 2021 (inception) to December 31, 2021 | |
Operating Expenses | | | | |
General and administrative expenses | | $ | 17,520 | |
Total operating expenses | | | 17,520 | |
Net Loss | | | (17,520 | ) |
| | | | |
Other Income/Expenses | | | | |
Interest Expense | | | (181 | ) |
Total Other Income (Expense) | | | (181 | ) |
| | | | |
Net Loss | | $ | (17,701 | ) |
Basic and diluted income (loss) per share | | $ | (0.00 | ) |
Weighted average number of shares outstanding | | | | |
Basic and diluted | | | 8,000,000 | |
Theaccompanying notes are an integral part of the financial statements.
MANGOCEUTICALS,INC.
Statementof Changes in Stockholders’ deficit
FromOctober 7, 2021 (inception) to December 31, 2021
| | Common Stock | | | Additional Paid in | | | Accumulated | | | Total Shareholder’s | |
| | Shares | | | Amount | | | Capital | | | Deficit | | | (Deficit) | |
October 7, 2021 (inception) | | | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | |
Issuance of Common Shares | | | 8,000,000 | | | $ | 800 | | | | - | | | | – | | | $ | 800 | |
| | | | | | | | | | | | | | | | | | | | |
Imputed Interest | | | | | | | | | | | 181 | | | | | | | | 181 | |
| | | | | | | | | | | | | | | | | | | | |
Net (loss) | | | – | | | | – | | | | – | | | $ | (17,701 | ) | | | (17,701 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2021 | | | 8,000,000 | | | $ | 800 | | | $ | 181 | | | $ | (17,701 | ) | | $ | (16,720 | ) |
Theaccompanying notes are an integral part of these financial statements.
MANGOCEUTICALS,INC.
Statementof Cash Flows
FromOctober 7, 2021 (inception) to December 31, 2021
(Audited)
| | From October 7, 2021 (inception) to December 31, 2021 | |
| | | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | |
Net Loss | | $ | 17,701 | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | |
Imputed Interest | | | (181 | ) |
NET CASH (USED IN) OPERATING ACTIVITIES | | | (17,520 | ) |
| | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
Notes Payable from Related Parties | | | 39,270 | |
Proceeds from sales of stock | | | 800 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | | | 40,070 | |
| | | | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | | – | |
| | | | |
CASH AND CASH EQUIVALENTS: | | | | |
Beginning of period | | | – | |
End of period | | $ | 22,550 | |
| | | | |
Supplemental disclosure of cash flow information: | | | | |
Cash paid for income taxes | | $ | – | |
Cash paid for interest | | $ | – | |
Theaccompanying notes are an integral part of these financial statements.
MANGOCEUTICALS,INC.
Notesto Financial Statements
FromOctober 7, 2021 (inception) to December 31, 2021
(Audited)
NOTE1 – ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Mangoceuticals,Inc. (“Mangoceuticals” or the “Company”), was incorporated in the State of a Texas on October 7, 2021, with theintent of focusing on developing, marketing, and selling a variety of men’s wellness products and services via a telemedicine platform.To date, the Company has identified men’s wellness telemedicine services and products as a growing sector in the most recent yearsand especially related to the areas of erectile dysfunction. In this regard, Mangoceuticals is currently in the process of developingand preparing to market a new brand of erectile dysfunction (ED) products through a proprietary combinationof FDA approved ingredients.
Mangoceuticalsplans to market and sell this new brand of ED products exclusively online and will require the use of a telemedicine visit, a doctor’sprescription and the fulfillment of the prescription by pharmacy licensed in the state in which the customer resides. Mangoceuticalsplans to rely heavily on digital and social media marketing with the goal of creating viral marketing campaigns, using social media influencersand celebrities, funding permitting.
TheCompany is a majority owned subsidiary of American International Holdings Corp, a Nevada corporation whose common stock is quoted onthe OTCQB Market maintained by OTC Markets Group Inc. under the symbol “AMIH.”
Impactof COVID-19 Pandemic on Consolidated Financial Statements. The outbreak of the 2019 novel coronavirus disease (“COVID-19”),which was declared a global pandemic by the World Health Organization on March 11, 2020, and the related responses by public health andgovernmental authorities to contain and combat its outbreak and spread has severely impacted the U.S. and world economies during theend of the first quarter of 2020, and continuing through the end of 2020 and into 2021. COVID-19 and the U.S. response to the pandemicare significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemicmay have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. The Company does not yet knowthe full extent of the effects on the economy, the markets we serve, our business, or our operations.
Movingforward, economic recessions, including those brought on by the continued COVID-19 outbreak may have a negative effect on the demandfor our services and our operating results. Any prolonged disruption to our operations or work force availability is likely to have asignificant adverse effect on our results of operations, cash flows and ability to meet continuing debt service requirements. All ofthe above may be exacerbated in the future as the COVID-19 outbreak and the governmental responses thereto continues.
NOTE2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basisof Presentation – The financial statements present the financial position, results of operations and cash flows of the Companyin accordance with accounting principles generally accepted in the United States of America (“US GAAP”). All dollar amountsare rounded to the nearest thousand dollars.
CashEquivalents
Highlyliquid investments with original maturities of three months or less are considered cash equivalents. The Company maintains the majorityof its cash accounts at a commercial bank. The total cash balance is insured by the Federal Deposit Insurance Corporation (“FDIC”)up to $250,000 per commercial bank. From time to time, cash in deposit accounts may exceed the FDIC limits, the excess would be at riskof loss for purposes of the statement of cash flows. There are no cash equivalents at December 31, 2021.
IncomeTaxes
TheCompany is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differencesbetween the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Income taxes areprovided in accordance with ASC-740, Income Taxes. Deferred tax assets and liabilities are measured using enacted tax rates expectedto be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax ratesis recognized in income in the year that includes the enactment date of the rate change. A valuation allowance is used to reduce deferredtax assets to the amount that is more likely than not to be realized.
NetLoss Per Common Share
Wecompute net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basicand diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) availableto common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPSgives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferredstock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the numberof shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential sharesif their effect is anti-dilutive. There were no options, warrants or derivative securities outstanding as of December 31, 2021.
Useof Estimates and Assumptions
Thepreparation of financial statements in accordance with US GAAP requires the Company’s management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of expenses during the reporting period. Actual results can, and in many cases will, differ fromthose estimates.
Fairvalue of financial instruments
TheCompany measures its financial and non-financial assets and liabilities, as well as makes related disclosures, in accordance with FASBAccounting Standards Codification No. 820, Fair Value Measurement (“ASC 820”), which provides guidance with respect to valuationtechniques to be utilized in the determination of fair value of assets and liabilities. Approaches include, (i) the market approach (comparablemarket prices), (ii) the income approach (present value of future income or cash flow), and (iii) the cost approach (cost to replacethe service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuationtechniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assetsor liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such asvaluations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable.
Ourfinancial instruments include cash, accounts payable and accrued liabilities.
Management’sEstimates and Assumptions
Thepreparation of financial statements in conformity with generally accepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dateof the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from these estimates.
Concentrationand Risks
TheCompany’s operations are subject to risks including financial, operational, regulatory and other risks including the potentialrisk of business failure. For the year ended December 31, 2021, the Company had no significant revenue from continuing operations whichwere derived from a single or a few major customers.
RecentlyIssued Accounting Pronouncements
Fromtime to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company asof the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that arenot yet effective will not have a material effect on its financial position or results of operations upon adoption.
InDecember 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740).”This standard simplifies the accounting for income taxes. This standard is effective for fiscal years beginning after December 15, 2020,including interim periods within those fiscal years. Early adoption is permitted for all entities. The Company adopted ASU 2019-12 effectiveon January 1, 2021, and it did not have an effect on the Company’s financial statements.
InAugust 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivativesand Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)” (“ASU 2020-06”).ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertibleinstruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aimsto reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15,2023, and interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.
RelatedParties
TheCompany follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosureof related party transactions.
Pursuantto Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securitieswould be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15,to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharingtrusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company;f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policiesof the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; andg. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownershipinterest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transactingparties might be prevented from fully pursuing its own separate interests.
Thefinancial statements shall include disclosures of material related party transactions, other than compensation arrangements, expenseallowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in thepreparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. thenature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amountswere ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understandingof the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for whichincome statements are presented and the effects of any change in the method of establishing the terms from that used in the precedingperiod; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent,the terms and manner of settlement. A material related party transaction has been identified in Note 3 in the financial statements.
RevenueRecognition
OurCompany generates our online revenue through the sale of products and services purchased by customers directly through our online platformOnline Revenue represents the sales of products and services on our platform, net of refunds, credits, and chargebacks, and includesrevenue recognition adjustments recorded pursuant to accounting principles generally accepted in the United States of America (“U.S.GAAP”), primarily relating to deferred revenue and returns reserve. Online Revenue is generated by selling directly to consumersthrough our websites.
TheCompany recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration towhich it expects to be entitled in exchange for those goods or services. Forrevenue generated through its online platform, the Company defines its customer as an individual who purchases products or services throughwebsites. The transaction price in the Company’s contracts with customers is the total amount of consideration to which the Companyexpects to be entitled in exchange for transferring products or services to the customer.
TheCompany’s contracts that contain prescription products issued as the result of a consultation include two performance obligations:access to (i) products and (ii) consultation services. The Company’s contracts for prescription refills have a single performanceobligation. Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised product tothe customer and, in contracts that contain services, by the provision of consultation services to the customer. The Company satisfiesits performance obligation for products at a point in time, which is upon delivery of the products to a third-party carrier. The Companysatisfies its performance obligation for services over the period of the consultation service, which is typically a few days. The customerobtains control of the products and services upon the Company’s completion of its performance obligations.
Tofulfill its promise to customers for contracts that include professional medical consultations, the Company maintains relationships withvarious “Affiliated Medical Groups,” which are professional corporations or other professional entities owned by licensedphysicians and that engage licensed healthcare professionals (physicians, physician assistants, nurse practitioners, and mental healthproviders; collectively referred to as “Providers” or individually, a “Provider”) to provide consultation services.The Company accounts for service revenue as a principal in the arrangement with its customers. This conclusion is reached because (i)the Company determines which Affiliated Medical Group and Provider provides the consultation to the customer; (ii) the Company is primarilyresponsible for the satisfactory fulfillment and acceptability of the services; (iii) the Company incurs costs for consultation serviceseven for visits that do not result in a prescription and the sale of products; and (iv) the Company, at its sole discretion, sets alllisted prices charged on its websites for products and services.
Additionally,to fulfill its promise to customers for contracts that include sale of prescription products, the Company maintains relationships withcertain affiliated and third-party pharmacies (“Contracted Pharmacies” or individually, a “Contracted Pharmacy”)to fill prescriptions that are ordered by the Company’s customers for fulfillment through the Company’s websites. The Companyaccounts for prescription product revenue as a principal in the arrangement with its customers. This conclusion is reached because (i)the Company has sole discretion in determining which Contracted Pharmacy fills a customer’s prescription; (ii) Contracted Pharmaciesfill the prescription based on fulfillment instructions provided by the Company, including using the Company’s branded packagingfor generic products; (iii) the Company is primarily responsible to the customer for the satisfactory fulfillment and acceptability ofthe order; (iv) the Company is responsible for refunds of the prescription medication after transfer of control to the customer; and(v) the Company, at its sole discretion, sets all listed prices charged on its websites for products and services.
TheCompany estimates refunds using the expected value method based on historical refunds granted to customers. The Company updates its estimateat the end of each reporting period and recognizes the estimated amount as contra-revenue with a corresponding refund liability. Sales,value-added, and other taxes are excluded from the transaction price and, therefore, from revenue.
TheCompany accounts for shipping activities, consisting of direct costs to ship products performed after the control of a product has beentransferred to the customer, in cost of revenue.
NOTE3 – LOANS FROM RELATED PARTIES
OnDecember 10, 2021, the Company received an advance of $39,200 from its majority shareholder, AMIH, in order to cover various generaland administrative expenses. The advance bears no interest and is due on demand upon the Company’s ability to repay the advancefrom either future revenues or investment proceeds. The amount owed to AMIH was $39,200 as of December 31, 2021. Imputed interest equalto eight percent (8%) per annum, or $181, was recorded against the related party advance as of December 31, 2021.
OnDecember 10, 2021, the Company received an advance of $70 from ZipDoctor, Inc., a wholly owned subsidiary of its majority shareholder,AMIH, which was used to open and establish the Company’s bank account. The advance bears no interest and is due on demand uponthe Company’s ability to repay the advance from either future revenues or investment proceeds. The amount owed to ZipDoctor was$70 as of December 31, 2021. Imputed interest equal to eight percent (8%) per annum, or $0, was recorded against the related party advanceas of December 31, 2021.
NOTE4 – INCOME TAXES
Deferredincome taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilitiesas measured by the enacted tax rates, which will be in effect when these differences reverse. The components of deferred income tax assetsare as follows:
December 31, 2021 | | | |
Deferred Tax Asset: | | | | |
Net Operating Loss | | $ | 17,701 | |
Valuation Allowance | | | (17,701 | ) |
Net Deferred Asset | | $ | — | |
AtDecember 31, 2021, the Company provided a 100% valuation allowance for the deferred tax asset because it could not be determined whetherit was more likely than not that the deferred tax asset/(liability) would be realized.
