NutriBand Inc 10-K for FY2024
NutriBand Inc. (NTRB)
About this 10-K
NutriBand Inc filed this 10-K on May 1, 2024, covering the fiscal year ended January 31, 2024 (FY2024).
Headline figures
Fiscal year ended January 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.09M
- up 0.3% from $2.08M a year earlier
- Net loss
- $5.49M
- compared with a net loss of $4.48M a year earlier
- Diluted EPS
- -$0.69
- compared with -$0.53 a year earlier
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TABLE OF CONTENTS
References to “we,” “us,” “our” and words of like import refer to us and our subsidiaries, including 4P Therapeutics LLC following our acquisition of 4P Therapeutics on August 1, 2018, and the acquisition of Pocono Pharmaceuticals Inc. on August 31, 2020, unless the context indicates otherwise. References to 4P Therapeutics and Pocono refer to the business and operations of 4P Therapeutics and Pocono prior to our acquisition unless the context indicates otherwise.
The market data and certain other statistical information used throughout this annual report are based on independent industry publications, government publications and other published independent sources. Some data is also based on our good faith estimates. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications.
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PART I
ITEM 1. BUSINESS.
Overview
Nutriband Inc. (the “Company”, “Nutriband”, “we” or “us”), was incorporated in Nevada in January 2016. Our primary business is the development of a portfolio of transdermal pharmaceutical products. Our development pipeline consists of transdermal products that are based on our proprietary AVERSA™ abuse deterrent transdermal technology that we believe can be incorporated into existing transdermal patches that contain drugs that are susceptible to abuse and misuse such as opioid and stimulant drugs.
The Company’s revenues are based on providing services through our subsidiaries Pocono Pharmaceuticals operating as Active Intelligence and 4P Therapeutics. Pocono Pharmaceuticals provides contract manufacturing services for health, wellness and over-the-counter pharmaceutical customers and 4P Therapeutics performs contract research and development related services for pharmaceutical and medical devices customers. We manage and evaluate our operations, and report our financial results, through these two separate subsidiaries.
Our principal offices are located in Orlando, Florida, and our subsidiary, Pocono Pharmaceuticals, has a manufacturing facility in Cherryville, North Carolina. We primarily operate and derive most of our revenues in the United States.
Recent Development
On April 19, 2024, the Company completed an $8,400,000 equity financing with European investors (the “Offering”) of 2,100,000 units (“Units”), at a price of $4.00 per Unit, each Unit consisting of one share of common stock (“Shares”) and a Warrant to purchase two Shares of common stock, the Warrants having an initial exercise price of $6.43, are exercisable by payment of the exercise price in cash only and expire April 19, 2029, five years from the date of issuance (“Warrants”). The Offering was made solely to investors resident outside the United States and was not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any jurisdiction, including any jurisdiction outside the United States, but was made privately by the Company pursuant to the exemptions from registration provided in the SEC’s Regulation S and other exemptions under the Securities Act.
Our Business
AVERSA Abuse Deterrent Transdermal Products
Our lead product under development is AVERSA Fentanyl, an abuse deterrent fentanyl transdermal system that combines an approved generic fentanyl patch with our AVERSA abuse deterrent transdermal technology to reduce the abuse and misuse of fentanyl patches. We believe that our AVERSA technology can be broadly applied to various transdermal products, and our plan is to follow the development of AVERSA Fentanyl with the development of additional abuse deterrent transdermal products for pharmaceuticals that have a risk or history of abuse, misuse or accidental exposure. Specifically, we have expanded our development pipeline to include AVERSA Buprenorphine and AVERSA Methylphenidate. In addition, we are developing a portfolio of transdermal pharmaceutical products to deliver already approved drugs or biologics that are typically delivered by injection but with the potential to improve compliance and therapeutic outcomes through transdermal delivery.
In January 2024, we signed a commercial development and clinical supply agreement with Kindeva Drug Delivery, formerly 3M Drug Delivery (“Kindeva”), for the development of AVERSA Fentanyl using Kindeva’s FDA-approved fentanyl patch. This agreement replaced the previous feasibility agreement between the two companies which was focused on establishing the feasibility of incorporating our AVERSA abuse deterrent transdermal technology into Kindeva’s commercial transdermal manufacturing process. The commercial development and clinical supply agreement is focused on developing the commercial manufacturing process for AVERSA Fentanyl.
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The product development program for AVERSA Fentanyl includes performing preclinical and clinical studies to demonstrate the abuse deterrent properties of the product. The development program is based on the fact that the fentanyl transdermal system is already approved and the only change to the approved product will be to incorporate the AVERSA technology into the patch design with no change being made to the fentanyl drug matrix or its demonstrated safety, patch performance or drug release characteristics. Preclinical studies to be performed consist of laboratory-based in vitro manipulation and chemical extraction studies per FDA guidance. Clinical evaluation consists of a Phase 1 human abuse potential study to demonstrate the abuse potential of the product per FDA guidance. The regulatory path to FDA approval is planned to be a 505(b)(2) NDA submission to access the safety and efficacy information on file for the Duragesic® fentanyl transdermal system as the reference-listed drug and to be able to obtain approval for abuse deterrent claims as a branded pharmaceutical product.
The product development program for the additional AVERSA pipeline products, AVERSA Buprenorphine and AVERSA Methylphenidate, are similar to that of AVERSA Fentanyl, assuming that the AVERSA technology is incorporated into an already approved transdermal patch.
Acquisition of 4P Therapeutics
Pursuant to an acquisition agreement dated April 5, 2018 between us and 4P Therapeutics, on August 1, 2018, we acquired all of the equity interest in 4P Therapeutics from Steven Damon, the owner of 4P Therapeutics. The purchase price of $2,250,000, consisting of 62,500 shares of common stock, valued at $1,850,000, and cash of $400,000, and are to pay Mr. Damon a 6% royalty on any revenue we receive or derive from our utilization or sale of the abuse deterrent intellectual property that we acquired as a part of the assets 4P Therapeutics, including partner license milestones and development payments. The royalty is payable pursuant to the acquisition agreement and continues as long as we generate revenue from our utilization or sale of the abuse deterrent intellectual property we acquired as part of the acquisition of 4P Therapeutics. The 62,500 shares were issued to Mr. Damon (41,750 shares pre-split) and Dr. Alan Smith (20,750 shares pre-split). In connection with the acquisition, Mr. Damon retained any cash and accounts receivable and assumed any liabilities other than those relating to the ongoing business. Pursuant to the acquisition agreement, we appointed Mr. Damon to our board of directors in April 2018, when we signed the acquisition agreement. Mr. Damon resigned as a director in January 2022.
As a result of the acquisition, the focus of our business changed from the development and marketing outside of the U.S. of consumer transdermal products to the development of 4P Therapeutics’ portfolio of pharmaceutical transdermal products. Our lead product under development is AVERSA® Fentanyl (abuse deterrent fentanyl transdermal system) which we plan to develop to deter the abuse and accidental misuse of fentanyl transdermal patches. Fentanyl is a potent synthetic opioid that is marketed as a transdermal patch for chronic pain management. There are currently several generic fentanyl patches on the market but none of them have abuse deterrent properties. We believe that AVERSA Fentanyl, once approved by the US FDA will significantly deter the abuse and accidental misuse of fentanyl transdermal patches.
With the acquisition of 4P Therapeutics, we acquired a research pipeline of other transdermal products, including novel transdermal products that involve delivery of peptides and proteins through the skin. These drugs are off patent but are currently only available as injections, and we are evaluating the possibility of developing a transdermal delivery system for these drugs as an alternative to injection but with improved compliance and safety. In addition, we may develop certain generic passive transdermal products where we think we can make an improvement to existing patches and where we believe we can take significant market share with good profit margins. The prioritization of our portfolio product candidates will be reviewed on an ongoing basis and will take into account technical progress, market potential and R&D funding available. We cannot assure you that we will be able to develop and obtain FDA approval for any of these potential products or that we can be successful in marketing any such products. The FDA approval process can take many years to complete successfully, and we will require substantial funding for each product that goes through the process. We cannot assure you that we will obtain FDA marketing approval for any of our products.
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In addition to performing research and development for its own products, 4P Therapeutics performs contract research and development services for a small number of clients in the life sciences field to help support its ongoing operations. The work includes conducting early-stage drug and device clinical and preclinical studies and providing clinical-regulatory and formulation/analytical consulting services. Neither we nor current clients have any long-term commitments, and either party can terminate at any time. We do not expect to generate significant revenues from these services.
Acquisition of Pocono Coated Products
On August 25, 2020, the Company formed Pocono Pharmaceuticals Inc.(“Pocono”), a wholly owned subsidiary of the Company. Effective August 31, 2020, the Company entered into a Purchase Agreement (“Agreement”) with Pocono Coated Products (“PCP”), a manufacturer of topical and transdermal products, pursuant to which PCP agreed to sell the Company certain of the assets and liabilities associated with its Transdermal, Topical, Cosmetic and Nutraceutical business (the “Business”), including all related equipment, intellectual property and trade secrets, cash balances, receivables, bank accounts and inventory. The net assets were contributed to Pocono. Included in the transaction, the Company acquired 100% of the membership interests of Active Intelligence LLC (“Active Intelligence”). The purchase price for the assets of the Business is (i) $6,000,000 paid in 608,519 shares of the Company’s common stock, based on the average price for the Company’s common stock for the previous 90 days as of the date of Closing; (ii) a promissory note of the Company in the principal amount of $1,500,000, which has been paid in full as of October 1, 2021.
Our Organization
We are a Nevada corporation, incorporated on January 4, 2016. In January 2016, we acquired Nutriband Ltd, an Irish company which was formed by Gareth Sheridan, our chief executive officer, in 2012, to enter the health and wellness market by marketing transdermal patches. Our corporate headquarters are located at 121 S. Orange Ave. Suite 1500, Orlando, Florida 32801, telephone (407) 377-6695. Our website is www.nutriband.com. Information contained on or available through our website or any other website does not constitute a portion of this annual report.
Pharmaceutical Products in Development
We have a pipeline of transdermal pharmaceutical products that are primarily in the early stages of development. Our current focus is on developing our AVERSA abuse deterrent transdermal patch products. Our lead product is AVERSA Fentanyl for which we have a commercial development agreement with Kindeva Drug Delivery, a contract development and manufacturing organization. We plan to follow on from this with the development of additional products utilizing the AVERSA abuse deterrent transdermal technology, namely, AVERSA Buprenorphine and AVERSA Methylphenidate.
Transdermal patches containing opioid and stimulant drugs are designed to provide an alternative route of administration for treatment of conditions such as chronic pain, opioid use disorder or attention deficit/hyperactivity disorder. Although transdermal versions offer improved pharmacokinetic delivery as well as patient convenience with wear times of up to 7 days, they contain an increased drug payload which can often be a target for recreational drug abusers or subject to accidental pediatric exposure, particularly with infants and toddlers. Abuse of opioids in general, and in particular fentanyl abuse and overdose, continues to be an epidemic which can lead to the abuse of prescription transdermal fentanyl and other opioid containing transdermal products.
AVERSA Fentanyl is an abuse deterrent fentanyl patch for the treatment of chronic pain. As the United States faces an epidemic of opioid abuse, fentanyl transdermal patches have become an attractive target for recreational drug abusers due to the high potency of fentanyl, the high drug content contained in patches designed for delivery over three days, and its ease of abuse by the oral route. We are looking to utilize our proprietary approach to incorporate aversive agents into the transdermal patch to deter the abuse of fentanyl patches by the oral, buccal and inhaled routes, which represent as much as 70% of all transdermal fentanyl abuse. The technology is based on the incorporation of taste and sensory aversive agents into the patch that are intended to make abuse a very unpleasant experience thereby deterring the recreational abuse of fentanyl patches. These aversive agents have high potency, established safety, and the potential to prevent accidental misuse by children and pets. The aversive agents are coated onto the backing of the transdermal patch in a controlled release formulation that provides immediate and sustained release of aversive agents. This provides several advantages including having a physical separation of the aversive agents from the drug matrix, availability of aversive agents even after the patch is used and making it difficult to separate the aversive agents from the drug by extraction. The aversive agents are not contained in the drug matrix and are not delivered to the skin during patch wear. In addition to the fentanyl patch, this technology has broad applicability to any patch where deterring abuse as well as accidental misuse by children and pets are valuable attributes.
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According to the FDA1, accidental exposure to medication is a leading cause of poisoning in children. Young children, in particular, have died or become seriously ill after being exposed to a skin patch containing fentanyl, a powerful opioid pain reliever. Children can overdose on new and used fentanyl patches by putting them in their mouth or sticking the patches on their skin. This can cause death by slowing the child’s breathing and decreasing the levels of oxygen in their blood.
We believe that our abuse deterrent technology can be broadly applied to various transdermal products and our strategy is to follow the development of our AVERSA Fentanyl with the development of additional products for pharmaceuticals that have a risk or history of abuse, misuse or accidental exposure. For example, we believe that our technology can be utilized in other transdermal products to deter the abuse of other drugs such as buprenorphine, an opioid, and methylphenidate, a central nervous system stimulant. Buprenorphine is an opioid used to treat opioid addiction, acute pain and chronic pain. It can be used under the tongue, by injection, as a skin patch, or as an implant. For opioid addiction, it is typically only started when withdrawal symptoms have begun and for the first two days of treatment under direct observation of a health care provider. For longer term treatment of addiction, a combination formulation of buprenorphine/naloxone is recommended to prevent misuse by injection. Methylphenidate, sold under various trade names, such as Ritalin in oral form, and in transdermal patch form known as Daytrana, is a central nervous system stimulant that is used in the treatment of attention deficit hyperactivity disorder and narcolepsy. We plan to develop transdermal delivery systems for buprenorphine and methylphenidate after we make significant progress on our abuse deterrent fentanyl transdermal system.
Our research pipeline consists primarily of drug compounds which have been previously approved by the FDA and are now off-patent. In some cases, we are developing a non-injectable version of the drug utilizing our transdermal technology which represents a new route of administration. We believe that transdermal delivery has the potential to improve compliance, which can lead to improved therapeutic outcomes associated with these treatments. In most cases, we plan to utilize the 505(b) (2) NDA regulatory pathway provided by the FDA which allows us to reference the safety information on file at FDA for the approved drug or to reference the published literature instead of having to generate new safety information that would typically be required for new chemical entities. However, we cannot assure you that the FDA will concur with our approach or that we will be able to receive FDA approval to market any of products that we develop.
In addition, we may seek to develop certain generic transdermal products where we think we can efficiently make an improvement to existing patches and potentially take significant market share with good profit margins.
The prioritization of our portfolio of product candidates will be reviewed on an ongoing basis and will take into account technical progress, market potential, available funding and commercial interest. Our ability to take any meaningful steps to the development of any of these products is determined by our ability to provide sufficient funding for such activities.
Pharmaceutical Manufacturing and Supply
Manufacturing of our pharmaceutical transdermal products in development will be performed in compliance with FDA current Good Manufacturing Practices (cGMP) and all applicable local regulations by contract manufacturers. All manufacturing processes and facilities will be subject to review by the FDA during development, prior to approval and during subsequent routine FDA inspections. We plan to continue to rely on contract manufacturers and, potentially, collaboration partners to manufacture commercial quantities of our products, if and when approved for marketing by the FDA.
| 1 | https://www.fda.gov/consumers/consumer-updates/accidental-exposures-fentanyl-patches-continue-be-deadly-children |
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Government Regulation and Regulatory Path
United States
The pharmaceutical business is subject to extensive government regulation. In the United States, we must comply with the rules and regulations of the FDA. In other countries, we must comply with the laws and regulations of each country to legally market and sell our products. Obtaining FDA approval does not mean that the product will be approved in other countries. Each country may require that additional clinical and nonclinical studies be conducted prior to approval.
The process required by the FDA to receive approval prior to marketing and distributing a drug in the United States generally involves a preclinical phase followed by three phases of clinical trials. The definition of drug is broadly defined and includes the pharmaceutical products we have in development. Even though the drug used in each of our proposed products is currently approved by the FDA in other dosage forms, we will still need to conduct a development program that will include preclinical and clinical trials before we receive FDA marketing approval. The FDA also has a number of abbreviated approval pathways which, if we are eligible, could shorten the time for approval. For example, the regulatory path for the AVERSA products in development is intended to follow a 505(b)(2) NDA regulatory pathway which may reduce the amount of clinical work that needs to be performed to a single trial to evaluate the abuse potential of the product as the safety and efficacy of the drug has already been established. However, we cannot be certain that we will be able to use any abbreviated approval pathway, in which event we will need to comply with the full regulatory pathway as described below.
In general, the full NDA product development program required for new drugs for FDA approval consists of the following phases of development listed below. The full NDA pathway is not expected to be required for products incorporating AVERSA technology into an already approved transdermal patch.
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● | Preclinical phase. Before a drug company can test an experimental treatment in humans, it must prove the drug is safe and effective in animals. Scientists run tests in various animals before presenting the data to the FDA as an investigational new drug application. For already approved drugs, an animal study may not be required prior to testing in humans. In most cases, the company must file an Investigational New Drug (IND) submission to get clearance to test the product in humans. |
| ● | Phase one clinical trial. In the first round of clinical trials, the drug company attempts to establish the drug’s safety in humans. Drug researchers administer the treatment to healthy individuals — instead of patients suffering from the disease or condition the drug is intended to treat — and gradually increase the dose to see if the drug is toxic at higher levels or if any possible side effects occur. These drug trials are usually small, containing about 20 to 80 participants, according to the FDA. For drug delivery products incorporating already approved drugs, Phase 1 studies involve measuring blood levels of the drug to understand the pharmacokinetics for a new route of administration. |
| ● | Phase two clinical trial. In the second round of clinical trials, researchers give the treatment to patients who have the disease to assess the drug’s efficacy. The trial is randomized, meaning half of the study participants receive the drug and half receive a placebo. These trials usually contain hundreds of participants, according to the FDA. There is about a 30 percent chance of a drug moving on to a phase three clinical trial, according to data from the biotech trade organization BIO. For already approved drugs, as is the case with drug delivery products, a Phase 2 trial may not be necessary as the therapeutic drug doses and blood concentrations are already known. However, a Phase 2 may be conducted to inform the design of the Phase 3 clinical trial in regards to the safety and efficacy of the product when used by patients. |
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| ● | Phase three clinical trial. In the third phase of clinical trials, researchers work with the FDA to design a larger trial to test the drug’s ideal dosage, patient population and other factors that could decide whether the drug is approved, according to the report. These trials usually contain a few hundred to thousands of participants. In the case of drug delivery products that utilize an approved drug, Phase 3 trials will typically include a comparison to the already approved reference product. For example, a transdermal patch may be compared to an injection. |
| ● | New drug application (NDA). Once a drug company collects and analyzes all data from the clinical trials, it submits a new drug application to the FDA. The application includes trial data, preclinical information and details on the drug’s manufacturing process. If the FDA accepts the application for review, the agency typically has ten months, or six months if the drug has priority review status, to make a decision whether to approve the drug or not. The FDA can hold an advisory committee meeting where independent experts assess the data and recommend whether to approve the drug. From there, the FDA will either approve the drug or give the applicant a complete response letter, which explains why the drug did not get approved and what steps the applicant must take before resubmitting the application for approval. |
Before approving an NDA, the FDA may inspect the facilities where the product is being manufactured or facilities that are significantly involved in the product development and distribution process and will not approve the product unless they determine that compliance with current good manufacturing practices is satisfactory. The FDA may deny approval of an NDA if applicable statutory or regulatory criteria are not satisfied, or may require additional testing or information, which can delay the approval process. In pursuing FDA approval there may be various delays and it is possible that approval may never be granted. In addition, new government requirements may be established that could delay or prevent regulatory approval of our product candidates under development.
