Nutriband Inc. — Form 10-Q Summary
Reporting period: Three and six months ended July 31, 2016. The unaudited consolidated statements cover Nutriband Inc. and its subsidiary, Nutriband Ltd. Nutriband was incorporated in January 2016 and acquired Nutriband Ltd. that month to pursue health supplements delivered through transdermal patches.
Financial results and position
| Metric | Three months ended July 31, 2016 | Six months ended July 31, 2016 |
|---|---|---|
| Revenue | $0 | $0 |
| Selling, general and administrative expenses | $35,623 | $87,704 |
| Net loss | $35,623 | $87,704 |
| Net loss per share, basic and diluted | $0.00 loss per share as reported | $0.00 loss per share as reported |
| Operating cash flow | Not presented for the quarter | $(100,319) |
- At July 31, 2016, cash was $6,229, inventory $27,986, total assets $34,452, total liabilities $33,971, and stockholders’ equity $481. Working capital was $756.
- Total debt was $17,829: $16,654 in interest-free related-party advances due on demand, plus $1,175 of interest-free council debt ($900 current; $275 long-term). Accounts payable and accrued expenses were $16,142.
- Cash increased by $6,129 over the six months, primarily from $100,000 of stock proceeds and $7,500 of related-party advances, offset by operating cash use and debt/payable payments. No interest or income taxes were paid.
- Gross margin and operating margin are not meaningful because the company reported no revenue. The filing reports no investing cash flows.
Changes versus prior comparable periods
The company reported no revenue, expenses, or net loss in the corresponding three- and six-month periods of 2015; 2016 results therefore reflect the company’s early operating and development stage. Compared with January 31, 2016, cash rose from $100 to $6,229, inventory from zero to $27,986, and current liabilities from $11,114 to $33,696. Stockholders’ deficiency of $11,470 became equity of $481. In February, the company issued 500,000 shares for $100,000 and granted a warrant for 500,000 shares at $0.70; the warrant’s reported fair value was $77,315. A five-for-one forward split was approved in May and reflected retroactively in the filing.
Outlook, risks, and other notable matters
- Funding and going concern: Management said available resources were insufficient to execute its business plan, additional funding was needed, and the conditions raised substantial doubt about the company’s ability to continue as a going concern. It reported operating cash use of $100,319 for the six months and said it could need to curtail operations or consider selling assets if financing is unavailable.
- Capital needs: Management estimated $85,000 to $150,000 in capital requirements over the next 12 months, and a minimum of $85,000 in expenses. It had no financing arrangements or commitments and offered no assurance that funding would be available.
- Business plans: The product lines were Energy, Weight Management, and Multivitamin patches; manufacturing and operations were moving to the United States. Management was exploring pharmaceutical-sector acquisitions, but no agreements had been consummated. Its belief that acquisitions could be profitable is forward-looking, not assured.
- Controls and reporting: Management concluded disclosure controls and procedures were not effective. No material changes to internal control over financial reporting were reported during the quarter. The company checked “No” for having filed all required reports during the preceding 12 months and for submitting and posting required interactive data files.
- Other risks: The filing cites risks including financing, growth execution, key personnel, competition, business disruption, and general economic and market conditions. No off-balance-sheet arrangements were reported; market-risk disclosures were stated to be not applicable.
Important facts for investors to verify
- Whether the company secured enough financing to fund operations and address the stated going-concern uncertainty.
- Whether inventory can be marketed and converted into revenue, and whether the patch products achieved commercial launch or regulatory milestones.
- The terms, balances, and repayment expectations for related-party advances due on demand, and the status of the council loan.
- The status and dilution implications of the 500,000-share warrant and the reported stock issuance and forward split.
- The filing contains an apparent date inconsistency: the going-concern discussion refers to accumulated deficits of $26,204 at January 31 and $113,908 at April 30, while the balance sheet reports $113,908 at July 31. Verify the correct period and amount.