UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2021April 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 000-55654
NUTRIBAND INC.
(Exact name of registrant as specified in its charter)
NEVADA | 81-1118176 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
121 South Orange Ave., Suite 1500, Orlando, FL | 32801 | |
(Address of Principal Executive Offices) | (Zip Code) |
(407) 377-6695
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, 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 | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares outstanding of the issuer’s common stock, par value $0.001 per share, was 7,773,9627,843,671 shares as of December 13, 2021.May 31, 2022.
NUTRIBAND INC.
INDEX
i
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following financial statements pursuant to the rules and regulations of the Securities and Exchange Commission.
The results of operations for the three and nine months ended October 31,April 30, 2022 and 2021 and 2020 are not necessarily indicative of the results for the entire fiscal year or for any other period.
NUTRIBAND INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30, | January 31, | |||||||||||||||
October 31, | January 31, | 2022 | 2022 | |||||||||||||
2021 | 2021 | (Unaudited) | ||||||||||||||
ASSETS | (Unaudited) | |||||||||||||||
CURRENT ASSETS: | ||||||||||||||||
Cash and cash equivalents | $ | 5,485,344 | $ | 151,993 | $ | 4,010,644 | $ | 4,891,868 | ||||||||
Accounts receivable | 146,411 | 109,347 | 99,098 | 71,380 | ||||||||||||
Inventory | 124,937 | 52,848 | 127,533 | 131,648 | ||||||||||||
Prepaid expenses | 191,820 | - | 404,637 | 370,472 | ||||||||||||
Total Current Assets | 5,948,512 | 314,188 | 4,641,912 | 5,465,368 | ||||||||||||
PROPERTY & EQUIPMENT-net | 989,997 | 1,076,626 | 1,000,873 | 979,297 | ||||||||||||
OTHER ASSETS: | ||||||||||||||||
Goodwill | 7,529,875 | 7,529,875 | 5,349,039 | 5,349,039 | ||||||||||||
Operating lease right of use asset | 98,192 | 19,043 | ||||||||||||||
Intangible assets-net | 959,367 | 1,006,730 | 894,459 | 926,913 | ||||||||||||
TOTAL ASSETS | $ | 15,427,751 | $ | 9,927,419 | $ | 11,984,475 | $ | 12,739,660 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||
Accounts payable and accrued expenses | $ | 644,543 | $ | 940,612 | $ | 535,440 | $ | 639,539 | ||||||||
Deferred revenue | 239,582 | 86,846 | 129,986 | 106,267 | ||||||||||||
Notes payable-related party, net | - | 1,402,523 | ||||||||||||||
Finance lease liabilities-current portion | 106,031 | 24,740 | ||||||||||||||
Operating lease liability-current portion | 33,885 | 19,331 | ||||||||||||||
Notes payable-current portion | 14,119 | 113,885 | 23,746 | 14,119 | ||||||||||||
Total Current Liabilities | 1,004,275 | 2,568,606 | 723,057 | 779,256 | ||||||||||||
LONG-TERM LIABILITIES: | ||||||||||||||||
Note payable-net of current portion | 104,601 | 150,063 | 115,749 | 101,119 | ||||||||||||
Finance lease liabilities-net of currnt portion | - | 96,804 | ||||||||||||||
Operating lease liability-net of current portion | 65,569 | - | ||||||||||||||
Total Liabilities | 1,108,876 | 2,815,473 | 904,375 | 880,375 | ||||||||||||
Commitments and Contingencies | - | - | - | - | ||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||||||
Preferred stock, $.001 par value, 10,000,000 shares authorized, -0- outstanding | - | - | - | - | ||||||||||||
Common stock, $.001 par value, 250,000,000 shares authorized; 7,743,963 and 6,256,770 shares issued and outstanding as of October 31, 2021 and January 31, 2021, respectively | 7,744 | 6,257 | ||||||||||||||
Common stock, $.001 par value, 250,000,000 shares authorized; 7,871,359 shares issued at April 30, 2022 and January 31, 2022, 7,820,232 and 7,843,234 shares outstanding as of April 30,2022 and January 31, 2022, respectively | 7,820 | 7,843 | ||||||||||||||
Additional paid-in-capital | 28,487,341 | 18,871,098 | 29,967,467 | 29,967,444 | ||||||||||||
Subscription payable | 66,900 | 70,000 | ||||||||||||||
Accumulated other comprehensive loss | (304 | ) | (304 | ) | (304 | ) | (304 | ) | ||||||||
Treasury stock, 51,127 and 28,125 shares at cost, respectively | (193,663 | ) | (104,467 | ) | ||||||||||||
Accumulated deficit | (14,242,806 | ) | (11,835,105 | ) | (18,701,220 | ) | (18,011,231 | ) | ||||||||
Total Stockholders’ Equity | 14,318,875 | 7,111,946 | 11,080,100 | 11,859,285 | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 15,427,751 | $ | 9,927,419 | $ | 11,984,475 | $ | 12,739,660 |
See notes to unaudited condensed consolidated financial statementsstatements.
NUTRIBAND INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(Unaudited)
For the | For the | |||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
October 31, | October 31, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue | $ | 283,037 | $ | 391,797 | $ | 930,264 | $ | 595,611 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of revenues | 173,694 | 228,772 | 529,300 | 420,648 | ||||||||||||
Research and development expenses | 161,000 | - | 161,000 | - | ||||||||||||
Selling, general and administrative expenses | 1,486,784 | 203,976 | 2,575,611 | 589,224 | ||||||||||||
Total Costs and Expenses | 1,821,478 | 432,748 | 3,265,911 | 1,009,872 | ||||||||||||
Loss from operations | (1,538,441 | ) | (40,951 | ) | (2,335,647 | ) | (414,261 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Gain (loss) on extinguishment of debt | - | - | 43,214 | (12,500 | ) | |||||||||||
Early prepayment fee on convertible debentures | - | - | - | (69,131 | ) | |||||||||||
Gain on change of fair value of derivative | - | - | - | 22,096 | ||||||||||||
Interest expense | (33,380 | ) | (1,618 | ) | (115,268 | ) | (206,836 | ) | ||||||||
Total other income (expense) | (33,380 | ) | (1,618 | ) | (72,054 | ) | (266,371 | ) | ||||||||
Loss before provision for income taxes | (1,571,821 | ) | (42,569 | ) | (2,407,701 | ) | (680,632 | ) | ||||||||
Provision for income taxes | - | - | - | - | ||||||||||||
Net loss | (1,571,821 | ) | (42,569 | ) | (2,407,701 | ) | (680,632 | ) | ||||||||
Deemed dividend related to warrant round-down | (196,589 | ) | - | (196,589 | ) | - | ||||||||||
Net loss attributable to common shareholders | $ | (1,768,410 | ) | $ | (42,569 | ) | $ | (2,604,290 | ) | $ | (680,632 | ) | ||||
Net loss per share of common stock-basic and diluted | $ | (0.27 | ) | $ | (0.01 | ) | $ | (0.40 | ) | $ | (0.12 | ) | ||||
Weighted average shares of common stock outstanding - basic and diluted | 6,505,249 | 5,517,188 | 6,586,921 | 5,495,423 | ||||||||||||
Other Comprehensive Income (Loss): | ||||||||||||||||
Net loss | $ | (1,768,410 | ) | $ | (42,569 | ) | $ | (2,604,290 | ) | $ | (680,632 | ) | ||||
Foreign currency translation adjustment | - | - | - | - | ||||||||||||
Total Comprehensive Loss | $ | (1,768,410 | ) | $ | (42,569 | ) | $ | (2,604,290 | ) | $ | (680,632 | ) |
For the Three Months Ended | ||||||||
April 30, | ||||||||
2022 | 2021 | |||||||
Revenue | $ | 477,922 | $ | 433,488 | ||||
Costs and expenses: | ||||||||
Cost of revenues | 277,436 | 195,610 | ||||||
Research and development expenses | 117,814 | - | ||||||
Selling, general and administrative expenses | 768,551 | 551,942 | ||||||
Total Costs and Expenses | 1,163,801 | 747,552 | ||||||
Loss from operations | (685,879 | ) | (314,064 | ) | ||||
Other income (expense): | ||||||||
Gain on extinguishment of debt | - | 39,876 | ||||||
Interest expense | (4,110 | ) | (40,869 | ) | ||||
Total other income (expense) | (4,110 | ) | (993 | ) | ||||
Loss before provision for income taxes | (689,989 | ) | (315,057 | ) | ||||
Provision for income taxes | - | - | ||||||
Net loss | $ | (689,989 | ) | $ | (315,057 | ) | ||
Net loss per share of common stock-basic and diluted | $ | (0.09 | ) | $ | (0.05 | ) | ||
Weighted average shares of common stock outstanding - basic and diluted | 7,871,356 | 6,329,438 | ||||||
Other Comprehensive Loss: | ||||||||
Net loss | $ | (689,989 | ) | $ | (315,057 | ) | ||
Foreign currency translation adjustment | - | - | ||||||
Total Comprehensive Loss | $ | (689,989 | ) | $ | (315,057 | ) |
See notes to unaudited condensed consolidated financial statementsstatements.