If a product is approved, the FDA may impose limitations on the indications for use for which the product may be marketed, may require that warning statements be included in the product labeling, may require that additional studies or trials be conducted following approval as a condition of the approval, may impose restrictions and conditions on product distribution, prescribing or dispensing in the form of a risk management plan, or impose other limitations.
Once a product receives FDA approval, marketing the product for other indicated uses or making certain manufacturing or other changes related to the product will require FDA review and approval of a supplemental NDA or a new NDA, which may require additional clinical safety and efficacy data and may require additional review fees. In addition, further post-marketing testing and surveillance to monitor the safety or efficacy of a product may be required. Also, product approvals may be withdrawn if compliance with regulatory standards is not maintained or if safety or manufacturing problems occur following initial marketing.
With respect to the labeling for our abuse deterrent transdermal fentanyl system or any other opioid transdermal patch we develop, it is likely that the FDA will require us to disclose the risks of improper use or abuse using language required by the FDA upon approval.
FDA Approval Pathways
The FDA has several pathways that can be followed to obtain FDA approval.
| ● | A stand-alone NDA is an application submitted under Section 505(b)(1) of the Food, Drug and Cosmetic Act (“FD&C Act”) and approved under Section 505(c) of the FD&C Act that contains full reports of investigations of safety and effectiveness that were conducted by or for the applicant or for which the applicant has a right of reference or use. This is typically the pathway used for new chemical entities. |
| ● | A 505(b)(2) application is a limited NDA submitted under Section 505(b)(1) and approved under Section 505(c) of the FD&C Act that contains full reports of investigations of safety and effectiveness, where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use. This is the pathway typically taken for off-patent drugs that are being development into alternate dosage forms or routes of administration. |
| ● | An ANDA is an application for a duplicate of a previously approved drug product that was submitted and approved under Section 505(j) of the FD&C Act. An ANDA relies on the FDA’s finding that the previously approved drug product is safe and effective. An ANDA generally must contain information to show that the proposed generic product (1) is the same as the drug with respect to the active ingredients, conditions of use, route of administration, dosage form, strength and labeling (with certain permissible differences) and (2) is bioequivalent to the referenced drug. An ANDA may not be submitted if studies are necessary to establish the safety and effectiveness of the proposed product. This is the pathway taken for generic drugs. |
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Nutriband plans to utilize the 505(b)(2) New Drug Application (NDA) regulatory pathway which limits the development required for products that contain drugs that have already been approved, and allows applicants to reference data already on file at the FDA. As a result, the NDA application will be primarily based on a single Phase 1 human abuse potential clinical study with no Phase 2 or 3 clinical trials needed. A clinical abuse potential study is typically performed in recreational drug abusers and is designed to demonstrate that the abuse-deterrent product is less preferable to recreational drug abusers than conventional fentanyl patches which contain no abuse-deterrent technology.
Following a successful Phase 1 clinical abuse potential study, Nutriband intends to file a 505(b)(2) NDA to the FDA for marketing approval of AVERSA™ Fentanyl, which has the potential to be the first and only abuse deterrent patch approved anywhere in the world. The AVERSA™ Fentanyl NDA has the potential to receive an expedited review by FDA as has been granted for certain abuse-deterrent oral opioid products, which shortens the regulatory review period to six months from the conventional 10-month FDA review cycle for NDAs.
Combined, the clinical development and regulatory path for AVERSA Fentanyl is substantially limited compared to conventional pharmaceutical product development, requiring only a single clinical trial and, following a limited NDA pathway, undergoing an expedited review by the FDA.
We cannot assure you that we will be able to take advantage of any of the available abbreviated approval pathways for any of our proposed products.
Post-approval requirements
Any drug products for which we receive FDA approval will be subject to continuing regulation by the FDA. Certain requirements include, among other things, record-keeping requirements, reporting of adverse events with the product, providing the FDA with updated safety and efficacy information on an annual basis or more frequently for specific events, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements. These promotion and advertising requirements include, among others, standards for direct-to-consumer advertising, prohibitions against promoting drugs for uses or patient populations that are not described in the drug’s approved labeling, known as “off-label use,” and other promotional activities, such as those considered to be false or misleading. Failure to comply with FDA regulations can have negative consequences, including the immediate discontinuation of noncomplying materials, adverse publicity, enforcement letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties. Such enforcement may also lead to scrutiny and enforcement by other government and regulatory bodies.
Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not encourage, market or promote such off-label uses. As a result, “off-label promotion” has formed the basis for litigation under the Federal False Claims Act, violations of which are subject to significant civil fines and penalties. In addition, manufacturers of prescription products are required to disclose annually to the Center for Medicaid and Medicare any payments made to physicians and teaching hospitals in the U.S. under the federal Physician Payment Sunshine Act. Reportable payments may be direct or indirect, in cash or kind, for any reason, and are required to be disclosed even if the payments are not related to the approved product. Failure to fully disclose or not in time reporting could lead to penalties up to $1.15 million per year.
The manufacturing of any of our products will be required to comply with the FDA’s current Good Manufacturing Practices (cGMP) regulations. These regulations require, among other things, quality control and quality assurance, as well as the corresponding maintenance of comprehensive records and documentation. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are also required to register with the FDA their establishments and list any products they make and to comply with related requirements in certain states. These entities are further subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with current good manufacturing practices and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.
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Discovery of problems with a product after approval may result in serious and extensive restrictions on a product, manufacturer or holder of an approved NDA, as well as lead to potential market disruptions. These restrictions may include recalls, suspension of a product until the FDA is assured that quality standards can be met, and continuing oversight of manufacturing by the FDA under a “consent decree,” which frequently includes the imposition of costs and continuing inspections over a period of many years, as well as possible withdrawal of the product from the market. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
The FDA also may require post-marketing testing, or Phase IV testing, as well as risk minimization action plans and surveillance to monitor the effects of an approved product or place conditions on an approval that could otherwise restrict the distribution or use of our products.
Other Government Regulations
We may be subject to government regulations that are applicable to businesses generally, including those relating to workers’ health and safety, environmental and waste disposal, wage and hour and labor practices, including sexual harassment laws and regulations, and anti-discrimination laws and regulations.
In addition, we must comply with the laws and regulations governing the research and manufacture of products containing controlled substances such as fentanyl and other opioids. We or our contract manufacturer must be licensed by the Drug Enforcement Agency (DEA) and the state(s) in which we conduct research and development activities.
Europe and Other Countries
If we market our products in any countries other than the United States, we would be subject to the laws of those countries. To obtain market access for our products in other countries we must comply with numerous and varying regulatory requirements of such countries regarding the demonstration of safety and efficacy for authorization and governing, among other things, clinical trials and commercial sales, pricing and distribution of our products.
The European medicines regulatory system is based on a network of around 50 regulatory authorities from the 31 countries in the European Economic Area, the European Commission and the European Medicines Agency. All medicines must be authorized before they can be placed on the market in the European Union. The European system offers different routes for authorization. A centralized procedure allows the marketing of a medicine on the basis of a single European Union assessment and marketing authorization which is valid throughout the European Union. However, a majority of medicines authorized in the European Union do not fall within the scope of the centralized procedure, and we do not know whether our proposed products will fall within the centralized authorization. We also do not know how the withdrawal of Great Britain from the European Union will affect the procedure for approval of medicines in the United Kingdom. If we are not able to use the centralized procedure, we would need to use one of the following procedures. One method is the decentralized procedure where we would apply for simultaneous authorization in more than one European Union member. The second method is the mutual-recognition procedure where we would have a medicine authorized in one European Union country apply for authorization to be recognized in other European Union countries. In either case, we would be required to complete clinical trials to demonstrate the safety and efficacy of the medicine and show that the medicine is manufactured in accordance with good manufacturing practices based upon European Union standards.
In countries other than the United States and the European Union, we would be required to comply with the applicable laws of those countries, which may require us to perform additional clinical testing.
Failure to obtain regulatory approval in any country would prevent our product candidates from being marketed in those countries. In order to market and sell our products in jurisdictions other than the United States and the European Union, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The regulatory approval process outside the United States and the European Union generally includes all of the risks associated with obtaining FDA and European Union approval but can involve additional testing.
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In addition, in many countries worldwide, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Even if we were to receive approval in the United States or the European Union, approval by the FDA or the European Medicines Agency does not ensure approval by regulatory authorities in other countries or jurisdictions. Similarly, approval by one regulatory authority outside the United States would not ensure approval by regulatory authorities in other countries or jurisdictions. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. If we are unable to obtain approval of our product candidates by regulatory authorities in other foreign jurisdictions, the commercial prospects of those product candidates may be significantly diminished and our business prospects could decline.
Outside the United States, particularly in member states of the European Union, the pricing of prescription drugs is subject to governmental control. In these countries, pricing negotiations or the successful completion of health technology assessment procedures with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures.
In addition to regulations in the United States, if we market outside of the United States, we will be subject to a variety of regulations governing, among other things, clinical trials and any commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries.
Intellectual Property
The AVERSA abuse deterrent technology utilized in our AVERSA product pipeline is covered by an international intellectual property portfolio with patents issued in 45 countries including the United States, Europe, Japan, Korea, Russia, Mexico, Canada, and Australia and pending in China and Hong Kong. These patents provide patent coverage to 2035. We continue to build on our proprietary positions in the United States and internationally for our product candidates AVERSA Fentanyl, AVERSA Buprenorphine and AVERSA Methylphenidate as well as other products and technology that we may have in development. Our policy is to pursue, maintain and defend patent rights developed internally or acquired externally and to protect the technology, inventions and improvements that are commercially important to the development of our business. We cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents granted to us in the future will be commercially useful in protecting our technology. We also may rely on trade secrets to protect our commercial products and product candidates. Our commercial success also depends in part on our non-infringement of the patents or proprietary rights of third parties.
On September 19, 2023, the United States Patent and Trademark Office (USPTO) granted US Patent No. 11,759,431 for Nutriband’s proprietary AVERSA abuse deterrent technology utilizing taste aversion to address the primary routes of abuse of opioid based transdermal patches. The issuance of this patent, entitled, “Abuse and Misuse Deterrent Transdermal Systems,” further expands Nutriband’s intellectual property protection in the United States for its portfolio of AVERSA abuse deterrent transdermal products.
Further, we plan to seek trademark protection in the United States and internationally where available and when appropriate. We have registered the name Nutriband in the United States. We have filed an intent to use Trademark application for AVERSA. The USPTO will require us to show the mark used in commerce prior to fully registering the trademark.
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Publications
On March 8, 2024, Nutriband presented data on the incidence of transdermal patch abuse and accidental pediatric exposure as a scientific poster at the 2024 American Academy of Pain Medicine (AAPM) Annual Meeting2. The American Academy of Pain Medicine (AAPM) is dedicated to advancing multidisciplinary pain care, education, advocacy, and research.
The company engaged Rocky Mountain Poison & Drug Safety (RMPDS), a division of Denver Health and Hospital Authority, Denver, Colorado, to determine the incidence of abuse and accidental pediatric exposure of transdermal patches containing drugs of abuse (fentanyl, buprenorphine, and methylphenidate) in the United States based on poison center data for the surveillance period 2018-2022. RMPDS utilized the Researched Abuse, Diversion and Addiction-Related Surveillance (RADARS®) System, a surveillance system that collects real-world safety and effectiveness data about prescription drugs (https://www.radars.org/).
The data indicate that transdermal patch abuse and accidental pediatric exposures to patches continues to be a serious problem resulting in major medical outcomes and death, suggesting an unmet need for safer abuse-deterrent versions of transdermal patches containing drugs with a risk of abuse, misuse or accidental exposure. Key findings from the study showed that major medical outcome or death resulted from a notable proportion of fentanyl and buprenorphine patch intentional and accidental pediatric exposures with two deaths reported due to abuse of fentanyl transdermal patches. The oral route accounted for the majority of fentanyl patch abuse with 62.5% of all intentional abuse/misuse event reports for fentanyl patches (85.3% of non-dermal routes of abuse). Furthermore, there was a notable proportion of accidental pediatric exposures to transdermal formulations that resulted in major medical outcomes (fentanyl patches: 10.1%, buprenorphine patches: 16.7%). Abuse and overdose are a real problem with transdermal fentanyl as well as other transdermal opioid and stimulant products. In addition, there continues to be an alarming amount of accidental pediatric exposures, resulting in major negative health outcomes. We believe our AVERSA abuse-deterrent technology will have a substantial impact on both of these unfortunate and preventable situations and will help reduce the risk of harm from opioid and stimulant patches by providing taste aversion agents in every patch.
Market Assessment
The company engaged leading healthcare consulting company Health Advances to assess the market opportunity and commercial strategy for AVERSA Fentanyl and AVERSA Buprenorphine.
AVERSA Fentanyl is the lead AVERSA product under development and has the potential to be the world’s first fentanyl transdermal systems with abuse deterrent properties. Once approved by the United States FDA, Aversa Fentanyl will be priced competitively with the non-abuse deterrent patch and has the potential to reach peak annual US sales of $80-200 million according to the assessment performed by Health Advances in January 2022. This assessment did not include the impact of the revised CDC Opioid Prescribing Guidelines which were published in November 2022 that encouraged prescribers to implement comprehensive and holistic pain management including responsible opioid use particularly for patients with moderate to severe chronic pain. Health Advances was able to confirm the significant unmet patient need for AVERSA Fentanyl based on rigorous primary and secondary market research accompanied with deep experience in the abuse deterrence pain space. Nutriband is also considering developing the product for strategic international markets as protected by its global abuse deterrent patent portfolio.
| 2 | Olsen, H, Mogusu, E, Black, JC, Sumbundu, K, Dart, RC. Poison center exposure calls involving fentanyl, buprenorphine, and methylphenidate transdermal patches in the United States. Poster presented at the 40th Annual Meeting of the American Academy of Pain Medicine; 2024 Mar 7-10; Scottsdale, Arizona. https://www.radars.org/system/publications/39.%20Olsen.pdf |
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AVERSA Buprenorphine is the second AVERSA product under development and has the potential to be the world’s first buprenorphine transdermal systems with abuse deterrent properties. Once approved by the United States FDA, Aversa Buprenorphine will be priced competitively with non-abuse deterrent options and has the potential to reach peak annual US sales of $70-130 million according to the assessment performed by Health Advances in October 2023. Health Advances was able to confirm the significant unmet patient need for Aversa™ Buprenorphine based on rigorous primary and secondary market research accompanied with deep experience in the abuse deterrence pain space. Nutriband is also considering developing the product for strategic international markets as protected by its global abuse deterrent patent portfolio.
Competition
The pharmaceutical industry is highly competitive and subject to rapid change as new products are developed and marketed. Potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, and medical technology companies. We believe the key competitive factors that will affect the development and commercial success of our products are product performance including safety and efficacy, level of patient compliance, healthcare professional acceptance, and the extent of insurance reimbursement of our products.
As our development pipeline includes products that contain opioids (AVERSA Fentanyl and AVERSA Buprenorphine), we continually monitor the market for opioid products, particularly in the United States. Pharmaceutical companies engaged in the distribution and sale of opioids, in particular for the treatment of chronic pain, are promoting responsible opioid use. In 2022, the CDC revised its clinical practice guideline for prescribing opioids to ease the restrictions on prescribers and encourage responsible opioid use particularly for patients with moderate to severe pain. Our abuse deterrent opioid products potentially offer a unique proposition to meet the unmet needs of patients by deterring the abuse and misuse of opioids while making opioids accessible to those patients who need them. If approved, our AVERSA pipeline products will compete with the currently marketed products that do not contain abuse deterrent features as well as other products that may employ different abuse deterrent technology. We may also have to compete with products that do not contain opioids or other drugs that are susceptible to abuse. We are not aware of any abuse deterrent transdermal products that are in development or being marketed at this time. If we obtain regulatory approval to market our products, we cannot assure you that we will be successful in the marketplace.
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ITEM 1A. RISK FACTORS
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision with regard to our securities. The statements contained in this prospectus include forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. The risks set forth below are not the only risks facing us. Additional risks and uncertainties may exist that could also adversely affect our business, prospects or operations. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or a significant part of your investment.
Risks Concerning our Business
Because we do not have a product we can market in the United States, we cannot predict when or whether we will operate profitably.
Our lead product, which is our abuse deterrent fentanyl transdermal system, is currently in development and is not yet approved by the FDA in the United States or by any other regulatory agency in any other country. Because of the numerous risks and uncertainties associated with product development, we cannot assure you that we will be able to develop and market any products or achieve or attain profitability. If we are able to obtain financing for our operations, we expect that we will incur substantial expenses as we continue with our product development programs and clinical trials. Further, if we are required by applicable regulatory authorities, including the FDA as well as the comparable regulatory agencies in other countries in which we may seek to market product, to perform studies in addition to those we currently anticipate, our expenses will increase beyond expectations and the timing of any potential product approval may be delayed. As a result, we expect to continue to incur substantial losses and negative cash flow for the foreseeable future.
A number of factors, including, but not limited to the following, may affect our ability to develop our business and operate profitably:
| ● | our ability to obtain necessary funding to develop our proposed products; |
| ● | the success of clinical trials for our products; |
| ● | our ability to obtain FDA approval for us to market any proposed product in our pipeline in the United States; |
| ● | any delays in regulatory review and approval of product in development; |
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if we obtain FDA approval to market our product, our ability to establish manufacturing and distribution operations or entering into manufacturing and distribution agreements with qualified third parties; |
| ● | market acceptance of our products; |
| ● | our ability to establish an effective sales and marketing infrastructure; |
| ● | our ability to protect our intellectual property; |
| ● | competition from existing products or new products that may emerge; |
| ● | the ability to commercialize our products; |
| ● | potential product liability claims and adverse events; |
| ● | our ability to adequately support future growth; and |
| ● | our ability to attract and retain key personnel to manage our business effectively. |
Our failure to develop our abuse deterrent fentanyl transdermal system will impair our ability to continue in business.