NOTE5 – CAPITAL STOCK
TheCompany is authorized to issue 10,000,000 shares of Common stock, $.0001 par value, with such designations, rights and preferences asmay be determined from time to time by the Board of Directors. On October 7, 2021, the Company issued 8,000,000 shares of its commonstock, $.0001 par value, to its majority shareholder, AMIH, in exchange for $800 in cash. At December 31, 2021, there were 8,000,000shares issued and outstanding.
NOTE6 – GOING CONCERN
Thesefinancial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realizationof assets and the discharge of liabilities in the normal course of business for the foreseeable future. As reflected in the accompanyingfinancials, the Company had a net loss of $17,520 and an accumulated deficit of $17,520 for the year ended December 31, 2021. Althoughmanagement believes that it will be able to successfully execute its business plan, which includes third party financing and the raisingof capital to meet the Company’s future liquidity needs, there can be no assurances in this regard. These matters raise substantialdoubt about the Company’s ability to continue as a going concern.
NOTE7 – COMMITMENTS AND CONTINGENCIES
Inthe ordinary course of business, the Company may become a party to lawsuits involving various matters. The impact and outcome of litigation,if any, is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harmits business. The Company believes the ultimate resolution of any such current proceeding will not have a material adverse effect onour continued financial position, results of operations or cash flows.
NOTE8 – SUBSEQUENT EVENTS
OnApril 6, 2022, the Company issued 1,000,000 shares of common stock to the Company’s co-founder and CEO, Jacob D. Cohen, in considerationfor services rendered.
OnApril 6, 2022, the Company issued 1,000,000 shares of common stock to the Company’s co-founder, President and COO, Jonathan Arango,in consideration for services rendered to the Company.
OnApril 15, 2022, the Company filed a Certificate of Amendment with the Secretary of State of Texas to increase its authorized number ofshares to 210,000,000, consisting of 200,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of “blankcheck” preferred stock par value $0.0001 per share.
OnJune 16, 2022, Cohen Enterprises, Inc. (“Cohen Enterprises”), which entity is owned and controlled by Jacob D. Cohen, theCompany’s Chief Executive Officer and member of the Board of Directors, entered into and closed on a Stock Purchase Agreement (the“SPA”) for the purchase of all shares of the Company’s common stock as held by American International Holdings Corp.(“AMIH”). Pursuant to the SPA, Cohen Enterprises purchased 8,000,000 shares of the outstanding common stock of the Company,which represented 80% of the Company’s then outstanding shares of common stock, in consideration for $90,000, which was approximatelythe same amount that had been advanced to the Company from AMIH through the date of the SPA ($89,200). Cohen Enterprises also acquiredthe right to be repaid the $89,200 advanced from AMIH to the Company, pursuant to the terms of the SPA.
OnJune 23, 2022, the Company issued 250,000 shares of common stock to The Loev Law Firm, PC in consideration for legal services renderedto the Company.
MANGOCEUTICALS,INC.
BalanceSheet
| | (Unaudited) | | | (Audited) | |
| | Sept. 30, 2022 | | | December 31, 2021 | |
ASSETS | | | | | | | | |
| | | | | | | | |
Cash and Cash Equivalents | | $ | 873,491 | | | $ | 22,550 | |
Prepaid Expenses – Related Party | | | 15,000 | | | | | |
Prepaid Rent | | | 5,778 | | | | | |
TOTAL CURRENT ASSETS | | $ | 894,269 | | | $ | 22,550 | |
FIXED ASSETS | | | | | | | | |
Property and Equipment, net of accumulated depreciation of $0 | | $ | 2,531 | | | $ | - | |
TOTAL FIXED ASSETS | | $ | 2,531 | | | $ | - | |
| | | | | | | | |
OTHER ASSETS | | | | | | | | |
Security Deposit | | | 16,942 | | | $ | - | |
TOTAL OTHER ASSETS | | | 16,942 | | | $ | - | |
| | | | | | | | |
TOTAL ASSETS | | $ | 913,742 | | | $ | 22,550 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Payroll Tax Liabilities | | $ | 671 | | | | - | |
Notes Payable from Related Parties | | $ | 89,200 | | | | 39,270 | |
TOTAL CURRENT LIABILITIES | | $ | 89,871 | | | | 39,270 | |
TOTAL LIABILITIES | | $ | 89,871 | | | | 39,270 | |
STOCKHOLDERS’ DEFICIT | | | | | | | | |
Common stock (par value $0.0001, 200,000,000 shares authorized, of which 12,015,500 shares issued and outstanding as of September 30, 2022 and 8,000,000 shares issued and outstanding as of December 31, 2021) | | | 1,202 | | | | 800 | |
Additional paid in capital | | | 2,164,770 | | | | 181 | |
Accumulated Deficit | | | (1,342,101 | ) | | | (17,701 | ) |
TOTAL STOCKHOLDERS’ EQUITY | | | 823,871 | | | | (16,720 | ) |
| | | | | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 913,742 | | | $ | 22,550 | |
Theaccompanying notes are an integral part of these financial statements.
MANGOCEUTICALS,INC.
Statementof Operations
(Unaudited)
| | For the Nine Months Ended Sept. 30, 2022 | |
Operating expenses | | | | |
General and administrative expenses | | $ | 1,319,727 | |
Total operating expenses | | | 1,319,727 | |
| | | | |
Loss from operations | | | (1,319,727 | ) |
| | | | |
Other income (expenses) | | | | |
Interest Expense | | | (4,673 | ) |
Total other income (expenses) | | | (4,673 | ) |
| | | | |
Loss before income taxes | | | (1,324,400 | ) |
| | | | |
Income taxes | | | - | |
| | | | |
Net Loss | | $ | (1,324,400 | ) |
| | | | |
Basic and diluted income (loss) per share | | | | |
Continuing operations | | $ | (0.13 | ) |
| | | | |
Weighted average number of shares outstanding | | | | |
Basic and diluted | | | 9,913,388 | |
Theaccompanying notes are an integral part of the financial statements
MANGOCEUTICALS,INC.
Statementof Changes in Stockholders’ deficit
(Unaudited)
| | | | | Additional | | | Common | | | Retained | | | | | | Total | |
| | Common Stock | | | Paid-in | | | Stock | | | Earnings | | | Treasury | | | Stockholders’ | |
| | Shares | | | Amount | | | Capital | | | Payable | | | (Deficit) | | | Stock | | | (Deficit) | |
| | | | | | | | | | | | | | | | | | | | | |
October 7, 2021 (inception) | | | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Issuance of Common Shares | | | 8,000,000 | | | | 800 | | | | - | | | | - | | | | - | | | | - | | | | 800 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Imputed Interest | | | - | | | | - | | | | 181 | | | | - | | | | - | | | | - | | | | 181 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (loss) | | | - | | | | - | | | | - | | | | - | | | | (17,701 | ) | | | - | | | | (17,701 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2021 | | | 8,000,000 | | | $ | 800 | | | $ | 181 | | | $ | - | | | $ | (17,701 | ) | | $ | - | | | $ | (16,720 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Issuance of Common Stock for Services | | | 2,515,000 | | | | 252 | | | | 489,748 | | | | | | | | | | | | | | | | 490,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Issuance of Units for Cash | | | 1,500,500 | | | | 150 | | | | 1,500,350 | | | | - | | | | - | | | | - | | | | 1,500,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock Based Compensation from issuance of Options and Warrants | | | | | | | - | | | | 169,817 | | | | - | | | | - | | | | - | | | | 169,817 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Imputed Interest | | | - | | | | - | | | | 4,674 | | | | - | | | | - | | | | - | | | | 4,674 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | | | - | | | | - | | | | - | | | | - | | | | (1,324,400 | ) | | | - | | | | (1,324,400 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, September 30, 2021 | | | 12,015,500 | | | $ | 1,202 | | | $ | 2,164,770 | | | $ | - | | | $ | (1,342,101 | ) | | $ | - | | | $ | 823,871 | |
Theaccompanying notes are an integral part of these financial statements.
MANGOCEUTICALS,INC.
Statementof Cash Flows
(Unaudited)
| | For the Nine Months Ended | |
| | Sept 30, 2022 | |
| | | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | |
Net Loss | | $ | (1,324,400 | ) |
Issuance of common stock for services | | | 490,000 | |
Stock based compensation from issuances of options and warrants | | | 169,817 | |
Imputed interest | | | 4,674 | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | |
Prepaid expenses – related party | | | (15,000 | ) |
Prepaid expenses | | | (22,720 | ) |
Payroll tax liabilities | | | 671 | |
NET CASH (USED IN) OPERATING ACTIVITIES | | | (696,958 | ) |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | |
Equipment | | | (2,531 | ) |
NET CASH USED IN INVESTING ACTIVITIES | | | (2,531 | ) |
| | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
Notes payable from related parties | | | 75,000 | |
Repayment of notes payable from related parties | | | (25,070 | ) |
Sales of units for cash | | | 1,500,500 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | | | 1,550,430 | |
| | | | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | | | 850,941 | |
| | | | |
CASH AND CASH EQUIVALENTS: | | | | |
Beginning of period | | $ | 22,550 | |
End of period | | $ | 873,491 | |
| | | | |
Supplemental disclosure of cash flow information: | | | | |
Cash paid for income taxes | | $ | - | |
Cash paid for interest | | $ | - | |
Theaccompanying notes are an integral part of these financial statements
MANGOCEUTICALS,INC.
Notesto Financial Statements
NineMonths Ended September 30, 2022
(Unaudited)
NOTE1 – ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Mangoceuticals,Inc. (“Mangoceuticals” or the “Company”), was incorporated in the State of a Texas on October 7, 2021, with theintent of focusing on developing, marketing, and selling a variety of men’s wellness products and services via a telemedicine platform.To date, the Company has identified men’s wellness telemedicine services and products as a growing sector in the most recent yearsand especially related to the areas of erectile dysfunction. In this regard, Mangoceuticals has developed and iscurrently in the process of preparing to commercially market a new erectile dysfunction (ED) product.
Mangoceuticalsplans to market and sell this new brand of ED products exclusively online and will require the use of a telemedicine visit, a doctor’sprescription and the fulfillment of the prescription by pharmacy licensed in the state in which the customer resides.
Impactof COVID-19 Pandemic on Consolidated Financial Statements. The outbreak of the 2019 novel coronavirus disease (“COVID-19”),which was declared a global pandemic by the World Health Organization on March 11, 2020, and the related responses by public health andgovernmental authorities to contain and combat its outbreak and spread has severely impacted the U.S. and world economies during theend of the first quarter of 2020, and continuing through the end of 2020 and into 2021. COVID-19 and the U.S. response to the pandemicare significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemicmay have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. The Company does not yet knowthe full extent of the effects on the economy, the markets we serve, our business, or our operations.
Movingforward, economic recessions, increased inflation and/or interest rates, including those brought on by the continued COVID-19 outbreakmay have a negative effect on the demand for our services and our operating results. Any prolonged disruption to our operations or workforce availability is likely to have a significant adverse effect on our results of operations, cash flows and ability to meet continuingdebt service requirements. All of the above may be exacerbated in the future as the COVID-19 outbreak and the governmental responsesthereto continues.
NOTE2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basisof Presentation – The financial statements present the financial position, results of operations and cash flows of the Companyin accordance with accounting principles generally accepted in the United States of America (“US GAAP”). All dollar amountsare rounded to the nearest thousand dollars.
CashEquivalents
Highlyliquid investments with original maturities of three months or less are considered cash equivalents. The Company maintains the majorityof its cash accounts at a commercial bank. The total cash balance is insured by the Federal Deposit Insurance Corporation (“FDIC”)up to $250,000 per commercial bank. From time to time, cash in deposit accounts may exceed the FDIC limits, the excess would be at riskof loss for purposes of the statement of cash flows. There are no cash equivalents at September 30, 2022.
IncomeTaxes
TheCompany is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differencesbetween the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Income taxes areprovided in accordance with FASB Accounting Standards Codification (ASC) ASC 740, Income Taxes. Deferred tax assets and liabilitiesare measured using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred taxassets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change.A valuation allowance is used to reduce deferred tax assets to the amount that is more likely than not to be realized.
NetLoss Per Common Share
Wecompute net loss per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and dilutedearnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders(numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutivepotential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-convertedmethod. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchasedfrom the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.There were 1,250,000 options, 1,710,570 warrants and no derivative securities outstanding as of September30, 2022.
Useof Estimates and Assumptions
Thepreparation of financial statements in accordance with US GAAP requires the Company’s management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of expenses during the reporting period. Actual results can, and in many cases will, differ fromthose estimates.
Fairvalue of financial instruments
TheCompany measures its financial and non-financial assets and liabilities, as well as makes related disclosures, in accordance with FASBASC 820, Fair Value Measurement (“ASC 820”), which provides guidance with respect to valuation techniques to be utilizedin the determination of fair value of assets and liabilities. Approaches include, (i) the market approach (comparable market prices),(ii) the income approach (present value of future income or cash flow), and (iii) the cost approach (cost to replace the service capacityof an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used tomeasure fair value into three broad levels. The following is a brief description of those three levels:
Level1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assetsor liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such asvaluations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable.
Thefollowing tables summarize our financial instruments measuredat fair value as of September 30, 2022 and December 31, 2021
| | Fair Value Measurements at September 30, 2022 | |
| | Level 1 | | | Level 2 | | | Level 3 | |
Assets | | | | | | | | | |
Cash | | $ | 873,491 | | | $ | - | | | $ | - | |
Total assets | | | 873,491 | | | | - | | | | - | |
Liabilities | | | | | | | | | | | | |
Total liabilities | | | - | | | | - | | | | - | |
| | $ | 873,491 | | | $ | - | | | $ | - | |
| | Fair Value Measurements at December 31, 2021 | |
| | Level 1 | | | Level 2 | | | Level 3 | |
Assets | | | | | | | | | |
Cash | | $ | 22,550 | | | $ | - | | | $ | - | |
Total assets | | | 22,550 | | | | - | | | | - | |
Liabilities | | | | | | | | | | | | |
Total liabilities | | | - | | | | - | | | | - | |
| | $ | 22,550 | | | $ | - | | | $ | - | |
Management’sEstimates and Assumptions
Thepreparation of financial statements in conformity with generally accepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dateof the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from these estimates.
