Nutriband Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended July 31, 2017. Financial statements are unaudited; amounts are in U.S. dollars.
Business context
Nutriband is developing transdermal patches for supplements and over-the-counter products, including energy, weight-management and multivitamin product lines. It had not generated revenue. In May 2017, it acquired rights to patent applications concerning transdermal patches and formulation from Advanced Health Brands, issuing 5,000,000 shares valued at $2.5 million. The patents are provisional; the company says it has one year from issuance to finalize the applications.
Financial results and position
| Metric | Three months ended July 31, 2017 | Six months ended July 31, 2017 |
|---|---|---|
| Revenue | $0 | $0 |
| Selling, general and administrative expense | $92,962 | $128,579 |
| Net loss | $92,962 | $128,579 |
| Net loss per share, basic and diluted | $0.00 | $0.01 |
- Six-month operating cash use was $58,729, versus $100,319 in the comparable 2016 period. Financing provided $40,000, all from common-stock sales; cash declined by $19,328 to $7,796.
- At July 31, 2017, total assets were $2,508,377, including net intangible assets of $2,452,055. Liabilities were $17,914 and stockholders’ equity was $2,490,463. Current assets were $56,322 and current liabilities $17,914.
- Debt totaled $11,449: $9,720 in interest-free related-party advances due on demand and $1,729 current debt owed to South County Dublin Council. No long-term debt was reported beyond the current portion.
- No gross margin was reported because there was no revenue. Patent amortization was $47,945 for the six months. The company reported no patent impairment and had not recognized income or cash flow from the patents.
Changes versus the comparable period and year-end
- Six-month net loss increased to $128,579 from $87,704 in 2016; quarterly loss increased to $92,962 from $35,623. Management attributed the higher expenses primarily to amortization of the acquired patents and increased legal fees.
- Cash fell from $27,124 at January 31, 2017, to $7,796 at July 31. Intangible assets rose from zero to $2,452,055 following the patent acquisition.
- Common shares issued and outstanding rose from 15,572,100 at January 31 to 20,767,100 at July 31, primarily reflecting the 5 million shares issued for the patent rights. The company also issued 80,000 shares for $40,000 and 115,000 shares for services valued at $57,500; $13,750 of the service-share value was expensed in the period.
Outlook, risks and other notable items
- Going concern: Management says additional funding is needed and the company cannot continue operating on current resources without immediate financing. Recurring losses, no revenue and operating cash use raise substantial doubt about its ability to continue as a going concern. Failure to obtain funding could require curtailing operations or considering asset sales.
- The company estimated next-12-month expenses of at least $85,000 and capital requirements of $85,000–$150,000 for product development and marketing. It had no financing arrangements or commitments in place and warned that capital may not be available.
- Management was exploring acquisitions to expand into pharmaceuticals and believed potential acquisitions could be profitable and help fund operations over the next 12 months. These are forward-looking expectations, not assured outcomes.
- In September 2017, the company received a $15,000 interest-free advance from TII Jet Services, subsequent to the reporting date.
- Disclosure controls and procedures were determined to be ineffective. No material changes to internal controls were reported during the quarter.
- The filing checked “No” for having filed all required reports during the preceding 12 months, and “No” for submitting and posting required Interactive Data Files. These responses warrant follow-up.
Important facts for investors to verify
- Funding availability and runway, given $7,796 quarter-end cash, stated immediate funding needs and the going-concern warning.
- Patent application status, ownership and path to commercialization, including the provisional-patent deadlines and lack of revenue or patent-generated cash flow.
- Potential dilution and share-related obligations, including the patent consideration, service shares and 730,000 warrants outstanding at July 31.
- Filing compliance and remediation of ineffective disclosure controls.
- The MD&A lists 2016 six-month SG&A as $87,804, while the financial statements report $87,704; the filing text does not reconcile this difference.