NUTRIBAND INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Nine Months Ended October 31, 2021
Accumulated | ||||||||||||||||||||||||||||
Common Stock | Additional | Other | ||||||||||||||||||||||||||
Number of | Paid In | Comprehensive | Accumulated | Subscription | ||||||||||||||||||||||||
Total | shares | Amount | Capital | Income (Loss) | Deficit | Payable | ||||||||||||||||||||||
Balance, February 1, 2021 | $ | 7,111,946 | 6,256,772 | $ | 6,257 | $ | 18,871,098 | $ | (304 | ) | $ | (11,835,105 | ) | $ | 70,000 | |||||||||||||
Common stock issued for proceeds and payment for license | 640,000 | 81,396 | 81 | 699,919 | - | - | (60,000 | ) | ||||||||||||||||||||
Proceeds from sale of common stock and warrants in public offering | 5,836,230 | 1,056,000 | 1,056 | 5,835,174 | - | - | 0 | |||||||||||||||||||||
Proceeds from exercise of warrants | 2,062,500 | 275,000 | 275 | 2,062,225 | - | - | 0 | |||||||||||||||||||||
Cashless exercise of warrants | - | 14,869 | 15 | (15 | ) | - | - | 0 | ||||||||||||||||||||
Issuance of common stock for note payable | 100,000 | 17,182 | 17 | 99,983 | - | - | 0 | |||||||||||||||||||||
Common stock issued for services | 466,900 | 18,102 | 18 | 409,982 | - | - | 56,900 | |||||||||||||||||||||
Common stock issued for settlement of liabilities | 144,000 | 24,642 | 25 | 143,975 | ||||||||||||||||||||||||
Warrants issued for services | 365,000 | - | - | 365,000 | - | - | - | |||||||||||||||||||||
Settlement of warrant round down | 196,589 | - | - | 196,589 | - | - | - | |||||||||||||||||||||
Deemed dividend from warrants | (196,589 | ) | - | - | (196,589 | ) | - | - | - | |||||||||||||||||||
Net loss for the nine months ended October 31, 2021 | (2,407,701 | ) | - | - | - | - | (2,407,701 | ) | - | |||||||||||||||||||
Balance, October 31, 2021 | $ | 14,318,875 | 7,743,963 | $ | 7,744 | $ | 28,487,341 | $ | (304 | ) | $ | (14,242,806 | ) | $ | 66,900 |
Nine Months Ended October 31, 2020
Accumulated | ||||||||||||||||||||||||||||
Common Stock | Additional | Other | ||||||||||||||||||||||||||
Number of | Paid In | Comprehensive | Accumulated | Subscription | ||||||||||||||||||||||||
Total | shares | Amount | Capital | Income (Loss) | Deficit | Payable | ||||||||||||||||||||||
Balance, February 1, 2020 | $ | 175,433 | 5,441,100 | $ | 5,441 | $ | 9,072,573 | $ | (304 | ) | $ | (8,902,277 | ) | $ | - | |||||||||||||
Issuance of common stock for services | 50,000 | 5,000 | 5 | 49,995 | - | - | - | |||||||||||||||||||||
Sale of commonstock for cash | 515,108 | 46,828 | 47 | 515,061 | - | - | - | |||||||||||||||||||||
Conversion of debt for common stock | 287,500 | 25,000 | 25 | 287,475 | - | - | - | |||||||||||||||||||||
Issuance of common stock for acquisition | 6,000,000 | 608,581 | 609 | 5,999,391 | - | - | - | |||||||||||||||||||||
Reclassification of warrants from liability to equity | 906,678 | - | - | 906,678 | - | - | - | |||||||||||||||||||||
Net loss for the nine months ended October 31, 2020 | (680,632 | ) | - | - | - | - | (680,632 | ) | - | |||||||||||||||||||
Balance, October 31, 2020 | $ | 7,254,087 | 6,126,509 | $ | 6,127 | $ | 16,831,173 | $ | (304 | ) | $ | (9,582,909 | ) | $ | - |
Three Months Ended October 31, 2021April 30, 2022
Accumulated | ||||||||||||||||||||||||||||
Common Stock | Additional | Other | ||||||||||||||||||||||||||
Number of | Paid In | Comprehensive | Accumulated | Subscription | ||||||||||||||||||||||||
Total | shares | Amount | Capital | Income (Loss) | Deficit | Payable | ||||||||||||||||||||||
Balance, July 31, 2021 | $ | 7,316,066 | 6,356,270 | $ | 6,356 | $ | 19,980,999 | $ | (304 | ) | $ | (12,670,985 | ) | $ | - | |||||||||||||
Proceeds from sale of common stock and warrants in public offering | 5,836,230 | 1,056,000 | 1,056 | 5,835,174 | - | - | - | |||||||||||||||||||||
Proceeds from exercise of warrants | 2,062,500 | 275,000 | 275 | 2,062,225 | - | - | - | |||||||||||||||||||||
Cashless exercise of warrants | - | 14,869 | 15 | (15 | ) | - | - | - | ||||||||||||||||||||
Issuance of common stock for note payable | 100,000 | 17,182 | 17 | 99,983 | - | - | - | |||||||||||||||||||||
Common stock issued for services | 66,900 | - | - | - | - | - | 66,900 | |||||||||||||||||||||
Common stock issued for settlement of liabilities | 144,000 | 24,642 | 25 | 143,975 | ||||||||||||||||||||||||
Warrants issued for services | 365,000 | - | - | 365,000 | - | - | - | |||||||||||||||||||||
Settlement of warrant round down | 196,589 | - | - | 196,589 | - | - | - | |||||||||||||||||||||
Deemed dividend from warrants | (196,589 | ) | - | - | (196,589 | ) | - | - | - | |||||||||||||||||||
Net loss for the three months ended October 31, 2021 | (1,571,821 | ) | - | - | - | - | (1,571,821 | ) | - | |||||||||||||||||||
Balance, October 31, 2021 | $ | 14,318,875 | 7,743,963 | $ | 7,744 | $ | 28,487,341 | $ | (304 | ) | $ | (14,242,806 | ) | $ | 66,900 |
Accumulated | ||||||||||||||||||||||||||||||||
Common Stock | Additional | Other | ||||||||||||||||||||||||||||||
Number of | Paid In | Comprehensive | Accumulated | Subscription | Treasury | |||||||||||||||||||||||||||
Total | shares | Amount | Capital | Income(Loss) | Deficit | Payable | Stock | |||||||||||||||||||||||||
Balance, February 1, 2022 | $ | 11,859,285 | 7,843,234 | $ | 7,843 | $ | 29,967,444 | $ | (304 | ) | $ | (18,011,231 | ) | $ | - | $ | (104,467 | ) | ||||||||||||||
Treasury stock repurchased | (89,196 | ) | (23,002 | ) | (23 | ) | 23 | (89,196 | ) | |||||||||||||||||||||||
Net loss for the three months ended April 30, 2022 | (689,989 | ) | - | - | - | - | (689,989 | ) | - | - | ||||||||||||||||||||||
Balance, April 30, 2022 | $ | 11,080,100 | 7,820,232 | $ | 7,820 | $ | 29,967,467 | $ | (304 | ) | $ | (18,701,220 | ) | $ | - | $ | (193,663 | ) |
Three Months Ended October 31, 2020April 30, 2021
Accumulated | ||||||||||||||||||||||||||||
Common Stock | Additional | Other | ||||||||||||||||||||||||||
Number of | Paid In | Comprehensive | Accumulated | Subscription | ||||||||||||||||||||||||
Total | shares | Amount | Capital | Income (Loss) | Deficit | Payable | ||||||||||||||||||||||
Balance, July 31, 2020 | $ | 1,296,656 | 5,517,928 | $ | 5,518 | $ | 10,831,782 | $ | (304 | ) | $ | (9,540,340 | ) | $ | - | |||||||||||||
Issuance of common stock for acquisition | 6,000,000 | 608,581 | 609 | 5,999,391 | - | - | - | |||||||||||||||||||||
Net loss for the three months ended October 31, 2020 | (42,569 | ) | - | - | - | - | (42,569 | ) | - | |||||||||||||||||||
Balance, October 31, 2020 | $ | 7,254,087 | 6,126,509 | $ | 6,127 | $ | 16,831,173 | $ | (304 | ) | $ | (9,582,909 | ) | $ | - |
Accumulated | ||||||||||||||||||||||||||||||||
Common Stock | Additional | Other | ||||||||||||||||||||||||||||||
Number of | Paid In | Comprehensive | Accumulated | Subscription | Treasury | |||||||||||||||||||||||||||
Total | shares | Amount | Capital | Income(Loss) | Deficit | Payable | Stock | |||||||||||||||||||||||||
Balance, February 1, 2021 | $ | 7,111,946 | 6,256,772 | $ | 6,257 | $ | 18,871,098 | $ | (304 | ) | $ | (11,835,105 | ) | $ | 70,000 | $ | - | |||||||||||||||
Common stock issued for proceeds and in payment for license | 640,000 | 81,396 | 81 | 699,919 | - | - | (60,000 | ) | - | |||||||||||||||||||||||
Common stock issued for services | 400,000 | 18,102 | 18 | 409,982 | - | - | (10,000 | ) | - | |||||||||||||||||||||||
Net loss for the three months ended April 30, 2021 | (315,957 | ) | - | - | - | - | (315,957 | ) | - | - | ||||||||||||||||||||||
Balance, April 30, 2021 | $ | 7,835,989 | 6,356,270 | $ | 6,356 | $ | 19,980,999 | $ | (304 | ) | $ | (12,151,062 | ) | $ | - | $ | - |
See notes to unaudited condensed consolidated financial statementsstatements.
