F-1/A: Bon Natural Life Eyes $12 Million in Unit Offering to Fuel Growth

Bon Natural Life Limited announces a best-efforts offering of up to 10,000,000 units to raise capital for working capital, sales expansion, R&D, and production capacity.

Summary

• Bon Natural Life Limited is undertaking a best-efforts offering of up to 10,000,000 units, with each unit containing one Class A ordinary share, one Series A warrant, and one Series B warrant, at an assumed price of $1.20 per unit.
• The company is also offering pre-funded units to investors who would exceed beneficial ownership thresholds of 4.99% or 9.99% with ordinary share purchases.
• Each pre-funded unit includes a pre-funded warrant, a Series A warrant, and a Series B warrant, with the pre-funded warrant exercisable for one Class A ordinary share at $0.001 per share.
• The Series A warrants will have their exercise price reset 30 days after issuance to 105% of the average of the three lowest VWAPs in the prior 20 trading days, but not below a floor price of $0.24.
• The Series B warrants have an exercise price of $1.80, but also include a one-time zero exercise price option where holders can receive shares based on a formula if the share price is below the exercise price, with a floor price of $0.24.
• The company anticipates net proceeds of approximately $9.05 million from the offering, which will be used for working capital, sales network expansion, research and development, and production capacity expansion.
• The company is an emerging growth company and a foreign private issuer, allowing for reduced reporting requirements.
• Bon Natural Life conducts its operations through PRC subsidiaries and faces risks associated with doing business in China, including regulatory uncertainties and potential government intervention.
• The company's organizational structure involves unique risks to investors, and PRC regulatory authorities could disallow the operating structure.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCAA), which could lead to delisting if the company's auditor is not subject to inspection by the PCAOB for two consecutive years.
• The company has established clear policies and procedures to ensure effective cash oversight.
• The company believes that it has obtained all material licenses and permits from the PRC government authorities for its business operations in the PRC.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the company is undertaking a capital raise to fund growth, it also reports decreased revenue, gross profit, and net income. The presence of regulatory risks and potential dilution from warrant exercises further tempers the outlook.

Positives

• The company has established clear policies and procedures to ensure effective cash oversight.
• The company believes that it has obtained all material licenses and permits from the PRC government authorities for its business operations in the PRC.

Negatives

• The company faces risks associated with doing business in China, including regulatory uncertainties and potential government intervention.
• The company's organizational structure involves unique risks to investors, and PRC regulatory authorities could disallow the operating structure.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCAA), which could lead to delisting if the company's auditor is not subject to inspection by the PCAOB for two consecutive years.
• Series B warrants include a zero exercise price option, potentially leading to the issuance of up to 130,000,000 Class A ordinary shares if the share price falls to the $0.24 floor.

Risks

• The company faces risks associated with doing business in China, including regulatory uncertainties and potential government intervention.
• The company's organizational structure involves unique risks to investors, and PRC regulatory authorities could disallow the operating structure.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCAA), which could lead to delisting if the company's auditor is not subject to inspection by the PCAOB for two consecutive years.
• Series B warrants include a zero exercise price option, potentially leading to the issuance of up to 130,000,000 Class A ordinary shares if the share price falls to the $0.24 floor.
• There is no minimum offering amount required as a condition to closing this Offering

Future Outlook

The company intends to use the net proceeds for working capital, to expand its sales network, research and development, and to expand its production capacity.

Industry Context

The company operates in the natural products and ingredients business, facing competition from established players in the functional food, personal care, cosmetic, and pharmaceutical industries.

Comparison to Industry Standards

• The company faces competition from Chenguang Biotech, Layn, Koninklijke DSM N.V., Symrise AG, and Givaudan SA.
• These competitors have stronger capital, technology, and development capabilities.

Related Party Transactions

• As of September 30, 2024, the balance of due to related parties was comprised of the Company's borrowings from related parties and was used for working capital during the Company's normal course of business.
• The Company's controlling shareholder, Mr. Yongwei Hu pledged his personal bank savings as collateral to safeguard the Company's borrowings from the banks and financial institutions.
• Mr. Yongwei Hu and his wife Ms. Jing Liu also jointly pledged their personal residence property to guarantee the Company's certain loans.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares and the potential exercise of warrants.
• The company's ability to execute its business plan and achieve growth targets will impact shareholder value.
• Employees may benefit from the company's expansion plans and increased investment in research and development.

Next Steps

• The company expects to hold an initial closing of the Offering on , 2025, but the Offering will be terminated by , 2025 provided that closing of the Offering for all of the Units have not occurred by such date, but may be extended by written agreement of the Company and the Placement Agent for a period of up to 30 days , 2025.

Key Dates