Propertyand Equipment
Propertyand equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removedfrom the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financialstatement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated usefullives of three (3) to five (5) years.
Concentrationand Risks
TheCompany’s operations are subject to risks including financial, operational, regulatory and other risks including the potentialrisk of business failure. For the nine months ended September 30, 2022, the Company had no significant revenue from continuingoperations which were derived from a single or a few major customers.
RecentlyIssued Accounting Pronouncements
Fromtime to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company asof the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that arenot yet effective will not have a material effect on its financial position or results of operations upon adoption.
InAugust 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivativesand Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)” (“ASU 2020-06”).ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertibleinstruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aimsto reduce unnecessary complexity in US GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2023,and interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.
RelatedParties
TheCompany follows subtopic 850-10 of the FASB ASC for the identification of related parties and disclosure of related party transactions.
Pursuantto Section 850-10-20, the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securitieswould be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15,to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharingtrusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company;f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policiesof the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; andg. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownershipinterest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transactingparties might be prevented from fully pursuing its own separate interests.
Thefinancial statements shall include disclosures of material related party transactions, other than compensation arrangements, expenseallowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in thepreparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. thenature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amountswere ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understandingof the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for whichincome statements are presented and the effects of any change in the method of establishing the terms from that used in the precedingperiod; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent,the terms and manner of settlement. A material related party transaction has been identified in Note 3 in the financial statements.
RevenueRecognition
OurCompany generates our online revenue through the sale of products and services purchased by customers directly through our online platform.Online revenue represents the sales of products and services on our platform, net of refunds, credits, and chargebacks, and includesrevenue recognition adjustments recorded pursuant to US GAAP primarily relating to deferred revenue and returns reserve. Online revenueis generated by selling directly to consumers through our websites.
TheCompany recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration towhich it expects to be entitled in exchange for those goods or services. Forrevenue generated through its online platform, the Company defines its customer as an individual who purchases products or services throughwebsites. The transaction price in the Company’s contracts with customers is the total amount of consideration to which the Companyexpects to be entitled in exchange for transferring products or services to the customer.
TheCompany’s contracts that contain prescription products issued as the result of a consultation include two performance obligations:access to (i) products and (ii) consultation services. The Company’s contracts for prescription refills have a single performanceobligation. Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised product tothe customer and, in contracts that contain services, by the provision of consultation services to the customer. The Company satisfiesits performance obligation for products at a point in time, which is upon delivery of the products to a third-party carrier. The Companysatisfies its performance obligation for services over the period of the consultation service, which is typically a few days. The customerobtains control of the products and services upon the Company’s completion of its performance obligations.
TheCompany has entered into a Physician Services Agreement with BrighterMD, LLC dba Doctegrity (“Doctegrity”) to provide onlinetelemedicine technology services to the Company (as discussed below under Note 8 – Subsequent Events). The Company accounts forservice revenue as a principal in the arrangement with its customers. This conclusion is reached because (i) the Company determines whichproviders provide the consultation to the customer; (ii) the Company is primarily responsible for the satisfactory fulfillment and acceptabilityof the services; (iii) the Company incurs costs for consultation services even for visits that do not result in a prescription and thesale of products; and (iv) the Company, at its sole discretion, sets all listed prices charged on its websites for products and services.
Additionally,the Company has entered into a Master Services Agreement and Statement of Work with Epiq Scripts, LLC (“Contracted Pharmacy”),which is a related party, to provide pharmacy and compounding services to the Company to fulfill its promise to customers for contractsthat include sale of prescription products and to fill prescriptions that are ordered by the Company’s customers for fulfillmentthrough the Company’s websites. The Company accounts for prescription product revenue as a principal in the arrangement with itscustomers. This conclusion is reached because (i) the Company has sole discretion in determining which Contracted Pharmacy fills a customer’sprescription; (ii) Contracted Pharmacy fills the prescription based on fulfillment instructions provided by the Company, including usingthe Company’s branded packaging for generic products; (iii) the Company is primarily responsible to the customer for the satisfactoryfulfillment and acceptability of the order, and (iv) the Company, at its sole discretion, sets all listed prices charged on its websitesfor products and services.
TheCompany accounts for shipping activities, consisting of direct costs to ship products performed after the control of a product has beentransferred to the customer, in cost of revenue.
NOTE3 – PREPAID EXPENSES
Duringthe nine months ended September 30, 2022, and in association with the Master Services Agreement and Statement of Work with our relatedparty Contracted Pharmacy, the Company prepaid the related party Contracted Pharmacy $15,000 as a retainer to be credited towards futureproduct sales. Additionally, the Company has signed a lease agreement for office space, effective October 1, 2022. The initial securitydeposit of $16,942 and the first month’s rent payment of $5,778 have been credited to prepaid expenses.
NOTE4 – PROPERTY, PLANT AND EQUIPMENT
OnSeptember 27, 2022, the Company acquired computers and office equipment totaling $2,531. We have not calculated any depreciation forthe nine months ended September 30, 2022, due to the amount being de minimis. Total property, plant and equipment at September 30, 2022was $2,531.
NOTE5 – OTHER LIABILITIES
Otherliabilities totaled $671 at September 30, 2022 and are related to payroll tax liabilities.
NOTE6 – LOANS FROM RELATED PARTIES
OnDecember 10, 2021 and March 18, 2022, the Company received advances of $39,200 and $50,000, respectively, for a total of $89,200 fromits previous majority shareholder, American International Holdings Corp (“AMIH”), in order to cover various general and administrativeexpenses. The advances bear no interest and are due on demand upon the Company’s ability to repay the advances from either futurerevenues or investment proceeds. On June 16, 2022, Cohen Enterprises, Inc. (“Cohen Enterprises”), which entity is owned andcontrolled by Jacob D. Cohen, the Company’s Chief Executive Officer and member of the Board of Directors, entered into and closeda Stock Purchase Agreement (the “SPA”) for the purchase of 8,000,000 shares of the outstanding common stock of the Companywhich were then held by AMIH, which represented 80% of the Company’s then outstanding shares of common stock, in considerationfor $90,000. Pursuant to the terms of the SPA, Cohen Enterprises also acquired the right to be repaid the $89,200 advanced from AMIHto the Company.
OnJune 29, 2022, the Company received an advance of $25,000 from Cohen Enterprises in order to cover various general and administrativeexpenses. The Company repaid Cohen Enterprises $25,000 on August 18, 2022, bringing the total amount owed to Cohen Enterprisesto $89,200 as of September 30, 2022. The Company recorded imputed interest equal to eight percent (8%) per annum,or $4,674, against the related party advances through the nine months ended September 30, 2022.
OnDecember 10, 2021, the Company received an advance of $70 from ZipDoctor, Inc., a wholly-owned subsidiary of its then majority shareholder,AMIH, which was used to open and establish the Company’s bank account. The advance bears no interest and is due on demand uponthe Company’s ability to repay the advance from either future revenues or investment proceeds. The amount was paid in full on May24, 2022 and the amount owed to ZipDoctor was $0 as of September 30, 2022.
TheCompany’s Chief Executive Officer, Jacob D. Cohen, has made his personal credit card available for purchases on behalf of the Companyto cover various general and administrative expenses. Mr. Cohen has been repaid a total of $150,423 as of September 30,2022 for Company purchases made on his personal credit card.
NOTE7 – CAPITAL STOCK
PreferredStock
TheCompany is authorized to issue up to 10,000,000 shares of “blank check” preferred stock, $0.0001 par value. All preferredstock were undesignated as of December 31, 2021 and September 30, 2022.
CommonStock
TheCompany is authorized to issue 200,000,000 shares of common stock, par value $0.0001 per share, of which 12,015,500 shareswere issued and outstanding at September 30, 2022 and 8,000,000 were issued and outstanding at December 31, 2021.
OnApril 6, 2022, the Company issued 1,000,000 shares of restricted common stock to the Company’s co-founder and CEO, Jacob D. Cohen,in consideration for services rendered. The shares were valued at $0.10 per share, based on then recent third-party sales of shares,for a total of $100,000.
OnApril 6, 2022, the Company issued 1,000,000 shares of restricted common stock to the Company’s co-founder, President and COO, JonathanArango, in consideration for services rendered to the Company. The shares were valued at $0.10 per share, based on then recent third-partysales of shares, for a total of $100,000.
OnJune 23, 2022, the Company issued 250,000 shares of restricted common stock to The Loev Law Firm, PC in consideration for legal servicesrendered to the Company. The managing partner of The Loev Law Firm, PC is David M. Loev, who is the brother-in-law of the Company’sCEO, Jacob D. Cohen. The shares were valued at $0.10 per share, based on then recent third-party sales of shares, for a totalof $25,000.
OnAugust 8, 2022, the Company began a private placement of up to $2,000,000 of units (the “Units”), each consisting of oneshare of common stock (the “Shares”) and a warrant to purchase one share of common stock (the “Warrants”), ata price of $1.00 per Unit. The Warrants have a five-year term and an exercise price of $1.00 per share, for which cash would need tobe remitted to us for exercise in the event that the shares underlying the warrants have been registered, otherwise the Warrants areexercisable on either a cash basis or a cashless basis. The offering of the Units is referred to as the “Offering.” The Unitsare being offered by the Company only to investors that qualify as “accredited investors,” as that term is defined in Rule501(a) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “SecuritiesAct”). The price of the Units has been determined by us and such price does not necessarily bear any relation to the book valueor other recognized criteria of value of the Company.
TheOffering commenced on August 8, 2022 and will continue until the earlier of the sale of all $2,000,000 of Units or September 30, 2022,unless extended by the Company and Boustead Securities, LLC, the placement agent for the Offering (“Boustead”), in theirsole discretion, without notice to any prospective or then current investor, for up to an additional 90 days (i.e., until December 29,2022), which offering has been extended until December 29, 2022. The Offering is for a minimum of $250,000 of Units and all subscriptionswill remain in escrow until this minimum amount is raised. The Company and Boustead reserve the right to terminate the Offering at anytime in their sole discretion, before or after the minimum offering amount is raised.
BetweenAugust 16, 2022 and September 30, 2022, the Company sold 1,500,500 Units at $1.00 per Unit to 19 investors in exchange for $1,500,500in gross proceeds from each investor, and subsequently issued the investors 1,500,500 Shares and 1,500,500 Warrants.
OnSeptember 6, 2022, the Company issued 50,000 restricted shares of common stock to PHX Global, LLC (“PHX”) in connection aConsulting Agreement. PHX is owned and controlled by Peter “Casey” Jensen, who is a member of the Board of Directors of AmericanInternational. The shares were valued at $1.00 per share, based on recent third-party sales of shares, for a total of $50,000.
OnSeptember 6, 2022, the Company issued 100,000 restricted shares of common stock to Ezekiel Elliott (“Elliott”) in connectiona Consulting Agreement. The shares were valued at $1.00 per share, based on recent third-party sales of shares, for a total of $100,000.
OnSeptember 15, 2022, the Company issued 10,000 restricted shares of common stock to David Sandler (“Sandler”) in connectiona Consulting Agreement. The shares were valued at $1.00 per share, based on recent third-party sales of shares, for a total of $10,000.
OnSeptember 15, 2022, the Company issued 5,000 restricted shares of common stock to Hsiaoching Chou (“Chou”) in connectiona Consulting Agreement. The shares were valued at $1.00 per share based on recent third-party sales of shares, for a total of $5,000.
OnSeptember 22, 2022, the Company issued 100,000 restricted shares of common stock to Greentree Financial Group, Inc. (“Greentree”)in connection a Service Agreement. The shares were valued at $1.00 per share based on recent third-party sales of shares, for a totalof $100,000.
Options:
Duringthe nine months ended September 30, 2022, the Company granted a total of 1,250,000 options, of which 750,000 were granted to Jacob Cohen,the Company’s CEO, and 500,000 were granted to Jonathan Arango, the Company’s President and COO, as Bonus Equity Shares relatedto their respective employment agreement. The options have an exercise price of $1.10 per share, an original life of five years and vestat the annual renewal of their employment over three years. As of September 30, 2022, $17,996 has been recorded as stock-based compensation.
Thefollowing table summarizes common stock options activity:
| | Options | | | Weighted Average Exercise Price | |
December 31, 2021 | | | - | | | $ | - | |
Granted | | | 1,250,000 | | | | 1.10 | |
Exercised | | | — | | | | — | |
Expired | | | — | | | | — | |
Outstanding, September 30, 2022 | | | 1,250,000 | | | $ | 1.10 | |
Exercisable, September 30, 2022 | | | - | | | $ | - | |
Theweighted average exercise prices, remaining lives for options granted, and exercisable as of September 30, 2022 were as follows:
| | | Outstanding Options | | | Exercisable Options | |
| Options Exercise Price Per Share | | | | Shares | | | | Life (Years) | | | | Weighted Average Exercise Price | | | | Shares | | | | Weighted Average Exercise Price | |
$ | 1.10 | | | | 1,250,000 | | | | 4.92 | | | $ | 1.10 | | | | - | | | | - | |
Asof September 30, 2022, the fair value of options outstanding was $753,255. The aggregate initial fair value of the options measured duringthe nine months ended September 30, 2022 was calculated using the Black-Scholes option pricing model based on the following assumption:
| | September 30, 2022 | |
Fair Value of Common Stock on measurement date | | $ | 1.00 | |
Risk free interest rate | | | 3.30 | % |
Volatility | | | 92.54 | % |
Dividend Yield | | | 0 | % |
Expected Term | | | 3.5 | |
(1)The risk-free interest rate was determined by management using the market yield on U.S. Treasury securities with comparable terms asof the measurement date.