NUTRIBAND INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended | ||||||||
October 31, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (2,407,701 | ) | $ | (680,632 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Expenses paid on behalf of the Company by related party | - | 3,628 | ||||||
Depreciation and amortization | 235,380 | 83,562 | ||||||
Amortization of debt discount | 97,477 | 202,500 | ||||||
Gain on change in fair value of derivative | - | (22,096 | ) | |||||
Early prepayment fee on convertible debentures | - | 69,131 | ||||||
Amortization of right of use asset | - | 9,610 | ||||||
(Gain) loss on extinguisment of debt | (43,214 | ) | 12,500 | |||||
Stock-based compensation | 754,400 | 50,000 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (37,064 | ) | (76,066 | ) | ||||
Prepaid expenses | (114,320 | ) | 20,167 | |||||
Inventories | (72,089 | ) | 3,404 | |||||
Deposit on sales | 152,736 | 91,166 | ||||||
Operating lease liability | - | (10,050 | ) | |||||
Accounts payable and accrued expenses | (142,394 | ) | 29,267 | |||||
Net Cash Used In Operating Activities | (1,576,789 | ) | (213,909 | ) | ||||
Cash flows from investing activities: | ||||||||
Cash received from acquisition | - | 66,994 | ||||||
Purchase of equipment | (51,388 | ) | - | |||||
(51,388 | ) | 66,994 | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from sale of common stock | 583,000 | 515,108 | ||||||
Proceeds from sale of common stock in public offering | 5,836,230 | - | ||||||
Proceeds from exercise of warrants | 2,062,500 | - | ||||||
Proceeds from notes payable | - | 194,870 | ||||||
Payment on convertible debt | - | (339,131 | ) | |||||
Payment on note payable | (4,689 | ) | (5,635 | ) | ||||
Payment on related party note payable | (1,500,000 | ) | - | |||||
Payment on finance leases | (15,513 | ) | (2,391 | ) | ||||
Proceeds from related parties | - | 11,567 | ||||||
Payment of related party payables | - | (44,262 | ) | |||||
Net Cash Provided by Financing Activities | 6,961,528 | 330,126 | ||||||
Effect of exchange rate on cash | - | - | ||||||
Net change in cash | 5,333,351 | 183,211 | ||||||
Cash and cash equivalents - Beginning of period | 151,993 | 10,181 | ||||||
Cash and cash equivalents - End of period | $ | 5,485,344 | $ | 193,392 | ||||
Supplementary information: | ||||||||
Cash paid for: | ||||||||
Interest | $ | 9,447 | $ | 7,488 | ||||
Income taxes | $ | - | $ | - | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Common stock issued for settlement of notes payable | $ | 100,000 | $ | 287,500 | ||||
Common stock issued for prepaid consulting | $ | 400,000 | $ | - | ||||
Non-cash payment for license agreement | $ | 57,000 | $ | - | ||||
Derivative liability warrant reclassed to equity | $ | - | $ | 906,678 | ||||
Common stock issued for subscription payable | $ | 70,000 | $ | - | ||||
Common stock and note issued in acquisition | $ | - | $ | 7,500,000 | ||||
Settlement of liabilities for common stock | $ | 144,000 | $ | - | ||||
Deemed dividend in connection with warrant round down | $ | 196,589 | $ | - | ||||
Cashless exercise of warrant | $ | 15 | $ | - |
For the Three Months Ended | ||||||||
April 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (689,989 | ) | $ | (315,957 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 77,475 | 76,262 | ||||||
Amortization of debt discount | - | 36,554 | ||||||
Amortization of right of use asset | 14,985 | - | ||||||
(Gain) loss on extinguishment of debt | - | (39,875 | ) | |||||
Common stock issued for services | - | 127,500 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (27,718 | ) | (41,463 | ) | ||||
Prepaid expenses | (28,744 | ) | (10,042 | ) | ||||
Inventories | 4,115 | (37,418 | ) | |||||
Deferred revenue | 23,719 | (16,952 | ) | |||||
Operating lease liability | (14,001 | ) | - | |||||
Accounts payable and accrued expenses | (104,099 | ) | (58,024 | ) | ||||
Net Cash Used In Operating Activities | (744,257 | ) | (279,415 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of equipment | (43,803 | ) | (38,779 | ) | ||||
Net Cash Used in Investing Activities | (43,803 | ) | (38,779 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from sale of common stock | - | 583,000 | ||||||
Payment on note payable | (3,968 | ) | - | |||||
Payment on finance leases | - | (6,045 | ) | |||||
Purchase of treasury stock | (89,196 | ) | - | |||||
Net Cash Provided by (used in) Financing Activities | (93,164 | ) | 576,955 | |||||
Effect of exchange rate on cash | - | - | ||||||
Net change in cash | (881,224 | ) | 258,761 | |||||
Cash and cash equivalents - Beginning of period | 4,891,868 | 151,993 | ||||||
Cash and cash equivalents - End of period | $ | 4,010,644 | $ | 410,754 | ||||
Supplementary information: | ||||||||
Cash paid for: | ||||||||
Interest | $ | 4,110 | $ | 2,715 | ||||
Income taxes | $ | - | $ | - | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Common stock issued for prepaid consulting | $ | - | $ | 400,000 | ||||
Non-cash payment for license agreement | $ | - | $ | 57,000 | ||||
Common stock issued for subscription payable | $ | - | $ | 70,000 | ||||
Adoption of ASC 842 Operating lease asset and liability | $ | 94,134 | $ | - | ||||
Promissory note on equipment purchase | $ | 22,483 | $ | - |
See notes to unaudited condensed consolidated financial statements
statements.
NUTRIBAND INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
as of and for the NineThree Months Ended October 31,April 30, 2022 and 2021 and 2020
1. | ORGANIZATION AND DESCRIPTION OF BUSINESS |
Organization
Nutriband Inc. (the “Company”) is a Nevada corporation, incorporated on January 4, 2016. In January 2016, the Company acquired Nutriband Ltd, an Irish company which was formed by the Company’s chief executive officer in 2012 to enter the health and wellness market by marketing transdermal patches. References to the Company relate to the Company and its subsidiaries unless the context indicates otherwise.
On August 1, 2018, the Company acquired 4P Therapeutics LLC (“4P Therapeutics”) for $2,250,000, consisting of 250,000 shares of common stock, valued at $1,850,000, and $400,000, and a royalty of 6% on all revenue generated by the Company from the abuse deterrent intellectual property that had been developed by 4P Therapeutics payable to the former owner of 4P Therapeutics. The former owner of 4P Therapeutics has been a director of the Company since April 2018, when the Company entered into an agreement to acquire 4P Therapeutics. The former owner resigned as a director in January 2022.
4P Therapeutics is engaged in the development of a series of transdermal pharmaceutical products, that are in the preclinical stage of development. Prior to the acquisition of 4P Therapeutics, the Company’s business was the development and marketing of a range of transdermal consumer patches. Most of these products are considered drugs in the United States and cannot be marketed in the United States without approval by the Food and Drug Administration (the “FDA”). The Company is not presently taking any stepsentered a feasibility agreement as an initial step to seek FDA approval of its consumer transdermal products and its consumer products which are not being marketed in the United States.
With the acquisition of 4P Therapeutics, 4P Therapeutics’ drug development business became the Company’s principal business. The Company’s approach is to use generic drugs that are off patent and incorporate them into the Company’s transdermal drug delivery system. Although these medications have received FDA approval in oral or injectable form, the Company needs to conduct a transdermal product development program which will include the preclinical and clinical trials that are necessary to receive FDA approval before we can market any of our pharmaceutical products.
On August 25, 2020, the Company formed Pocono Pharmaceuticals Inc. (“Pocono Pharmaceuticals”), a wholly owned subsidiary of the Company. On August 31, 2020, the Company acquired certain assets and liabilities associated with the Transdermal, Topical, Cosmetic, and Nutraceutical business of Pocono Coated Products LLC (“PCP”). The net assets were contributed to Pocono Pharmaceuticals. Included in the transaction, the CompanyPocono Pharmaceuticals also acquired 100% of the membership interests of Active Intelligence LLC (“Active Intelligence”). See Note 2 for further details of the acquisition.
Pocono Pharmaceuticals is a coated products manufacturing entity organized to take advantage of unique process capabilities and experience. Pocono helps their customer with product design and development along with manufacturing to bring new products to market with minimal capital investment. Pocono Pharmaceutical’s competitive edge is a low-cost manufacturing base: a result of its unique processes and state of the art material technology. Active Intelligence manufactures activated kinesiology tape. The tape has transdermal and topical properties. This tape is used as the same as traditional kinesiology tape.
In December 2019, COVID-19 emerged and has subsequently spread world-wide. The World Health Organization has declared COVID-19 a pandemic resulting in federal, state and local governments and private entities mediatingproscribing various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining people who may have been exposed to the virus. The effect of these orders, government imposed quarantines and measures the Company wouldand suppliers and customers it works with might have to take, such as work-at-home policies, may negatively impact productivity, disrupt our business and could delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and disruptions in our operations, could negatively impact our business, operating results and financial condition. Further, quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns, or other restrictions on the conduct of business could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which could disrupt our supply chain.
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Unaudited Interim Financial Statements
The consolidated balance sheet as of October 31, 2021,April 30, 2022, and the consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the periods presented have been prepared by the Company and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations, changes in stockholders’ equity and cash flows for all periods presented have been made. The results forof the ninethree months ended October 31, 2021,April 30, 2022, are not necessarily indicative of the results to be expected for the full year. The consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in Nutriband’s Annual Report on Form 10-K for the year ended January 31, 2021.2022.
Certain information and footnote disclosures required under generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted from these consolidated financial statements pursuant to the rules and regulations, including the interim reporting requirements of the U.S. Securities and Exchange Commission (“SEC”). The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosures of contingent amounts in our consolidated financial statements and accompanying footnotes. Actual results could differ from estimates.
The Company’s significant accounting policies are summarized in Note 1 in the Company’s Annual Report on Form 10-K for the year ended January 31, 2021.2022. There were no significant changes to these accounting policies during the ninethree months October 31, 2021.ended April 30, 2022.
Going Concern Assessment
Management assesses liquidity and going concern uncertainty in the Company’s condensed consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.
As of October 31, 2021,April 30, 2022, we had cash and cash equivalents of $4,010,644 and working capital of $3,918,885. For the three months ended April 30, 2022, the Company believes the substantial doubt about its status as a going concern has been resolved.incurred an operating loss of $689,989 and used cash flow from operations of $744,257. The going concern conditions that caused substantial doubt no longer exist as the Company has positivegenerated operating losses since its inception and has relied on sales of securities and issuance of third-party and related party debt to support cash flow during the last quarter and as of October 31, 2021, has positive working capital.from operations. In October 2021, the Company consummated a public offering and received net proceeds of $5,836,230. The Company also received $2,026,500 of$2,942,970 proceeds from the exercise of warrants. Management retired most of its debt and other current obligations.
Management has implemented other plansprepared estimates of operations for fiscal year 2022 and 2023 believes that sufficient funds will be generated from operations to alleviatefund its operations for one year from the substantial doubt. These plans includedate of the filing of these condensed consolidated financial statements, which indicates improved operations and the Company’s ability to continue operations as a substantial increasegoing concern. The impact of COVID-19 on the Company’s business has been considered in projected sales commitments. These factors did not exist in prior years duringthese assumptions; however, it is too early to know the full impact of COVD-19 or its start-uptiming on a return to more normal operations. The Company’s recent history of losses has continued but future positive cash flow projections due to its management’s plans which includes its acquisition in the latter part of 2020 will enable the Company to alleviate
Management believes the substantial doubt about the Company’s ability of the Company to continue as a going concern. Management’s plans have been currently implemented. The plans enableconcern is alleviated by the Company to meet its obligations for at least one year from the date when the financial statements are issued.above assessment.
Principles of Consolidation
The consolidated financial statements of the Company include the Company and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated. The operations of 4P Therapeutics are included in the Company’s financial statements from the date of acquisition of August 1, 2018, and the operations of Pocono and Active Intelligence are included in the Company’s financial statements from the date of acquisition of September 1, 2020. The wholly owned subsidiaries are as follows:
Nutriband Ltd.
4P Therapeutics LLC
Pocono Pharmaceuticals Inc.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates including, but not limited to, those related to such items as income tax exposures, accruals, depreciable/useful lives, allowance for doubtful accounts and valuation allowances. The Company bases its estimates on historical experience and on other various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to a customer. The Company adopted the guidance under the new revenue standards using the modified retrospective method effective February 1, 2018 and determined no cumulative effect adjusted to retained earnings was necessary upon adoption. Topic 606 requires the Company to recognize revenues when control of the promised goods or services and receipt of payment is probable. The Company recognizes revenue based on the five criteria for revenue recognition established under Topic 606: 1) identify the contract, 2) identify separate performance obligations, 3) determine the transaction price, 4) allocate the transaction price among the performance obligations, and 5) recognize revenue as the performance obligations are satisfied.
