Nutriband Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended October 31, 2022; filed December 2, 2022. The interim financial statements are unaudited. Nutriband develops transdermal pharmaceutical products, including its AVERSA abuse-deterrent fentanyl patch, and earns current revenue from transdermal/coated products and contract services.
Financial performance and position
| Metric | Three months ended Oct. 31 | Nine months ended Oct. 31 |
|---|---|---|
| Revenue, 2022 | $618,003 | $1,552,074 |
| Revenue, 2021 | $283,037 | $930,264 |
| Gross profit, 2022 | $268,731 | $621,013 |
| Operating loss, 2022 | $1,071,519 | $2,791,644 |
| Net loss, 2022 | $1,075,485 | $2,804,149 |
| Net loss per share, 2022 | $0.14 | $0.32 |
- Revenue increased approximately 118% for the quarter and 67% for the nine-month period year over year. Management attributed growth mainly to higher demand for transdermal patches.
- Gross margin was approximately 43.5% for the quarter and 40.0% for the nine months, compared with approximately 26.6% and 33.6%, respectively, in 2021.
- Quarterly net loss narrowed from $1.57 million in 2021; nine-month net loss increased from $2.41 million. Higher nine-month R&D and SG&A more than offset higher gross profit. 2021 loss attributable to common shareholders also included a warrant-related deemed dividend.
- For the nine months, R&D was $686,401 (up from $161,000), SG&A was $2,726,256 (up from $2,487,611), and interest expense was $12,505 (down from $115,268).
- Cash from operations was negative $2,173,193; investing cash use was $69,281; financing provided $166,924. Cash declined from $4,891,868 at January 31 to $2,816,318 at October 31.
- At October 31, cash was $2.82 million, working capital $2.72 million, total assets $10.67 million, and total liabilities $937,633. Notes payable totaled approximately $126,847; operating lease liabilities totaled approximately $72,955.
Changes, outlook, and material matters
- The Kindeva feasibility program for AVERSA fentanyl began in February 2022. The estimated workplan cost is approximately $1.7 million over eight to twelve months; $481,979 had been incurred by October 31. The filing also describes a $5.0 million R&D budget for the lead product, while warning the total could be substantially higher.
- The lead product remains under development and requires FDA approval and substantial additional capital. The company reported no product it could market in the United States. Management expects continued losses and negative cash flow risks; it stated it believes available funds and expected operations will support at least one year and that substantial doubt about going concern is alleviated.
- The Rambam device program was suspended after preliminary review suggested it was not commercially viable in its current form. The license was terminated November 11, 2022, and the related intellectual property returned to Rambam.
- After quarter-end, Nutriband and BPM terminated their distribution arrangement on November 8, 2022; Nutriband issued BPM 25,000 treasury shares and warrants for 25,000 shares at $7.50. The filing also reports 4,888 treasury shares issued to consultants on November 15.
- A court judgment rescinding the 2017 Advanced Health Brands transaction was settled as binding, with no appeal; 1.4 million shares were returned and canceled in 2022.
- Management reported ineffective disclosure controls and material weaknesses, citing lack of segregation of duties and qualified accounting personnel, and reliance on consultants. It described remediation efforts, including hiring accounting personnel and adding monitoring and transaction-review controls.
- Key risks include financing needs, development and clinical-trial outcomes, FDA approval and timing, commercialization and manufacturing capability, competition, intellectual-property protection, and potential COVID-related operational or supply-chain disruption. No formal financial guidance was provided.
Investor verification points
- Reconcile revenue disclosures: the statements report quarterly revenue of $618,003, but the revenue-disaggregation table reports $456,149 for the quarter; segment and MD&A figures also differ. Nine-month revenue components likewise contain small inconsistencies.
- Confirm the status, remaining cost, milestones, and funding plan for the Kindeva/AVERSA program, including the difference between the $1.7 million feasibility estimate and the broader $5.0 million R&D budget.
- Assess cash runway against operating cash burn and management’s assumption that operations will generate sufficient funds; the company has a history of losses and relies on external financing.
- Review FDA development and approval requirements, including clinical-trial plans, timelines, and the ability to finance commercialization if approval is obtained.
- Monitor dilution and governance implications of outstanding warrants, options, and subsequent share and warrant issuances, as well as progress addressing the reported control weaknesses.