Mangoceuticals, Inc S-1/A, filed Feb 28, 2023

Mangoceuticals, Inc. (MGRX)

S-1/A 2023-02-28

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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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

	●	*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.

	●	*Resale Prospectus*. A prospectus to be used for the resale by the selling shareholders set forth therein of 4,765,000 shares of common stock of the registrant (the “Resale Prospectus”).

	●	they contain different front cover pages and back cover pages;

	●	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;

	●	all references in the Public Offering Prospectus to “underwriters” will be changed to “underwriters of the IPO” in the Resale Prospectus;

	●	the ownership percentages described in the Public Offering Prospectus will be adjusted in the Resale Prospectus to reflect the shares of common stock sold in our initial public offering;

	●	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;

	●	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;

	●	the “Capitalization” and “Dilution” sections are deleted from the Resale Prospectus;

	●	a “Selling Shareholders” section is included in the Resale Prospectus;

	●	the “Legal Matters” section in the Resale Prospectus deletes the reference to counsel for the underwriters; and

	●	they contain different back pages.

	Per Share	Total
Initial public offering price	$	$
Underwriting discounts and commissions⁽¹⁾	$	$
Proceeds to us, before expenses	$	$

Glossary of Industry Terms	ii
About This Prospectus	iii
Prospectus Summary	1
The Offering	10
Risk Factors	12
Cautionary Note Regarding Forward-Looking Statements	39
Use of Proceeds	40
Dividend Policy	41
Capitalization	42
Dilution	43
Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Business	49
Management	61
Executive and Director Compensation	69
Certain Relationships and Related Party Transactions	79
Security Ownership of Certain Beneficial Owners and Management	81
Description of Capital Stock	82
Shares Eligible for Future Sale	86
Underwriting	88
Legal Matters	93
Experts	93
Changes in Accountants	93
Where You Can Find More Information	93
Index to Financial Statements	F-1

	●	We have a limited operating history, have produced only a limited amount of products and have generated only minimal revenues to date;

	●	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;

	●	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;

	●	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 protocol which seeks to prevent the possibility of serious patient injury and death;

	●	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;

	●	Risks associated with related party relationships and agreements;

	●	The effect of data security breaches, malicious code and/or hackers;

	●	Competition and our ability to create a well-known brand name;

	●	Changes in consumer tastes and preferences;

	●	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;

	●	Our ability to innovate, expand our offerings and compete against competitors which may have greater resources;

	●	Our significant reliance on related party transactions;

	●	Our Chairman and Chief Executive Officer, Jacob D. Cohen, has majority voting control over the company which may deter some investors;

	●	Our ability to prevent credit card and payment fraud;

	●	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;

	●	The risk of unauthorized access to confidential information;

	●	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;

	●	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;

	●	Our reliance on our current management and the terms of their employment agreements with us;

	●	The outcome of future lawsuits, litigation, regulatory matters or claims;

	●	The fact that certain recent initial public offerings of companies with public floats comparable to the anticipated public float of the Company have experienced extreme volatility that was seemingly unrelated to the underlying performance of the respective company; and the fact that we may experience similar volatility, which may make it difficult for prospective investors to assess the value of our common stock;

	●	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

	●	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.

*Common stock we are offering*		1,250,000 shares (or 1,437,500 shares if the underwriters exercise their over-allotment option in full).

*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 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*		14,065,000 shares

*Common stock outstanding immediately after this offering*		15,315,000 shares, or 15,502,500 shares if the over-allotment option is exercised in full.

*Use of proceeds*		We expect to receive net proceeds from this offering of approximately $4.4 million (or approximately $5.0 million if the underwriters exercise in full their option to purchase 187,500 additional shares of our common stock), based on an initial public offering price of $4.00 per share, 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 “Use of Proceeds”.

*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.

*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.

*Proposed trading symbol*		We have applied to list our common stock for trading on The Nasdaq Capital Market under the symbol “MGRX.” 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.