Revenue Types
The following is a description of the Company’s revenue types, which include professional services and sale of goods:
● | Service revenues include the contract of research and development related services with the Company’s clients in the life sciences field on an as-needed basis. Deliverables primarily consist of detailed findings and conclusion reports provided to the client for each given research project engaged. |
● | Product revenues are derived from the sale of the Company’s consumer transdermal and coated products. Upon the reception of a purchase order, we have the order filled and shipped. |
Contracts with Customers
A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
Deferred RevenueContract Liabilities
Deferred revenue is a liability related to a revenue producing activity for which revenue has not been recognized. The Company records deferred revenue when it receives consideration from a contract before achieving certain criteria that must be met for revenue to be recognized in conformity with GAAP.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For the Company’s different revenue service types, the performance obligation is satisfied at different times. The Company’s performance obligations include providing products and professional services in the area of research. The Company recognizes product revenue performance obligations in most cases when the product has shipped to the customer. When we perform professional service work, we recognize revenue when we have the right to invoice the customer for the work completed, which typically occurs over time on a monthly basis for the work performed during that month.
All revenue recognized in the income statement is considered to be revenue from contracts with customers.
Disaggregation of Revenues
The Company disaggregates its revenue from contracts with customers by type and by geographical location. See the tables:
Three Months Ended | Nine Months Ended | Three Months Ended April 30, | ||||||||||||||||||||||
October 31, | October 31, | 2022 | 2021 | |||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||
Revenue by type | ||||||||||||||||||||||||
Sale of goods | $ | 183,037 | $ | 347,216 | $ | 724,288 | $ | 467,986 | ||||||||||||||||
Revenue by type Sale of goods | $ | 401,990 | $ | 327,512 | ||||||||||||||||||||
Services | 100,000 | 44,581 | 205,976 | 127,625 | 75,932 | 105,976 | ||||||||||||||||||
Total | $ | 283,037 | $ | 391,797 | $ | 930,264 | $ | 595,611 | $ | 477,922 | $ | 433,488 |
Three Months Ended | Nine Months Ended | |||||||||||||||
October 31, | October 31, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue by geographic location: | ||||||||||||||||
United States | $ | 283,037 | $ | 155,083 | $ | 843,664 | $ | 238,127 | ||||||||
Foreign | - | 236,714 | 86,600 | 357,484 | ||||||||||||
$ | 283,037 | $ | 391,797 | $ | 930,264 | $ | 595,611 |
Three Months Ended April 30, | ||||||||
2022 | 2021 | |||||||
Revenue by geographic location: | ||||||||
United States | $ | 477,922 | $ | 346,888 | ||||
Foreign | - | 86,600 | ||||||
$ | 477,922 | $ | 433,488 |
Accounts receivable
Trade accounts receivables are recorded at the net invoice value and are not interest bearing. The Company maintains allowances for doubtful accounts for estimated losses from the inability of its customers to make required payments. The Company determines its allowances by both specific identification of customer accounts where appropriate and the application of historical loss to non-applicable accounts. For the ninethree months ended October 31,April 30, 2022 and 2021, and 2020, the Company recorded no bad debt expense for doubtful accounts related to account receivable.
Inventories
Inventories are valued at the lower of cost and reasonable value determined using the first-in, first-out (FIFO) method. Net reasonablerealized value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. The cost of finished goods and work in process is comprised of material costs, direct labor costs and other direct costs and related production overheads (based on normal operating capacity). As of OctoberApril 30, 2022 and January 31, 2021,2022, 100% of the inventory consists of raw materials.
Property, Plant and Equipment
Property and equipment represent an important component of the Company’s assets. The Company depreciates its plant and equipment on a straight-line basis over the estimated useful life of the assets. Property, plant and equipment is stated at historical cost. Expenditures for minor repairs, maintenance and replacement parts which do not increase the useful lives of the assets are charged to expense as incurred. All major additions and improvements are capitalized. Depreciation is computed using the straight-line method. The lives over which the fixed assets are depreciated range from 3 to 20 years as follows:
Lab Equipment | 5-10 years |
Furniture and fixtures | 3 years |
Machinery and equipment | 10-20 years |
Intangible Assets
Intangible assets include trademarks, intellectual property and customer base acquired through business combinations. The Company accounts for Other Intangible Assets under the guidance of ASC 350, “Intangibles-Goodwill and Other.” The Company capitalizes certain costs related to patent technology. A substantial component of the purchase price related to the Company’s acquisitions have also been assigned to intellectual property and other intangibles. Under the guidance, other intangible assets with definite lives are amortized over their estimated useful lives. Intangible assets with indefinite lives are tested annually for impairment. Trademarks, intellectual property and customer base are being amortized over their estimated useful lives of ten years.
Goodwill
Goodwill represents the difference between the total purchase price and the fair value of assets (tangible and intangible) and liabilities at the date of acquisition. Goodwill is reviewed for impairment annually on January 31, and more frequently as circumstances warrant, and written down only in the period in which the recorded value of such assets exceeds their fair value. The Company does not amortize goodwill in accordance with ASC 350. In connection with the Company’s acquisition of 4P Therapeutics LLC in 2018, the Company recorded Goodwill of $1,719,235. On August 31, 2020, in connection with the Company’s acquisition of Pocono Coated Products LLC and Active Intelligence LLC, the Company recorded Goodwill of $5,810,640. During the year ended January 31, 2022, the Company recorded an impairment charge of $2,180,836 reducing the Active Intelligence LLC Goodwill to $3,629,813. As of OctoberApril 30, 2022 and January 31, 2021,2022, Goodwill amounted to $7,529,875.$5,349,039.
Long-lived Assets
Management reviews long-lived assets for potential impairment whenever significant events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment exists when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. If an impairment exists, the resulting write-down would be the difference between the fair market value of the long-lived asset and the related book value.
Earnings per Share
Basic earnings per share of common stock is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock and potential shares of common stock outstanding during the period. Potential shares of common stock consist of shares issuable upon the exercise of outstanding options and common stock purchase warrants. As of October 31,April 30, 2022, and 2021, and 2020, there were 1,347,928 and141,8301,394,034 and 141,830 common stock equivalents outstanding, that were not included in the calculation of dilutive earnings per share as their effect would be anti-dilutive.
Stock-Based Compensation
ASC 718, “Compensation - Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services, and, since February 1, 2019, non-employees, are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). As of February 1, 2019, pursuant to ASC 2018-07, ASC 718 was applied to stock-based compensation for both employees and non-employees.
Business Combinations
The Company recognizes the assets acquired, the liabilities assumed, and any non-controlling interest in the acquired entity at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the accounting literature. In accordance with this guidance, acquisition-related costs, including restructuring costs, must be recognized separately from the acquisition and will generally be expensed as incurred. That replaces the cost-allocation process detailed in previous accounting literature, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair value.
Leases
In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842), to provide a new comprehensive model for lease accounting under this guidance, lessees and lessors should apply a “right-of-use” model in accounting for all leases (including subleases) and eliminate the concept of operating leases and off-balance-sheet leases. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. Similar modifications have been made to lessor accounting in-line with revenue recognition guidance.
The Company adopted ASU 2016-02 as amended effective February 1, 2019 using the modified retrospective approach. In connection with the adoption, the Company elected to utilize the Comparative Under 840 Option whereby the Company will continue to present prior period financial statements and disclosures under ASC 840. In addition, the Company elected the transition package of three practical expedients permitted under the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and initial direct costs. The Company completed the necessary changes to its accounting policies, processes, disclosure and internal control over financial reporting.
Research and Development Expenses
Research and development expensescosts are expensed as incurred.
Income Taxes
Taxes are calculated in accordance with taxation principles currently effective in the United States and Ireland.
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company records net deferred tax assets to the extent they believe these assets will more-likely-than-not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event the Company was to determine that it would be able to realize its deferred income tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the valuation allowance which would reduce the provision for income taxes.
Fair Value Measurements
FASB ASC 820, “Fair Value Measurements and Disclosure” (“ASC 820”), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value.
The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis during the reporting period. The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:
Level 1 | Observable inputs such as quoted market prices in active markets. | ||
Level 2 | Inputs other than quoted prices in active markets that are either directly or indirectly observable. | ||
Level 3 | Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
The carrying value of the Company’s financial instruments including cash and cash equivalents, accounts receivable, prepaid expenses, and accrued expenses approximate their fair value due to the short maturities of these financial instruments.
Recent Accounting StandardsReclassification
The Company has implemented all new pronouncements, includingreclassified prior year amounts to show the adoptionallocation of ASU 2018-13, ASU 2019-12 and ASU 2020-06, that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial statements or resultsdepreciation expense to cost of operations.
On August 31, 2020, the Company entered into a Purchase Agreement (“Agreement”), with Pocono Coated Products (“PCP”), pursuant to which PCP agreed to sell the Company certain of the assets and liabilities associated with its Transdermal, Topical, Cosmetic, and Nutraceutical business, including: (1) all the equipment, intellectual property and trade secrets, cash balances, receivables, bank accounts and inventory, free and clear of all liens, except for certain lease obligations, and (2), a 100% membership interest in Active Intelligence, LLC (collectively the “Assets”). The net assets acquired were contributed to Pocono Pharmaceuticals Inc, a newly formed wholly owned subsidiary of the Company. The purchase price for the Assets was (i) $6,085,180 paid with the issuance of 608,519 shares in the Company’s common stock of Nutriband at a value of the average price of the previous 90 days at the date of Closing (the “Shares”), and (ii) a promissory note of the Company, net of debt discount, in the principal amount, of $1,332,893 (the Note”) which is due upon the earlier of (a) twelve (12) months from issuance, or (b) immediately following a capital raise of not less than $4,000,000 and/or a public offering of no less than $4,000,000. Michael Myer, the CEO of PCP, has been elected to the Board of Directors of the Company for period of one year at the annual meeting of shareholders of the Company held in October 2020.goods sold.
The Agreement provides that it is effective August 31, 2020, on which date the parties also entered into an escrow agreement (the “Escrow Agreement”), with legal counsel serving as the escrow agent, providing for holding of the Note, certificate for the shares, and title to the Assets (held in a special purpose subsidiary) as collateral security for completion of all closing conditions under the Agreement. On that date, the parties also entered into a security agreement granting PCP a security interest in all proceeds of the Assets held as collateral under the Escrow Agreement.Recent Accounting Standards
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which clarifies how to properly account for deferred revenue in a business combination. ASU 2021-08 is effective for periods after December 15, 2022. The purposeCompany adopted ASU 2021-08 on February 1, 2022. The adoption of ASU 2021-08 did not have a material effect on the Company entering into the transaction is to enhance the transdermal products operations of the Company. The fair value of consideration given was allocated to the net tangible assets acquired. Under U.S. GAAP, both the PCP segment and Active Intelligence were considered to be businesses and, as such, the transaction was accounted for under the acquisition method of accounting.Company’s consolidated financial statements.