Our lead product is our abuse deterrent fentanyl transdermal system, and we are devoting our resources primarily to developing this product to enable us to obtain FDA approval and to market the product. If we are not able to obtain necessary financing to develop, obtain FDA marketing approval and market this product successfully, we may not have the resources to develop additional products, and we may not be able to continue in business.
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Before we can market in the United States any product which is classified by the FDA as a drug, we must obtain FDA marketing approval.
Our proposed transdermal products are drug-device combinations that are considered by the FDA to be drugs, which require approval by the FDA. In order to obtain FDA approval, it is necessary to conduct a series of preclinical and clinical tests to confirm that the product is safe and effective. Even though the medication that is being delivered through our transdermal patch may have already received FDA approval, because we are changing the dosage form or route of administration, we will need to complete, to the FDA’s satisfaction, all of the studies required to demonstrate safety and efficacy. At any point, the FDA could ask us to perform additional tests or to refine and redo a test that we had previously completed. The process of obtaining FDA approval could take many years, with no assurance that the FDA will approve the product. The FDA also will need to approve the manufacturing process and the manufacturing facility.
We may need to rely on a contract research organization to conduct our preclinical and clinical trials.
Although we believe that we, through 4P Therapeutics, have the capabilities to conduct certain preclinical studies and early- stage clinical studies in house, we may need to rely on third party contract research organizations to conduct our pivotal preclinical and clinical trials. Our failure or the failure of the contract research organization to conduct the trials in compliance with FDA regulations could possibly derail our obtaining FDA approval and could require us to redo any preclinical or clinical trials which we or the contract research organization administered.
We may encounter delays in completing clinical trials, which would increase our costs and delay market entry.
We may experience delays in completing the clinical trials necessary for FDA approval. These delays may result from a number of factors which could prevent us from starting the trial on time or completing the study in a timely manner, which may include factors out of our control. Since we may need to rely on third parties for supplying us with the drug and transdermal patches used in the trials, there may be various reasons for us to experience a delay in obtaining the clinical materials required to start each clinical trial, which may include factors out of our control. Clinical trials can be delayed or terminated for a number of reasons, including delay or failure to:
| ● | obtain necessary financing; |
| ● | obtain regulatory approval to commence a trial; |
| ● |
reach agreement on acceptable terms with prospective contract research organizations, investigators and clinical trial sites, the terms of which may be subject to extensive negotiation and vary significantly among different research organizations and trial sites; |
| ● | obtain institutional review board approval at each site; |
| ● | enlist suitable patients to participate in a trial; |
| ● | have patients complete a trial or return for post-treatment follow-up; |
| ● | ensure clinical sites observe trial protocol or continue to participate in a trial; |
| ● | address any patient safety concerns that arise during the course of a trial; |
| ● | address any conflicts with new or existing laws or regulations; |
| ● | add a sufficient number of clinical trial sites; or |
| ● | manufacture sufficient quantities of the product candidate for use in clinical trials. |
Patient enrollment is also a significant factor in the timely completion of clinical trials and is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to available alternatives, including any new drugs or treatments that may be approved for the indications we are investigating.
We may also encounter delays if a clinical trial is suspended or terminated by us, by the independent review boards of the institutions in which such trials are being conducted, by the trial’s data safety monitoring board, or by the FDA. Such authorities may suspend or terminate one or more of our clinical trials due to a number of factors, including our failure to conduct the clinical trial in accordance with relevant regulatory requirements or clinical protocols, inspection of the clinical trial operations or trial site by the FDA resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.
If we experience delays in carrying out or completing clinical trials for any product candidates, the commercial prospects of our product candidates may be harmed, and our ability to generate revenues from any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down the product development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business and financial condition. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
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Our ability to finance our operations and generate revenues depends on the clinical and commercial success of our abuse deterrent fentanyl transdermal system and our other related product candidates and failure to achieve such success will negatively impact our business.
Our prospects, including our ability to finance our operations and generate revenues, depend on the successful development, regulatory approval and commercialization of our abuse deterrent fentanyl transdermal system, which itself requires substantial financing, as well as our other product candidates. The clinical and commercial success of our product candidates depends on a number of factors, many of which are beyond our control, including:
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the FDA’s acceptance of our parameters for regulatory approval relating to our product candidates, including our proposed indications, primary endpoint assessments, primary endpoint measurements and regulatory pathways; | |
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the FDA’s acceptance of the number, design, size, conduct and implementation of our clinical trials, our trial protocols and the interpretation of data from preclinical studies or clinical trials; |
| ● |
the FDA’s acceptance of the sufficiency of the data we collect from our preclinical studies and pivotal clinical trials to support the submission of a New Drug Application, known as an NDA, without requiring additional preclinical or clinical trials; |
| ● |
the FDA’s acceptance of our abuse deterrent labelling relating to our products, including our abuse deterrent fentanyl transdermal system; |
| ● |
when we submit our NDA upon completion of our clinical trials, the FDA’s willingness to schedule an advisory committee meeting, if applicable, in a timely manner to evaluate and decide on the approval of our NDA; |
| ● |
the recommendation of the FDA’s advisory committee, if applicable, to approve our application without limiting the approved labelling, specifications, distribution, or use of the products, or imposing other restrictions; |
| ● | our ability to satisfy any issued raised by the FDA in response to our test data; |
| ● | the FDA’s satisfaction with the safety and efficacy of our product candidates; |
| ● | the prevalence and severity of adverse events associated with our product candidates; |
| ● | the timely and satisfactory performance by third party contractors of their obligations in relation to our clinical trials; |
| ● |
if we receive FDA approval, our success in educating physicians and patients about the benefits, administration and use our product candidates; |
| ● | our ability to raise additional capital on acceptable terms in order to achieve conduct the necessary clinical trials; |
| ● | the availability, perceived advantages and relative cost of alternative and competing treatments; |
| ● | the effectiveness of our marketing, sales and distribution strategy and operations; |
| ● |
our ability to develop, validate and maintain a commercially viable manufacturing process that is compliant with current good manufacturing practices; |
| ● | our ability to obtain, protect and enforce our intellectual property rights; |
| ● |
our ability to bring an action timely for patent infringement arising out of the filing of ANDAs by generic companies seeking approval to market generic versions of our products, if applicable, before the expiry of our patents; and |
| ● | our ability to avoid third party claims of patent infringement or intellectual property violations. |
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If we fail to achieve these objectives or to overcome the challenges presented above, many of which are beyond our control, in a timely manner, we could experience significant delays or an inability to successfully commercialize our product candidates. Accordingly, even if we obtain FDA approval to market our products, we may not be able to generate sufficient revenues through the sale of our products to enable us to continue our business.
Since we do not have commercial manufacturing capability, if we are unable to establish manufacturing facilities, we may have to enter into a manufacturing agreement with a manufacturer that has been approved by the FDA.
Any commercial manufacturer of our products and the manufacturing facilities where we make our commercial products will be subject to FDA inspection. Part of the process of seeking FDA approval to market our products is the FDA’s approval of the manufacturing process and facility. Although we may establish our own manufacturing facilities, the establishment of a manufacturing facility is very costly, and, unless we obtain funding for that purpose, it would be necessary for us to engage a contract manufacturer who has experience is manufacturing FDA-approved transdermal products. By relying on a contract manufacturer, we will be dependent upon the manufacturer, whose interests may be different from ours. Any contract manufacturer will be responsible for product quality and for meeting regulatory requirements. If the manufacturer does not meet our quality standards and delivers products that do not meet our specifications, we may both incur liability for breach of our warranty to our customer, as well as liability for any adverse events, including death, that may result from the use, abuse or accidental misuse of the product. Regardless of whether we are able to make a claim against the contract manufacturer, our reputation may be harmed and we may lose business as a result. Further, the contract manufacturer may have other customers and may allocate its resources based on the contract manufacturer’s interest rather than our interest. Furthermore, we may not be able to assure ourselves that we will get favorable pricing.
If we or any third-party manufacturer fails to comply with FDA current good manufacturing practices, we may not be able to sell our products until and unless the manufacturer becomes compliant.
All FDA approved drugs, including our proposed transdermal products, must be manufactured in accordance with good manufacturing practices. All manufacturing facilities are inspected by the FDA as a matter of routine inspection or for a specific cause. If a manufacturer fails to comply with all applicable regulations, the FDA can prohibit us from distributing products manufactured in those facilities, whether they are a contract manufacturer or own facility. Failure to be in compliance with good manufacturing practices could result in the FDA closing the facilities or limiting our use of the facilities.
If the FDA implements Risk Evaluation and Mitigation Strategies policies for any of our proposed products, we will need to comply with such policies before we can obtain FDA approval or the product.
The Food and Drug Administration Amendments Act of 2007 gave FDA the authority to require a Risk Evaluation and Mitigation Strategy (REMS) from manufacturers to ensure that the benefits of a drug or biological product outweigh its risks. If one of our proposed product candidates does receive regulatory approval, the approval may be limited to specific conditions and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. The FDA may require a REMS, which can include a medication guide, patient package insert, a communication plan, elements to assure safe use and implementation system, and include a timetable for assessment of the REMS. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. In addition, the FDA may require post-approval testing which involves clinical trials designed to further assess a drug product’s safety and effectiveness after the NDA.
Depending on the extent of the REMS requirements, any U.S. launch may be delayed, the costs to commercialize may increase substantially and the potential commercial market could be restricted. Furthermore, risks that are not adequately addressed through the proposed REMS program may also prevent or delay its approval for commercialization.
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Our products will continue to be subject to FDA review after FDA approval is given.
Discovery of previously unknown problems with our products or unanticipated problems with the manufacturing processes and facilities, even after FDA and other regulatory approvals of the product for commercial sale, may result in the imposition of significant restrictions, including withdrawal of the product from the market.
The FDA and other regulatory agencies continue to review products even after the products receive agency approval. If and when the FDA approves one of our products, its manufacture and marketing will be subject to ongoing regulation, which could include compliance with current good manufacturing practices, adverse event reporting requirements and general prohibitions against promoting products for unapproved or “off-label” uses. We are also subject to inspection and market surveillance by the FDA for compliance with these and other requirements. Any enforcement action resulting from the failure, even by inadvertence, to comply with these requirements could affect the manufacture and marketing of our products. In addition, the FDA or other regulatory agencies could withdraw a previously approved product from the market upon receipt of newly discovered information. The FDA or another regulatory agency could also require us to conduct additional, and potentially expensive, studies in areas outside our approved indicated uses.
We must continually monitor the safety of our products once approved and marketed for potential adverse events which could jeopardize our ability to continue marketing the products.
As with all medical products, the use of our products could sometimes produce undesirable side effects or adverse reactions or events (referred to cumulatively as adverse events). For the most part, we expect these adverse events to be known and occur at some predicted frequency based on our experience in the clinical development program. When adverse events are reported to us, we are required to investigate each event and the circumstances surrounding it to determine whether it was caused by our product and whether a previously unrecognized safety issue exists. We will also be required to periodically report summaries of these events to the applicable regulatory authorities. If the adverse effects are significant, we may be required to recall our product. We cannot assure you that our transdermal products will not cause skin irritation or other adverse events. Our ability to market our products may be impaired by unanticipated adverse events and any recall of our product. Because we are an early-stage company, our reputation, and our ability to market products, could be affected more severely than a major pharmaceutical company.
In addition, the use of our products could be associated with serious and unexpected adverse events, or with less serious reactions at a greater than expected frequency. Such issues may arise when our products are used in critically ill or otherwise compromised patient populations. When unexpected events are reported to us, we are required to make a thorough investigation to determine causality and the implications for product safety. These events must also be specifically reported to the applicable regulatory authorities. If our evaluation concludes, or regulatory authorities perceive, that there is an unreasonable risk associated with the product, we would be obligated to withdraw the impacted lot(s) of that product or recall the product and discontinue marketing until all problems are satisfactorily resolved. Furthermore, an unexpected adverse event of a new product could be recognized only after extensive use of the product, which could expose us to product liability risks, enforcement action by regulatory authorities and damage to our reputation and public image.
A serious adverse finding concerning the risk of any of our products by any regulatory authority could adversely affect our reputation, business and financial results.
If we obtain FDA approval to market our products, we expect to spend considerable time and money complying with federal and state laws and regulations governing their sale, and, if we are unable to fully comply with such laws and regulations, we could face substantial penalties.
Health care providers, physicians and others will play a primary role in the recommendation and prescription of our proposed products. Further, if we use third-party sales and marketing providers, they may expose us to broadly applicable fraud and abuse and other health care laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products. Applicable federal and state health care laws and regulations are expected to include, but not be limited to, the following:
| ● |
The federal anti-kickback statute is a criminal statute that makes it a felony for individuals or entities knowingly and willfully to offer or pay, or to solicit or receive, direct or indirect remuneration, in order to induce the purchase, order, lease, or recommending of items or services, or the referral of patients for services, that are reimbursed under a federal health care program, including Medicare and Medicaid; |
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The federal False Claims Act imposes liability on any person who knowingly submits, or causes another person or entity to submit, a false claim for payment of government funds. Penalties include three times the government’s damages plus civil penalties of $5,500 to $11,000 per false claim. In addition, the False Claims Act permits a person with knowledge of fraud, referred to as a qui tam plaintiff, to file a lawsuit on behalf of the government against the person or business that committed the fraud, and, if the action is successful, the qui tam plaintiff is rewarded with a percentage of the recovery; |
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Health Insurance Portability and Accountability Act, known as HIPAA, imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; |
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The Social Security Act contains numerous provisions allowing the imposition of a civil money penalty, a monetary assessment, exclusion from the Medicare and Medicaid programs, or some combination of these penalties; and |
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Many states have analogous state laws and regulations, such as state anti-kickback and false claims laws. In some cases, these state laws impose more strict requirements than the federal laws. Some state laws also require pharmaceutical companies to comply with certain price reporting and other compliance requirements. |
Our failure to comply with any of these federal and state health care laws and regulations, or health care laws in foreign jurisdictions, could have a material adverse effect on our business, financial condition, result of operations and cash flows.
Before we can market our products outside of the United States, we will need to obtain regulatory approval in each country in which we propose to sell our products.
In order to market and sell our products in jurisdictions other than the United States, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA and can involve additional testing.
In addition, in many countries worldwide, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Even if we were to receive approval in the United States, approval by the FDA for marketing in the United States does not ensure approval by regulatory authorities in other countries. Similarly, approval by one regulatory authority outside the United States would not ensure approval by regulatory authorities in other countries. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. If we are unable to obtain approval of our product candidates by regulatory authorities in foreign jurisdictions, the commercial prospects of those product candidates may be significantly diminished and our business prospects could be impaired.
Outside the United States, particularly in member states of the European Union, the pricing of prescription drugs is subject to governmental control. In these countries, pricing negotiations or the successful completion of health technology assessment procedures with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Certain countries allow companies to fix their own prices for medicines but monitor the pricing.
In addition to regulations in the United States, if we market outside of the United States, we will be subject to a variety of regulations governing, among other things, clinical trials and any commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries.
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If we do not have sufficient product liability insurance, we may be subject to claims that are in excess of our net worth.
Before we market any pharmaceutical product, we will need to purchase significant product liability insurance. However, in the event of major claims from the use of our products, it is possible that our product liability insurance will not be sufficient to cover claims against us. We cannot assure you that we will not face liability arising out of the use of our products which is significantly in excess of the limits of our product liability insurance. In such event, if we do not have the funds or access to the funds necessary to satisfy such liability, we may be unable to continue in business.
Because some of the patches we are developing, such as our abuse deterrent fentanyl patch, have potential severe side effects, we may face liability in the event patients suffer serious, possibly life-threatening, side effects from our products.
Fentanyl patches have known side effects and may cause serious or life-threatening breathing problems due to opioid-induced respiratory depression. In addition, taking certain medications with fentanyl may increase the risk of serious or life-threatening breathing problems, sedation or coma. Because of the seriousness of the side effects, fentanyl patches should only be used in accordance labelling approved by the FDA or by the applicable regulatory authorities outside of the United States. Fentanyl patches are only indicated for the treatment of people who are tolerant to opioid medications because they have taken this type of medication for at least one week and should not be used to treat mild or moderate pain, short-term pain, pain after an operation or medical or dental procedure, or pain that can be controlled by medication that is taken on an as-needed basis. Although we will include all warnings on the packaging that are required by the FDA or foreign regulatory authorities, claims may be made against us in the event that death or serious side effects result from the use of our abuse deterrent fentanyl transdermal system, even if prescribed for a patient for whom fentanyl patches should not be prescribed. We cannot assure you that we will not face significant liability as a result of such side effects and we may not have sufficient product liability insurance to cover any damages that may be assessed against us.
Because of our lack of funds, we may have to enter into a joint venture or strategic relationship or licensing agreement with a third party to develop and seek to obtain FDA approval of our potential products.
Our present efforts are directed to developing and seeking FDA approval for our pipeline of transdermal pharmaceutical products including our lead product, the abuse deterrent fentanyl transdermal system. The development of pharmaceutical products is very expensive with no assurance of obtaining FDA approval. Because of the costs involved, we may need to enter into a joint venture or strategic alliance or licensing or similar agreement with a third party to bring our products to market, in which event we would have to give up a significant percentage of the equity in or rights to the product and require the other party to provide the necessary financing and personnel and to take a significant role in making the decisions relating to the development, testing, marketing and manufacturing of the product. The third party may have interests which are different from, and possibly in conflict with, our own. If we are unable to attract competent parties to distribute and market any product which we may develop, or if such parties’ efforts are inadequate, we will not be able to implement our business strategy and may have to cease operations. We cannot assure you that we will be successful in entering into joint ventures or other strategic relationships or that any relationship into which we may enter will develop a marketable product or that we will generate any revenue or net income from such a venture.
We may decide not to continue developing or commercializing any products at any time during development or after approval, which would reduce or eliminate our potential return on investment for those product candidates.
We may decide to discontinue the development of our abuse deterrent fentanyl transdermal system or any other product in our pipeline or not to continue to commercialize any potential product for a variety of reasons, such as the appearance of new technologies that make our product less commercially viable, an increase in competition, changes in or failure to comply with applicable regulatory requirements, changes in the regulatory or public policy environment, the discovery of unforeseen side effects during clinical development or after the approved product has been marketed or the occurrence of adverse events at a rate or severity level that is greater than experienced in prior clinical trials. If we discontinue a program in which we have invested significant resources, we will not receive any return on our investment.
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If any of our potential products are approved for marketing but fail to achieve the broad degree of physician or market acceptance necessary for commercial success, our operating results and financial condition will be adversely affected.