	●	is based on 14,065,000 shares of common stock issued and outstanding as of February 28, 2023;

	●	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;

	●	assumes no exercise of outstanding options to purchase 1,250,000 shares of common stock at an exercise price of $1.10 per share;

	●	assumes no exercise of outstanding warrants to purchase 2,000,000 shares of common stock at an exercise price of $1.00 per share;

	●	assumes no exercise of warrants to purchase shares of common stock expected to be issued to the representative of the underwriters as underwriting consideration as discussed under “Underwriting” below; and

	●	excludes 1,850,000 shares of common stock reserved for future issuance under our 2022 Equity Incentive Plan.

Statements of Operations Data:	Year Ended December 31, 2022			From October 7, 2021 (Inception) to December 31, 2021

Revenues	$	8,939			—
Cost of revenues		(4,089	)		—
General and administrative expenses		1,996,432			17,520
Imputed interest		6,473			181
Net loss	$	(1,998,055	)		(17,701	)

	December 31, 2022
Balance Sheet Data:	Actual			As Adjusted⁽¹⁾

Cash and cash equivalents	$	682,860		$	5,034,860
Total assets		1,003,287			5,355,287
Debt⁽²⁾		167,460			167,460
Working capital		434,028			4,786,028
Accumulated deficit		(2,015,756	)		(2,015,756	)
Total stockholders’ equity		614,030			4,964,693

	●	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;

	●	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;

	●	the current environment in capital markets combined with our capital constraints may prevent us from being able to obtain adequate debt financing; and

	●	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.

	●	our marketing efforts;

	●	the flexibility and variety of our product offerings relative to our competitors, and our ability to timely launch new product initiatives;

	●	the quality and price of products offered by us and our competitors;

	●	our reputation and brand strength relative to our competitors;

	●	customer satisfaction;

	●	the size and composition of our customer base;

	●	the convenience of the experience that we provide;

	●	our ability to comply with, and manage the costs of complying with, laws and regulations applicable to our business; and

	●	our ability to cost-effectively source and distribute the products we offer and to manage our operation.

	●	our ability to expand the use of our products through targeted patient and physician education;

	●	competition and timing of market introduction of competitive products;

	●	quality, safety and efficacy in the approved setting;

	●	prevalence and severity of any side effects, including those of the components of our products;

	●	emergence of previously unknown side effects, including those of the generic components of our products;

	●	potential or perceived advantages or disadvantages over alternative treatments;

	●	the convenience and ease of purchasing the product, as perceived by potential patients;

	●	strength of sales, marketing and distribution support;

	●	price, both in absolute terms and relative to alternative treatments;

	●	the effectiveness of any future collaborators’ sales and marketing strategies;

	●	the effect of current and future healthcare laws;

	●	availability of coverage and reimbursement from government and other third-party payors;

	●	recommendations for prescribing physicians to complete certain educational programs for prescribing drugs;

	●	the willingness of patients to pay out-of-pocket in the absence of government or third-party coverage; and

	●	product labeling, product insert, or new studies or trial requirements of the FDA or other regulatory authorities.

	●	injury to our reputation;

	●	costs of defending the claim and/or related litigation;

	●	cost of any potential adverse verdict;

	●	substantial monetary awards to patients or other claimants; and

	●	the inability to commercialize our products.

	●	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;

	●	our contracting parties may experience financial, regulatory or operational difficulties, which may impair their ability to fulfill their contractual obligations;

	●	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;

	●	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

	●	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.

	●	the board maintain a nominations committee with prescribed duties and a written charter; and

	●	the board maintain a Compensation Committee with prescribed duties and a written charter and comprised solely of independent directors.

	●	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.

	●	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;

	●	authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock; and

	●	providing indemnification to, our directors and officers.

	●	actual or anticipated variations in our quarterly operating results;

	●	changes in market valuations of similar companies;

	●	adverse market reaction to the level of our indebtedness;

	●	additions or departures of key personnel;

	●	actions by shareholders;

	●	speculation in the press or investment community;

	●	general market, economic, and political conditions, including an economic slowdown or dislocation in the global credit markets;

	●	announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations, or capital commitments;

	●	general economic and market conditions;

	●	disputes or other developments related to our intellectual property or other proprietary rights, including litigation;

	●	our operating performance and the performance of other similar companies;

	●	changes in accounting principles; and

	●	passage of legislation or other regulatory developments that adversely affect us or our industry.

	●	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.