DetailsThe Company has reviewed all other FASB-issued ASU accounting pronouncements and interpretations thereof that have effective dates during the period reported and in future periods. The Company has carefully considered the new pronouncements that alter previous GAAP and does not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of the net assets acquiredCompany’s financial management and certain standards are as follows:under consideration.
Fair value | ||||
Recognized on | ||||
Acquisition | ||||
Common stock issued | $ | 6,085,180 | ||
Note payable issued | 1,332,893 | |||
$ | 7,418,073 | |||
Cash | $ | 66,994 | ||
Accounts receivable | 1,761 | |||
Inventory | 42,613 | |||
Equipment and fixtures | 1,056,935 | |||
Customer base | 177,600 | |||
Intellectual property and trademarks | 583,200 | |||
Goodwill | 5,810,640 | |||
Accounts payable and accrued expenses | (26,104 | ) | ||
Deferred revenue | (26,851 | ) | ||
Debt | (268,715 | ) | ||
Net assets acquired | $ | 7,418,073 |
The following unaudited pro forma condensed financial information presents the combined results of operations of the Company and the two businesses acquired from PCP, Pocono and Active Intelligence, as if the acquisition occurred as part of the beginning of cash period presented. The unaudited pro forma condensed financial information is not intended to represent or be indicative of the consolidated results of operations of the Company that would have been reported had the acquisition occurred at the beginning of the period presented and should not be taken as being representation of the future consolidated results of operations of the Company.
Nine Months Ended | ||||||||
October 31, | ||||||||
2020 | ||||||||
As Reported | Proforma | |||||||
Net revenue | $ | 595,611 | $ | 2,167,208 | ||||
Net loss | (680,632 | ) | (609,741 | ) | ||||
Loss per common share - basic and diluted | (0.12 | ) | (0.10 | ) |
PROPERTY AND EQUIPMENT |
October 31, | January 31, | April 30, | January 31, | |||||||||||||
2021 | 2021 | 2022 | 2022 | |||||||||||||
Lab equipment | $ | 144,585 | $ | 144,585 | $ | 144,585 | $ | 144,585 | ||||||||
Machinery and equipment | 1,099,524 | 1,056,935 | 1,205,127 | 1,138,530 | ||||||||||||
Furniture and fixtures | 28,442 | 19,643 | 19,643 | 19,643 | ||||||||||||
1,272,551 | 1,221,163 | 1,369,355 | 1,302,758 | |||||||||||||
Less: Accumulated depreciation | (282,554 | ) | (144,537 | ) | (368,482 | ) | (323,461 | ) | ||||||||
Net Property and Equipment | $ | 989,997 | $ | 1,076,626 | $ | 1,000,873 | $ | 979,297 |
Depreciation expense amounted to $138,017$45,021 and $55,760$43,808 for the ninethree months ended October 31,April 30, 2022 and 2021, and 2020, respectively. During the three months ended April 30. 2022 and 2021, depreciation expense of $27,693 and $27,166, respectively, have been allocated to cost of goods sold.
NOTES |
Notes Payable
On March 21, 2020, the Coronavirus Aid Relief and Economic Security Act (“CARES ACT” was enacted. The CARES ACT established the Paycheck Protection Program (“PPP”) which funds small businesses through federally guaranteed loans. Under the PPP, companies are eligible for forgiveness of principal and interest if the proceeds are used for eligible payroll costs, rent and utility costs. On June 17, 2020, the Company’s subsidiary, 4P Therapeutics, was advanced $34,870 under the PPP, all of which was forgiven as of April 30, 2021. The Company recorded a gain on the extinguishment of debt of $34,870 during the ninethree months ended October 31,April 30, 2021.
In July 2020, a minority shareholder made an additional loan to the Company in the amount of $100,000. The loan is interest- freeinterest-free and due upon demand. In October 2021, the loan was converted into 17,182 common shares of the Company. The shares were issued at fair market value and no gain or loss was recorded for the transaction.
Active Intelligence, the Company’s newly acquired subsidiary, entered into an agreement with the Carolina Small Business Development Fund for a line of credit of $160,000 due October 16, 2029, with interest of 5% per year. The amount assumed in Note 3 was $139,184. The loan requires monthly payments of principal and interest of $1,697. During the nine monthsyear ended OctoberJanuary 31, 2021,2022, principal and interest payments of $8,344 were forgiven under the Cares Act. The amount, $8,344, has been recorded as a gain on the forgiveness of debt. During the three months ended April 30, 2022, the Company made principal payments of $3,647. As of October 31, 2021,April 30, 2022, the amount due was $118,720,$111,591, of which $14,119 is current.
On April 3, 2022, the Company entered into a retail installment agreement for the purchase of an automobile. The contract price was $32,274, of which $22,795 was financed. The agreement is for five years bearing interest at 2.95% per annum with payments of $495 per month. The loan is secured by automobile. As of April 30, 2022, the amount due was $22,483 of which $3,960 is current.
Finance Leases
Pocono hashad two finance leases secured by equipment. The leases mature in 2025 and 2026. The incremental borrowing rate is 5.0%. As of October 31, 2021, theThe amount due on the leases was $106,031,$121,544, all of which was paid in November 2021.during the year ended January 2022.
Related Party Payable
On August 31, 2020, in connection with the Company’s acquisition of Pocono Products LLC, the Company issued to Pocono Coated Products LLC a promissory note, net of debt discount, in the amount of $1,332,893 with interest accruing at an annual rate of 0.17%, due on August 28, 2021, or immediately following the earlier of a capital raise of no less than $4,000,000 and/or a public offering of no less than $4,000,000. The members of Pocono Coated Products LLC, which include Mike Myer who was a related party, is a shareholderare shareholders of the Company. During the ninethree months ended October 31,April 30, 2021, the Company recorded amortization of debt discount of $97,477.$36,554. In October 2021, the note in the amount of $1,500,000 was paid in full.
Convertible Debt
On October 30, 2019, the Company entered into a securities purchase agreement with two investors pursuant to which the Company issued to the investors (i) 6% one-year convertible promissory notes in the principal amount of $270,000 and (ii) three-year warrant to purchase 50,000 shares of common stock at an exercise price equal to the lesser of (i) $20.90 or (ii) if the Company completes a public offering, 110% of the initial public offering price of the common stock in the public offering. The loans contained an original issue discount of $20,000 resulting in gross proceeds from this financing of $250,000.
The notes are convertible at a conversion price equal to the lesser of (i) the per share price of our common stock offered in a public offering or (ii) the variable conversion price, which is defined as 70% of the lowest trading price of the common stock during the 20 trading days preceding the date of conversion. The conversion price and the percentage of the trading price is subject to downward adjustment in the event the Company fails to comply with the obligations under the notes. The Company has the right to prepay the notes during the 180 days following the issuance of the notes at a premium of 115% of the outstanding principal and interest during the 60 days following the date of issuance of the note, which percentage increases to 125% during the remainder of the 180-day period. The Company is required to pay the notes one business day after the closing of the first to occur of (a) the next public offering of the Company’s securities or (b) the next private placement of the Company’s equity or debt securities in which the Borrower received net proceeds of at least $1.0 million, (c) issuance of securities pursuant to an equity line of credit or (d) a financing with a bank or other institutional lender.
The embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivative and Hedging. The initial fair of the conversion feature was $128,870 and the fair value of the warrants in connection with the notes were valued at $888,789 and were recorded based on their relative fair values. A debt discount to the note payables of $270,000 and an initial derivative expense of $767,650 was recorded.
The debt discount will be amortized over the life of the note. Amortization of the debt discount for the nine months ended October 31, 2020, was $202,500.
On March 25, 2020, the Company prepaid the convertible notes in the principal amount of $270,000 from the proceeds of a private placement. The total payments, including a prepayment fee of $69,131 and accrued interest, was $345,565. As a result of the payment of the notes, the derivative liability, which was $928,774 as of January 31, 2020, was reduced to zero. The warrants are no longer a derivative liability based on the notes being paid in full.
Interest expense for the ninethree months ended October 31, 2021was $115,268 including the amortization of the debt discount of $97,477 and interest expense of $17,791.April 30, 2022, was $4,110. Interest expense for the ninethree months ended October 31, 2020,April 30, 2021, was $206,836$40,869 including the amortization of debt discount of $202,500$36,554 and interest expense of $4,336.$4,315.
INTANGIBLE ASSETS |
As of October 31, 2021,April 30, 2022 and January 31, 2021,2022, intangible assets consisted of intellectual property and trademarks, customer base, and trademarks,license agreement, net of amortization, as follows:
October 31, | January 31, | April 30, | January 31, | |||||||||||||
2021 | 2021 | 2022 | 2022 | |||||||||||||
Customer base | $ | 314,100 | $ | 314,100 | $ | 314,100 | $ | 314,100 | ||||||||
License agreement | 50,000 | - | 50,000 | 50,000 | ||||||||||||
Intellectual property | 817,400 | 817,400 | ||||||||||||||
Intellectual property and trademarks | 817,400 | 817,400 | ||||||||||||||
Total | 1,181,500 | 1,131,500 | 1,181,500 | 1,181,500 | ||||||||||||
Less: Accumulated amortization | (222,133 | ) | (124,770 | ) | (287,031 | ) | (254,587 | ) | ||||||||
Net Intangible Assets | $ | 959,367 | $ | 1,006,730 | $ | 894,469 | $ | 926,913 |
In February 2021, the Company acquired an IP license for $50,000, see Note 10-8- “Rambam Agreement” for further discussion regarding the license agreement. The value of the intangible assets, consisting of intellectual property, license agreement and customer base has been recorded at their fair value by the Company and are being amortized over a period of three to ten years. Amortization expense for the ninethree months ended October 31,April 30, 2022, and 2021 was $32,454 and 2020 was $97,363 and $27,802,$32,454, respectively.
Estimated Amortization:
Year Ended January 31, | ||||||||
2023 | $ | 97,332 | ||||||
2024 | 129,776 | |||||||
2025 | 113,109 | |||||||
2026 | 113,109 | |||||||
2027 | 113,109 | |||||||
2028 and thereafter | 328,034 | |||||||
Total | $ | 894,469 | ||||||
Year Ended January 31, | ||||||||
Remainder of 2022 | $ | 32,416 | ||||||
2023 | 129,776 | |||||||
2924 | 129,776 | |||||||
2025 | 113,109 | |||||||
2026 and thereafter | 554,290 | |||||||
$ | 959,367 |
RELATED PARTY TRANSACTIONS |
a) | In connection with the acquisition of Pocono, the Company recorded various transactions and operations through Pocono Coated Products LLC, of which Mike Myer was a related |
STOCKHOLDERS’ EQUITY |
Preferred Stock
On January 15, 2016, the board of directors of the Company approved a certificate of amendment to the articles of incorporation and changed the authorized capital stock of the Company to include and authorize 10,000,000 shares of Preferred Stock, par value $0.001 per share.