If any of the products in our pipeline receives FDA approval thereby allowing us to market the product in the United States, it will be necessary for us to generate acceptance of our product for the indications covered by the FDA approval. In order to generate acceptance in the marketplace, we will need to demonstrate to physicians, patients and payors that our product provides a distinct advantage or better outcome at a price that reflects the value of our product as compared with existing products. We will need to develop and implement a marketing program directed at both physicians and the general public. Since we do not presently have the resources necessary to develop or implement an in-house marketing program and we may not have the funds to do so if and when we obtain FDA approval to market our product, we will need to establish a distribution network though license and distribution agreements with third parties who have the capability to market our product to physicians, and we will be dependent upon the ability of these third parties to market our products effectively. We cannot assure you that we will be able to negotiate license and distribution agreements with terms that are acceptable to us. Since we do not have an established track record and our product pipeline is relatively small, we may be at a disadvantage in negotiating the terms of license and distribution agreements. Further, we may have little control over the development and implementation of our licensee’s marketing program, and our licensees may have interests that are inconsistent with ours with respect to the allocation of resources and implementation of the marketing program. We cannot assure you that a marketing program for any of our products can or will be implemented effectively or that we will be successful in developing physician and emergency service acceptance of our products.
The drug delivery industry is subject to rapid technological change and, our failure to keep up with technological developments may impair our ability to market our products.
Our products use technology which we developed for the transdermal delivery of drugs. The field of drug delivery is subject to rapid technological changes. Our future success will depend upon our ability to keep abreast of the latest developments in the industry and to keep pace with advances in technology and changing customer requirements. If we cannot keep pace with such changes and advances, our proposed products could be rendered obsolete, which would result in our having to cease its operations.
If we obtain FDA approval, we will face significant competition from better known and better capitalized companies.
If we obtain FDA approval for any of our products, we expect to face significant competition from existing companies, which are better known and already have developed relationships with physicians within the healthcare system. Any product we may develop will compete with existing medications performing the same medicinal functions, which may include transdermal patches. We cannot assure you that we will be able to compete successfully. In addition, even if we are able to commercialize our product candidates, we may not be able to price them competitively with current standard of care products or their price may drop considerably due to factors outside our control. If this happens or the price of materials and manufacture increases dramatically, our ability to continue to operate our business would be materially harmed and we may be unable to commercialize any products successfully. In addition, other pharmaceutical companies may be engaged in developing, patenting, manufacturing and marketing products that compete with those that we are developing. These potential competitors may include large and experienced companies that enjoy significant competitive advantages over us, such as greater financial, research and development, manufacturing, personnel and marketing resources, greater brand recognition and more experience and expertise in obtaining marketing approvals from the FDA and foreign regulatory authorities.
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Healthcare reforms by governmental authorities, court decisions affecting health care policies and related reductions in pharmaceutical pricing, reimbursement and coverage by third-party payors may adversely affect our business.
We expect the healthcare industry to face increased limitations on reimbursement, rebates and other payments as a result of healthcare reform, which could adversely affect third-party coverage of our proposed products and how much or under what circumstances healthcare providers will prescribe or administer our products, if approved.
In both the U.S. and other countries, sales of our products, if approved for marketing, will depend in part upon the availability of reimbursement from third-party payors, which include governmental authorities, managed care organizations and other private health insurers. Third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services.
Increasing expenditures for healthcare have been the subject of considerable public attention in the United States. Both private and government entities are seeking ways to reduce or contain healthcare costs. Numerous proposals that would effect changes in the United States healthcare system have been introduced or proposed in Congress and in some state legislatures, including reducing reimbursement for prescription products and reducing the levels at which consumers and healthcare providers are reimbursed for purchases of pharmaceutical products.
Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement for any approved products, which in turn would affect the price we can receive for those products. Any reduction in reimbursement that results from federal legislation or regulation may also result in a similar reduction in payments from private payors, since private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates.
Significant developments that may adversely affect pricing in the United States include the enactment of federal healthcare reform laws and regulations, including the Affordable Care Act, or ACA, which is popularly known as Obamacare, and the Medicare Prescription Drug Improvement and Modernization Act of 2003. A recent district court decision which struck down Obamacare, if upheld, could have a material adverse effect upon reimbursement and payment for products such as our proposed products. Changes to the healthcare system enacted as part of any healthcare reform in the United States, as well as the increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, may result in increased pricing pressure by influencing, for instance, the reimbursement policies of third-party payors. Regulatory changes which have the effect of decreasing the use of opioids has resulted in a decrease in the size of the market for opioid products, including fentanyl, could impact the market for our abuse deterrent fentanyl transdermal system or any other opioid-based transdermal product we may develop.
It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection.
Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection for our technology which is incorporated in our products as well as successfully defending these patents against third-party challenges, should any be brought. 4P Therapeutics originally filed an international patent application under the Patent Cooperation Treaty for worldwide prosecution of the abuse deterrent transdermal technology intellectual property used in our lead product, the abuse deterrent fentanyl transdermal system.
The AVERSA abuse deterrent technology utilized in our AVERSA product pipeline is covered by an international intellectual property portfolio with patents issued in 45 countries including the United States, Europe, Japan, Korea, Russia, Mexico, Canada and Australia. Patent prosecution is still pending in China and Hong Kong. These patents provide patent coverage to 2035. We continue to build on our proprietary positions in the United States and internationally for our product candidates AVERSA Fentanyl, AVERSA buprenorphine and AVERSA methylphenidate as well as other products and technology that we may have in development. Our policy is to pursue, maintain and defend patent rights developed internally or acquired externally and to protect the technology, inventions and improvements that are commercially important to the development of our business. We cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents granted to us in the future will be commercially useful in protecting our technology. We also rely on trade secrets to protect our commercial products and product candidates. Our commercial success also depends in part on our non-infringement of the patents or proprietary rights of third parties.
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Our ability to stop third parties from making, using, selling, offering to sell or importing products utilizing our proprietary or patented technology is dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. The patent positions of pharmaceutical and biopharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in biopharmaceutical patents has emerged to date in the United States. The biopharmaceutical patent situation outside the United States varies from country to country and is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in any patents we may be granted. Further, if any patents are granted and are subsequently deemed invalid and unenforceable, it could impact our ability to license our technology and, as noted previously, fend off competitive challenges. Patent litigation is very expensive and we may not have sufficient funds to defend our proprietary technology from infringement, either as a plaintiff in an action seeking to stop infringers from using our technology, or as a defendant in an action against us alleging infringement by us.
The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
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others may be able to make compositions or formulations that are similar to our product s but that are not covered by the claims of our patents; |
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other persons may have filed patents covering inventions, technology or processes that we use, with the result that we may infringe upon the prior patents; |
| ● | others may independently develop similar or alternative technologies or duplicate any of our technologies; |
| ● | our pending patent applications may not result in the grant of patents; |
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any patents which may be issued may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges by third parties; |
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our inability to fund any litigation to defend our proprietary rights, either in defense of an action against us or a plaintiff to seek to prevent infringement. |
| ● | our failure to develop additional proprietary technologies that are patentable. |
If we seek to expand our business through acquisition, we may not be successful in identifying acquisition targets or integrating their businesses with our existing business.
We have recently expanded our business by acquisition, and we may make acquisitions in the future. In 2017, we issued 1,458,333 shares of common stock, valued at $2,500,000, in connection with our proposed acquisition of Advanced Health Brands, Inc., but the stock of Advanced Health Brands was never transferred to us and the value of the intellectual property we were to have acquired did not have the value we anticipated, with the result that we incurred a $2,500,000 impairment loss in the year ended January 31, 2018. In September 2018, we entered into an agreement to acquire Carmel Biosciences Inc., and in November 2018, we terminated the agreement. We previously entered into another acquisition agreement which was rescinded shortly after the agreement was executed. We cannot assure you that any acquisition we complete will be successful or that any acquisition agreement we may enter into will result in an acquisition. An acquisition can be unsuccessful for a number of reasons, including the following:
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We may incur significant expenses and devote significant management time to the acquisition and we may be unable to consummate the acquisition on acceptable terms. |
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The integration of any acquisition with our existing business may be difficult and, if we are not able to integrate the business successfully, we may not only be unable to operate the business profitably, but management may be unable to devote the necessary time to the development of our existing business; |
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The key employees who operated the acquired business successfully prior to the acquisition may not be happy working for us and may resign, thus leaving the business without the necessary continuity of management. |
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Even if the business is successful, our senior executive officers may need to devote significant time to the acquired business, which may distract them from their other management activities. |
| ● | If the business does not operate as we expect, we may incur an impairment charge based on the value of the assets acquired. |
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The products or proposed products of the acquired company may have regulatory problems with the FDA or any other regulatory agency, including the need for additional and unanticipated testing or the need for a recall or a change in labeling. |
| ● | We may have difficulty maintaining the necessary quality control over the acquired business and its products and services. |
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To the extent that an acquired company operates at a loss prior to our acquisition, we may not be able to develop profitable operations following the acquisition. |
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The acquired company may have liabilities or obligations which were not disclosed to us, or the acquired assets, including any intellectual property, may not have the value we anticipated. |
| ● | The assets, including intellectual property, of the acquired company may not have the value that we anticipated. |
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We may require significant capital both to acquire and to operate the business, and the capital requirements of the business may be greater than we anticipated. Our failure to obtain funds on reasonable terms may impair the value of the acquisition. |
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The acquired company may not operate at the revenue level or with the gross margin shown in the financial statements or projections. |
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Patents may not be granted for patent applications which the acquired company filed or patents may be successfully challenged. |
| ● | There may be conflicts in management styles that prevent us from integrating the acquired company with us. |
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The business of the acquired company may have problems of which management was unaware and which do not become evident until after the acquisition and we may require significant funding to remedy the problem. |
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The indemnification obligations of the seller under the purchase agreement, if any, may be inadequate to compensate us for any loss, damage or expense which we may sustain, including undisclosed claims or liabilities. |
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To the extent that the acquired company is dependent upon its management to maintain relationships with existing customers, we may have difficulty in retaining the business of these customers if there is a change in management. |
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Government agencies may seek damages after we make the acquisition for conduct which occurred prior to the acquisition and we may not have adequate recourse against the seller. |
If any of the foregoing or any other events which we do not contemplate happen, we may incur significant expenses, which we may not be able to cover, and the development of our business can be impaired. We cannot assure you that any acquisition we will make will be successful.
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We are dependent on third party distributors for the international marketing of our consumer products and complying with applicable laws.
We do not currently sell or market our consumer transdermal products domestically, or for our international sales, directly to international consumers, and we rely on distributors to sell and market these products. We cannot market our consumer transdermal patch products in the United States without first obtaining FDA approval. We do not plan to seek FDA approval or market these products in the United States at this time. We plan to sell our transdermal consumer products to distributors in those countries in which the products can be sold in compliance with all applicable regulations without our spending significant monies for preclinical and clinical studies to obtain regulatory approval.
We are dependent upon our chief executive officer, our president and our chief operating officer.
We are dependent upon Gareth Sheridan, our chief executive officer, Serguei Melnik, our president and Dr. Alan Smith, our chief operating officer who is president of 4P Therapeutics. Although Mr. Sheridan and Mr. Melnik have employment agreements with us, the employment agreements does not guarantee that the officer will continue with us. We do not have an employment agreement with Dr. Smith. The loss of Mr. Sheridan, Mr. Melnik or Dr. Smith would materially impair our ability to conduct our business.
If we are unable to attract, train and retain technical and financial personnel, our business may be materially and adversely affected.
Our future success depends, to a significant extent, on our ability to attract, train and retain key management, technical, regulatory and financial personnel. Recruiting and retaining capable personnel with experience in pharmaceutical product development is vital to our success. There is substantial competition for qualified personnel, and competition is likely to increase. We cannot assure you we will be able to attract or retain the personnel we require. Our financial condition is likely to impair our ability to attract qualified candidates. If we are unable to attract and retain qualified employees, our business may be materially and adversely affected.
Risks Concerning our Securities
Our lack of internal controls over financial reporting may affect the market for and price of our common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to file a report by our management on our internal control over financial reporting. Our disclosure controls and our internal controls over financial reporting are not effective. We do not have the financial resources or personnel to develop or implement systems that would provide us with the necessary information on a timely basis so as to be able to implement financial controls The absence of internal controls over financial reporting may inhibit investors from purchasing our stock and may make it more difficult for us to raise capital or borrow money. Implementing any appropriate changes to our internal controls may require specific compliance training of our directors and employees, entail substantial costs in order to modify our existing accounting systems, take a significant period of time to complete and divert management’s attention from other business concerns. These changes may not, however, be effective in developing or maintaining internal control.
The market price for our common stock may be volatile and your investment in our common stock could suffer a decline in value.
The trading volume in our stock is low, which may result in volatility in our stock price. As a result, any reported prices may not reflect the price at which you would be able to sell shares of common stock if you want to sell any shares you own or buy if you wish to buy shares. Further, stocks with a low trading volume may be more subject to manipulation than a stock that has a significant public float and is actively traded. The price of our stock may fluctuate significantly in response to a number of factors, many of which are beyond our control. These factors include, but are not limited to, the following, in addition to the risks described above and general market and economic conditions:
| ● | the market’s perception as to our ability to generate positive cash flow or earnings; |
| ● | changes in our or any securities analysts’ estimate of our financial performance; |
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the perception of our ability to raise the necessary financing to complete the product development activities including preclinical and clinical testing required for FDA approval and our ability to generate revenue and cash flow from our products; |
| ● | the anticipated or actual results of our operations; |
| ● | changes in market valuations of other companies in our industry; |
| ● | litigation or changes in regulations and insurance company reimbursement policies affecting prescription drugs; |
| ● | concern that our internal controls are ineffective; |
| ● | any discrepancy between anticipated or projected results and actual results of our operations; |
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actions by third parties to either sell or purchase stock in quantities which would have a significant effect on our stock price; and |
| ● | other factors not within our control. |
Raising funds by issuing equity or convertible debt securities could dilute the net tangible book value of the common stock and impose restrictions on our working capital.
We anticipate that we will require funds for our business. If we were to raise capital by issuing equity securities, either alone or in connection with a non-equity financing, the net tangible book value of the then outstanding common stock could decline. If the additional equity securities were issued at a per share price less than the market price, which is customary in the private placement of equity securities, the holders of the outstanding shares would suffer dilution, which could be significant. Further, if we are able to raise funds from the sale of debt securities, the lenders may impose restrictions on our operations and may impair our working capital as we service any such debt obligations.
Stockholders may experience significant dilution as a result of future equity offerings and other issuances of our common stock or other securities.
We will need to raise substantial funds in order to develop our products. In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that may not which is less than the market price and which may be based on a discount from market at the time of issuance. Stockholders will incur dilution upon exercise of any outstanding stock options, warrants or upon the issuance of shares of common stock under our present and future stock incentive programs. In addition, the sale of shares and any future sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could adversely affect the price of our common stock. We cannot predict the effect, if any, that market sales of those shares of common stock or the availability of those shares of common stock for sale will have on the market price of our common stock.
Our failure to meet the continued listing requirements of Nasdaq could result in a de-listing of our common stock.
If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to de-list our securities. Such a de-listing would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our Common Stock when you wish to do so. In the event of a de-listing, we would take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.
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We and our senior executive officers settled an SEC investigation, which may affect the market for and the market price of our common stock and our ability to list on a stock exchange.
Following an investigation into the accuracy of statements in our Form 10 registration statement filed June 2, 2016, as amended, and our Form 10-K annual report filed May 8, 2017 that did not accurately reflect the FDA’s jurisdiction over our consumer products and did not disclose that we could not legally market these products in the United States, a Wells notice which we, our chief executive officer and our chief financial officer received on August 10, 2017 and a Wells submission which we and the officers submitted in response to the Wells notice, the SEC, on December 26, 2018, announced that it has accepted our settlement offer and instituted settled an administrative cease-and-desist proceeding against us and our chief executive officer and chief financial officer. The SEC’s administrative order, dated December 26, 2018, finds that we and the officers consented – without admitting or denying any findings by the SEC — to cease-and-desist orders against them for violations by us of Sections 12(g) and 13(a) of the Securities Exchange Act of 1934 and Rules 12b-20 and 13a-1 thereunder, which require issuers to file accurate registration statements and annual reports with the Commission; violations by the officers for causing our violations of the above issuer reporting provisions; and violations by the officers of Rule 13a-14 of the Exchange Act, which requires each principal executive and principal financial officer of issuers to attest that annual reports filed with the SEC do not contain any untrue statements of material fact. In addition to consenting to the cease-and-desist orders, the officers have each agreed to pay a $25,000 civil penalty to resolve the investigation. The administrative order does not impose a civil penalty or any other monetary relief against us. The settlement may affect the market for and the market price of our common stock.
The market price for our common stock may be volatile and your investment in our common stock could suffer a decline in value.
The trading volume in our stock is low, which may result in volatility in our stock price. As a result, any reported prices may not reflect the price at which you would be able to sell shares of common stock if you want to sell any shares you own or buy if you wish to buy shares. Further, stocks with a low trading volume may be more subject to manipulation than a stock that has a significant public float and is actively traded. The price of our stock may fluctuate significantly in response to a number of factors, many of which are beyond our control. These factors include, but are not limited to, the following, in addition to the risks described above and general market and economic conditions:
| ● | concern about the effects of our settlement with the SEC; |
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the market’s reaction to our financial condition and its perception of our ability to raise necessary funding or enter into a joint venture, as well as its perception of the possible terms of any financing or joint venture; |
| ● | the market’s perception as to our ability to generate positive cash flow or earnings; |
| ● | changes in our or any securities analysts’ estimate of our financial performance; |
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the perception of our ability to raise the necessary financing to complete the product development activities including preclinical and clinical testing required for FDA approval and our ability to generate revenue and cash flow from our products; |
| ● | the anticipated or actual results of our operations; |
| ● | changes in market valuations of other companies in our industry; |
| ● | litigation or changes in regulations and insurance company reimbursement policies affecting prescription drugs; |
| ● | concern that our internal controls are ineffective; |
| ● | any discrepancy between anticipated or projected results and actual results of our operations; |
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actions by third parties to either sell or purchase stock in quantities which would have a significant effect on our stock price; and |
| ● | other factors not within our control. |
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Because of our executive officers’ stock ownership and stock ownership of certain other stockholders that have invested in the company, these stockholders have the power to elect all directors and to approve any action requiring stockholder approval.
Our officers and directors as a group beneficially own approximately 32% of our common stock as of April 29, 2024. As a result, they have the effective power using their contacts with a limited number of other shareholders to elect all of our directors and to approve any action requiring stockholder approval.
Raising funds by issuing equity or convertible debt securities could dilute the net tangible book value of the common stock and impose restrictions on our working capital.
We anticipate that we will require funds for our business. If we were to raise capital by issuing equity securities, either alone or in connection with a non-equity financing, the net tangible book value of the then outstanding common stock could decline. If the additional equity securities were issued at a per share price less than the market price, which is customary in the private placement of equity securities, the holders of the outstanding shares would suffer dilution, which could be significant. Further, if we are able to raise funds from the sale of debt securities, the lenders may impose restrictions on our operations and may impair our working capital as we service any such debt obligations.
