Nutriband Inc. — Form 10-Q Summary
Reporting period: Three months ended April 30, 2018. The interim financial statements are unaudited. Nutriband is developing consumer health and transdermal prescription products; it reported no revenue in either comparable quarter.
Financial performance and position
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Selling, general and administrative expenses | $448,098 | $35,617 |
| Net loss | $448,098 | $35,617 |
| Basic and diluted loss per share | $0.02 | $0.00 |
| Net cash used in operating activities | $27,441 | $28,081 |
- Expenses were primarily professional fees, consulting fees, and payroll. Management attributed the year-over-year increase mainly to legal and payroll costs, including $277,500 of stock-based compensation for services.
- Cash was $0 at April 30, 2018. Total assets were $110,886, consisting principally of $106,753 in prepaid expenses and $4,133 in inventory.
- Current liabilities were $159,830, including $77,128 of accounts payable and accrued expenses, $40,905 due to related parties, and $41,797 of notes payable. Stockholders’ equity was negative $48,944, compared with positive $121,508 at January 31, 2018.
- Operating cash outflow was offset by $27,441 of financing cash inflow, including $25,000 in note proceeds and $2,500 from related parties. Cash remained at $0. The filing reports no interest paid, capital expenditures, or investing cash flows.
- Gross and operating margins are not meaningful because the company reported no revenue. The filing does not provide a clear margin measure.
Changes, outlook, and risks
- SG&A and net loss increased substantially from the comparable 2017 quarter. The $277,500 stock compensation was recorded as common stock to be issued; the filing also reports issuance of 110,000 shares valued at that amount during the quarter.
- The company estimated it would need $2 million to $5 million over the next 12 months, depending on products selected for development, and said it would need to raise additional funds. Management cited recurring losses and financing dependence as raising substantial doubt about the company’s ability to continue as a going concern.
- After quarter-end, Nutriband reported receiving $1 million from a May 2 common-stock sale and $500,000 from a May 27 warrant exercise. These proceeds occurred after April 30 and are not reflected in quarter-end cash. The filing says the company had no arrangements for additional bank loans, credit lines, or other funding.
- An April 5 agreement contemplated acquiring 4P Therapeutics for $400,000 and 250,000 shares, subject to completion of its certified audit. On June 13, the company signed a letter of intent to acquire Carmel Biosciences for an estimated $3.8 million, payable in 450,000 shares. These were proposed transactions, not reported as completed in the filing.
- Related-party and other short-term loans described in the notes were paid in full in May 2018. The company also disclosed a May issuance of 160,000 shares for services, valued at $602,500; $277,500 had been expensed in the quarter.
- Management identified risks including financing availability, execution of its growth and development plans, competition, key-personnel retention, business disruptions, and general economic and market conditions. FDA clearance may be required for U.S. products.
- Disclosure controls and procedures were concluded to be ineffective; the filing reports no material quarterly changes to internal control over financial reporting.
Important facts for investors to verify
- Whether the post-quarter financing provides sufficient runway against the estimated $2 million–$5 million funding need.
- Whether the 4P Therapeutics acquisition and Carmel Biosciences transaction are completed, and their final consideration and funding requirements.
- Progress toward revenue, product development, and any required FDA clearances.
- How the company addresses its going-concern uncertainty, recurring losses, and ineffective disclosure controls.
- Subsequent changes in liabilities, related-party balances, and share count; 21,304,100 common shares were reported outstanding as of June 18, 2018.