(2)The trading volatility was determined by calculating the volatility of the Company’s peer group.
(3)The Company does not expect to pay a dividend in the foreseeable future
(4)The Company, in accordance with Staff Accounting Bulletin 14-D.2, used the simplified method (plain vanilla) to determine the overallexpected term
Warrants:
OnAugust 8, 2022, the Company began a private placement of up to $2,000,000 of units (the “Units”), each consisting of oneshare of common stock (the “Shares”) and a warrant to purchase one share of common stock (the “Warrants”), ata price of $1.00 per Unit. The Warrants have a five-year term and an exercise price of $1.00 per share, for which cash would need tobe remitted to us for exercise in the event that the shares underlying the warrants have been registered, otherwise the Warrants areexercisable on either a cash basis or a cashless basis. The offering of the Units is referred to as the “Offering.” The Unitsare being offered by the Company only to investors that qualify as “accredited investors,” as that term is defined in Rule501(a) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “SecuritiesAct”). The price of the Units has been determined by us and such price does not necessarily bear any relation to the book valueor other recognized criteria of value of the Company.
Duringthe nine months ended September 30, 2022, the Company issued a total of 1,500,500 Warrants to investors and 210,070 Warrants as compensationfor services rendered in connection with the Offering. The Warrants have an original life of five years and vest immediately.
Asof September 30, 2022, the fair value of Warrants outstanding to investors was $1,082,722. Because the Warrants vest immediately thefair value was assessed on the grant date. The aggregate initial fair value of the Warrants measured during the nine months ended September30, 2022 was calculated using the Black-Scholes option pricing model based on the following assumption:
TheWarrants for services have been expensed as stock-based compensation at the aggregate fair value in the amount of $151,821, for the ninemonths ended September 30, 2022. Because the Warrants vest immediately the fair value was assessed on the grant date. The aggregate fairvalue of the Warrants measured during the nine months ended September 30, 2022 was calculated using the Black-Scholes option pricingmodel based on the following assumption:
Thefollowing table summarizes common stock warrants activity:
| | Warrants | | | Weighted Average Exercise Price | |
Outstanding, December 31, 2021 | | | - | | | $ | - | |
Granted | | | 1,710,570 | | | | 1.00 | |
Exercised | | | — | | | | — | |
Expired | | | - | | | | | |
Cancelled | | | - | | | | — | |
Outstanding, September 30, 2022 | | | 1,710,570 | | | $ | 1.00 | |
Exercisable, September 30, 2022 | | | 1,710,570 | | | $ | 1.00 | |
Theweighted average exercise prices, remaining lives for warrants granted, and exercisable as of September 30, 2022, were as follows:
| | | Outstanding and Exercisable Warrants | |
Warrants Exercise Price Per Share | | | Shares | | | Life (Years) | |
$ | 1.00 | | | | 1,710,570 | | | | 4.93 | |
Asof September 30, 2022, 1,710,570 Warrants are outstanding and vested, and the vested stock Warrants have a weighted average remininglife of 5.00 years.
| | September 30, 2022 | |
Fair Value of Common Stock on measurement date | | $ | 0.63 | |
Risk free interest rate | | | From 2.95% to 3.75 | % |
Volatility | | | From 92.01% to 92.87 | % |
Dividend Yield | | | 0 | % |
Expected Term | | | 5 years | |
| (1) | The risk-free interest rate was determined by management using the market yield on U.S. Treasury securities with comparable terms as of the measurement date. |
| (2) | The trading volatility was determined by calculating the volatility of the Company’s peer group. |
| (3) | The Company does not expect to pay a dividend in the foreseeable future. |
NOTE8 – GOING CONCERN
Thesefinancial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realizationof assets and the discharge of liabilities in the normal course of business for the foreseeable future. As reflected in the accompanyingfinancials, the Company had a net loss of $1,324,401 for the nine months ended September 30, 2022 and an accumulateddeficit of $1,342,101 as of September 30, 2022. The Company will need to raise additional capital to successfully executeits business plan of which there can be no assurance. The sources of this capital are expected to be the sale of equity and debt, whichmay not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing shareholders. If we areunable to access additional capital moving forward, it may hurt our ability to grow and to generate future revenues, our financial position,and liquidity, or force us to abandon our business plan. These factors raise substantial doubt about the ability of the Company to continueas a going concern. Unless management is able to obtain additional financing, it is unlikely that the Company will be able to meet itsfunding requirements during the next 12 months. The financial statements do not include any adjustments that might result from the outcomeof this uncertainty.
NOTE9 – COMMITMENTS AND CONTINGENCIES
Inthe ordinary course of business, the Company may become a party to lawsuits involving various matters. The impact and outcome of litigation,if any, is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harmits business. The Company is not currently subject to any such litigation.
NOTE10 – SUBSEQUENT EVENTS
OnSeptember 28, 2022, and with an effective date of October 1, 2022, the Company entered into a Lease Agreement with Rox Trep Tollway,L.P. (the “Landlord”) to lease and occupy approximately 2,201 square feet of office space located at 15110 N. Dallas Parkway,Suite 600, Dallas, Texas 75248 to serve as the Company’s main headquarters (the “Lease Agreement”). The LeaseAgreement has a term of thirty-eight (38) months and has a monthly base rent of $0 for month 2, $5,778, or $31.50 per square foot, formonth 1 and months 3-18 and increases at the rate of $1 per square foot per annum until the end of the lease term (the “BaseRent”). In addition to the Base Rent, the Company is required to reimburse the landlord for its pro-rata share of all realestate taxes and assessments, hazard and liability insurance and common area maintenance costs for the building at the rate of 2.45%(the “Proportionate Rent”). Upon the execution of the Lease Agreement, the Company agreed to prepay the first fullmonth’s Base Rent along with a security deposit equal to $16,942.
OnOctober 1, 2022, the Company executed a Summary of Terms and Conditions (“Offer Letter”) with Eugene M. Johnston (“Johnston”)appointing Johnston to serve as the Company’s Chief Financial Officer on a full-time basis for a term of 12 months. Pursuant tothe Offer Letter, the Company issued Johnston 150,000 shares of the Company’s restricted stock and vestover a 6-month period at the rate of 25,000 shares per month with the first 25,000 shares vesting on November 1st, 2022. Johnstonis eligible to participate in any of the Company’s future sponsored benefit plans, including but not limited to, health insurancebenefits, 401k, stock option or restricted stock grants, and other fringe benefits, once established, and no earlier than the first ofthe month following 105 days of Johnston’s start date. Johnston is also eligible to receive equity incentive grants or cash bonusawards as determined by the Company’s Board (or a committee of the Board) in their sole discretion. The shares were valued at $1.00per share for a total of $150,000.
OnOctober 13, 2022, the Company ratified, confirmed, adopted and approved the Charters of the Company’s (a) Compensation Committee(the “Compensation Committee”); (b) Audit Committee (the “Audit Committee”); and (c) Nominating and CorporateGovernance Committee (the “Nominating and Corporate Governance Committee”). The Company further approved the appointmentsof each of Alex Hamilton (“Hamilton”), Dr. Kenny Myers (“Myers”) and Lorraine D’Alessio (“Alessio)to serve as independent members of the Board of Directors and appointed Hamilton to serve as the Chairman of the Audit Committee, Myersto serve as the Chairman of the Compensation Committee, and D’Alessio to serve as the Chairman of the Nominating and GovernanceCommittee.
TheCompany further entered into Director Offer Letter agreements with Hamilton, Myers and D’Alessio compensating each of them with75,000 shares of restricted common stock (for a total of 225,000 shares) (the “Director Shares”). The Director Shares wereissued under the Company’s 2022 Equity Incentive Plan (the “Plan”), with the following vesting schedule: 1/3 of theDirector Shares vested on October 14, 2022, and the remaining Director Shares will vest annually in one-third increments commencing onthe first anniversary date thereof. The shares were valued at $1.00 per share for a total of $225,000.
OnOctober 14, 2022, the Company issued its Project Manager, Joan Arango, 25,000 shares of restricted common stock under the Plan. The shareswere issued to Ms. Arango as a bonus for services rendered to date. Ms. Arango is the sister of the Company’s President and ChiefOperating Officer, Jonathan Arango. The shares were valued at $1.00 per share for a total of $25,000.
OnNovember 1, 2022, we entered into a Consulting Agreement with White Unicorn, LLC (“White Unicorn”), to provide business advisoryservices related to product packaging, strategic marketing, branding, advertising and future product development as reasonably requestedby the Company during the term of the agreement, which is for 12 months unless otherwise earlier terminated due to breach of the agreementby either party and the failure to cure such breach 30 days after written notice thereof. In consideration for agreeing to provide theservices under the agreement, the Company issued White Unicorn 100,000 shares of restricted common stock. The agreement contains customaryconfidentiality and non-solicitation provisions. The shares were valued at $1.00 per share for a total of $100,000.
OnDecember 1, 2022, the Company entered into a Master Services Agreement with Global Career Networks, Inc. (“GCN”). Pursuantto the agreement, we agreed to issue GCN 100,000 shares of restricted common stock with registration rights (which are included in theResale Prospectus) and GCN agreed to assist us with a planned twitter marketing campaign. The agreement has a one year term (providedthe individual project described therein has a six month term, beginning December 1, 2022), and may be renewed thereafter for additionalone year terms with the mutual approval of the parties. Either party may terminate the agreement at any time for any reason, with atleast 60 days’ notice, or upon the occurrence of any breach or default under the agreement, which remains uncured within 30 daysof written notice thereof, or if the non-terminating party is subject to bankruptcy. The agreement contains customary confidentiality,indemnification obligations, and limitations of liability.
OnDecember 21, 2022, we entered into a Consulting Agreement with Chartered Services, LLC (“Chartered Services”), to providestrategic marketing services for advertising and consulting, product distribution, digital marketing and identifying creative and constructivebrand awareness to the Company during the term of the agreement, which is for six months unless otherwise earlier terminated due to breachof the agreement by either party and the failure to cure such breach 30 days after written notice thereof. In consideration for agreeingto provide the services under the agreement, the Company agreed to pay Chartered Services $150,000 in cash (with $75,000 payable uponentry into the agreement and $75,000 payable on January 31, 2023) and issued Chartered Services 250,000 shares of restricted common stock.The agreement contains customary confidentiality and non-solicitation provisions. The shares were valued at $1.00 per share for a totalof $250,000.
OnDecember 30, 2022, we entered into a Waiver of Warrant agreement with the placement agent in our 2022 Private Offering, Boustead Securities,LLC (“Boustead”) whereby Boustead agreed to surrender all 280,000 warrants issued to them in connection with the 2022 PrivateOffering (the “Placement Agent Warrants”) for no consideration and Boustead irrevocably waived any right or interest in thePlacement Agent Warrants.
OnJanuary 3, 2023, we entered into a Consulting Agreement with DojoLabs Group, Inc. (“DojoLabs”), to provide various strategicmarketing related services to the Company pursuant to a defined scope of work during the term of the agreement, which is the earlierof a) all deliverables being received by the Company pursuant to the scope of work, or b) if terminated due to breach of the agreementby either party and the failure to cure such breach 30 days after written notice thereof. In consideration for agreeing to provide theservices under the agreement, the Company agreed to pay DojoLabs $100,000 in cash and issued DojoLabs 50,000 shares of restricted commonstock with registration rights (the registration of the resale of which shares are included in the Resale Prospectus) and fully vestupon the completion of all work performed under the scope of work. The agreement contains customary confidentiality and non-solicitationprovisions. The shares were valued at $1.00 per share for a total of $50,000.
OnJanuary 6, 2023, we entered into a Consulting Agreement with Bethor, Ltd. (“Bethor”), to provide strategic advisory servicesto the Company during the term of the agreement, which is for 12 months unless otherwise earlier terminated due to breach of the agreementby either party and the failure to cure such breach 30 days after written notice thereof. In consideration for agreeing to provide theservices under the agreement, the Company issued Bethor 250,000 shares of restricted common stock with registration rights (the registrationof the resale of which shares are included in the Resale Prospectus). The agreement contains customary confidentiality and non-solicitationprovisions. The shares were valued at $1.00 per share for a total of $250,000.
OnJanuary 6, 2023, the Company established an advisory board (the “Advisory Board”) and approved and adopted a charter (the“Advisory Board Charter”) to govern the Advisory Board. Pursuant to the Advisory Board Charter, the Advisory Board shallbe comprised of a minimum of two (2) members, all of whom shall be appointed and subject to removal by the Board of Directors at anytime. In addition to the enumerated responsibilities of the Advisory Board in the Advisory Board Charter, the primary function of theAdvisory Board is to assist the Board of Directors in its general oversight of the Company’s development of new business venturesand strategic planning.
Inconnection with the establishment of the Advisory Board, the Board of Directors appointed Dr. Brian Rudman (“Dr. Rudman”)and Mr. Jarrett Boon (“Mr. Boon”), both of whom are independent, non-Board members and non-Company employees, to the AdvisoryBoard. Dr. Rudman will serve as Chairman of the Advisory Board.