We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.
Our articles of incorporation authorize us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our common stock respecting dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect a number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.
We do not intend to pay any cash dividends in the foreseeable future.
We have not paid any cash dividends on our common stock and do not intend to pay cash dividends on our common stock in the foreseeable future.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not Applicable.
ITEM 2. PROPERTIES
Property
We do not own any real property. We lease under a one year lease an office for $ 2,500 per month at 121 South Orange Street, Orlando, Florida. With the office lease, we have access to boardrooms, kitchen facilities and administrative support services. We lease manufacturing space in Cherryville, North Carolina, for $3,000 per month under a three-year lease entered into on February 1, 2022, with a renewal option.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently a defendant in a lawsuit initiated by Joseph Gunnar, LLC (“Gunnar”) and Lucosky Brookman LLP (“LB”) in the Supreme Court of the State of New York, New York County, under Index No.654633/2023. The lawsuit alleges multiple allegations such as breach of contract, fraudulent activities, and tortious interference and seeks damages following the Company’s termination of an engagement letter for assistance with a public stock offering. Gunnar is seeking over $500,000 in damages plus punitive damages, while LB is demanding reimbursement of legal fees.
In response, the Company denies all allegations, alleging that the engagement letter was unenforceable, and its termination was legally justified. The Company has also initiated counterclaims against Joseph Gunnar & Co., accusing them of intentional interference and breach of fiduciary duty, and is seeking $1,000,000 for each claim along with a declaratory judgment affirming the legality and justification of the termination. The plaintiffs have denied these counterclaims.
Currently, there are no pending hearings or motions as both parties are engaged in discovery and are attempting to resolve the matter amicably.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Common Stock and Warrants Listing and Trading
Since our initial public offering on October 1, 2021, our common stock has traded on The NASDAQ Capital Market under the symbol “NTRB”, and our Warrants are traded on that exchange under the symbol “NTRBW”.
Shareholders of Record
As of April 26, 2024, we had approximately 110 holders of record of our common stock; our Warrants are held in book entry form by the Depository Trust Corporation, which is the holder of record of all of the publicly-traded warrants, based upon data provided by our transfer agent. The transfer agent for the common stock is Equiniti Trust Company, LLC, 6201 15th Ave, Brooklyn, NY 11219, telephone (800) 937-5449.
Dividends
We have not declared any cash dividends at any time, and we do not anticipate declaring any cash dividends in the foreseeable future.
Issuer Purchases of Equity Securities
In the fiscal year ended January 31, 2024, the Company made no purchases in the market of its common stock.
ITEM 6. [RESERVED]
The Company, as a smaller reporting company, is not required to provide the information called for by this Item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed in “Risk Factors” and elsewhere in this report.
Overview
AVERSA™ Abuse Deterrent Transdermal Products
Our primary business is the development of a portfolio of transdermal pharmaceutical products. Our lead product under development is AVERSA Fentanyl, our abuse deterrent fentanyl transdermal system which will require approval from the Food and Drug Administration (“FDA”) and substantial capital for research and development. AVERSA Fentanyl has the potential to provide clinicians and patients with an extended-release transdermal fentanyl product for use in managing chronic pain requiring around the clock opioid therapy combined with properties designed to deter the abuse and misuse of fentanyl patches. In addition, we believe that our abuse deterrent technology can be broadly applied to various other transdermal products and our strategy is to follow the development of our abuse deterrent fentanyl transdermal system with the development of abuse deterrent transdermal products for pharmaceuticals that have a risk of abuse, misuse or accidental exposure.
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On September 19, 2023, the United States Patent and Trademark Office (USPTO) granted US Patent No. 11,759,431 for Nutriband's proprietary AVERSA abuse deterrent technology utilizing taste aversion to address the primary routes of abuse of opioid based transdermal patches. The issuance of this patent, entitled, "Abuse and Misuse Deterrent Transdermal Systems," further expands Nutriband's intellectual property protection in the United States for its portfolio of AVERSA abuse deterrent transdermal products.
Transdermal Pharmaceutical Products
Through October 31, 2018, our business was the development of a line of consumer and health products that are delivered through a transdermal or topical patch. Following our acquisition of 4P Therapeutics on August 1, 2018, our focus expanded to include prescription pharmaceuticals, and we are seeking to develop and seek FDA approval on a number of transdermal pharmaceutical products under development by 4P Therapeutics.
Most of our planned consumer products require FDA approval for sale in the United States, and we have not sought to obtain, and we do not plan to seek to obtain, FDA approval to market these products in the United States at this time. Following our acquisition of selected assets from Pocono Coated Products, LLC (“Pocono”), we are primarily focused on providing contract manufacturing services and consulting services to third party brands with no intention at this time to launch our own consumer products.
4P Therapeutics has not generated any revenue from any of its products under development. Rather, prior to our acquisition, 4P Therapeutics generated revenue to provide cash for its operations through contract research and development and related services for a small number of clients in the life sciences field on an as-needed basis. We are, for the near term, continuing this activity, although we do not anticipate that it will generate significant revenues and, since our acquisition, it has generated minor gross margins. We have no long-term contractual obligations, and either party can terminate at any time.
With the change in our focus, our capital requirements increased substantially. The process of developing pharmaceutical products and submitting them for FDA approval is both time consuming and expensive, with no assurance of obtaining approval from the FDA to market our product in the United States. We will require approximately $13 million for research and development of our abuse deterrent fentanyl transdermal system, including clinical manufacturing and clinical trials that need to be completed in order to obtain FDA approval. However, the total cost could be substantially in excess of that amount.
On August 31, 2020, the Company entered into a Purchase Agreement (“Agreement”), with Pocono Coated Products (“PCP”), pursuant to which PCP agreed to sell the Company all of the assets associated with its Transdermal, Topical, Cosmetic and Nutraceutical business (the “Assets”). PCP was the manufacturer of our transdermal consumer products, and we bought that business from them. The purchase price for the Assets was (i) $6,000,000 paid in shares of the Company’s common stock at a value of the average price of the previous 90 days at the date of Closing (the “Shares”); (ii) a promissory note of the Company in the principal amount of $1,500,000, which is due upon the earlier of (a) twelve (12) months from issuance, or (b) immediately following a capital raise of no less than $4,000,000 and/or a public offering of no less than $4,000,000. The note was repaid in full in October 2021. Subsequent to the repayment of the note, the Shares were released from escrow.
On October 5, 2021, the Company, having been approved for the listing of its common stock on The Nasdaq Capital Market effective October 1, 2021, consummated a public offering (the “IPO”) of units (the “Units”), of common stock and warrants that were offered in the IPO on The Nasdaq Capital Market, which included 1,231,200 (each a “Unit”), each Unit consisting of one share of common stock, par value $0.001 per share, and one warrant (each a “Warrant”) at a price of $5.36 per Unit. Each Warrant is immediately exercisable, will entitle the holder to purchase one share of common stock at an exercise price of $6.43 and will expire five (5) years from the date of issuance. The underwriters’ over-allotment option was exercised for 184,800 warrants to purchase shares of common stock bringing to total net proceeds to the Company from the IPO to $5,836,230. The shares of common stock and Warrants are separately transferred immediately upon issuance. As of January 31, 2023, 457,795 warrants issued in the IPO have been exercised, with net proceeds to the Company of $ 2,942,970.
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On November 1, 2021, The Board of Directors adopted the 2021 Employee Stock Option Plan (the “Plan”). The Company has reserved 408,333 shares to issue and sell upon the exercise of stock options issued under the Plan. On November 3, 2021, the Company filed a Registration Statement on Form S-8, to register under the Securities Act of 1933, as amended, the 408,333 shares of common stock reserved for issuance under the Plan, and on October 12, 2022, a Post-Effective Amendment to the Form S-8 was filed with the SEC.
Forward Split of our Common Stock.
On July 26, 2022, our Board of Directors approved the amendment to our Articles of Incorporation to effect a 7 for 6 forward stock split (the “Stock Split”) of our outstanding common stock. We filed the amendment set forth in a Certificate of Change with the Secretary of State of Nevada on August 4, 2022. The 7:6 forward split was effective for trading purposes on the Nasdaq Capital Market on August 12, 2022. Each shareholder of record as of the August 15, 2022 record date received one (1) additional share of common stock for each six (6) shares held as of the record date. No fractional shares of common stock were issued in connection with the Stock Split. Instead, all shares were rounded up to the next whole share. In connection with the Stock Split, which did not require shareholder approval under the Nevada corporation law, the number of authorized shares of common stock of the Company was increased in the same ratio as the shares of outstanding common stock were increased in the Stock Split, from 250,000,000 authorized shares to 291,666,666 authorized shares.
On December 15, 2023, the Company filed the Proxy Statement with the SEC for its Annual Meeting of Stockholders, to be held January 21, 2024, in Orlando, Florida. This Proxy Statement is available on our website at HTTPS://Nutriband.com/proxy.
On March 20, 2024, our Board of Directors adopted an amendment to the Company’s 2021 Employees Stock Option Plan (the “Plan”) increasing the number of shares of common stock subject to the plan (as of March 20, 2024 875,000 shares) to 1,400,00 shares (the “Amendment”). The plan adopted by the Board on November 1, 2021, provided for an initial 350,000 shares to issue and sell upon the exercise of stock options issued under the Plan. The Plan provides for an automatic annual increase to be added on February 1 of each year equal to the lesser of (i) 250,000 shares of Common Equity or (ii) five percent (5%) of the total shares of Common Stock outstanding on such date (including for this purpose any shares of Common Stock issuable upon conversion of any outstanding capital equity of the Company) or (iii) such lesser number as determined by the Board. We will submit the Amendment to the Plan to our stockholders for adoption and approval at the 2025 Annual Meeting. If the Amendment is not approved by stockholders within one year of adoption by the increase in shares subject to the Plan will be void, together with any options issued following March 20, 2024 in the period pending approval of the Plan by our stockholders.
On April 19, 2024, the Company completed an $8,400,000 equity financing with European investors (the “Offering”) of 2,100,000 units (“Units”), at a price of $4.00 per Unit, each Unit consisting of one share of common stock (“Shares”) and a Warrant to purchase two Shares of common stock, the Warrants having an initial exercise price of $6.43, are exercisable by payment of the exercise price in cash only and expire April 19, 2029, five years from the date of issuance (“Warrants”). The Offering was made solely to investors resident outside the United States and was not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any jurisdiction, including any jurisdiction outside the United States, but was made privately by the Company pursuant to the exemptions from registration provided in the SEC’s Regulation S and other exemptions under the Securities Act.
Years Ended January 31, 2024 and 2023
For the year ended January 31, 2024, we generated revenue of $2,085,314 and our costs of revenue were $1,223,209. For the year ended January 31, 2023, we generated revenue of $2,079,609 and our costs of revenue were $1,329,200. Our revenue for the year ended January 31, 2024, included sales of $1,920,280 from contract manufacturing services performed in our Pocono Pharmaceuticals (Active Intelligence) segment and $165,034 from contract research and development services from our 4P Therapeutics segment. The revenue from the Transdermal Patches segment remained relatively constant from the prior year. An increase in demand is expected in the subsequent year. Our cost of revenue for our contract research and development services represents our labor cost plus a modest amount of material costs which we passed on to the client. Our cost of sales during the year for our contract services in comparison to the prior year as our main contract has been completed and the balance of the contract is being recognized with limited additional costs.
For the year ended January 31, 2024, our selling, general and administrative expenses were $3,773,606, primarily legal, accounting, administrative salaries non-cash compensation from the issuance of warrants and employee stock options, compared to $3,916,041 for the year ended January 31, 2023. The decrease from 2023 is primarily due to a decrease in salaries and wages to executives of the Company.
During the years ended January 31, 2024 and 2023, the Company recorded an impairment expense of $-0- and $327,326, respectively, due to a write down of Goodwill in connection with its Pocono acquisition. The write down of goodwill for the year ended January 31, 2023, was attributable primarily to the effects of the pandemic. As of January 31, 2024, the valuation of the reporting unit exceeds the carrying amount of goodwill using the value in use or the going concern premise.
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During the year ended January 31, 2024, the Company incurred research and development expenses for its Aversa Fentanyl product of $1,960,425, primarily due to labor and material costs incurred at our contract manufacturer, Kindeva Drug Delivery, as compared to $982,227 for the year ended January 31, 2023.
During the year ended January 31, 2024, the Company incurred a loss on extinguishment of debt of $554,423, consisting primarily of the loss on the conversion of $2,000,000 of credit line note into 1,026,750 shares of the Company’s common stock. There was no gain or loss on extinguishment of debt during the year ended January 31, 2023.
We incurred interest expense of $75,815 for the year ended January 31, 2024, as compared to $6,289 for the year ended January 31, 2023. The increase is primarily due to interest on the Company’s related party credit line note.
As a result of the foregoing, we sustained a net loss of $5,485,314, or $(0.69) per share (basic and diluted) for the year ended January 31, 2024, compared with a loss of $4,483,474, or $(0.53) per share (basic and diluted) for the year ended January 31, 2023.
Liquidity and Capital Resources
As of January 31, 2024, we had $492,942 in cash and cash equivalents and working capital of $22,770, as compared with cash and cash equivalents of $1,985,440 and working capital of $1,945,132 as of January 31, 2023. During the year ended January 31, 2024, the Company on March 19, 2023, entered a three-year Credit Line Note facility for $2 million, to fund its research and development of its Aversa Fentayl product and an amendment thereto on July 13, 2023, increasing the amount under the credit line to $5 million. During 2024, the Company drew down a total of $2,000,000 under the credit line. In December 2023, the $2,000,000 was converted into shares of the Company’s common stock. On April 19, 2024, the Company completed an $8,400,000 equity financing with European investors (the “Offering”) of 2,100,000 units (“Units”), at a price of $4.00 per Unit, each Unit consisting of one share of common stock (“Shares”) and a Warrant to purchase two Shares of common stock.
For the year ended January 31, 2024, we used cash of $3,527,509 in our operations. The principal adjustments to our net loss of $5,485,314 were depreciation and amortization of $287,722, net loss on extinguishment of debt of $554,423 and stock-based compensation of $742,696.
For the year ended January 31, 2024, we used cash in investing activities of $51,761 primarily for the purchase of equipment.
For the year ended January 31, 2024, we provided cash in financing activities of $2,086,772, primarily from the proceeds of $2,000,000 from the proceeds of $2,000,000 from its line of credit and $106,528 from a factoring arrangement, offset from the payment on notes of $19,756. For the year ended January 31, 2023, we had cash flows of $160,074 from financing activities, primarily of $296,875 from the exercise of warrants, offset by a payment on notes and the repurchase of treasury stock.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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Critical Accounting Policies
Going Concern Assessment
Management assesses liquidity and going concern uncertainty in the Company’s condensed financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.
As of January 31, 2024, the Company had cash and cash equivalents of $492,942 and working capital of $22,770. For the year ended January 31, 2024, the Company incurred a net loss from operations of $4,871,926 and used cash flow from operations of $3,527,509. The Company has generated operating losses since its inception and has relied on sales of securities and issuance of third-party and related-party debt to support cash flow from operations. In October 2021, the Company consummated a public offering and received net proceeds of $5,836,230. The Company has also received to date $3,239,845 in proceeds from the exercise of warrants. The Company has used these proceeds to fund operations and will continue to use the funds as needed. In March 2023, the Company entered into a three-year $2,000,000 Credit Line Note facility with a related party, amended on July 13, 2023, to $5,000,000, which will permit the Company to draw down on the credit line to fund the Company’s research and development of its Aversa product. The Company was advanced $2,000,000, all of which was settled by the issuance of common stock during the year ended January 31, 2024. The $2,000,000 of debt and accrued interest was converted into 1,026,720 shares of the Company’s common stock. On April 19, 2024, the Company received proceeds of $8,400,000 from a private placement of its common stock.
Management has prepared estimates of operations for the next twelve months and believes that sufficient funds will be generated from operations to fund its operations for one year from the date of the filing of these condensed consolidated financial statements, which indicates improved operations and the Company’s ability to continue operations as a going concern.
Management believes the substantial doubt about the ability of the Company to continue as a going concern is alleviated by the above assessment.
Principles of Consolidation
The consolidated financial statements of the Company include the Company and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated. The operations of 4P Therapeutics are included in the Company’s financial statements from the date of acquisition of August 1, 2018, and the operations of Pocono Pharmaceuticals (Active Intelligence) are included in the Company’s financial statements from the date of acquisition of September 1, 2020 under Pocono Pharmaceuticals Inc. The wholly owned subsidiaries are as follows:
Nutriband Ltd.
4P Therapeutics LLC
Pocono Pharmaceuticals Inc.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates including, but not limited to, those related to such items as income tax exposures, accruals, depreciable/useful lives, allowance for doubtful accounts and valuation allowances. The Company bases its estimates on historical experience and on other various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
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Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to a customer. The Company recognizes revenue based on the five criteria for revenue recognition established under Topic 606: 1) identify the contract, 2) identify separate performance obligations, 3) determine the transaction price, 4) allocate the transaction price among the performance obligations, and 5) recognize revenue as the performance obligations are satisfied.
Revenue Types
The following is a description of the Company’s revenue types, which include professional services and sale of goods:
| ● | Contract development and manufacturing services for consumer health transdermal, topical and tape products with revenues listed under sale of goods |
| ● | Product revenues derived from the sale of the Company’s consumer transdermal, topical and tape products with sales listed under sale of goods |
| ● | Contract research and development services for pharmaceuticals and medical devices for life sciences customers with revenues listed under services |
Contracts with Customers
A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
Contract Liabilities
Deferred revenue is a liability related to a revenue producing activity for which revenue has not been recognized. The Company records deferred revenue when it receives consideration from a contract before achieving certain criteria that must be met for revenue to be recognized in conformity with GAAP.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For the Company’s different revenue service types, the performance obligation is satisfied at different times. The Company’s performance obligations include providing products and professional services in the area of research. The Company recognizes product revenue performance obligations in most cases when the product has shipped to the customer. When we perform professional service work, we recognize revenue when we have the right to invoice the customer for the work completed, which typically occurs over time on a monthly basis for the work performed during that month.
All revenue recognized in the income statement is considered to be revenue from contracts with customers.
Cash and cash equivalents
Cash equivalents are short-term, highly liquid investments that have a maturity of three months or less.