	●	implement additional management information systems;

	●	further develop our operating, administrative, legal, financial, and accounting systems and controls;

	●	hire additional personnel;

	●	develop additional levels of management within our company;

	●	locate additional office space; and

	●	maintain close coordination among our operations, legal, finance, sales and marketing, and client service and support personnel.

	●	the difficulty of integrating acquired products, services or operations;

	●	the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies;

	●	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;

	●	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;

	●	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

	●	potential expenses under the labor, environmental and other laws of various jurisdictions.

	●	a significant portion of our cash flows is required to be used to service our indebtedness;

	●	a high level of debt increases our vulnerability to general adverse economic and industry conditions;

	●	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;

	●	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

	●	debt covenants may affect our flexibility in planning for, and reacting to, changes in the economy and in our industry.

	●	our ability to obtain additional funding;

	●	the continuing effect of COVID-19 on our planned operations, sales, and the market for our products;

	●	our ability to build and maintain our brand;

	●	cybersecurity, information systems and fraud risks and problems with our websites;

	●	our ability to expand and grow our operations, and successfully market our planned;

	●	changes in, and our compliance with, rules and regulations affecting our operations, sales, and/or our products;

	●	shipping, production or manufacturing delays;

	●	our ability to obtain and increase sales;

	●	regulations we are required to comply with in connection with our operations, manufacturing, labeling and shipping;

	●	competition from existing competitors or new competitors or products that may emerge;

	●	our dependency on third-parties to prescribe and compound our planned ED product;

	●	our ability to establish or maintain relations and/or relationships with third-parties;

	●	potential safety risks associated with our Mango ED product, including the use of ingredients, combination of such ingredients and the dosages thereof;

	●	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;

	●	our ability to protect intellectual property rights;

	●	our ability to adequately support future growth; and

	●	our ability to attract and retain key personnel to manage our business effectively.

	●	an actual basis; and

	●	an as adjusted basis after giving effect to the sale of 1,250,000 shares of our common stock in this offering based on the initial public offering price of $4.00 per share, and our receipt of the estimated $4.4 million in net proceeds from this offering, after deducting underwriting commissions and estimated offering expenses payable by us.

	As of December 31, 2022 (In thousands)
	Actual			As Adjusted
Cash	$	683		$	5,035

Stockholders’ deficit:
Common stock (par value $0.0001 per share) 13,365,000 and 15,315,000 shares issued and outstanding at December 31, 2022, on an actual and as adjusted basis, respectively		1			1
Additional paid-in capital		2,628			6,980
Accumulated deficit		(2,016	)		(2,016	)
Total stockholders’ equity		614			4,965
Total capitalization	$	614		$	4,965

	●	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;

	●	any exercise of outstanding options to purchase 1,250,000 shares of common stock at an exercise price of $1.10 per share;

	●	any exercise of outstanding warrants to purchase 2,000,000 shares of common stock at an exercise price of $1.00 per share; and

	●	any future awards under our 2022 Equity Incentive Plan.

Initial public offering price per share of common stock			$	4.00
Net tangible book value per share of common stock as of December 31, 2022	$	0.03
Increase in net tangible book value per share of common stock attributable to this offering	$	0.30
As adjusted net tangible book per share of common stock as of December 31, 2022, after this offering			$	0.33
Dilution per share common stock to investors participating in this offering			$	(3.67	)

	Shares Purchased					Total Consideration					Average Price Per Share
	Number		Percent			Amount⁽¹⁾		Percent
Existing shareholders before this offering		14,065,000		91.8	%	$	2,007,000		28.6	%	$	0.14
Investors purchasing shares in this offering		1,250,000		8.2	%	$	5,000,000		71.4	%	$	4.00
Total		15,315,000		100.0	%	$	7,007,000		100.00	%	$	0.46

	●	Plan of Operations.

	●	Results of Operations.

	●	Liquidity and Capital Resources.

	●	Critical Accounting Policies and Estimates.

	Year ended December 31, 2022			From October 7, 2021 (Inception) to December 31, 2021
Cash provided by (used in):
Operating activities	$	(1,346,518	)	$	(17,520	)
Investing activities		(43,102	)		—
Financing activities		2,049,930			40,070
Net increase (decrease) in cash	$	660,310		$	22,550