Nutriband Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended January 31, 2022. This annual filing is not a standalone fourth-quarter report. The company develops transdermal pharmaceuticals, led by its AVERSA abuse-deterrent technology, and also earns revenue from contract manufacturing and services.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $1.42 million | $0.94 million |
| Gross profit / margin | $504,310 / 35.5% | $316,324 / 33.5% |
| Operating loss | $6.11 million | $2.60 million |
| Net loss | $6.18 million; $6.37 million attributable to common shareholders after deemed dividend | $2.93 million |
| Net loss per share | $0.94 | $0.51 |
| Cash used in operations | $2.81 million | $0.30 million |
| Cash and cash equivalents at year-end | $4.89 million | $0.15 million |
| Working capital | Surplus of $4.69 million | Deficit; amount is inconsistent in the filing |
| Total liabilities | $0.88 million | $2.82 million |
Revenue increased about 51%, led by $1.09 million from the acquired transdermal products business. Sales of goods were $1.18 million and services generated $242,534. The company raised capital through its October 2021 IPO and warrant exercises, reporting $5.84 million in net IPO proceeds and $2.94 million from exercised warrants. It repaid the $1.5 million related-party acquisition note in October 2021. Year-end current assets were $5.47 million versus current liabilities of $779,256.
Material changes and unusual items
- SG&A rose to $4.02 million from $2.91 million, including substantial stock-based and consulting costs and expenses from Active Intelligence.
- A $2.18 million goodwill impairment reduced goodwill to $5.35 million. The filing attributes the charge mainly to COVID-19 effects, unmet sales expectations, and other factors.
- FY2022 included $411,383 of research and development expense, compared with none reported for FY2021, and $118,421 of interest expense, down from $280,686.
- The company began trading on Nasdaq in October 2021 and repurchased 28,125 shares for $104,467 during December.
Business outlook, risks, and contingencies
- AVERSA Fentanyl is the lead development program; no company pharmaceutical product had marketing approval. The company signed a feasibility agreement with Kindeva in January 2022 to adapt its approved fentanyl-patch manufacturing process. The estimated workplan cost is approximately $1.7 million, with an estimated duration of eight to twelve months; work began in February 2022.
- Management budgeted $5.0 million for AVERSA Fentanyl research and development, including clinical manufacturing and trials, but warned costs could be substantially higher. The filing provides no quantified revenue or earnings guidance.
- Management said substantial doubt about going concern had been resolved, citing financing, debt reduction, positive working capital, and projected sales commitments. However, the company reported a $6.18 million net loss and $2.81 million of operating cash use for the year.
- Development and commercialization depend on additional financing or a strategic partner, successful trials and FDA review, manufacturing arrangements, and market acceptance. The company states that without additional financing or a joint venture it cannot advance its pipeline.
- Revenue and receivables are concentrated: three customers accounted for 49% of FY2022 revenue and, together, 96% of year-end receivables. Contract services can be terminated at any time.
- Disclosure controls and internal control over financial reporting were reported ineffective, with material weaknesses involving staffing, segregation of duties, review, and complex transactions. The independent auditor issued an unqualified opinion on the financial statements but did not audit internal-control effectiveness.
- Contingencies include ongoing litigation related to the disputed Advanced Health Brands acquisition and recovery of shares or damages. A June 2022 trial was scheduled in the New York case. The filing also describes a prior SEC cease-and-desist settlement; no monetary relief was imposed on the company.
Important facts for investors to verify
- Reconcile reported FY2022 gross profit: the income statement’s revenue less cost of revenue equals $504,310, while the segment table reports total gross profit of $554,310.
- Confirm the prior-year working-capital deficit: the filing gives both $2.25 million and $2.88 million.
- Clarify cash-flow and earnings figures: the MD&A and financial statements differ on financing cash flow, and certain narrative net-loss amounts do not match the statements’ net loss before the deemed dividend.
- Track cash runway, financing needs, actual sales commitments, customer concentration, and funding and execution of the Kindeva workplan and planned clinical studies.
- Assess potential dilution from warrants, options, and future fundraising, along with the status of the material internal-control weaknesses and litigation.