Inconnection with Dr. Rudman’s appointment to the Advisory Board, the Company entered into an Advisor Agreement (the “Dr. RudmanConsulting Agreement”), dated effective January 6, 2023, with Dr. Rudman, whereby the Company agreed to issue Dr. Rudman 25,000shares of the Company’s restricted common stock, pay Dr. Rudman $2,000 per month in cash, and reimburse Dr. Rudman for reasonableout-of-pocket expenses, including, without limitation, travel expenses incurred by him in connection with the Company’s requestsof the performance of his duties to the Company in service on the Advisory Board.
Inconnection with Mr. Boon’s appointment to the Advisory Board, the Company entered into an Advisor Agreement (the “Mr. BoonConsulting Agreement”), dated effective January 6, 2023, with Mr. Boon, whereby the Company agreed to issue Mr. Boon 25,000 sharesof the Company’s restricted common stock and to reimburse Mr. Boon for reasonable out-of-pocket expenses, including, without limitation,travel expenses incurred by him in connection with the Company’s requests of the performance of his duties to the Company in serviceon the Advisory Board.
1,250,000Shares
Mangoceuticals,Inc.
CommonStock
PROSPECTUS
BousteadSecurities, LLC
__________,2023
Throughand including , 2023 (the 25th day after the date of this prospectus),all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsoldallotment or subscription.
[Alternate Page for Resale Prospectus]
Theinformation in this prospectus is not complete and may be changed. These securities may not be sold until the registration statementfiled with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is notsoliciting offers to buy these securities in any state where the offer or sale is not permitted.
SUBJECTTO COMPLETION, DATED JANUARY 13, 2023
Mangoceuticals,Inc.
4,690,000 Shares of Common Stock
Thisprospectus relates to 4,690,000 shares of common stock, par value $0.0001 per share, of Mangoceuticals, Inc. that may be soldfrom time to time by the selling shareholders named in this prospectus.
Wewill not receive any proceeds from the sales of outstanding common stock by the selling shareholders.
Ourcommon stock is listed on The Nasdaq Capital Market, or NASDAQ, under the symbol “MNGO.”
Aftercompletion of our initial public offering, Cohen Enterprises, Inc., our largest single shareholder, controlled by Jacob D. Cohen, ourChairman and Chief Executive Officer, will continue to own approximately 53.5% of our outstanding common stock. We are a “controlledcompany” as defined under Nasdaq Marketplace Rules and are eligible for certain exemptions from these rules, though we do not intendto rely on any such exemptions. See “Risk Factors – Jacob D. Cohen, our Chairman and Chief Executive Officer, beneficiallyowns greater than 50% of our outstanding common stock” for more information.
Theselling shareholders may offer and sell the common stock being offered by this prospectus from time to time in public or private transactions,or both. These sales will occur at a fixed price of $4.00 per share until our common stock is quoted on the OTCQB or OTCQX marketplacemaintained by OTC Markets, Inc., or listed on a national securities exchange. Thereafter, these sales will occur at fixed prices, atmarket prices prevailing at the time of sale, at prices related to prevailing market prices, or at negotiated prices. The selling shareholdersmay sell shares to or through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessionsor commissions from the selling shareholders, the purchasers of the shares, or both. Any participating broker-dealers and any sellingshareholders who are affiliates of broker-dealers may be deemed to be “underwriters” within the meaning of the SecuritiesAct of 1933, as amended, and any commissions or discounts given to any such broker-dealer or affiliates of a broker-dealer may be regardedas underwriting commissions or discounts under the Securities Act of 1933, as amended. The selling shareholders have informed us thatthey do not have any agreement or understanding, directly or indirectly, with any person to distribute their common stock. See “Planof Distribution” for a more complete description of the ways in which the shares may be sold.
Atthe same time as the offering set forth in this prospectus (the “Resale Prospectus”), we have completed a public offeringof 1,250,000 shares of common stock through a separate prospectus (the “Public Offering Prospectus”) throughthe underwriters named on the cover page of the Public Offering Prospectus, each of which prospectuses were filed as part of the sameregistration statement of which this prospectus forms a part.
Weare an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and, as such,may elect to comply with certain reduced public company reporting requirements for future filings. This prospectus complies with therequirements that apply to an issuer that is an emerging growth company.
Aninvestment in our common stock involves a high degree of risk. You should carefully consider the risk factors set forth under “RiskFactors,” beginning on page 12 of this prospectus before you make your decision to invest in our common stock.
Neitherthe Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon theaccuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Thedate of this prospectus is ____________, 2023.
[AlternatePage for Resale Prospectus]
TheOffering
Common stock offered by the selling shareholders: | | This prospectus relates to 4,690,000 shares of common stock that may be sold from time to time by the selling shareholders named in this prospectus. |
| | |
Shares outstanding prior to this offering: | | 14,965,000 shares of common stock. |
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Shares outstanding after this offering: | | 16,995,000 shares of common stock1. |
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Use of proceeds: | | We will not receive any proceeds from the sales of outstanding common stock by the selling shareholders. However, to the extent that certain warrants, the common stock issuable upon exercise thereof which are registered in the registration statement of which this prospectus is a part, are exercised for cash, we will receive the payment of the exercise price in connection with such exercise (see also “Use of Proceeds,” below). |
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Risk factors: | | Investing in our securities involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” below. |
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Trading market and symbol: | | Our common stock is listed on The Nasdaq Capital Market under the symbol “MNGO.” |
1Assumes the cash exercise of all warrants, shares of common stock issuable upon exercise of which are registered inthis prospectus, the issuance of all shares of common stock registered in the registration statement, of which this prospectus formsa part and the sale of all shares of common stock pursuant to the Public Offering Prospectus (but no exercise of the underwriters’overallotment option in connection therewith).
Inthis prospectus, unless otherwise indicated, the number of shares of our common stock and other capital stock, and the other informationbased thereon, is as of January 13, 2023 and excludes:
| ● | shares of common stock issuable upon exercise of warrants to purchase 2,000,000 shares of our common stock at an exercise price of $1.00 per share (including shares of common stock issuable upon exercise of the warrants which are registered herein); |
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| ● | shares of common stock issuable upon exercise of warrants to purchase 100,625 shares of our common stock at an exercise price of [$5.00] per share granted to the representative of the underwriters as descried in the Public Offering Prospectus (which represents the maximum number of shares underlying such warrants issuable to the representative of the underwritersin the event the underwriter’s overallotment option is exercised); |
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| ● | shares of common stock issuable upon exercise of options to purchase 1,250,000 shares of our common stock at an exercise price of $1.10 per share; and |
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| ● | no further awards under the Company’s 2022 Equity Incentive Plan, of which 1,850,000 shares currently remain available for future awards under such plan. |
Additionally,unless otherwise stated, all information in this prospectus:
| ● | reflects all currency in United States dollars. |
[AlternatePage for Resale Prospectus]
PRIVATEPLACEMENT OFFERING
InAugust 2022, the Company initiated a $250,000 or none, minimum private placement of up to $2 million of units to accredited investors,with each unit consisting of one share of common stock and a warrant to purchase one share of common stock, at a price of $1.00 per unit(the “2022 Private Offering”). The warrants have a five-year term (from each closing date that units were sold, which unitswere sold in rolling offerings) and an exercise price of $1.00 per share. If at any time after the six month anniversary of the issuancedate, there is no effective registration statement registering, or no current prospectus available for the resale of the shares of commonstock issuable upon exercise the warrants, the holder of the warrants may elect a cashless exercise of the warrants. The offering wasto continue until the earlier of the sale of all $2,000,000 of units or December 29, 2022, and the offering closed on December 22,2022, upon the sale of all $2,000,000 of the units.
BousteadSecurities, LLC (“Boustead”), served as the placement agent in connection with the offering (the “Placement Agent”).In total we sold an aggregate of 2,000,000 units for $2,000,000 to 23 accredited investors between August 16, 2022 and December 22,2022, the end date of the offering.
Wepaid Boustead a success fee of 7% of the gross purchase price of the units sold in the offering discussed above $140,000 and a 1% non-accountableexpense allowance $20,000. Additionally, we granted Boustead warrants to purchase 7% of the number of shares and warrants sold in theoffering, totaling warrants to purchase 280,000 shares of common stock, with an exercise price of $1.00 per share, the shares of commonstock issuable upon exercise of which warrants are being registered in the Resale Prospectus. The warrants granted to Boustead have cashlessexercise rights (regardless of whether the shares underlying such warrants are registered) and a term of five years from their originalgrant date (a total of 56,000 warrants were granted to Boustead on August 16, 2022; a total of 51,870 warrants were granted to Bousteadon September 9, 2022, a total of 102,200 warrants were granted to Boustead on September 21, 2022, a total of 45,500 warrants were grantedto Boustead on November 11, 2022, and a total of 24,430 warrants were granted to Boustead on December 22, 2022). On December30, 2022, we entered into a Waiver of Warrant agreement with Boustead, wherebyBoustead agreed to surrender all 280,000 warrants issued to them in connection with the 2022 Private Offering (the “Placement AgentWarrants”) for no consideration and Boustead irrevocably waived any right or interest in the Placement Agent Warrants.
Underthe Company’s engagement letter with Boustead, dated June 21, 2022 (the “Engagement Letter”), Boustead has beenengaged as our exclusive financial advisor for the 12-month term of the Engagement Letter.
TheCompany has agreed to indemnify Boustead, as placement agent, for certain liabilities, including certain liabilities under the SecuritiesAct, or to contribute to payments that Boustead, as Placement Agent, may be required to make in respect thereof.
Investorsin the private placement were provided piggy-back registration rights (with customary underwriter cutbacks) for a period of five yearsafter the closing of the private placement offering, in connection with the shares and shares of common stock issuable upon exerciseof the warrants, which shares and shares underlying the warrants are included in the registration statement of which this prospectusforms a part.
Weagreed to pay all fees and expenses related to the registration statement of which this prospectus is a part, but the investors are requiredto pay any and all underwriting commissions and the expenses of any legal counsel selected by the investors to represent them in connectionwith the sale of the securities.
Eachinvestor agreed to comply with all prospectus delivery requirements of the Securities Act as applicable in connection with sales of anysecurities pursuant to this prospectus.
Thewarrants contain provisions limiting each holder’s ability to exercise any portion of its individual warrant if such conversionwould cause the holder’s (or any affiliate of any such holder’s) holdings in the Company to exceed 4.999% of the Company’sissued and outstanding shares of common stock, which percentage may be increased to up to 9.999% with 61 days prior written notice tothe Company.
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USEOF PROCEEDS
Weare registering the shares of common stock for the benefit of the selling shareholders. We are not selling any securities under thisprospectus and we will not receive any of the proceeds from the sale or other disposition by the selling shareholders or their transfereesof the shares of common stock covered hereby. However, to the extent that the warrants are exercised for cash, we will receive up to$2,000,000 (assuming a cash exercise of all such warrants, which each contain cashless exercise rights) which amount we plan touse for product development, marketing and advertising, working capital and general corporate purposes. However, the timing and mannerof use of the net proceeds may vary, depending on the amount of actual proceeds received from the exercise of the warrants, if any, thetiming of the receipt of such proceeds, our rate of growth and other factors.
Wehave agreed to pay all costs, expenses and fees relating to registering the shares of our common stock referenced in this prospectus.The selling shareholders will pay any underwriting discounts and commissions and expenses incurred by the selling shareholders for brokerage,accounting, tax or legal services or any other expenses incurred by the selling shareholders in disposing of the shares.
See“Selling Shareholders” and “Plan of Distribution” described below.
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SELLINGSHAREHOLDERS
Thisprospectus covers the resale from time to time by the selling shareholders identified in the table below of up to 4,690,000 sharesof common stock through this prospectus, including up to 2,000,000 shares of common stock issuable upon exercise of outstandingwarrants, each described in greater detail above under “Private Placement Offering.”
Weare registering the shares to permit the selling shareholders and any of their pledgees, donees, transferees, assignees and successors-in-interestto, from time to time, sell any or all of the shares through public or private transactions at prevailing market prices, at prices relatedto prevailing market prices or at privately negotiated prices of common stock on any stock exchange, market or trading facility on whichthe shares are traded or in private transactions when and as they deem appropriate in the manner described in “Planof Distribution.” As of the date of this prospectus, there are [14,965,000] shares of our common stock issued and outstanding.
Thefollowing table sets forth, as of the date of this prospectus, the name of each selling shareholder, the number and percentage of sharesof our common stock beneficially owned by each selling shareholder prior to the offering for resale of the shares under this prospectus,the number of shares of our common stock beneficially owned by each selling shareholder that may be offered from time to time under thisprospectus, and the number and percentage of shares of our common stock beneficially owned by the selling shareholder after the offeringof the shares (assuming all of the offered shares are sold by the selling shareholder). The selling shareholders can offer all, someor none of their shares of common stock, and thus we have no way of determining the number of shares of common stock each selling shareholderwill hold after this offering.
Thereare no agreements between the Company and any selling shareholder pursuant to which the shares subject to this registration statementwere issued except as discussed above under “Private Placement Offering.” None of the selling shareholdershas ever been an executive officer or director of the Company or has had a material relationship with us at any time within the pastthree years unless disclosed in the footnotes below. None of the selling shareholders is a registered broker-dealer or an affiliate ofa registered broker-dealer, except as discussed in the footnotes below.