On May 24, 2019, the board of directors created a series of preferred stock consisting of 2,500,000 shares designated as the Series A Convertible Preferred Stock (“Series A Preferred Stock”). On June 20, 2019, the Series A preferred Stock was terminated, and the 2,500,000 shares were restored to the status of authorized but unissued shares of Preferred Stock, without designation as to series, until such stock is once more designated as part of a particular series by the board of directors.
Common Stock
On June 25, 2019, the Company effected a one-for fourone-for-four reverse stock split, pursuant to which each share of common stock became converted into 0.25 shares of common stock, and the Company decreased its authorized common stock from 100,000,000 to 25,000,000 shares.
On January 27, 2020, the Company amended its articles of incorporation to increase its authorized common shares from 25,000,000 shares to 250,000,000 shares.
Activity during the NineThree Months Ended October 31, 2020April 30, 2022
On March 22, 2020, the Company issued in a private placement 46,828 units at a price of $11 per unit. Each unit consisted of one share of common stock and a warrant to purchase one share of common stock at an exercise price of $14 per share. The warrants expire April 30, 2023. The Company issued a total of 46,828 shares of common stock and warrants to purchase 46,828 shares of common stock. The Company received proceeds of $515,108.
In March 2020, a minority shareholder who had previously made loans of $215,000, made an additional loan to the Company in the amount of $60,000, increasing the loans to shareholder to $275,000. On March 27, 2020, the Company issued 25,000 shares of common stock upon reaching a settlement with the noteholder to convert the notes in the principal amount of $275,000. The transaction resulted in a loss on extinguishment of $12,500.
On June 30,2020, the Company issued 5,000 shares to a consultant for services rendered to the Company. The fair value of the common stock at the date of issuance was $50,000, of which $38,000 is included in selling and general administrative expenses and $12,000 is included in prepaid expenses.
On August 31, 2020, the Company acquired the membership interests in Pocono Coated Products LLC and issued 608,519 shares of its common stock, valued at $6,000,000, and issued a promissory note in the amount of $1,500,000. See Note 3 for further information.
(a) | In March 2022, the Company purchased 22,058 shares of its common stock for $89,196 and recorded the purchase as Treasury Stock. As of April 30, 2022, the Company holds 50,183 of its shares comprising the $193,663 of treasury stock. |
Activity during the NineThree Months Ended October 31,April 30, 2021
On February 25, 2021, in connection with the Company’s License Agreement with Rambam, pursuant to a Stock Purchase Agreement with BPM Inno Ltd (“BPM”), the Company issued 81,396 shares of common stock to BPM and received proceeds of $700,000 to be applied to product development expenses under the License Agreement. The Company entered into the Stock Purchase Agreement with BPM in December 2020 and received a payment of $60,000 which is included in Stockholders’ Equity as Subscription Payable in the Company’s consolidated balance sheet as of January 31, 2021. In February 2021, BPM advanced a payment for the Company to Rambam in the amount of $57,000 for the license fee. The balance of the funds of $583,000 was received in February 2021. |
On February 25, 2021, the Company issued 5,602 shares of common stock, valued at $60,000, for consulting services pursuant to a consultant agreement commencing December 1, 2020. The Company has reflected $10,000 representing 934 shares as Subscription Payable in the Stockholders’ Equity in the Company’s consolidated balance sheet as of January 31, 2021. |
On February 15, 2021, the Company issued 12,500 shares of common stock, valued at $350,000, for consulting fees in connection with the Rambam License Agreement discussed in Note 10.Subscription Payable
On |
On |
7. | OPTIONS and WARRANTS |
Warrants
The following table summarizes the changes in warrants outstanding and the related price of the shares of the Company’s common stock issued to non-employees of the Company. During the nine months ended October 31, 221, the Company issued 1,056,000 publicmanagement (75,000 warrants in connection with its public offering, 105,600 to the underwriters in connection with its public offering, 158,400 warrants issued to the underwriters for the related over-allotment, 125,000 (of which 75,000 were issued to the Chief Financial Officer) warrants for services and 72,200 warrants to previous convertible noteholders as additional compensation due tonon-employees of the warrant round down provisions of their agreement. See Note 5 for further discussion.Company.
The warrant exercise price to the previous convertible noteholders was adjusted to $6.25 for the round down provision and the resulting $196,589 of deemed dividend was recorded during the nine months ended October 31, 2021. The fair value of the 125,000 warrants issued for services amounted to $365,000 and was recorded during the same period. The Company used the Black-Scholes model to determine the fair value of both the $196,589 in deemed dividends and the $365,000 in compensation. The valuation model used a dividend rate of 0%; expected term of 1.5 years; volatilities ranging from 136% to 145%; and risk-free rate 0.10%.
Exercise | Remaining | Intrinsic | Exercise | Remaining | Intrinsic | |||||||||||||||||||||||||||
Shares | Price | Life | Value | Shares | Price | Life | Value | |||||||||||||||||||||||||
Outstanding, January 31, 2021 | 141,828 | $ | 11.99 | 2.16 years | $ | 285,000 | 141,828 | $ | 11.99 | 2.16 years | $ | - | ||||||||||||||||||||
Granted | 1,517,200 | 7.23 | - | - | 1,517,200 | 7.23 | 4.70 years | - | ||||||||||||||||||||||||
Expired/Cancelled | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Exercised | (311,100 | ) | 7.35 | - | - | (428,496 | ) | 7.39 | - | - | ||||||||||||||||||||||
Outstanding - period ending October 31, 2021 | 1,347,928 | $ | 7.36 | 4.09 years | $ | 171,301 | ||||||||||||||||||||||||||
Outstanding, January 31, 2022 | 1,230,532 | 7.35 | 3.93 years | - | ||||||||||||||||||||||||||||
Exercisable - period ending October 31, 2021 | 1,347,928 | $ | 7.36 | 4.09 years | $ | 171,301 | ||||||||||||||||||||||||||
Granted | - | - | - | - | ||||||||||||||||||||||||||||
Expired/Cancelled | - | - | - | - | ||||||||||||||||||||||||||||
Exercised | - | - | - | - | ||||||||||||||||||||||||||||
Outstanding - April 30, 2022 | 1,230,532 | $ | 7.35 | 3.75 years | $ | - | ||||||||||||||||||||||||||
Exercisable - April 30, 2022 | 1,230,532 | $ | 7.35 | 3.75 years | $ | - |
The following table summarizes additional information relating to the warrants outstanding as of October 31, 2021:April 30, 2022:
Range of Exercise | Number | Weighted Average Remaining Contractual | Weighted Average Exercise Price for Shares | Number | Weighted | Intrinsic | ||||||||||||||||
Prices | Outstanding | Life(Years) | Outstanding | Exercisable | Exercisable | Value | ||||||||||||||||
$ | 6.25 | 131,100 | 1.00 | $ | 6.25 | 131,100 | $ | 6.25 | $ | 1,301 | ||||||||||||
$ | 14.00 | 46,828 | 1.50 | $ | 14.00 | 46,828 | $ | 14.00 | $ | - | ||||||||||||
$ | 7.50 | 1,045,000 | 4.73 | $ | 7.50 | 1,045,000 | $ | 7.50 | $ | - | ||||||||||||
$ | 4.90 | 125,000 | 2.84 | $ | 4.90 | 125,000 | $ | 4.90 | $ | 170,000 |
Range of Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life(Years) | Weighted Average Exercise Price for Shares Outstanding | Number Exercisable | Weighted Average Exercise Price for Shares Exercisable | Intrinsic Value | ||||||||||||||||||||
$ | 6.25 | 131,100 | 0.75 | $ | 6.25 | 131,100 | $ | 6.25 | $ | - | ||||||||||||||||
$ | 14.00 | 46,828 | 1.24 | $ | 14.00 | 46,828 | $ | 14.00 | $ | - | ||||||||||||||||
$ | 7.50 | 927,604 | 4.68 | $ | 7.50 | 822,004 | $ | 7.50 | $ | - | ||||||||||||||||
$ | 4.90 | 125,000 | 2.73 | $ | 4.90 | 125,000 | $ | 4.90 | $ | - |
Options
The following table summarizes the changes in options outstanding and the related price of the shares of the Company’s common stock issued to employees of the Company.
On November 1, 2021, The Board of Directors adopted the 2021 Employee Stock Option Plan (the”Plan”). The Company has reserved 350,000 shares to issue and sell upon the exercise of stock options. The options vest immediately upon issuance and expire in three years. Under the Plan, options may be granted which are intended to qualify as Incentive Stock Options (“ISOs”) under Section 422 of the Internal Revenue Code of 1986 (the “Code”) or which are not (“non-ISOs”) intended to qualify as Incentive Stock Options thereafter. The Plan also provides for restricted stock awards representing shares of common stock that are issued subject to such restrictions on transfer and other incidents of ownership and such forfeiture conditions as the Board of Directors, or the committee administering the Plan composed of directors who qualify as “independent” under Nasdaq rules, may determine. On November 3, 2021, the Committee filed a Registration Statement on Form S-8, to register under the Securities Act of 1933, as amended, 350,000 shares of common stock reserved for issuance under the Plan. As of April 30, 2022, 186,500 shares remain in the Plan.