Accounts receivable
Trade accounts receivables are recorded at the net invoice value and are not interest bearing. The Company maintains allowances for doubtful accounts for estimated losses from the inability of its customers to make the required payments. The Company determines its allowances by both specific identification of customer accounts where appropriate and the application of historical loss to non-applicable accounts. For the years ended January 31, 2024, and 2023, the Company recorded bad debt expenses of $118,364 and $-0-, respectively, for doubtful accounts related to accounts receivable. During the year ended January 31, 2024, the Company entered into an accounts receivable sale agreement for one of its subsidiaries. The Company received $106,528 in funds against an account receivable that is currently a claim in bankruptcy. The net accounts receivable remain on the books of the Company and a corresponding amount has been included as a secured borrowing liability under Notes payable. As of January 31, 2024, the receivable has been reserved in full. If the bankruptcy claim is not paid in full by the debtor, the Company is obligated to pay any difference to the factor. The loan bears interest at 10%. The Company adopted ASU 2016-13 during 2023 and implemented the guidance on expected credit losses.
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Inventories
Inventories are valued at the lower of cost and reasonable value determined using the first-in, first-out (FIFO) method. Net realized value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. The cost of finished goods and work in process is comprised of material costs, direct labor costs and other direct costs and related production overheads (based on normal operating capacity). As of January 31, 2024, total inventory was $168,605, consisting of work-in-process of $7,466, finished goods of $8,707 and raw materials of $152,717. As of January 31, 2023, total inventory was $229,335, consisting of work-in-process of $11,021 and raw materials of $218,334.
Property, Plant and Equipment
Property and equipment represent an important component of the Company’s assets. The Company depreciates its plant and equipment on a straight-line basis over the estimated useful life of the assets. Property, plant and equipment is stated at historical cost. Expenditures for minor repairs, maintenance and replacement parts which do not increase the useful lives of the assets are charged to expense as incurred. All major additions and improvements are capitalized. Depreciation is computed using the straight-line method. The lives over which the fixed assets are depreciated range from 3 to 20 years as follows:
| Lab Equipment | 5-10 years | |||
| Furniture and fixtures | 3 years | |||
| Machinery and equipment | 10-20 years |
Intangible Assets
Intangible assets include trademarks, intellectual property and customer base acquired through business combinations. The Company accounts for Other Intangible Assets under the guidance of ASC 350, “Intangibles-Goodwill and Other.” The Company capitalizes certain costs related to patent technology. A substantial component of the purchase price related to the Company’s acquisitions have also been assigned to intellectual property and other intangibles. Under the guidance, other intangible assets with definite lives are amortized over their estimated useful lives. Intangible assets with indefinite lives are tested annually for impairment. Trademarks, intellectual property and customer base are being amortized over their estimated useful lives of ten years.
Goodwill
Goodwill represents the difference between the total purchase price and the fair value of assets (tangible and intangible) and liabilities at the date of acquisition. Goodwill is reviewed for impairment annually on January 31, and more frequently as circumstances warrant, and written down only in the period in which the recorded value of such assets exceeds their fair value. The Company does not amortize goodwill in accordance with ASC 350. In connection with the Company’s acquisition of 4P Therapeutics LLC in 2018, the Company recorded Goodwill of $1,719,235. On August 31, 2020, in connection with the Company’s acquisition of Pocono Coated Products LLC and Active Intelligence LLC, the Company recorded Goodwill of $5,810,640. During the years ended January 31, 2024, and 2023, the Company recorded an impairment charge of $-0- and $327,326, respectively, reducing the Active Intelligence LLC Goodwill to $3,302,478. As of January 31, 2024, and 2023, Goodwill amounted to $5,021,713 and $5,021,713, respectively.
Long-lived Assets
Management reviews long-lived assets for potential impairment whenever significant events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment exists when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. If an impairment exists, the resulting write-down would be the difference between the fair market value of the long-lived asset and the related book value.
Earnings per Share
Basic earnings per share of common stock is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock and potential shares of common stock outstanding during the period. Potential shares of common stock consist of shares issuable upon the exercise of outstanding options and common stock purchase warrants. As of January 31, 2024, and 2023, there were 2,157,873 and 1,778,006 common stock equivalents outstanding, that were not included in the calculation of dilutive earnings per share as their effect would be anti-dilutive.
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Stock-Based Compensation
ASC 718, “Compensation - Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services, and, since February 1, 2019, non-employees, are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). As of February 1, 2019, pursuant to ASC 2018-07, ASC 718 was applied to stock-based compensation for both employees and non-employees.
Business Combinations
The Company recognizes the assets acquired, the liabilities assumed, and any non-controlling interest in the acquired entity at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the accounting literature. In accordance with this guidance, acquisition-related costs, including restructuring costs, must be recognized separately from the acquisition and will generally be expensed as incurred. That replaces the cost-allocation process detailed in previous accounting literature, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair value.
Leases
In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842), to provide a new comprehensive model for lease accounting under this guidance, lessees and lessors should apply a “right-of-use” model in accounting for all leases (including subleases) and eliminate the concept of operating leases and off-balance-sheet leases. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. Similar modifications have been made to lessor accounting in-line with revenue recognition guidance.
The Company applies the guidance for right-of-use accounting for all leases and records the operating lease liabilities on its balance sheet. The Company completed the necessary changes to its accounting policies, processes, disclosure and internal control over financial reporting.
Research and Development Expenses
Research and development costs are expensed as incurred.
Income Taxes
Taxes are calculated in accordance with taxation principles currently effective in the United States and Ireland.
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company records net deferred tax assets to the extent they believe these assets will more-likely-than-not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event the Company was to determine that it would be able to realize its deferred income tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the valuation allowance which would reduce the provision for income taxes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NUTRIBAND INC.
January 31, 2024
Index to Consolidated Financial Statements
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Nutriband Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Nutriband Inc. (“the Company”) as of January 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended January 31, 2024 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended January 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
Long-Lived Asset Impairment Assessment
Critical Audit Matter Description
As described in note 2 to the consolidated financial statements, the Company performs impairment testing for its long-lived assets when events or changes in circumstances indicate that its carrying amount may not be recoverable and exceeds its fair value. Due to challenging industry and economic conditions, the Company tested its long-lived assets during the year ended January 31, 2024. The Company’s evaluation of the recoverability of these long-lived asset groups involved comparing the undiscounted future cash flows expected to be generated by these long-lived asset groups to their respective carrying amounts. The Company’s recoverability analysis requires management to make significant estimates and assumptions related to cash flows over the remaining useful life of these long-lived asset groups.
We identified the evaluation of the recoverability analysis for the long-lived assets in the 4P Therapeutics asset group as a critical audit matter because of the significant estimates and assumptions management used in the related cash flow analysis. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort.
How the Critical Audit Matter was Addressed in the Audit
Our audit procedures related to the following:
| ● | Testing management’s process for developing the undiscounted cash flow model. |
| ● | Evaluating the appropriateness of the undiscounted cash flow models used by management. |
| ● | Testing the completeness and accuracy of underlying data used in the undiscounted cash flow model. |
| ● | Evaluating the significant assumptions used by management, including assumptions related to current and planned costs, future revenues, gross margin and other operating expenses to discern whether they are reasonable considering (i) the current and past performance of the entity; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. |
| ● | Professionals with specialized skill and knowledge were utilized by the Firm to assist in the evaluation of the undiscounted cash flow model and underlying assumptions. |
/s/
We have served as the Company’s auditor since 2016.
April 30, 2024
F-2
NUTRIBAND INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| January 31, | ||||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| PROPERTY & EQUIPMENT-net | ||||||||
| OTHER ASSETS: | ||||||||
| Goodwill | ||||||||
| Operating lease right of use asset | ||||||||
| Intangible assets-net | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Deferred revenue | ||||||||
| Operating lease liability-current portion | ||||||||
| Notes payable-current portion | ||||||||
| Total Current Liabilities | ||||||||
| LONG-TERM LIABILITIES: | ||||||||
| Note payable-net of current portion | ||||||||
| Note payable-related party | ||||||||
| Operating lease liability-net of current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Treasury stock, | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See notes to consolidated financial statements
F-3
NUTRIBAND INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Years Ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | $ | ||||||
| Costs and expenses: | ||||||||
| Cost of revenues | ||||||||
| Research and development | ||||||||
| Goodwill impairment | ||||||||
| Selling, general and administrative | ||||||||
| Total Costs and Expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest income | ||||||||
| Loss on extinguishment of debt | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
See notes to consolidated financial statements
F-4
NUTRIBAND INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| Accumulated | ||||||||||||||||||||||||||||
| Common Stock | Additional | Other | ||||||||||||||||||||||||||
| Number of | Paid In | Comprehensive | Accumulated | Treasury | ||||||||||||||||||||||||
| Year Ended January 31, 2024 | Total | shares | Amount | Capital | Income(Loss) | Deficit | Stock | |||||||||||||||||||||
| Balance, February 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Warrants issued for services | ||||||||||||||||||||||||||||
| Options issued for services | - | |||||||||||||||||||||||||||
| Issuance of common stock for note payable and interest | ||||||||||||||||||||||||||||
| Net loss for the year ended January 31, 2024 | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Balance, January 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||
| Common Stock | Additional | Other | ||||||||||||||||||||||||||
| Number of | Paid In | Comprehensive | Accumulated | Treasury | ||||||||||||||||||||||||
| Year Ended January 31, 2023 | Total | shares | Amount | Capital | Income(Loss) | Deficit | Stock | |||||||||||||||||||||
| Balance, February 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||||||||||
| Common stock returned in settlement | ( | ) | ( | ) | ||||||||||||||||||||||||
| Treasury stock issued for services | ||||||||||||||||||||||||||||
| Treasury stock and warrants issued for termination agreement | ||||||||||||||||||||||||||||
| Treasury stock repurchased | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Options issued for services | ||||||||||||||||||||||||||||
| Net loss for the year ended January 31, 2023 | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Balance, January 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
See notes to consolidated financial statements
F-5
NUTRIBAND INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Years Ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Operating lease expense | ||||||||
| Loss on extinguishment of debt | ||||||||
| Reserve for doubtful accounts | ||||||||
| Treasury stock issued for services | ||||||||
| Treasury stock and warrants issued for termination agreement | ||||||||
| Goodwill impairment | ||||||||
| Stock-based compensation-warrants | ||||||||
| Stock-based compensation-options | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses | ||||||||
| Inventories | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Net Cash Used In Operating Activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from note payable-related party | ||||||||
| Proceeds from secured borrowing liability | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Payment on note payable | ( | ) | ( | ) | ||||
| Purchase of treasury stock | ( | ) | ||||||
| Net Cash Provided by Financing Activities | ||||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash and cash equivalents - Beginning of period | ||||||||
| Cash and cash equivalents - End of period | $ | $ | ||||||
| Supplementary information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Adoption of ASC 842 Operating lease asset and liability | $ | $ | ||||||
| Promissory note on equipment purchase | $ | $ | ||||||
| Common stock returned in settlement | $ | $ | ||||||
| Issuance of common stock for extinguishment of debt | $ | $ | ||||||
See notes to consolidated financial statements
F-6
NUTRIBAND INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
as of and for the Years Ended January 31, 2024 and 2023
| 1. | ORGANIZATION AND DESCRIPTION OF BUSINESS |
Organization
Nutriband Inc. (the “Company”) is a Nevada corporation, incorporated on January 4, 2016. In January 2016, the Company acquired Nutriband Ltd, an Irish company which was formed by the Company’s chief executive officer in 2012 to enter the health and wellness market by marketing transdermal patches. References to the Company relate to the Company and its subsidiaries unless the context indicates otherwise.
On August 1,
2018, the Company acquired 4P Therapeutics LLC (“4P Therapeutics”) for $
4P Therapeutics is engaged in the development of a series of transdermal pharmaceutical products, that are in the preclinical stage of development. Prior to the acquisition of 4P Therapeutics, the Company’s business was the development and marketing of a range of transdermal consumer patches. Most of these products are considered drugs in the United States and cannot be marketed in the United States without approval by the Food and Drug Administration (the “FDA”). The Company entered a feasibility agreement as an initial step to seek FDA approval of its consumer transdermal products and its consumer products which are not being marketed in the United States.
With the acquisition of 4P Therapeutics, 4P Therapeutics’ drug development business became the Company’s principal business. The Company’s approach is to use generic drugs that are off patent and incorporate them into the Company’s transdermal drug delivery system. Although these medications have received FDA approval in oral or injectable form, the Company needs to conduct a transdermal product development program which will include the preclinical and clinical trials that are necessary to receive FDA approval before we can market any of our pharmaceutical products.
On August 25,
2020, the Company formed Pocono Pharmaceuticals Inc. (“Pocono Pharmaceuticals”), a wholly owned subsidiary of the Company.
On August 31, 2020, the Company acquired certain assets and liabilities associated with the Transdermal, Topical, Cosmetic, and Nutraceutical
business of Pocono Coated Products LLC (“PCP”). The net assets were contributed to Pocono Pharmaceuticals. Included in the
transaction, Pocono Pharmaceuticals also acquired
Pocono Pharmaceuticals is a contract development and manufacturing organization with unique process capabilities and experience focused on coated product manufacturing. Pocono helps their customers with product design and development along with manufacturing to bring new products to market with minimal capital investment. Pocono Pharmaceutical’s competitive edge is a low-cost manufacturing base: a result of its unique processes and state-of-the-art material technology. Active Intelligence manufactures activated kinesiology tape for transdermal or topical use.
F-7
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Forward Stock Split
On July 26,
2022, our Board of Directors approved the amendment to our Articles of Incorporation to effect a 7- for- 6 forward stock split (the “Stock
Split”) of our outstanding common stock. The Company filed the amendment set forth in a Certificate of Change with the Secretary
of State of Nevada on August 4, 2022.
All share and per share information in these financial statements retroactively reflect the forward stock split.
Going Concern Assessment
Management assesses liquidity and going concern uncertainty in the Company’s condensed financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.
As of January
31, 2024, the Company had cash and cash equivalents of $
Management has prepared estimates of operations for the next twelve months and believes that sufficient funds will be generated from operations to fund its operations for one year from the date of the filing of these condensed consolidated financial statements, which indicates improved operations and the Company’s ability to continue operations as a going concern.
Management believes the substantial doubt about the ability of the Company to continue as a going concern is alleviated by the above assessment.
F-8
Principles of Consolidation
The consolidated financial statements of the Company include the Company and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated. The operations of 4P Therapeutics are included in the Company’s financial statements from the date of acquisition of August 1, 2018, and the operations of Pocono and Active Intelligence are included in the Company’s financial statements from the date of acquisition of September 1, 2020 under Pocono Pharmaceuticals Inc. The wholly owned subsidiaries are as follows:
Nutriband Ltd.
4P Therapeutics LLC
Pocono Pharmaceuticals Inc.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates including, but not limited to, those related to such items as income tax exposures, accruals, depreciable/useful lives, allowance for doubtful accounts and valuation allowances. The Company bases its estimates on historical experience and on other various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to a customer. The Company recognizes revenue based on the five criteria for revenue recognition established under Topic 606: 1) identify the contract, 2) identify separate performance obligations, 3) determine the transaction price, 4) allocate the transaction price among the performance obligations, and 5) recognize revenue as the performance obligations are satisfied.
Revenue Types
The following is a description of the Company’s revenue types, which include professional services and sale of goods:
| ● | Contract development and manufacturing services for consumer health transdermal, topical and tape products with revenues listed under sale of goods |
| ● | Product revenues derived from the sale of the Company’s consumer transdermal, topical and tape products with sales listed under sale of goods |
| ● | Contract research and development services for pharmaceuticals and medical devices for life sciences customers with revenues listed under services |
Contracts with Customers
A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
Contract Liabilities
Deferred revenue is a liability related to a revenue producing activity for which revenue has not been recognized. The Company records deferred revenue when it receives consideration from a contract before achieving certain criteria that must be met for revenue to be recognized in conformity with GAAP.
F-9
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For the Company’s different revenue service types, the performance obligation is satisfied at different times. The Company’s performance obligations include providing products and professional services in the area of research. The Company recognizes product revenue performance obligations in most cases when the product has shipped to the customer. When we perform professional service work, we recognize revenue when we have the right to invoice the customer for the work completed, which typically occurs over time on a monthly basis for the work performed during that month.
All revenue recognized in the income statement is considered to be revenue from contracts with customers.
Disaggregation of Revenues
| Years Ended | ||||||||
| January 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue by type | ||||||||
| Sale of goods | $ | $ | ||||||
| Services | ||||||||
| Total | $ | $ | ||||||
| Years Ended | ||||||||
| January 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue by geographic location: | ||||||||
| United States | $ | $ | ||||||
| Foreign | ||||||||
| $ | $ | |||||||
Cash and cash equivalents.
Cash and cash equivalents include cash on hand, cash on deposit in money market accounts. The Company considers short-term highly liquid investments with an original maturity date of three months or less that are not part of an investment pool to be cash equivalents. As of January 31, 2024, the Company has no balances that exceed federally insured limits.
Accounts receivable
Trade accounts
receivables are recorded at the net invoice value and are not interest bearing. The Company maintains allowances for doubtful accounts
for estimated losses from the inability of its customers to make the required payments. The Company determines its allowances by both
the specific identification of customer accounts where appropriate and the application of historical loss to non-applicable accounts.
For the years ended January 31, 2024, and 2023, the Company recorded bad debt expenses of $
F-10
Inventories
Inventories
are valued at the lower of cost and reasonable value determined using the first-in, first-out (FIFO) method. Net realized value is the
estimated selling price in the ordinary course of business, less applicable variable selling expenses. The cost of finished goods and
work in process is comprised of material costs, direct labor costs and other direct costs and related production overheads (based on normal
operating capacity). As of January 31, 2024, total inventory was $
Property, Plant and Equipment
Property and
equipment represent an important component of the Company’s assets. The Company depreciates its plant and equipment on a straight-line
basis over the estimated useful life of the assets. Property, plant and equipment is stated at historical cost. Expenditures for minor
repairs, maintenance and replacement parts which do not increase the useful lives of the assets are charged to expense as incurred. All
major additions and improvements are capitalized. Depreciation is computed using the straight-line method.
| Lab Equipment | ||||
| Furniture and fixtures | ||||
| Machinery and equipment |
Intangible Assets
Intangible
assets include trademarks, intellectual property and customer base acquired through business combinations. The Company accounts for Other
Intangible Assets under the guidance of ASC 350, “Intangibles-Goodwill and Other.” The Company capitalizes certain costs related
to patent technology. A substantial component of the purchase price related to the Company’s acquisitions have also been assigned
to intellectual property and other intangibles. Under the guidance, other intangible assets with definite lives are amortized over their
estimated useful lives. Intangible assets with indefinite lives are tested annually for impairment. Trademarks, intellectual property
and customer base are being amortized over their estimated useful lives of
Goodwill
Goodwill represents
the difference between the total purchase price and the fair value of assets (tangible and intangible) and liabilities at the date of
acquisition. Goodwill is reviewed for impairment annually on January 31, and more frequently as circumstances warrant, and written down
only in the period in which the recorded value of such assets exceeds their fair value. The Company does not amortize goodwill in accordance
with ASC 350. In connection with the Company’s acquisition of 4P Therapeutics LLC in 2018, the Company recorded Goodwill of $
Long-lived Assets
Management reviews long-lived assets for potential impairment whenever significant events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment exists when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. If an impairment exists, the resulting write-down would be the difference between the fair market value of the long-lived asset and the related book value.