Beneficialownership is determined in accordance with the rules of the SEC, and includes any shares of common stock as to which a person has soleor shared voting power or investment power and any shares of common stock which the person has the right to acquire within sixty (60)days through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic terminationof a power of attorney or revocation of a trust, discretionary account or similar arrangement.
| | Number of Shares of Common Stock Beneficially Owned Prior to this Offering (1) | | | Number of Shares of Common Stock Being | | | Beneficial Ownership of Common Stock After Registration Assuming All Shares Are Sold (#) | |
Name of Selling Shareholder | | Number | | | Percentage | | | Offered | | | Number | | | Percentage | |
3675 and 3325 West Holdco, LLC (a)(2) | | | 300,000 | | | | 2.0 | % | | | 300,000 | | | | — | | | | — | |
Basestones, Inc. (b)(2) | | | 200,000 | | | | 1.3 | % | | | 200,000 | | | | — | | | | — | |
Bethor, Ltd. (c) (4) | | | 250,000 | | | | 1.7 | % | | | 250,000 | | | | — | | | | — | |
Chris Etherington (2) | | | 50,000 | | | | * | | | | 50,000 | | | | — | | | | — | |
Damien and Danielle Van der Putten JTWRS (2) | | | 121,000 | | | | * | | | | 121,000 | | | | — | | | | — | |
David Sandler (4) | | | 10,000 | | | | * | | | | 10,000 | | | | — | | | | — | |
DojoLabs Group, Inc. (d)(4) | | | 50,000 | | | | * | | | | 50,000 | | | | — | | | | — | |
Eternal Horizon International (e)(2) | | | 200,000 | | | | 1.3 | % | | | 200,000 | | | | — | | | | — | |
Eugene Myers (f)(2) | | | 300,000 | | | | 2.0 | % | | | 300,000 | | | | — | | | | — | |
Ezekiel Elliott (4) | | | 100,000 | | | | * | | | | 100,000 | | | | — | | | | — | |
Frank Salzano (2) | | | 50,000 | | | | * | | | | 50,000 | | | | — | | | | — | |
Frenkel & Frenkel LLC (g)(2) | | | 900,000 | | | | 4.999 | %(5) | | | 900,000 | | | | — | | | | — | |
Global Prestige Development Group, Inc. (h)(2) | | | 200,000 | | | | 1.3 | % | | | 200,000 | | | | — | | | | — | |
Greentree Financial Group, Inc. (i)(6) | | | 300,000 | | | | 2.0 | % | | | 300,000 | | | | — | | | | — | |
Hsiaoching Chou (4) | | | 5,000 | | | | * | | | | 5,000 | | | | — | | | | | |
Jason Pryor (2) | | | 20,000 | | | | * | | | | 20,000 | | | | — | | | | — | |
John Christopher Lee (2) | | | 60,000 | | | | * | | | | 60,000 | | | | — | | | | — | |
Manny Ceara (2) | | | 49,000 | | | | * | | | | 49,000 | | | | — | | | | — | |
Mark Olivier (2) | | | 50,000 | | | | * | | | | 50,000 | | | | — | | | | — | |
Mike Sanchez (2) | | | 450,000 | | | | 3.0 | % | | | 450,000 | | | | — | | | | — | |
Nicolas Keros and Alena Zdorovchenko JTWRS (2) | | | 50,000 | | | | * | | | | 50,000 | | | | — | | | | — | |
Oleta Investments, LLC (j)(2) | | | 200,000 | | | | 1.3 | % | | | 200,000 | | | | — | | | | — | |
Peter Casey Jensen (k)(2) | | | 50,000 | | | | * | | | | 50,000 | | | | — | | | | — | |
PHX Global, LLC (k)(4) | | | 50,000 | | | | * | | | | 50,000 | | | | — | | | | — | |
Raffi Sahul (2) | | | 50,000 | | | | * | | | | 50,000 | | | | — | | | | — | |
Tatiana Taleb (2) | | | 50,000 | | | | * | | | | 50,000 | | | | — | | | | — | |
The Candy Rib Trust (l)(2) | | | 200,000 | | | | 1.3 | % | | | 200,000 | | | | — | | | | — | |
The Loev Family Partnership Ltd. (m)(4) | | | 250,000 | | | | 1.7 | % | | | 125,000 | | | | 125,000 | | | | * | |
Varkes Churukian (2) | | | 50,000 | | | | * | | | | 50,000 | | | | — | | | | — | |
Wing Kai Lam (2) | | | 200,000 | | | | 1.3 | % | | | 200,000 | | | | — | | | | — | |
| | | | | | | | | | | 4,690,000 | | | | | | | | | |
*Less than one percent (1%).
#Assumes the sale of all shares offered herein.
(1)“Beneficial ownership” means that a person, directly or indirectly, has or shares voting or investment power with respectto a security or has the right to acquire such power within 60 days. The percentage is based upon [14,965,000] shares of our commonstock outstanding as of January 20, 2023.
(2)Such number of securities represents an equal number of shares of common stock currently outstanding and shares of common stock issuableupon exercise of outstanding warrants held by the selling shareholder, with an exercise price of $1.00 per share, which were purchasedin the Company’s 2022 Private Offering (see “Private Placement Offering” above).
(3)Represents shares of common stock issuable upon exercise of outstanding warrants to purchase shares of common stock of the Company issuedas consideration for serving as placement agent in connection with the Company’s 2022 Private Offering (see “PrivatePlacement Offering” above).
(4)Represents shares of common stock issued in consideration for services rendered.
(5) Each of the warrants sold in our 2022 Private Offering(see “Private Placement Offering” above) contain provisions limiting each holder’s ability to exercise any portionof its individual warrant if such conversion would cause the holder’s (or any affiliate of any such holder’s) holdings inthe Company to exceed 4.999% of the Company’s issued and outstanding shares of common stock, which percentage may be increasedto up to 9.999% with 61 days prior written notice to the Company. As such, the holder is prohibited from exercising any portion of thewarrants which would result in such holder’s (or any affiliate of any such holder’s) beneficial ownership of the Company’scommon stock exceeding 4.999%.
(6) Represents 100,000 shares of common stock and warrantsto purchase 100,000 shares of common sold in our 2022 Private Offering (see “Private Placement Offering” above) and 100,000shares of common stock issued pursuant to the Service Agreement (see “Business—MaterialAgreements— Consulting Agreements”, above).
(a) Thebeneficial owner of the securities held by 3675 and 3325 Westholdco, LLC is David Long, its Manager.
(b)The beneficial owner of the securities held by Basestones, Inc. is Mohammad Ansari, its President.
(c) The beneficialowner of the securities held by Bethor, Ltd. is Mohammad Ansari, its Director.
(d)The beneficial owner of the securities held by DojoLabs Group, Inc. is Robert Tallack, its CEO.
(e) The beneficial owner of the securities held by EternalHorizon International is Jie Xue, its Director.
(f) Eugene Meyers is the brother of our director, Dr. Kenny Meyers.
(g) The beneficial owner of the securities held by Frenkel& Frenkel LLC is Scott Frenkel, its Chief Executive Officer.
(h) The beneficial owner of the securities held by GlobalPrestige Development Group, Inc. is Andres Gomez, its President.
(i)The beneficial owner of the securities held by Greentree Financial Group, Inc., is Robert Chris Cottone, its Vice President. Since February2015, Mr. Eugene M. Johnston, our Chief Financial Officer (who was appointed October 1, 2022) has served as Audit Manager for Greentree.
(j) The beneficial owner of the securities held by OletaInvestments, LLC is Chris Etherington, its Managing Partner.
(k) The beneficial owner of the securities held by PHXGlobal, LLC is Peter Casey Jensen, its Manager, who is also an individual selling shareholder.
(l) The beneficial owner of the securities held by TheCandy Rib Trust is Ryan Quimby, its Trustee.
(m) The beneficial owner of the securities held by TheLoev Family Partnership Ltd. is David M. Loev, the Managing Partner, President and sole owner of The Loev Law Firm, PC. Mr. Loevis the brother-in-law of Jacob D. Cohen, our Chairman and Chief Executive Officer. Mr. Loev is a broker registered with the FinancialIndustry Regulatory Authority, Inc. The shares held by The Loev Family Partnership were originally issued to The Loev Law Firm, PCand were subsequently transferred to The Loev Family Partnership Ltd., of which Mr. Loev is a beneficial owner of both such entities.
Wemay require the Selling Shareholders to suspend the sales of the securities offered by this prospectus upon the occurrence of any eventthat makes any statement in this prospectus, or the related registration statement, untrue in any material respect, or that requiresthe changing of statements in these documents in order to make statements in those documents not misleading. We will file a post-effectiveamendment to this registration statement to reflect any material changes to this prospectus.
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PLANOF DISTRIBUTION
EachSelling Shareholder and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of theirsecurities covered hereby on any stock exchange, market or trading facility on which the securities are traded or in private transactions.These sales will occur at a fixed price of $[4.00] per share until our common stock is quoted on the OTCQB or OTCQX marketplacemaintained by OTC Markets, Inc., or listed on a national securities exchange. Thereafter, these sales will occur at fixed prices, atmarket prices prevailing at the time of sale, at prices related to prevailing market prices, or at negotiated prices. A Selling Shareholdermay use any one or more of the following methods when selling securities:
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| | |
| ● | block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| | |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| | |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; |
| | |
| ● | privately negotiated transactions; |
| | |
| ● | settlement of short sales; |
| | |
| ● | in transactions through broker-dealers that agree with the selling shareholders to sell a specified number of such securities at a stipulated price per security; |
| | |
| ● | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| | |
| ● | a combination of any such methods of sale; or |
| | |
| ● | any other method permitted pursuant to applicable law. |
Theselling shareholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.
BousteadSecurities, LLC (“Boustead”) is an underwriter for the Company’sinitial public offering (the “IPO”).
Inconnection with the IPO, Boustead will receive (i) a non-accountable expense allowance equal to 1.0% of the gross proceeds for expensesin connection with the IPO; (ii) a cash discount of 7% of the gross proceeds from the sale of securities in the IPO; and (iii) an accountableexpense reimbursement of up to $230,000 for out-of-pocket expenses incurred in connection with the IPO. Boustead will also receive awarrant to purchase a number of shares of common stock equal to 7% of the aggregate number of shares of common stock sold in the IPO.The warrant will be exercisable on a cashless basis at an exercise price equal to 125% of the public offering price of the shares soldin the IPO. Additionally, Boustead has the right of first refusal for 12 months following the consummation of the IPO or the terminationor expiration of the engagement with Boustead to act as financial advisor on at least equal economic terms on any public or private financing(debt or equity), merger, business combination, recapitalization or sale of some or all of our equity or our assets, whether in conjunctionwith another broker-dealer or on the Company’s own volition.
Broker-dealersengaged by the Selling Shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissionsor discounts from the Selling Shareholders, or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser, inamounts to be negotiated. The Selling Shareholders do not expect these commissions and discounts to exceed what is customary in the typesof transactions involved.
TheSelling Shareholders may from time to time pledge or grant a security interest in some or all of the shares owned by them and, if theydefault in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares of our common stockfrom time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provisionof the Securities Act amending the list of selling security holders to include the pledgee, transferee or other successors in interestas selling security holders under this prospectus.
Uponour being notified in writing by a Selling Shareholder that any material arrangement has been entered into with a broker-dealer for thesale of our common stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by abroker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing(i) the name of each such Selling Shareholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) theprice at which such the shares of our common stock were sold, (iv)the commissions paid or discounts or concessions allowed to such broker-dealer(s),where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporatedby reference in this prospectus, and (vi) other facts material to the transaction. In addition, upon our being notified in writing bya Selling Shareholder that a donee or pledgee intends to sell more than 500 shares of our common stock, a supplement to this prospectuswill be filed if then required in accordance with applicable securities law.
TheSelling Shareholders also may transfer the shares of our common stock in other circumstances, in which case the transferees, pledgeesor other successors in interest will be the selling beneficial owners for purposes of this prospectus.
TheSelling Shareholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters”within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealersor agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts underthe Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of Securitieswill be paid by the Selling Shareholder and/or the purchasers. Each Selling Shareholder has represented and warranted to us that it acquiredthe securities subject to this prospectus in the ordinary course of such Selling Shareholder’s business and, at the time of itspurchase of such securities such Selling Shareholder had no agreements or understandings, directly or indirectly, with any person todistribute any such securities.
Wehave advised each Selling Shareholder that it may not use shares registered on this prospectus to cover short sales of our common stockmade prior to the date on which this prospectus shall have been declared effective by the Commission. If a Selling Shareholder uses thisprospectus for any sale of our common stock, it will be subject to the prospectus delivery requirements of the Securities Act. The SellingShareholders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulationsthereunder promulgated, including, without limitation, Regulation M, as applicable to such Selling Shareholders in connection with resalesof their respective shares under this prospectus.
Weare required to pay all fees and expenses incident to the registration of the shares, but we will not receive any proceeds from the saleof our common stock. We have agreed to indemnify the Selling Shareholders against certain losses, claims, damages and liabilities, includingliabilities under the Securities Act.
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LEGALMATTERS
Thevalidity of the common stock covered by this prospectus will be passed upon by The Loev Law Firm, PC. David M. Loev, the Managing Partner,President and sole owner of The Loev Law Firm, PC, beneficially owns less than 2% of the outstanding shares of our common stockand is the brother-in-law of Jacob D. Cohen, our Chief Executive Officer and Chairman.
[Alternate Page for Resale Prospectus]
4,690,000 Shares
Mangoceuticals, Inc.