Exercise | Remaining | Intrinsic | ||||||||||||||
Shares | Price | Life | Value | |||||||||||||
Outstanding, January 31, 2021 | - | $ | - | - | ||||||||||||
Granted | 163,500 | 4.97 | 2.97 years | - | ||||||||||||
Expired/Cancelled | - | - | - | |||||||||||||
Exercised | - | - | - | |||||||||||||
Outstanding, January 31, 2022 | 163,500 | - | - | |||||||||||||
Granted | - | - | - | - | ||||||||||||
Expired/Cancelled | - | - | - | |||||||||||||
Exercised | - | - | - | |||||||||||||
Outstanding - April 30, 2022 | 163,500 | $ | 4.97 | 2.75 years | $ | - | ||||||||||
Exercisable - April 30, 2022 | 163,500 | $ | 4.97 | 2.75 years | $ | - |
The following table summarizes additional information relating to the options outstanding as of April 30, 2022:
Range of Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life(Years) | Weighted Average Exercise Price for Shares Outstanding | Number Exercisable | Weighted Average Exercise Price for Shares Exercisable | Intrinsic Value | ||||||||||||||||||||
$ | 5.34 | 40,000 | 2.75 | $ | 5.34 | 40,000 | $ | 5.34 | $ | - | ||||||||||||||||
$ | 4.85 | 123,500 | 2.75 | $ | 4.85 | 123,500 | $ | 4.85 | $ | - |
COMMITMENTS AND CONTIGENCIES |
Legal Proceedings
On July 27, 2018, the Company commenced an action in the Circuit Court of the Ninth Judicial Circuit in and for Orange County, Florida, against Advanced Health Brands, Inc., Raymond Kalmar, Paul Murphy, Michelle Polly-Murphy, Laura Fillman and John Baker, together with a Motion for Temporary Injunction Without Notice and a Motion for Prejudgment Writ of Replevin arising from the Company’s decision to seek to rescind for misrepresentation the agreement by which the Company acquired advanced Health Brands, Inc. for 1,250,000 shares of common stock valued at $2,500,000 and seek return of the shares. On August 2, 2018, the court entered a Temporary Injunction Without Notice and an Order to Show Cause against the defendants. Defendants Kalmar, Murphy, Polly-Murphy, and Baker filed a Motion to Dismiss the Company’s Verified Complaint, Motion to Dissolve Temporary Injunction Without Notice and Response to Order to Show Cause, and Motion to Compel Arbitration. On January 4, 2019, the court dismissed the Company’s complaint with prejudice, and directed the defendants to assign the Company within 30 days, the six patents never duly transferred to the Company. On February 1, 2019, the Company appealed the court’s order. Pursuant to a settlement agreement with one of the defendants, that defendant returned the 50,000 shares which had been issued to her, and the shares were cancelled as of January 31, 2019. On June 7, 2019, the individual defendants (other than the defendant whom the Company has a settlement agreement), filed a motion for sanctions and civil contempt against us, which generally claimed that we failed to comply with the Court’s January 4, 2019, order by refusing to issue the Ruling 144 letters that would allow the defendants to transfer their shares of common stock. On October 29, 2019, the Court denied the Defendants motion. On March 20, 2020, the Florida district court of appeal reversed the lower court ruling in the Florida state court action that dismissed our complaint, with prejudice, and gave us leave to file an amended complaint. On July 7, 2020, Defendants filed Notice for Trial, requesting the court to set a trial date. The Company and defendants have served their first set of interrogatories on each other and have filed answers and responses to each other’s first set of interrogatories.
On August 22, 2018, four of the defendants in the Florida action described in the previous paragraph filed a complaint against the Company in the Franklin County, Ohio Court of Common Pleas seeking a declaratory judgment permitting them to sell the shares of common stock they received pursuant to the acquisition agreement. The parties have agreed to a stay pending the outcome of the Florida litigation.
On April 29, 2019, the Company filed a securities fraud action in the U.S. District Court for the Eastern District of New York against Raymond Kalmar, Paul Murphy, Michelle Polly-Murphy, Advanced Health Brands and TD Therapeutic, Inc. In the complaint the Company alleges that in 2017, the defendants fraudulently and deceitfully obtained 1,250,000 shares of common stock by orchestrating a months-long scheme to defraud the Company. The Company is seeking the return of the shares of common stock and monetary damages resulting from the defendants’ fraudulent conduct. The defendants filed a motion to dismiss the complaint on August 23, 2019, and on September 13, 2019, the Company filed its response. On July 20, 2020, the Court denied the defendant’s motion to dismiss the complaint, and the parties have recently commenced the discovery phase of the litigation. The Court has scheduled a trial date in earlyJune 2022.
Employment Agreements
The Company entered into a three-year employment agreement with Gareth Sheridan, our CEO, Serguei Melnik, our President, effective April 25, 2019.February 1, 2022. The agreement also provides that the executiveexecutives will continue as a director. The agreement provides for an initial term, commencing on the effective date of the agreement and ending on January 31, 2024,2025, and continuing on a year-to-year basis thereafter unless terminated by either party on not less than 30 days’ notice given prior to the expiration of the initial term or any one-year extension. For their services to the Company during the term of the agreement, Mr. Sheridan and Mr. Melnik will receive an annual salary of $250,000 per annum, commencing on the effective date of the agreement. Mr. Sheridan and Mr. Melnik will also receive a performance bonus of 3.5% of net income before income taxes.
The Company entered into a three-year employment agreement with Gerald Goodman, our CFO, effective February 1, 2022. The agreement provides for an initial term, commencing on the effective date of the agreement and ending on January 31, 2025, and continuing on a year-to-year basis thereafter unless terminated by either party on not less than 30 days’ notice given prior to the expiration of the initial term or any one-year extension. For his services to the Company during the term of the agreement, Mr. Sheridan receivesGoodman will receive an annual salary $42,000of $210,000 per annum, commencing on the effective date of the agreement and increasing to $250,000 per annum in the month in which the Company shall have received not less than $2,500,000 from one or more public or private financings of the Company’s equity securities subsequent to the date of the agreement. During the year ended January 31, 2021, the salary was increased to $60,000 per annum.
Rambam Agreement
On December 9, 2020, the Company entered into a License Agreement (the “License Agreement”) with Rambam Med-Tech Ltd. (“Rambam”), Haifa, Israel, to develop the RAMBAM Closed System Transfer Device (“CTSD”) and such other products as the parties agree to develop/commercialize. The Company will license from Rambam the full technology, IP, and title to CTSD in the field, with an Initial license fee of $50,000 and running royalties on net sales. The $50,000 license fee was paid by a third party at the direction of the Company in February 2021, at which time the agreement became effective. As of April 30, 2022, the development of the RAMBAM CSTD Device has been suspended until further notice as preliminary reviews and market research found the product was not commercially viable in its current form.
The Company had entered into a prior agreement, dated November 13, 2020, with BPM Inno Ltd., Kiryat, Israel (“BPM”), that, in consideration of BPM’s introduction of Rambam to the Company, provided for BPM to have the rights as the exclusive of agent of the Company with Rambam and any other parties similarly introduced by BPM, and for a commission payable to BPM by the Company of 4.5% of revenues received by the Company resulting from the introduction of Rambam (and any other companies as to which the exclusive agency of BPM was in effect), and for BPM’s payment of a royalty to Rambam. If the Company fails to commercialize the medical products subject to the License Agreement with Rambam within 36 months, under the November 13, 2020 agreement, BPM and the Company would share 50/50 in the revenues generated from sales of the licensed products from Rambam. This agreement further provides that it will be effective for a period of 10 years, with either party having the right to terminate on notice given 30 days prior to the desired termination, and also provided for certain territorial distribution rights of BPM as are set forth in the March 10, 2021 Distribution Agreement between the Company and BPM. As of April 30, 2022, no revenues have been earned and royalties have been accrued.
BPM Distribution and Stock Purchase Agreements
On March 10, 2021, the Company finalized the Distribution Agreement with BPM, providing for distribution of the medical products developed and produced under the License Agreement. Under the Distribution Agreement, BPM has the right to distribute the medical products in Israel and has a right of first refusal in relation to all other countries/states, other than United States, Korea, China, Vietnam, Canada and Ecuador, which are termed excluded countries. Kindeva Drug Delivery Agreement On January 4, 2022, the Company signed a feasibility agreement with Kindeva Drug Delivery, L.P. (“Kindeva”) to develop Nutriband’s lead product, AVERSAL Fentanyl, based on its proprietary AVERSAL abuse deterrent transdermal technology and Kindeva’s FDA-approved transdermal fentanyl patch (fentanyl transdermal system). The feasibility agreement is focused on adapting Kindeva’s commercial transdermal manufacturing process to incorporate AVERSAI technology. The agreement will remain in force until the earlier of: (1) the completion of the work and deliverables under the Workplan; or (2) two (2) years after the Effective Date, after which time the agreement will expire. The estimated cost to complete the feasibility Workplan is approximately $1.7 million and the timing to complete will be between eight to twelve months. Nutriband made an advance deposit of $250,000 in January 2022, to be applied against the final invoice. The Workplan has commenced in February 2022, and the parties believe the Workplan will be completed in the time estimated in the agreement. As of April 30, 2022, the Company has incurred expenses of $36,000 and the deposit of $250,000 is included in prepaid expenses. Lease Agreement On February 1, 2022, Pocono Pharmaceuticals entered into a lease agreement with Geometric Group, LLC for 12,000 square feet of warehouse space currently occupied by Active Intelligence. The monthly rental is $3,000 and the lease expires on January 31, 2025. The lease can be extended for an additional three years at the same monthly rental. The Company recorded a Right of Use asset in the amount of $94,134 in connection with the valuation using an incremental borrowing rate of 9%. During the three months ended April 30, 2022, the Company paid $9,000 and recorded rent expense of $7,844. As of April 30, 2022, the operating lease liability was $87,235, of which $65,569 is long-term, which represents the operating liability less interest of $11,765.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended January 31, 2021, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and information contained in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
Overview
Our primary business is the development of a portfolio of transdermal pharmaceutical products. Our lead product is our abuse deterrent fentanyl transdermal system which we are developing to provide clinicians and patients with an extended-release transdermal fentanyl product for use in managing chronic pain requiring around the clock opioid therapy combined with properties designed to help combat the opioid crisis by deterring the abuse and misuse of fentanyl patches. We believe that our abuse deterrent technology can be broadly applied to various transdermal products and our strategy is to follow the development of our abuse deterrent fentanyl transdermal system with the development of additional transdermal prescription products for pharmaceuticals that have risks or a history of abuse. We received on January 28, 2022 an Issue Notification from the United States Patent and Trademark Office (USPTO) for its United States patent entitled, “Abuse and Misuse Deterrent Transdermal System,” that protects our AVERSA™ transdermal abuse deterrent technology. In addition, we are developing a portfolio of transdermal pharmaceutical products to deliver commercially available drugs or biologics that are typically delivered by injection but with the potential to improve compliance and therapeutic outcomes.
We are proceeding with our development efforts with respect to these products
Through July 31, 2018, our business was the development of a line of consumer and health products that are delivered through a transdermal
With our acquisition of 4P Therapeutics on August 1, 2018, our focus changed, and we are seeking to develop and seek FDA approval on a number of transdermal pharmaceutical products under development by 4P Therapeutics. As a result of the acquisition of 4P Therapeutics, we have pipeline of potential products.
4P Therapeutics has not generated any revenue from any of its products under development. Rather, prior to our acquisition, 4P Therapeutics generated revenue to provide cash for its operations through contract research and development and related services for a small number of clients in the life sciences field on an as-needed basis. We are, for the near term, continuing this activity, although we do not anticipate that it will generate significant revenues and, since our acquisition, it has generated a negative gross margin. We have no long-term contractual obligations, and either party can terminate at any time.
With the change in our focus, our capital requirements have increased substantially. The process of developing pharmaceutical products and submitting them for FDA approval is both time consuming and expensive, with no assurance of obtaining approval from the FDA to market our product in the United States. We have budgeted $5.0 million for research and development of our abuse deterrent fentanyl transdermal system, including clinical manufacturing and clinical trials that need to be completed in order to obtain FDA approval. However, the total cost could be substantially in excess of that amount.