F-11
Earnings per Share
Basic earnings
per share of common stock is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during
the period. Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares of common
stock and potential shares of common stock outstanding during the period. Potential shares of common stock consist of shares issuable
upon the exercise of outstanding options and common stock purchase warrants. As of January 31, 2024, and 2023, there were
Stock-Based Compensation
ASC 718, “Compensation - Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services, and, since February 1, 2019, non-employees, are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). As of February 1, 2019, pursuant to ASC 2018-07, ASC 718 was applied to stock-based compensation for both employees and non-employees.
Business Combinations
The Company recognizes the assets acquired, the liabilities assumed, and any non-controlling interest in the acquired entity at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the accounting literature. In accordance with this guidance, acquisition-related costs, including restructuring costs, must be recognized separately from the acquisition and will generally be expensed as incurred. That replaces the cost-allocation process detailed in previous accounting literature, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair value.
Leases
In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842), to provide a new comprehensive model for lease accounting under this guidance, lessees and lessors should apply a “right-of-use” model in accounting for all leases (including subleases) and eliminate the concept of operating leases and off-balance-sheet leases. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. Similar modifications have been made to lessor accounting in-line with revenue recognition guidance.
The Company applies guidance for right-of-use accounting for all leases and records the operating lease liabilities on its balance sheet. The Company completed the necessary changes to its accounting policies, processes, disclosure and internal control over financial reporting.
Research and Development Expenses
Research and development costs are expensed as incurred.
Income Taxes
Taxes are calculated in accordance with taxation principles currently effective in the United States and Ireland.
F-12
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company records net deferred tax assets to the extent they believe these assets will more-likely-than-not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event the Company was to determine that it would be able to realize its deferred income tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the valuation allowance which would reduce the provision for income taxes.
Fair Value Measurements
FASB ASC 820, “Fair Value Measurements and Disclosure” (“ASC 820”), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value.
The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis during the reporting period. The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:
| Level 1 | -Observable inputs such as quoted market prices in active markets. | |
| Level 2 | -Inputs other than quoted prices in active markets that are either directly or indirectly observable. | |
| Level 3 | -Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
The carrying value of the Company’s financial instruments, including accounts receivable, prepaid expenses, accounts payable and accrued expenses, and deferred revenue approximate their fair value due to the short maturities of these financial instruments.
Recent Accounting Standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), The ASU introduces a new credit loss methodology. Current Expected Credit Loss (“CECL”), which requires earlier recognition of credit losses, which also provides additional transparency about credit risk. Since its original issuance in 2016, the FASB has issued several updates to the original ASU. The Company adopted ASU 2016-13 during the year ended January 31, 2024. The adoption of ASU 2016-13 did not have a material impact on the Company’s balance sheet or statement of operations.
F-13
The Company has reviewed all other FASB-issued ASU accounting pronouncements and interpretations thereof that have effective dates during the period reported and in future periods. The Company has carefully considered the new pronouncements that alter previous GAAP and does not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of the Company’s financial management and certain standards are under consideration.
| 3. | PROPERTY AND EQUIPMENT |
| January 31, | ||||||||
| 2024 | 2023 | |||||||
| Lab equipment | $ | $ | ||||||
| Machinery and equipment | ||||||||
| Furniture and fixtures | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Net Property and Equipment | $ | $ | ||||||
Depreciation expenses amounted to $
| 4. | INCOME TAXES |
The Company adopted the provisions of ASC 740, “Income Taxes, (“ASC 740”). As a result of the implementation of ASC 740, the Company recognized no adjustment in the net liability for unrecognized income tax benefits. The Company believes there are no potential uncertain tax positions, and all tax returns are correct as filed. Should the Company recognize a liability for uncertain tax positions, the Company will separately recognize the liability for uncertain tax positions on its balance sheet. Included in any liability or uncertain tax positions, the Company will also set up a liability for interest and penalties. The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of the current
provision for income taxes.
There is no U.S. tax provision due to losses from U.S. operations for the years ended January 31, 2024 and 2023. Deferred income taxes are provided for the temporary differences between the financial reporting and tax basis of the Company’s assets and liabilities. The principal item giving rise to deferred taxes is the net operating loss carryforward in the U.S. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has set up a valuation allowance for losses for certain carryforwards that it believes may not be realized.
F-14
| Years
Ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| Current | ||||||||
| Federal | $ | $ | ||||||
| Foreign | ||||||||
| Deferred | ||||||||
| Federal | ||||||||
| Foreign | ||||||||
| Years
Ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| Book Income (loss from operations) | $ | ( | ) | $ | ( | ) | ||
| Common stock issued for services | ||||||||
| Impairment expense | ||||||||
| Unused operating losses | ||||||||
| Income tax expense | $ | $ | ||||||
As of January 31, 2024, the
Company recorded a deferred tax asset associated with a net operating loss (“NOL”) carryforward of approximately
$
F-15
| January 31, | ||||||||
| 2024 | 2023 | |||||||
| Net operating loss carryforward (expire through 2040) | $ | ( | ) | $ | ( | ) | ||
| Stock issued for services | $ | ( | ) | ( | ) | |||
| Intangible impairment expense | $ | ( | ) | ( | ) | |||
| Valuation allowance | $ | |||||||
| Net deferred taxes | $ | $ | ||||||
| 5. | NOTES PAYABLE |
Notes Payable
Active Intelligence,
entered into an agreement with the Carolina Small Business Development Fund for a line of credit of $
On April
3, 2022, the Company entered into a retail installment agreement for the purchase of an automobile. The contract price was $
Note payable-related party.
On July 17,
2023, the Company entered an amended Credit Line Note agreement, for an increased $
Secured borrowing liability.
The Company
entered into an accounts receivable sale agreement for one of its subsidiaries in connection with a bankruptcy claim. The Company received
$
Interest expenses
for the year ended January 31, 2024, and 2023, were $
F-16
| 6. | INTANGIBLE ASSETS |
| January 31, | ||||||||
| 2024 | 2023 | |||||||
| Customer base | $ | $ | ||||||
| Intellectual property and trademarks | ||||||||
| Total | ||||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Net Intangible Assets | $ | $ | ||||||
In
February 2021, the Company acquired an IP license from Rambam Med-Tech Ltd. for $
| Year Ended January 31, | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 and thereafter | ||||
| $ | ||||
| 7. | RELATED PARTY TRANSACTIONS |
Activity during the year ended January 31, 2024
| a) | On February 1, 2023, options to purchase |
F-17
| b) | In September and October 2023, options to purchase | |
| c) | On October 26, 2023, warrants to purchase | |
| d) | On July 17, 2023, the Company entered an amended Credit Line Note facility with TII Jet Services LDA,
a shareholder of the Company, for a credit facility of $ |
Activity during the year ended January 31, 2023
| a) | In May 2022, the Company issued stock awards to the Company’s CEO and the independent members of
the Board of Directors. The CEO received | |
| b) | On August 2, 2022, | |
| c) | On September 30, 2022, | |
| d) | On December 7, 2022, options to purchase |
| 8. | STOCKHOLDERS’ EQUITY |
Preferred Stock
On January 15, 2016, the board of directors of the Company
approved a certificate of amendment to the articles of incorporation and changed the authorized capital stock of the Company to include
and authorize
On May 24, 2019, the board of directors created a series
of preferred stock consisting of
F-18
Common Stock
On June 25, 2019,
On January 27, 2020, the Company amended its Articles of
Incorporation to increase its authorized common shares from
On July 26, 2022, the Board of Directors of
Activity during the Year Ended January 31, 2024
| (a) | As of January 31, 2024, the Company holds | |
| (b) | In December 2024, TII Jet Services LDA converted $ |
Activity during the Year Ended January 31, 2023
| (a) | In March and May 2022, the Company purchased | |
| (b) | On July 29, 2022, the Company received proceeds of $ | |
| (c) | In July 2022, the Company cancelled |
F-19
| 9. | OPTIONS and WARRANTS |
Warrants
The following table summarizes the changes
in warrants outstanding and the related price of the shares of the Company’s common stock issued to non-employees of the Company
during the year ended January 31, 2024. On March 7, 2023, the Company issued
| Exercise | Remaining | Intrinsic | ||||||||||||||
| Shares | Price | Life | Value | |||||||||||||
| Outstanding, January 31, 2022 | $ | | $ | |||||||||||||
| Granted | | |||||||||||||||
| Expired/Cancelled | ( | ) | ||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Outstanding, January 31, 2023 | ||||||||||||||||
| Granted | ||||||||||||||||
| Expired/Cancelled | ( | ) | ||||||||||||||
| Exercised | ||||||||||||||||
| Outstanding - January 31, 2024 | $ | | $ | |||||||||||||
| Exercisable - January 31, 2024 | $ | | $ | |||||||||||||
| Range of Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life(Years) | Weighted Average Exercise Price for Shares Outstanding | Number Exercisable | Weighted Average Exercise Price for Shares Exercisable | Intrinsic Value | ||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
F-20
Options
The following table summarizes the changes in options outstanding and the related price of the shares of the Company’s common stock issued to employees of the Company. See Note 7 for the issuance of related party options.
On November 1, 2021, the Board of Directors
adopted the 2021 Employee Stock Option Plan (the “Plan”). The Company has reserved
During the year ended January 31, 2024,
During the year ended January 31, 2023,
| Shares | Exercise Price | Remaining Life | Intrinsic Value | |||||||||||||
| Outstanding, January 31, 2022 | $ | | ||||||||||||||
| Granted | | |||||||||||||||
| Expired/Cancelled | ||||||||||||||||
| Exercised | ||||||||||||||||
| Outstanding, January 31, 2023 | | |||||||||||||||
| Granted | | |||||||||||||||
| Expired/Cancelled | ||||||||||||||||
| Exercised | ||||||||||||||||
| Outstanding- January 31, 2024 | $ | $ | ||||||||||||||
| Exercisable - January 31, 2024 | $ | $ | ||||||||||||||
F-21
| Prices | Outstanding | Life(Years) | Shares Outstanding | Exercisable | Shares Exercisable | Value | ||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||||||
| 10. | SEGMENT REPORTING |
We organize and manage our
business by the following two segments which meet the definition of reportable segments under ASC280-10, Segment Reporting: Sales of
Goods and Services. These segments are based on the type of products or services provided and are the same as our business units.
Separate financial information is available and regularly reviewed by our chief officer decision maker, in making resource
allocation decisions for our segments.
| Years Ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| Net sales | ||||||||
| Pocono Pharmaceuticals | $ | $ | ||||||
| 4P Therapeutics | ||||||||
| Gross profit | ||||||||
| Pocono Pharmaceuticals | ||||||||
| 4P Therapeutics | ||||||||
| Operating expenses | ||||||||
| Selling, general and administrative-Pocono Pharmaceuticals | ||||||||
| Selling, general and administrative-4P Therapeutics | ||||||||
| Selling, general and administrative-Corporate | ||||||||
| Research and development-4P Therapeutics | ||||||||
| Goodwill impairment-Pocono Pharmacueticals | ||||||||
| Depreciation and Amortization | ||||||||
| Pocono Pharmaceuticals | $ | $ | ||||||
| Corporate | ||||||||
| 4P Therapeutics | ||||||||
| $ | $ | |||||||
F-22
| Years Ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| Net sales | ||||||||
| United States | $ | $ | ||||||
| Outside the United States | ||||||||
| $ | $ | |||||||
| January 31, | January 31, | |||||||
| 2024 | 2023 | |||||||
| Property and equipment, net of accumulated depreciation | ||||||||
| United States | $ | $ | ||||||
| Outside the United States | ||||||||
| $ | $ | |||||||
| Assets | ||||||||
| Corporate | $ | $ | ||||||
| Pocono Pharmaceuticals | ||||||||
| 4P Therapeutics | ||||||||
| $ | $ |
| 11. | COMMITMENTS AND CONTIGENCIES |
Employment Agreements
The Company entered into a three-year
employment agreement with Gerald Goodman, our CFO, effective February 1, 2022. The agreement provides for an initial term, commencing
on the effective date of the agreement and ending on January 31, 2025, and continuing on a year-to-year basis thereafter unless terminated
by either party on not less than 30 days’ notice given prior to the expiration of the initial term or any one-year extension. For
his services to the Company during the term of the agreement, Mr. Goodman will receive an annual salary of $
Kindeva Drug Delivery Agreement
On January 4, 2022,
F-23
The agreement will remain in force until the earlier of: (1) the completion of the work and deliverables under the Workplan; or (2) two (2) years after the Effective Date, after which time the agreement will expire. The feasibility Workplan was completed in February 2024.
The estimated cost to complete the feasibility
Workplan was approximately $
In January 2024, Nutriband signed a
commercial development and clinical supply agreement with Kindeva Drug Delivery for development of AVERSA Fentanyl using Kindeva’s
FDA-approved fentanyl patch. Kindeva will perform commercial manufacturing process development and clinical supplies manufacturing for
the human abuse potential clinical study required by the FDA in support of a New Drug Application. The agreement replaces the previous
feasibility agreement between the two companies which was focused on adapting Kindeva’s commercial transdermal manufacturing process
to incorporate AVERSA abuse deterrent transdermal technology. The estimated cost to complete the commercial process development and clinical
supplies manufacturing is approximately $
Lease Agreement
On February 1, 2022, Pocono Pharmaceuticals
entered into a lease agreement with Geometric Group, LLC for
MDM Worldwide Agreement
In September 2022, the Company entered into a public relations agreement
with MDM Worldwide. In connection with the agreement, the Company agreed to issue
Money Channel Agreement
On March 13, 2023, the Company entered
into a media advertising agreement with Money Channel Inc. The Company will pay a monthly fee and after ninety days can cancel the agreement.
The Company, after 90 days, will also issue options to purchase
Sorrento Therapeutics, Inc. Agreement
4P Therapeutics had unpaid
account receivables related to a contract clinical research services agreement in place with Sorrento Therapeutics. On February 13,
2023, Sorrento declared Chapter 11 bankruptcy. On July 25, 2023, 4P Therapeutics assigned its claim under the bankruptcy proceedings
from Sorrento Therapeutics Inc. and received proceeds of $
F-24
Upstream Termination
On May 24, 2023, the Company sent notice of the termination of the Securities Facility Services Agreement, dated January 3, 2023, by and between MERJ DEP Ltd. And the Company (“Agreement”), which provided for the dual listing of the Company’s common stock on the MERJ Upstream exchange (“Upstream”), which is operated as a fully registered and licensed integrated securities exchange, clearing system and depository for digital and non-digital securities under the Seychelles security laws. The termination was effective May 31, 2023.
Legal Proceedings
The Company is currently a defendant
in a lawsuit initiated by Joseph Gunnar, LLC (“Gunnar”) and Lucosky Brookman LLP (“LB”) in the Supreme Court of
the State of New York, New York County, under Index No.654633/2023. The lawsuit alleges multiple allegations such as breach of contract,
fraudulent activities, and tortious interference and seeks damages following the Company’s termination of an engagement letter for
assistance with a public stock offering. Gunnar is seeking over $
In response, the Company denies all
allegations, alleging that the engagement letter was unenforceable, and its termination was legally justified. The Company has also initiated
counterclaims against Joseph Gunnar & Co., accusing them of intentional interference and breach of fiduciary duty, and is seeking
$
Currently, there are no pending hearings or motions as both parties are engaged in discovery and are attempting to resolve the matter amicably.
| 12. | SUBSEQUENT EVENTS |
| (a) | In February and April 2024, the Company received proceeds of $ | |
| (b) | On March 20, 2024, | |
| (c) | On March 20, 2024, our Board of Directors adopted an amendment to the Company’s Employee Stock Option
Plan (the “Plan”) increasing the number of shares of common stock subject to the Plan (as of March 20, 2024, | |
| (d) | On April 19, 2024, the Company completed an $ |
F-25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of January 31, 2024, the end of the period covered by this annual report. The disclosure controls evaluation was done under the supervision and with the participation of management, including our chief executive officer and chief financial officer, who are two of our three full-time employees. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer concluded that, due to our limited internal audit function, our very limited staff, and our acquisition of 4P Therapeutics and Pocono Coated Products, which are principally responsible for our business operations and were privately owned when we acquired them, were not effective as of January 31, 2024, such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the chief executive officer/chief financial officer, as appropriate to allow timely decisions regarding disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Management assessed the effectiveness of our internal control over financial reporting as of January 31, 2024. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. During our assessment of the effectiveness of internal control over financial reporting as of January 31, 2024, management identified material weaknesses related to (i) our internal audit functions (ii) inadequate levels of review of the financial statements, (iii) a lack of segregation of duties within accounting functions, (iv) inadequate monitoring review controls in accounting for complex transactions. Therefore, our internal controls over financial reporting were not effective as of January 31, 2024.
Management has determined that our internal controls contain material weaknesses due to the absence of segregation of duties, as well as lack of qualified accounting personnel, excessive reliance on third party consultants for accounting, financial reporting and related activities, and the lack of any separation of duties. During the past fiscal year, we have added qualified accounting personnel, so the Company does not have to rely on third party consultants. The Company has established additional monitoring controls over the financial statements. We have also improved our internal controls to provide for a detailed accounting review of all revenue items, and accounts receivable and payable transactions in connection with the entry and categorization of each transaction in the preparation of the Company’s financial statements. As a result of these improvements, we are confident our financial statements as of January 31, 2024 and for the two years then ended, fairly present in all material respects our financial condition and results of operations for all that reporting period covered by this report.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Changes in Internal Control over Financial Reporting.