Common Stock
RESALE PROSPECTUS
__________, 2023
Youshould rely only on the information contained in this Resale Prospectus. No dealer, salesperson or other person is authorized to giveinformation that is not contained in the Resale Prospectus. This Resale Prospectus is not an offer to sell nor is it seeking an offerto buy these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this Resale Prospectusis correct only as of the date of this Resale Prospectus, regardless of the time of the delivery of this Resale Prospectus or the saleof these securities.
PART II
INFORMATIONNOT REQUIRED IN PROSPECTUS
Item13. Other Expenses of Issuance and Distribution.
Thefollowing table sets forth the estimated costs and expenses to be incurred in connection with the issuance and distribution of the securitiesof Mangoceuticals, Inc. (the “Registrant”) which are registered under this Registration Statement on Form S-1 (this “RegistrationStatement”), except any expenses incurred by the selling shareholders and other than underwriting discounts and commissions.All amounts are estimates except the Securities and Exchange Commission registration fee, the Nasdaq Capital Market listing fee,and the Financial Industry Regulatory Authority, Inc. filing fee.
| | Amount to be Paid | |
SEC Registration fee | | $ | 3,446 | |
Financial Industry Regulatory Authority, Inc. filing fee | | | 5,190 | |
Nasdaq Listing fees | | | 75,000 | |
Printing and engraving expenses | | | 15,000 | * |
Legal fees and expenses | | | 200,000 | * |
Accounting fees and expenses | | | 30,000 | * |
Transfer Agent’s fees | | | 15,000 | * |
Miscellaneous fees and expenses | | | 2,585 | * |
Total | | $ | 350,000 | * |
*Estimates.
Item14. Indemnification of Directors and Officers.
Asauthorized by Chapter 8 of the Texas Business Organizations Code, we may indemnify our officers and directors (and our former officersand directors) against expenses incurred by such persons in connection with any (A) threatened, pending, or completed action or otherproceeding, whether civil, criminal, administrative, arbitrative, or investigative; (B) an appeal of an action or proceeding describedby (A); and (C) an inquiry or investigation that could lead to an action or proceeding described by (A), involving such persons in theircapacities as officers and directors, if it is determined in accordance with the Texas Business Organizations Code that: (1) the person:(A) acted in good faith; (B) reasonably believed: (i) in the case of conduct in the person’s official capacity, that the person’sconduct was in the enterprise’s best interests; and (ii) in any other case, that the person’s conduct was not opposed tothe enterprise’s best interests; and (C) in the case of a criminal proceeding, did not have a reasonable cause to believe the person’sconduct was unlawful; (2) with respect to expenses, the amount of expenses other than a judgment is reasonable; and (3) indemnificationshould be paid.
UnderTexas law, corporations may also purchase and maintain insurance or make other financial arrangements on behalf of any person who isor was a director or officer (or is serving at our request as a director or officer of another corporation) for any liability assertedagainst such person and any expenses incurred by him in his capacity as a director or officer.
Additionally,our Bylaws (“Bylaws”), state that we shall indemnify every (i) present or former director, advisory director or officer ofus, (ii) any person who while serving in any of the capacities referred to in clause (i) served at our request as a director, officer,partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership,joint venture, trust, employee benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant to authoritygranted by) the Board of Directors or any committee thereof to serve in any of the capacities referred to in clauses (i) or (ii) (eachan “Indemnitee”).
OurBylaws provide that we shall indemnify an Indemnitee against all judgments, penalties (including excise and similar taxes), fines, amountspaid in settlement and reasonable expenses actually incurred by the Indemnitee in connection with any proceeding in which he was, isor is threatened to be named as a defendant or respondent, or in which he was or is a witness without being named a defendant or respondent,by reason, in whole or in part, of his serving or having served, or having been nominated or designated to serve, if it is determinedthat the Indemnitee (a) conducted himself in good faith, (b) reasonably believed, in the case of conduct in his official capacity, thathis conduct was in our best interests and, in all other cases, that his conduct was at least not opposed to our best interests, and (c)in the case of any criminal proceeding, had no reasonable cause to believe that his conduct was unlawful; provided, however, that inthe event that an Indemnitee is found liable to us or is found liable on the basis that personal benefit was improperly received by theIndemnitee, the indemnification (i) is limited to reasonable expenses actually incurred by the Indemnitee in connection with the proceedingand (ii) shall not be made in respect of any proceeding in which the Indemnitee shall have been found liable for willful or intentionalmisconduct in the performance of his duty to us.
Exceptas provided above, the Bylaws provide that no indemnification shall be made in respect to any proceeding in which such Indemnitee hasbeen (a) found liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from anaction taken in the Indemnitee’s official capacity, or (b) found liable to us. The termination of any proceeding by judgment, order,settlement or conviction, or on a plea of nolo contendere or its equivalent, is not of itself determinative that the Indemnitee did notmeet the requirements set forth in clauses (a) or (b) above. An Indemnitee shall be deemed to have been found liable in respect of anyclaim, issue or matter only after the Indemnitee shall have been so adjudged by a court of competent jurisdiction after exhaustion ofall appeals therefrom. Reasonable expenses shall include, without limitation, all court costs and all fees and disbursements of attorneys’fees for the Indemnitee. The indemnification provided shall be applicable whether or not negligence or gross negligence of the Indemniteeis alleged or proven.
Neitherour Bylaws nor our Certificate of Formation, as amended, include any specific indemnification provisions for our officers or directorsagainst liability under the Securities Act. Additionally, insofar as indemnification for liabilities arising under the Securities Actmay be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, theCompany has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policyas expressed in the Securities Act and is, therefore, unenforceable.
Item15. Recent Sales of Unregistered Securities.
Thefollowing is a summary of transactions by us within the past three years involving sales or our securities that were not registered underthe Securities Act.
OnApril 6, 2022, the Company issued 1,000,000 shares of restricted common stock each (2,000,000 shares in aggregate) to Mr. Cohen and JonathanArango, in consideration for services rendered as the Chief Executive Officer and President and Chief Operating Officer, respectively,of the Company. The shares were valued at $0.10 per share or a total of $100,000.
OnApril 6, 2022, and effective on October 7, 2021, we issued 8,000,000 shares of restricted common stock of the Company to American InternationalHoldings Corp., of which Jacob D. Cohen, our Chief Executive Officer and Chairman is the President, Chief Executive Officer and director,in consideration for $800 or $0.0001 per share.
OnJune 22, 2022, we issued 250,000 shares of restricted common stock to The Loev Law Firm, PC, in consideration for services rendered tothe Company. The Managing Partner of The Loev Law Firm, PC, is David M. Loev, the brother-in-law of Jacob D. Cohen, our Chief ExecutiveOfficer and Chairman.
On September 6, 2022, we entered into a Consulting Agreement with PHX Global, LLC (“PHX”), which is owned by Peter “Casey” Jensen, who is a member of the Board of Directors of American International. Pursuant to the Consulting Agreement, PHX agreed to provide consulting and general business advisory services as reasonably requested by the Company during the term of the agreement, which was for 12 months, unless otherwise earlier terminated due to breach of the agreement by either party, and the failure to cure such breach 30 days after written notice thereof. In consideration for agreeing to provide the services under the agreement, the Company issued PHX 50,000 restricted shares of common stock. The agreement contains customary confidentiality and non-solicitation provisions. We also agreed to include the shares issued to PHX in the Resale Prospectus, which shares of common stock are included therein.
OnSeptember 6, 2022, we entered into a Consulting Agreement with Ezekiel Elliott, currently a professional football player, and the runningback for the Dallas Cowboys (“Elliott”) to provide consulting and general business advisory services as reasonably requestedby the Company during the term of the agreement, which was for 12 months, unless otherwise earlier terminated due to breach of the agreementby either party, and the failure to cure such breach 30 days after written notice thereof. In consideration for agreeing to provide theservices under the agreement, the Company issued Elliott 100,000 restricted shares of common stock. The agreement contains customaryconfidentiality and non-solicitation provisions. We also agreed to register the shares issued to Elliott in the Resale Prospectus, whichshares of common stock are included therein.
OnSeptember 15, 2022, we entered into a Consulting Agreement with David Sandler (“Sandler”), to provide consulting and generalbusiness advisory services as reasonably requested by the Company during the term of the agreement, which was for six months, unlessotherwise earlier terminated due to breach of the agreement by either party, and the failure to cure such breach 30 days after writtennotice thereof. In consideration for agreeing to provide the services under the agreement, the Company issued Sandler 10,000 restrictedshares of common stock. The agreement contains customary confidentiality and non-solicitation provisions. We also agreed to include theshares issued to Sandler in the Resale Prospectus, which shares of common stock are included therein.
OnSeptember 15, 2022, we entered into a Consulting Agreement with Hsiaoching Chou (“Chou”), to provide consulting and generalbusiness advisory services as reasonably requested by the Company during the term of the agreement, which was for six months, unlessotherwise earlier terminated due to breach of the agreement by either party, and the failure to cure such breach 30 days after writtennotice thereof. In consideration for agreeing to provide the services under the agreement, the Company issued Chou 5,000 restricted sharesof common stock. The agreement contains customary confidentiality and non-solicitation provisions. We also agreed to include the sharesissued to Chou in the Resale Prospectus, which shares of common stock are included therein.
OnSeptember 22, 2022, we entered into a service agreement with Greentree Financial Group, Inc. Pursuant to the Service Agreement, Greentreeagreed to perform various following services. The Company agreed to issue Greentree 100,000 shares of the Company’s restrictedcommon stock upon the parties’ entry into the agreement, and to pay Greentree $50,000 in cash. We also agreed to include the 100,000shares of common stock issued to Greentree in the Resale Prospectus, which shares of common stock are included therein. Since February2015, Mr. Eugene M. Johnston, our Chief Financial Officer (who was appointed October 1, 2022) has served as Audit Manager for Greentree.
InAugust 2022, we initiated a private offering, pursuant to which we have sold an aggregate of 2,000,000 units, each consisting of oneshare of our common stock and one warrant to purchase one share of common stock with an exercise price of $1.00 per share, for $1.00per unit, or 2,000,000 in aggregate in a private placement, made solely to accredited investors. The offering closed on December 22,2022. Boustead Securities, LLC served as placement agent for the offering. As additional consideration for serving as Placement Agent,we granted Boustead warrants to purchase 280,000 shares of common stock, representing 7% of the number of shares and warrants sold inthe private placement with an exercise price equal to $1.00 per share.
OnOctober 1, 2022, the Company agreed to grant Eugene M. Johnston, its Chief Financial Officer, 150,000 shares of the Company’s restrictedstock which vest over a 6-month period at the rate of 25,000 shares per month with the first 25,000 shares vesting on November 1, 2022.
OnOctober 14, 2022, the Company issued 75,000 restricted shares of common stock to each of its three independent directors, which sharesvest 1/3 on October 14, 2022, with the remaining shares vesting in one-third increments on each of October 14, 2023 and 2024, subjectto such directors continuing to provide services to the Company on such dates, and subject to the Restricted Stock Award agreements enteredinto to evidence such grants.
OnOctober 14, 2022, the Company issued its Project Manager, Joan Arango, 25,000 shares of restricted common stock under the Plan. The shareswere issued to Ms. Arango as a bonus for services rendered to date. Ms. Arango is the sister of the Company’s President and ChiefOperating Officer, Jonathan Arango. The shares were valued at $1.00 per share for a total of $25,000.
OnNovember 1, 2022, we entered into a Consulting Agreement with White Unicorn, LLC (“White Unicorn”), to provide business advisoryservices related to product packaging, strategic marketing, branding, advertising and future product development as reasonably requestedby the Company during the term of the agreement, which is for 12 months unless otherwise earlier terminated due to breach of the agreementby either party and the failure to cure such breach 30 days after written notice thereof. In consideration for agreeing to provide theservices under the agreement, the Company issued White Unicorn 100,000 shares of restricted common stock. The agreement contains customaryconfidentiality and non-solicitation provisions. The shares were valued at $1.00 per share for a total of $100,000.
OnDecember 1, 2022, the Company entered into a Master Services Agreement with Global Career Networks, Inc. (“GCN”). Pursuantto the agreement, we agreed to issue GCN 100,000 shares of restricted common stock with registration rights (which are included in theResale Prospectus) and GCN agreed to assist us with a planned twitter marketing campaign. The agreement has a one year term (providedthe individual project described therein has a six month term, beginning December 1, 2022), and may be renewed thereafter for additionalone year terms with the mutual approval of the parties. Either party may terminate the agreement at any time for any reason, with atleast 60 days’ notice, or upon the occurrence of any breach or default under the agreement, which remains uncured within 30 daysof written notice thereof, or if the non-terminating party is subject to bankruptcy. The agreement contains customary confidentiality,indemnification obligations, and limitations of liability.
OnDecember 21, 2022, we entered into a Consulting Agreement with Chartered Services, LLC (“Chartered Services”), to providestrategic marketing services for advertising and consulting, product distribution, digital marketing and identifying creative and constructivebrand awareness to the Company during the term of the agreement, which is for six months unless otherwise earlier terminated due to breachof the agreement by either party and the failure to cure such breach 30 days after written notice thereof. In consideration for agreeingto provide the services under the agreement, the Company agreed to pay Chartered Services $150,000 in cash (with $75,000 payable uponentry into the agreement and $75,000 payable on January 31, 2023) and issued Chartered Services 250,000 shares of restricted common stock.The agreement contains customary confidentiality and non-solicitation provisions. The shares were valued at $1.00 per share for a totalof $250,000.