On March 25, 2020, we completed a private placement of 46,828 units at a price of $11 per unit. Each unit consisted of one share of common stock and a warrant to purchase one share of common stock at an exercise price of $14 per share. The warrants expire April 30, 2023. We issued a total of 46,828 shares of common stock and warrants to purchase 46,828 shares of common stock. We received proceeds of $515,113.
On March 25, 2020, we paid off the convertible notes in the principal amount of $270,000 from the proceeds of the private placement. The total payments, including the prepayment penalty and accrued interest, was $345,656. The payment was made from the proceeds of the private placement. As a result of the payment of the notes, the derivative liability, which was $928,774 at July 31, 2020, was reduced to zero. As a result of a completed private placement, the warrants to purchase 50,000 shares at the lesser of (i) $20.90 or, (ii) if the Company completes its public offering of its common stock, 110% of the initial public offering price of the Common Stock in the public offering, became a warrant to purchase 95,000 warrants at $11 per share, subject to adjustment pursuant to the antidilution provisions of the warrant. The Company recorded a derivative liability for the warrants in the amount of $906,678 and reclassed the derivative liability to additional paid-in capital as of January 31, 2021.
In March 2020, a minority stockholder who had previously made loans to us in the total amount of $215,00, made an additional loan to us in the amount of $60,000, increasing the total loans from the stockholder to $275,000. On March 27, 2020, we issued 25,000 shares of common stock upon conversion of the notes.
Pursuant to a Stock Purchase Agreement (“SPA”), dated December 7, 2020, with the Company, BPM Inno Ltd., Kiryat, Israel, purchased 81,396 shares of common stock at a price of $8.60 per share, or $700,000, which provided payment for the RamBam license. The transaction was completed at a closing on February 26, 2021.
On August 31, 2020, the Company entered into a Purchase Agreement (“Agreement”), with Pocono Coated Products (“PCP”), pursuant to which PCP agreed to sell the Company all of the assets associated with its Transdermal, Topical, Cosmetic and Nutraceutical business (the “Assets”). PCP is the manufacturer of our transdermal products, and we bought that business from them. The purchase price for the Assets was (i) $6,000,000 paid in shares of the Company’s common stock at a value of the average price of the previous 90 days at the date of Closing (the “Shares”); (ii) a promissory note of the Company in the principal amount of $1,500,000, which is due upon the earlier of (a) twelve (12) months from issuance, or (b) immediately following a capital raise of no less than $4,000,000 and/or a public offering of no less than $4,000,000. The note was repaid in full in October 2021. Subsequent to the repayment of the note, the Shares were released from escrow.
On October 5, 2021, the Company, having been approved for the listing of its common stock on The Nasdaq Capital Market effective October 1, 2021, consummated a public offering (the “IPO”) of units (the “Units”), of common stock and warrants that were offered in the IPO on The Nasdaq Capital Market, which included 1,056,000 (each a “Unit”), each Unit consisting of one share of common stock, par value $0.001 per share, and one warrant (each a “Warrant”) at a price of $6.25 per Unit. Each Warrant is immediately exercisable, will entitle the holder to purchase one share of common stock at an exercise price of $7.50 and will expire five (5) years from the date of issuance. The underwriters’ over-allotment option was exercised for 158,400 warrants to purchase shares of common stock bringing to total net proceeds to the Company from the IPO to $5,836,230. The shares of common stock and Warrants are separately transferred immediately upon issuance. As of
On November 1, 2021, The Board of Directors adopted the 2021 Employee Stock Option Plan (the “Plan”). The Company has reserved 350,000 shares to issue and sell upon the exercise of stock options issued under the Plan. On November
Results of Operations
Three Months Ended
For the three months ended
For the three months ended
During the three months ended
We incurred interest expense of
As a result of the foregoing, we sustained a net loss of
Liquidity and Capital Resources
As of
For the
For the
For the
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
Going Concern Assessment Management assesses liquidity and going concern uncertainty in the Company’s condensed consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period. As of Management has Management believes the substantial doubt about the
Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates including, but not limited to, those related to such items as income tax exposures, accruals, depreciable/useful lives, allowance for doubtful accounts and valuation allowances. The Company bases its estimates on historical experience and on other various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to a customer.
Accounts receivable
Trade accounts receivables are recorded at the net invoice value and are not interest bearing. The
Intangible Assets Intangible assets include trademarks, intellectual property and customer base acquired through business combinations. The Company accounts for Other Intangible Assets under the guidance of ASC 350, “Intangibles-Goodwill and Other.” The Company capitalizes certain costs related to patent technology. A substantial component of the purchase price related to the Company’s
Goodwill Goodwill represents the difference between the total purchase price and the fair value of assets (tangible and intangible) and liabilities at the date of acquisition. Goodwill is reviewed for impairment annually on January 31, and more frequently as circumstances warrant, and written down only in the period in which the recorded value of such assets exceeds their fair value. The Company does not amortize goodwill in accordance with ASC 350. In connection with the Company’s acquisition of 4P Therapeutics LLC in 2018, the Company recorded Goodwill of $1,719,235. On August 31, 2020, in connection with the Company’s acquisition of Pocono Coated Products LLC and Active Intelligence LLC, the Company recorded Goodwill of $5,810,640. During the year ended January 31, 2022, the Company recorded an impairment charge of $2,180,836 reducing the Active Intelligence LLC Goodwill to $3,629,813. As of
Long-lived Assets Management reviews long-lived assets for potential impairment whenever significant events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment exists when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. If an impairment exists, the resulting write-down would be the difference between the fair market value of the long-lived asset and the related
Stock-Based Compensation ASC 718, “Compensation - Stock Compensation,” prescribes accounting and reporting standards for all Research and Development Expenses Research and development costs are expensed as incurred.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures.
As of the end of period covered by this report, we carried out an evaluation, with the participation of our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, we concluded that our disclosure controls and procedures are not effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.
Management has determined that our internal controls contain material weaknesses due to the absence of segregation of duties, as well as lack of qualified accounting personnel, and excessive reliance on third-party consultants for accounting, financial reporting and related activities. During the past fiscal year, we have added qualified accounting personnel, so the Company does not have to rely on third-party consultants. The Company has established additional monitoring controls over the financial statements. We have also improved our internal controls to provide for a detailed accounting review of all revenue items and accounts receivable and accounts payable transactions in connection with the entry and categorization of each transaction in the preparation of the Company’s financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Changes in internal controls over financial reporting.
No changes were made to our internal controls in the quarterly period covered by this report that have materially affected, or are reasonably likely materially to affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 27, 2018, we commenced an action in the Circuit Court of the Ninth Judicial Circuit in and for Orange County, Florida, against Advanced Health Brands, Inc., Raymond Kalmar, Paul Murphy, Michelle Polly-Murphy, Laura Fillman and John Baker, together with a Motion for Temporary Injunction Without Notice and a Motion for Prejudgment Writ of Replevin arising from our decision to seek to rescind for misrepresentation the agreement by which we acquired advanced Health Brands, Inc. for 1,250,000 shares of common stock valued at $2,500,000 and seek return of the shares. On August 2, 2018, the court entered a Temporary Injunction Without Notice and an Order to Show Cause against the defendants. Defendants Kalmar, Murphy, Polly-Murphy, and Baker filed a Motion to Dismiss our Verified Complaint, Motion to Dissolve Temporary Injunction Without Notice and Response to Order to Show Cause, and Motion to Compel Arbitration. On January 4, 2019, the court dismissed our complaint with prejudice, and directed the defendants to assign to us within 30 days, the nine patents never duly transferred to us. On February 1, 2019, we appealed the court’s order. Pursuant to a settlement agreement with one of the defendants, that defendant returned the 50,000 shares which had been issued to her, and the shares were cancelled as of January 31, 2019. On June 7, 2019, the individual defendants (other than the defendant whom we have a settlement agreement), filed a motion for sanctions and civil contempt against us, which generally claimed that we failed to comply with the Court’s January 4, 2019 order by refusing to issue the Ruling 144 letters that would allow the defendants to transfer their shares of common stock. On October 29, 2019, the Court denied the defendants’ motion. On March 20, 2020, the Florida district court of appeal reversed the lower court ruling in the Florida state court action that dismissed our complaint with prejudice, and gave us leave to file an amended complaint/
On August 22, 2018, four of the defendants in the Florida action described in the previous paragraph filed a complaint against us in the Franklin County, Ohio Court of Common Pleas seeking a declaratory judgment permitting them to sell the shares of common stock they received pursuant to the acquisition agreement. The parties have agreed to a stay pending the outcome of the Florida litigation.
On April 29, 2019, we filed a securities fraud action in the U.S. District Court for the Eastern District of New York against Raymond Kalmar, Paul Murphy, Michelle Polly-Murphy, Advanced Health Brands and TD Therapeutic, Inc. In the complaint we allege that in 2017, the defendants fraudulently and deceitfully obtained 1,250,000 shares of common stock by orchestrating a months-long scheme to defraud us. We are seeking the return of the 1,200,000 shares of common stock and monetary damages resulting from the defendants’ fraudulent conduct. The defendants filed a motion to dismiss on August 23, 2019, and we filed our response on September 13, 2019. On July 20, 2020, the Court denied the defendant’s motion to dismiss the complaint, and the parties have recently commenced the discovery phase of the litigation.
ITEM 1A. RISK FACTORS
You should carefully consider the key risks described below together with all of the other information included in this
Because we are an early-stage company with minimal revenue and a history of losses and we expect to continue to incur
We did not generate any revenue prior to the quarter ended October 31, 2018 and, since then, we have
Because we do not have a product we can market in the United States, we cannot predict when or whether we will operate profitably.
We have not completed the development of our lead product, which is our abuse deterrent fentanyl transdermal system, and we do not have any product that we can market in the United States. Because of the numerous risks and uncertainties associated with product development, we cannot assure you that we will be able to develop and market any products or achieve or attain profitability. If we are able to obtain financing for our operations, we expect that we will incur substantial expenses as we continue with our product development and clinical trials. Further, if we are required by applicable regulatory authorities, including the FDA as well as the comparable regulatory agencies in other countries in which we may seek to market product, to perform studies in addition to those we currently anticipate, our expenses will increase beyond expectations and the timing of any potential product approval may be delayed. As a result, we expect to continue to incur substantial losses and negative cash flow for the foreseeable future.
A number of factors, including, but not limited to the following, may affect our ability to develop our business and operate profitably:
Our business is impacted by the following additional key risks:
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities The following table sets forth purchases in the
ITEM 6. EXHIBITS.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
iso4217:USD xbrli:shares |