OnDecember 30, 2022, we entered into a Waiver of Warrant agreement with the placement agent in our 2022 Private Offering, Boustead Securities,LLC (“Boustead”), whereby Boustead agreed to surrender all 280,000 warrants issued to them in connection with the 2022 PrivateOffering (the “Placement Agent Warrants”) for no consideration and Boustead irrevocably waived any right or interest in thePlacement Agent Warrants.
OnJanuary 3, 2023, we entered into a Consulting Agreement with DojoLabs Group, Inc. (“DojoLabs”), to provide various strategicmarketing related services to the Company pursuant to a defined scope of work during the term of the agreement, which is the earlierof a) all deliverables being received by the Company pursuant to the scope of work, or b) if terminated due to breach of the agreementby either party and the failure to cure such breach 30 days after written notice thereof. In consideration for agreeing to provide theservices under the agreement, the Company agreed to pay DojoLabs $100,000 in cash and issued DojoLabs 50,000 shares of restricted commonstock with registration rights (the registration of the resale of which shares are included in the Resale Prospectus) and fully vestupon the completion of all work performed under the scope of work. The agreement contains customary confidentiality and non-solicitationprovisions. The shares were valued at $1.00 per share for a total of $50,000.
OnJanuary 6, 2023, we entered into a Consulting Agreement with Bethor, Ltd. (“Bethor”), to provide strategic advisory servicesto the Company during the term of the agreement, which is for 12 months unless otherwise earlier terminated due to breach of the agreementby either party and the failure to cure such breach 30 days after written notice thereof. In consideration for agreeing to provide theservices under the agreement, the Company issued Bethor 250,000 shares of restricted common stock with registration rights (the registrationof the resale of which shares are included in the Resale Prospectus). The agreement contains customary confidentiality and non-solicitationprovisions. The shares were valued at $1.00 per share for a total of $250,000.
OnJanuary 6, 2023, the Company established an advisory board (the “Advisory Board”) and approved and adopted a charter (the“Advisory Board Charter”) to govern the Advisory Board. Pursuant to the Advisory Board Charter, the Advisory Board will becomprised of a minimum of two (2) members, all of whom shall be appointed and subject to removal by the Board of Directors at any time.In addition to the enumerated responsibilities of the Advisory Board in the Advisory Board Charter, the primary function of the AdvisoryBoard is to assist the Board of Directors in its general oversight of the Company’s development of new business ventures and strategicplanning.
Inconnection with the establishment of the Advisory Board, the Board of Directors appointed Dr. Brian Rudman (“Dr. Rudman”)and Mr. Jarrett Boon (“Mr. Boon”), both of whom are independent, non-Board members and non-Company employees, to the AdvisoryBoard. Dr. Rudman will serve as Chairman of the Advisory Board.
Inconnection with Dr. Rudman’s appointment to the Advisory Board, the Company entered into an Advisor Agreement (the “Dr. RudmanConsulting Agreement”), dated effective January 6, 2023, with Dr. Rudman, whereby the Company agreed to issue Dr. Rudman 25,000shares of the Company’s restricted common stock, pay Dr. Rudman $2,000 per month in cash, and reimburse Dr. Rudman for reasonableout-of-pocket expenses, including, without limitation, travel expenses incurred by him in connection with the Company’s requestsof the performance of his duties to the Company in service on the Advisory Board.
Inconnection with Mr. Boon’s appointment to the Advisory Board, the Company entered into an Advisor Agreement (the “Mr. BoonConsulting Agreement”), dated effective January 6, 2023, with Mr. Boon, whereby the Company agreed to issue Mr. Boon 25,000 sharesof the Company’s restricted common stock and to reimburse Mr. Boon for reasonable out-of-pocket expenses, including, without limitation,travel expenses incurred by him in connection with the Company’s requests of the performance of his duties to the Company in serviceon the Advisory Board.
** * * *
Theuse of proceeds associated with the above listed sales of unregistered securities was for general working capital purposes.
Theissuances and grants described above were exempt from registration pursuant to Section 4(a)(2), and/or Rule 506 of Regulation D of theSecurities Act, since the foregoing issuances and grants did not involve a public offering, the recipients took the securities for investmentand not resale, we took take appropriate measures to restrict transfer, and the recipients were (a) “accredited investors”;(b) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act; and/or(c) were officers or directors of the Company. The securities are subject to transfer restrictions, and the certificates evidencing thesecurities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not beoffered or sold absent registration or pursuant to an exemption therefrom. The securities were not registered under the Securities Actand such securities may not be offered or sold in the United States absent registration or an exemption from registration under the SecuritiesAct and any applicable state securities laws.
Item16. Exhibits and Financial Statement Schedules.
| (a) | Exhibits: Exhibits Pursuant to Item 601 of Regulation S-K: |
Exhibit | | |
Number | | Description of Exhibit |
1.1† | | Form of Underwriting Agreement |
3.1† | | Certificate of Formation of Mangoceuticals, Inc., filed with the Secretary of State of Texas on October 7, 2021 |
3.2† | | Certificate of Amendment to Certificate of Formation of Mangoceuticals, Inc., filed with the Secretary of State of Texas on April 15, 2022 |
3.3† | | Bylaws of Mangoceuticals, Inc. |
4.1† | | Form of Representative’s Warrant |
4.2† | | Form of Common Stock Purchase Warrant (Investors – 2022 Private Placement) |
5.1* | | Opinion and consent of The Loev Law Firm, PC re: the legality of the securities being registered |
10.1† | | Stock Purchase Agreement between American International Holdings Corp. and Cohen Enterprises, Inc., dated June 16, 2022 |
10.2† | | Form of Subscription Agreement (2022 Private Placement) |
10.3†£ | | Physician Services Agreement dated August 1, 2022, between Mangoceuticals, Inc. and BrighterMD, LLC dba Doctegrity |
10.4†£ | | Master Services Agreement and Statement of Work dated September 1, 2022, and effective August 31, 2022, between Epiq Scripts, LLC and Mangoceuticals, Inc. |
10.5†# | | Executive Employment Agreement dated August 31, 2022, between Mangoceuticals, Inc. and Jacob D. Cohen |
10.6†# | | Executive Employment Agreement dated August 31, 2022, between Mangoceuticals, Inc. and Jonathan Arango |
10.7†# | | Mangoceuticals, Inc. 2022 Equity Incentive Plan |
10.8†# | | Stock Option Agreement dated August 31, 2022 between Mangoceuticals, Inc. and Jacob D. Cohen (750,000 option shares) |
10.9†# | | Stock Option Agreement dated August 31, 2022 between Mangoceuticals, Inc. and Jonathan Arango (500,000 option shares) |
10.10†# | | Consulting Agreement dated September 6, 2022, between Mangoceuticals, Inc. and PHX Global, LLC |
10.11†# | | Consulting Agreement dated September 6, 2022, between Mangoceuticals, Inc. and Ezekiel Elliott |
10.12†# | | Consulting Agreement dated September 15, 2022, between Mangoceuticals, Inc. and David Sandler |
10.13†# | | Consulting Agreement dated September 15, 2022, between Mangoceuticals, Inc. and Hsiaoching Chou |
10.14†# | | Service Agreement dated September 22, 2022, by and between Mangoceuticals, Inc. and Greentree Financial Group, Inc. |
10.15†# | | Offer Letter dated October 1, 2022 entered into between Mangoceuticals, Inc. and Eugene M. Johnston |
10.16†# | | Notice of Restricted Stock Grant and Restricted Stock Grant Agreement dated October 1, 2022 between Mangoceuticals, Inc. and Eugene M. Johnston |
10.17†# | | Notice of Restricted Stock Grant and Restricted Stock Grant Agreement dated October 14, 2022 between Mangoceuticals, Inc. and Dr. Kenny Myers |
10.18†# | | October 14, 2022 Offer Letter entered into between Mangoceuticals, Inc. and Dr. Kenny Myers |
10.19†# | | Notice of Restricted Stock Grant and Restricted Stock Grant Agreement dated October 14, 2022 between Mangoceuticals, Inc. and Alex P. Hamilton |
10.20†# | | October 14, 2022 Offer Letter entered into between Mangoceuticals, Inc. and Alex P. Hamilton |
10.21†# | | Notice of Restricted Stock Grant and Restricted Stock Grant Agreement dated October 14, 2022 between Mangoceuticals, Inc. and Lorraine D’Alessio |
10.22†# | | October 14, 2022 Offer Letter entered into between Mangoceuticals, Inc. and Dr. Lorraine D’Alessio |
10.23†# | | Consulting Agreement dated November 1, 2022, between Mangoceuticals, Inc. and White Unicorn, LLC |
10.24†# | | Master Services Agreement dated December 1, 2022, between Mangoceuticals, Inc. and Global Career Networks, Inc. |
10.25†# | | Consulting Agreement dated December 21, 2022, between Mangoceuticals, Inc. and Chartered Services, LLC |
10.26† | | Waiver Agreement dated December 30, 2022, between Mangoceuticals, Inc. and Boustead Securities, LLC |
10.27†# | | Consulting Agreement dated January 3, 2023, between Mangoceuticals, Inc. and DojoLabs Group, Inc. |
10.28†# | | Advisor Agreement dated January 6, 2023, between Mangoceuticals, Inc. and Dr. Brian Rudman |
10.29†# | | Advisor Agreement dated January 6, 2023, between Mangoceuticals, Inc. and Jarrett Boon |
10.30†# | | Consulting Agreement dated January 6, 2023, between Mangoceuticals, Inc. and Bethor, Ltd |
14.1† | | Code of Business Conduct and Ethics |
23.1† | | Consent of M&K CPAS, PLLC |
23.2* | | Consent of The Loev Law Firm, PC (included in Exhibit 5.1) |
24.1† | | Power of Attorney (included on the signature page to this Registration Statement) |
99.1† | | Audit Committee Charter |
99.2† | | Compensation Committee Charter |
99.3† | | Nominating and Corporate Governance Committee Charter |
99.4† | | Whistleblower Protection Policy |
99.5† | | Mangoceuticals, Inc. Advisory Board Charter, adopted January 6, 2023 |
107† | | Filing Fee Table |
†Filed herewith.
*To be filed by amendment.
#Indicates management contract or compensatory plan or arrangement.
£Certain portions of these Exhibits have been omitted in accordance with Regulation S-K Item 601 because they are both (i) not materialto investors and (ii) the type of information that the Registrant customarily and actually treats as private or confidential, and havebeen marked with ‘‘[***]’’ to indicate where omissions have been made. The Registrant agrees to furnish supplementallyan unredacted copy of the Exhibit to the SEC upon its request.
(b)Financial Statement Schedule.
Allfinancial statement schedules are omitted because the information called for is not required or is shown either in the financial statementsor the notes thereto.
Item17. Undertakings.
Theundersigned registrant hereby undertakes:
(1)To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:
(i)Include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii)Reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effectiveamendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registrationstatement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securitiesoffered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering rangemay be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volumeand price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of RegistrationFee” table in the effective registration statement; and
(iii)Include any material information with respect to the plan of distribution not previously disclosed in the registration statement or anymaterial change to such information in the registration statement.
(2)That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to bea new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemedto be the initial bona fide offering thereof.
(3)To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at thetermination of the offering.
(4)That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or otherthan prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of thedate it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that ispart of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statementor prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such firstuse, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statementor made in any such document immediately prior to such date of first use.
(5)Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controllingpersons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion ofthe Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurredor paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) isasserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unlessin the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction thequestion whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudicationof such issue.
(6)That, for the purpose of determining liability of the Registrant under the Securities Act to any purchaser in the initial distributionof the securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuantto this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securitiesare offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller tothe purchaser and will be considered to offer or sell such securities to such purchaser:
(i)Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule424;
(ii)Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to bythe undersigned registrant;
(iii)The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrantor its securities provided by or on behalf of the undersigned Registrant; and
(iv)Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
(7)The undersigned registrant hereby undertakes that:
(i)For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filedas part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuantto Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the timeit was declared effective.
(ii)For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form ofprospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securitiesat that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuantto the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signedon its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, Texas on the 13th day of January 2023.
| MANGOCEUTICALS, INC. |
| |
| By: | /s/ Jacob D. Cohen |
| Name: | Jacob D. Cohen |
| Title: | Chairman and Chief Executive Officer |
KNOWALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jacob D. Cohen, with full powerof substitution, as his or her, true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution forhim/her and in his/her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments)to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with theSecurities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to doand perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposesas he/she might or could do in person, hereby ratifying and confirming all that each of said attorney-in-fact or his/her substitute orsubstitutes, may lawfully do or cause to be done by virtue hereof.
Pursuantto the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following personsin the capacities and on the dates indicated.
NAME | | POSITION | | DATE |
| | | | |
/s/ Jacob D. Cohen | | Chairman, Chief Executive Officer and Chairman | | January 13, 2023 |
Jacob D. Cohen | | (Principal Executive Officer) | | |
| | | | |
/s/ Jonathan Arango | | President, | | January 13, 2023 |
Jonathan Arango | | Chief Operating Officer and Director | | |
| | | | |
/s/ Eugene M. Johnston | | Chief Financial Officer | | January 13, 2023 |
Eugene M. Johnston | | (Principal Financial and Accounting Officer) | | |
| | | | |
| | Director | | January 13, 2023 |
Lorraine D’Alessio | | | | |
| | | | |
/s/ Alex P. Hamilton | | Director | | January 13, 2023 |
Alex P. Hamilton | | | | |
| | | | |
| | Director | | January 13, 2023 |
Dr. Kenny Myers | | | | |