During the quarterly period ended January 31, 2024, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGH JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
35
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
MANAGEMENT
Set forth below are the name, age, position of and biographical information about each nominee, all of whom are currently directors and compromise our entire Board as of the record date.
| Name | Age | Position | ||
| Gareth Sheridan | 34 | Chief Executive Officer and Director | ||
| Serguei Melnik | 51 | Chairman of the Board, President and Secretary | ||
| Mark Hamilton(1)(3) | 37 | Director | ||
| Radu Bujoreanu(1)(2)(3) | 54 | Director | ||
| Stefani Mancas(2)(3) | 47 | Director | ||
| Irina Gram(2)(1) | 36 | Director | ||
| Gerald Goodman | 76 | Chief Financial Officer | ||
| Alan Smith, Ph.D. | 57 | Chief operating officer and president of 4P Therapeutics | ||
| Jeff Patrick, Pharm.D. | 55 | Chief scientific officer |
| (1) | Member of the Audit Committee. |
| (2) | Member of the Compensation Committee. |
| (3) | Member of the Nominating and Corporate Governance Committee. |
Gareth Sheridan, our founder, has been chief executive officer and a director since our organization in 2016. In 2012, Mr. Sheridan founded Nutriband Ltd., an Irish company which we acquired in 2016. Mr. Sheridan was named Ireland’s ‘Young Entrepreneur of the Year’ in 2014 in the National Bank of Ireland Startup Awards for establishing Nutriband Ltd. Mr. Sheridan has further business awards from S. Dublin’s Best Young Entrepreneur and Nutriband Ltd as S. Dublin’s Best Startup Company. Mr. Sheridan has also worked as a Business Mentor with 100 Minds, a social enterprise founded in 2013, that brings together some of Ireland’s top college students and connects them with one cause to achieve large charitable goals in a short space of time. Mr. Sheridan is also a past Nissan Generation Next Ambassador, receiving the acknowledgement in 2015 by Nissan Ireland as one of Ireland’s future generational leaders. In 2019 Mr. Sheridan served on the Board of the St. James Hospital foundation, the charitable foundation for Ireland’s largest public hospital. Mr. Sheridan received a B.Sc. in Business and Management from Dublin Institute of Technology in 2012 where he concentrated on international economics, venture creation and entrepreneurship.
Serguei Melnik, who was elected by the Board as President on October 8, 2021, serves as a member of the board of directors and is a co-founder of Nutriband Inc. Mr. Melnik has previously served as our chief financial officer and a director since January 2016. Mr. Melnik has been involved in general business consulting for companies in the U.S. financial markets and setting up a legal and financial framework for operations of foreign companies in the U.S. Mr. Melnik advised UNR Holdings, Inc. with regard to the initiation of the trading of its stock in the over-the-counter markets in the U.S. and has provided general advice with respect to the U.S. financial markets for companies located in the U.S. and abroad. From February 2003 to May 2005, he was the Chief Operations Officer and a Board member of Asconi Corporation, Winter Park, Florida, with regard to restructuring the company and listing it on the American Stock Exchange. Mr. Melnik from June 1995 to December 1996 was a lawyer in the Department of Foreign Affairs, JSC Bank “Inteprinzbanca,”, Chisinau, Moldova, and prior thereto practiced law in Moldova in various positions. Mr. Melnik is fluent in Russian, Romanian, English and Spanish.
Mark Hamilton, an independent director since July 2018, is an experienced director level professional who joined global consulting firm, Korn Ferry in 2020 as a Managing Consultant. Prior to moving into organizational consulting, Mark qualified as a Chartered Accountant in global advisory firm, BDO, where he spent 12 years advising some of Ireland’s most successful businesses. His work originated in corporate finance/corporate recovery and more recently, he spent 5 years leading BDO’s client management and sales function, as Head of Business Development.
Mr. Hamilton is a Member of the Association of Chartered Accountants (ACA), since 2012. Mr. Hamilton’s accounting/consulting background and experience in corporate finance, restructuring, sales and talent assists us in his role as an independent Board member and Committee Chair. Mr. Hamilton has a very strong presence in the business community across jurisdictions, along with an accomplished track record in project management and business development. Educated at Terenure College, Mark went on to study a B.Sc. degree in Business & Management at Dublin Institute of Technology and subsequently received First Class Honours in his postgraduate degree, for which he specialized in Accountancy in 2009. In addition to his ACA qualification, Mark has also recently completed a diploma in Corporate Governance and is now a member of the Corporate Governance Institute which will assist him in his role as Independent Director, alongside his recent approval by the Central Bank of Ireland to act as an Independent Director to regulated entities.
Radu Bujoreanu has been a director since June 2019. Mr Bujoreanu is a real estate agent and investor since 2019 and currently he is with Samson Properties LLC. Mr. Bujoreanu has been the owner and executive director of Consular Assistance, Inc., which provided assistance in obtaining visas, travel documents, other national and foreign documents and related services since December 2002 to December 2020. From 2003 to 2005 he served as an independent director and member of the Board of Directors of Asconi Corporation. From August 1999 to August 2002 Mr. Bujoreanu worked as a consular officer at the Embassy of the Republic of Moldova to the United States. Before that from May 1994 to August 1999 he was Chief of Bilateral Treaties section in the International Law and Treaties Department of the Ministry of Foreign Affairs of the Republic of Moldova. Mr. Bujoreanu received his bachelor degree in international public law from the University of Moldova.
36
Dr. Stefani Mancas graduated Summa cum Laude from the Military Navy College in Constanta, Romania. After attending the faculty of Cybernetics from the Academy of Economic Studies in Bucharest, Stefani transferred to University of Central Florida, and graduated with a dual B.Sc. in Mathematics/ Aerospace Engineering, a Master's Degree in Applied Mathematics, and a Ph.D. in Mathematical Sciences from the Department of Mathematics. The Ph.D. dissertation topic was "Dissipative solitons in the cubic-quintic complex Ginzburg-Landau equation: Bifurcations and Spatiotemporal Structure", for which Stefani received the UCF Outstanding Dissertation Award.
Currently, Stefani is a tenured full Professor, and a researcher in the Department of Mathematics at Embry-Riddle Aeronautical University in Daytona Beach, Florida. Stefani's research areas deal with finding analytical solutions to nonlinear dissipative equations that can be reduced through Darboux transformations to Riccati or Abel equations. The main focus is on Schrödinger equation, for which Stefani is using methods based on factorization, and variational formulation together with ansatz reduction with global minimizers of objective functions, applied to supersymmetric quantum mechanics. Another important area of interest is the theory of elliptic functions with applications to nonlinear optics, soliton theory, general relativity, as well as optimization of the blockchain, and quantum cryptography.
Irina Gram was elected as a director of the Company at the January 21, 2022 stockholders meeting. Irina is a Senior Financial Analyst at Thales IFEC, Melbourne, Florida. There she is responsible for financial planning, analysis and risk and opportunities reviews of multiple development and customer programs. From 2016 to 2017, she was a Project Engineering Coordinator at Thales IFEC, where she executed budgeting and forecasting activities with specialized focus on SFRD spending, interfaced with engineering team to monitor and report the performance of the financial impact of projects. From 2013 to 2016, she held various project management, accounting and reporting positions with Siemens Building Technology, Inc., Winter Park, Florida. She received a Bachelor’s Degree in Finance from the University of Central Florida, Orlando, Florida, where she graduated in May 2015, with honors, and received a Masters Degree in business administration from the University of Central Florida, Orlando, Florida, in May 2019.
Gerald Goodman has been our chief accounting officer since July 31, 2018 and was elected our Chief Financial Officer on November 12, 2020. Mr. Goodman is a certified public accountant and, since 2014, has practiced with his own firm, Gerald Goodman CPA P.C. From January 1, 2010 until December 31, 2014, Mr. Goodman practiced with Madsen & Associates, CPA’s Inc., Murray, Utah, and was a non-equity partner and managed the firm’s SEC practice. Mr. Goodman is a director of Lifestyle Medical Network, Inc., which provides management services to healthcare providers. From 1971 to 2010, Mr. Goodman was a partner in the accounting firm of Wiener, Goodman & Company P.C. Mr. Goodman is a 1970 graduate of Pennsylvania State University where he received a B.S. Degree in Accounting.
Alan Smith, Ph.D., serves as Chief Operating Officer of Nutriband and President of 4P Therapeutics, a wholly owned subsidiary of Nutriband. He joined the Company after Nutriband acquired 4P Therapeutics in 2018. Dr. Smith co-founded 4P Therapeutics in 2011 to develop drug-device and biologic-device combination products to meet the needs of patients, physicians, and payers, and was Vice President, Clinical, Regulatory, Quality and Operations at the time of the acquisition. Dr. Smith is co-inventor of the Company’s Aversa™ abuse deterrent transdermal system technology. Dr. Smith has over 20 years of experience in the research and development of drug and biologic delivery systems, diagnostics and medical devices for treatment and management of chronic pain, diabetes, and cardiovascular disease. Previously, he was with Altea Therapeutics, a venture capital funded company focused on novel transdermal drug and biologic delivery, most recently serving as Vice President, Product Development and Head of Clinical R&D, Regulatory Affairs, and Project Management. Prior to joining Altea Therapeutics, he led the development of transdermal glucose monitoring systems at SpectRx, Inc., a publicly traded noninvasive diagnostics company. Dr. Smith received Ph.D. and M.S. degrees in Biomedical Engineering from Rutgers University and the University of Medicine and Dentistry of New Jersey. He currently serves on the Editorial Advisory Board of Expert Opinion on Drug Delivery.
Jeff Patrick Pharm.D. currently serves as Director of Drug Development Institute at the Ohio State University Comprehensive Cancer Center. Dr. Patrick most recently serving as Chief Scientific Officer for New Haven Pharmaceuticals. Prior roles included global vice president of professional affairs at Mallinckrodt Pharmaceuticals, Inc.; and roles with ascending responsibilities at Dyax, Myogen/Gilead, Actelion and Sanofi-Synthelabo, Inc. Dr. Patrick is a residency-trained clinical pharmacist with approximately 20 years of pharmaceutical industry experience. He brings expertise in executive leadership, scientific and medical strategy, drug development and commercialization to the company. Prior to pursuing a career in research and development, Patrick was an ambulatory care clinical pharmacist at the University of Tennessee Medical Center and a clinical assistant professor of pharmacy at the University of Tennessee College of Pharmacy, where he earned his doctorate in pharmacy. He also completed the Wharton School of Business Pharmaceutical Executive Program. Dr. Patrick works for us on a part-time basis.
37
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
Board Leadership Structure and Risk Oversight
Gareth Sheridan serves as Chief Executive Officer and Serguei Melnik is serving as our Chairman and President. Our Chairman leads the Board of Directors in its discussions and has such other duties as are prescribed by the Board. As Chief Executive Officer, Mr. Sheridan is responsible for implementing the Company’s strategic and operating objectives and day-to-day decision-making related to such implementation.
The Board of Directors currently has three standing committees (audit, compensation, and nominating and corporate governance) that are chaired and composed entirely of directors who are independent under Nasdaq and SEC rules. Given the role and scope of authority of these committees, and that a majority of the members of the Board are independent, the Board of Directors believes that its leadership structure is appropriate. We select directors as members of these committees with the expectation that they will be free of relationships that might interfere with the exercise of independent judgement.
Our Board of Directors is our Company’s ultimate decision-making body, except with respect to those matters reserved to the stockholders. Our Board of Directors selects our senior management team, which is charged with the conduct of our business. Our Board of Directors also acts as an advisor and counselor to senior management and oversees its performance.
Board Composition
Our business and affairs are managed under the direction of our Board of Directors. The number of directors is determined by our board of directors, subject to the terms of our certificate of incorporation and bylaws. Our board of directors currently consists of six members, four of which are independent directors.
Meetings
Our Board of Directors held two meetings and acted by written consent eight times during fiscal 2024.
Committees of the Board of Directors
The board of directors has created three committees — the audit committee, the compensation committee and the nominating and corporate governance committee. Each of the committees has a charter which meets the Nasdaq Stock Market requirements and is composed of three independent directors.
Audit Committee
The audit committee is comprised of Mr. Hamilton, as chairman, Mr. Bujoreanu and Irina Gram. We believe that Mark Hamilton qualifies as an “audit committee financial expert” under the rules of the Nasdaq Stock Market. The audit committee oversees, reviews, acts on and reports on various auditing and accounting matters to the board, including: the selection of our independent accountants, the scope of our annual audits, fees to be paid to the independent accountants, the performance of our independent accountants and our accounting practices, all as set forth in our audit committee charter. The Audit Committee met three times in fiscal 2024.
Compensation Committee
The compensation committee is comprised of Irina Gram, Chairperson, Mr. Bujoreanu and Dr. Mancas. The compensation committee oversees the compensation of our chief executive officer and our other executive officers and reviews our overall compensation policies for employees generally as set forth in the audit committee charter. If so authorized by the board, the compensation committee may also serve as the granting and administrative committee under any option or other equity-based compensation plans which we may adopt. The compensation committee will not delegate its authority to fix compensation; however, as to officers who report to the chief executive officer, the compensation committee will consult with the chief executive officer, who may make recommendations to the compensation committee. Any recommendations by the chief executive officer are accompanied by an analysis of the basis for the recommendations. The committee will also discuss with the chief executive officer and other responsible officers the compensation policies for employees who are not officers. The compensation committee has the responsibilities and authority relating to the retention, compensation, oversight and funding of compensation consultants, legal counsel and other compensation advisers. The compensation committee members will consider the independence of such advisors before selecting or receiving advice from such advisors. The compensation committee met three times in fiscal 2024.
38
Nominating and Corporate Governance Committee
The nominating and corporate governance committee, which is comprised of Dr. Mancas, Mark Hamilton and Mr. Bujoreanu, will identify, evaluate and recommend qualified nominees to serve on our board; develop and oversee our internal corporate governance processes, and maintain a management succession plan. The nominating and corporate governance committee met two times in fiscal 2024.
Risk Management
The Board has an active role, as a whole and also at the committee level, in overseeing the management of our risks. The Compensation Committee of our Board is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. The Audit Committee of our Board oversees management of financial risks, under its charter it is to meet periodically and at least four times per year with management to review and assess the Company’s major financial risk exposures and the manner in which such risks are being monitored and controlled. The Nominating and Corporate Governance Committee of our Board is responsible for the management of risks associated with the independence of the Board members and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is informed about such risks.
Independent Directors
Four of our directors, Mark Hamilton, Radu Bujoreanu, Stefani Mancas and Irina Gram are independent directors based on the NASDAQ definition of independent director.
Family Relationships
There are no family relationships among our directors and executive officers.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serve on the board of directors or compensation committee of a company that has an executive officer who serves on our Board or compensation committee. No member of our Board is an executive officer of a company in which one of our executive officers serves as a member of the board of directors or compensation committee of that company.
Conflicts of Interest
Certain conflicts of interest exist and may continue to exist between the Company and its officers and directors due to the fact that each has other business interests to which they devote their primary attention. Each officer and director may continue to do so notwithstanding the fact that management time should be devoted to the business of the Company.
Certain conflicts of interest may exist between the Company and its management, and conflicts may develop in the future. The Company has not established policies or procedures for the resolution of current or potential conflicts of interest between the Company, its officers and directors or affiliated entities. There can be no assurance that management will resolve all conflicts of interest in favor of the Company, and conflicts of interest may arise that can be resolved only through the exercise by management their best judgment as may be consistent with their fiduciary duties. Management will try to resolve conflicts to the best advantage of all concerned.
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Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires our officers and directors, and persons who beneficially own more than ten percent of our Common Stock, to file reports of ownership and changes of ownership of such securities with the SEC. Mr. Goodman, Dr. Smith, Dr. Patrick, Mr. Bujoreanu, and Ms. Gram have not yet filed their Form 3 reports.
Gareth Sheridan and Serguei Melnik have not filed Form 4’s reporting receipt of compensation in fiscal years 2024 and 2025; With the exception of Gerald Goodman, who has filed Form 5’s to catch up on Form 4’s due over the past three fiscal years. Mr. Goodman is late with respect to Form 4’s required to be filed for stock option compensation issuances for fiscal 2024 and 2025. No other officer or director has filed any ownership reports.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
The table below shows the compensation for services in all capacities we paid during the years ended January 31, 2024 and 2023 to the individuals serving as our principal executive officers during the last completed fiscal year and our other two most highly paid executive officers at the end of the last completed fiscal year (whom we refer to collectively as our “named executive officers”);
| Name and Principal Position | Year | Salary $ | Bonus Awards $ | Stock Awards $ | Option/ Awards(1)$ | Incentive Plan Compensation $ | Nonqualified Deferred Earnings $ | All Other Compensation $ | Total $ | |||||||||||||||||||||||||
| Gareth Sheridan, | 2024 | 150,000 | 82,110 | 25,000 | 257,110 | |||||||||||||||||||||||||||||
| CEO(1) | 2023 | 200,000 | 38,000 | 140,672 | 378,672 | |||||||||||||||||||||||||||||
| Serguei Melnik | 2024 | 150,000 | 82,110 | 25,000 | 257,110 | |||||||||||||||||||||||||||||
| President | 2023 | 200,000 | 146,672 | 346,672 | ||||||||||||||||||||||||||||||
| Alan Smith | 2024 | 154,000 | 42,720 | 5,000 | 201,720 | |||||||||||||||||||||||||||||
| Chief Operating Officer | 2023 | 179,000 | 57,490 | 236,490 | ||||||||||||||||||||||||||||||
| Gerald Goodman | 2024 | 110,000 | 52,866 | 30,000 | 192,866 | |||||||||||||||||||||||||||||
| Chief Financial Officer | 2023 | 160,000 | — | 114,976 | — | — | 274,976 | |||||||||||||||||||||||||||
| (1) | During the year ended January 31, 2023, we issued to Gareth Sheridan, our CEO, 11,667 shares of common stock valued at $38,000, representing compensation for the year ended January 31, 2023. |
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| Directors Compensation | ||||||||||||||||||||||||||||
| Fees Earned or Paid in Cash | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation’ | Change in Pension Value and NonQualified Deferred Compensation Earnings | All Other Compensation | Total | ||||||||||||||||||||||
| Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | |||||||||||||||||||||
| Mark Hamilton | $ | 5,000 | $ | - | $ | 10,146 | $ | - | $ | - | $ | - | $ | 15,146 | ||||||||||||||
| Radu Bujorneau | $ | 5,000 | $ | - | $ | 11,214 | $ | - | $ | - | $ | - | $ | 16,214 | ||||||||||||||
| Stefani Mancas | $ | 5,000 | $ | - | $ | 10,146 | $ | - | $ | - | $ | - | $ | 15,146 | ||||||||||||||
| Irina Gram | $ | 5,000 | $ | - | $ | 10,146 | $ | - | $ | - | $ | - | $ | 15,146 | ||||||||||||||
Employment Agreements with Company Officers
The Company entered into a three-year employment agreement with Gareth Sheridan, our CEO, and Serguei Melnik, our President, effective February 1, 2022. The agreement also provides that the executives will continue as a director. The agreement provides for an initial term, commencing on the effective date of the agreement and ending on January 31, 2025, and continuing on a year-to-year basis thereafter unless terminated by either party on not less than 30 days’ notice given prior to the expiration of the initial term or any one-year extension. For their services to the Company during the term of the agreement, Mr. Sheridan and Mr. Melnik will receive an annual salary of $250,000 per annum, commencing on the effective date of the agreement. Mr. Sheridan and Mr. Melnik will also receive a performance bonus of 3.5% of net income before income taxes. As of July 31, 2022, the Company and Mr. Sheridan and Mr. Melnik mutually agreed to reduce their annual salary to $150,000.
The Company entered into a three-year employment agreement with Gerald Goodman, our CFO, effective February 1, 2022. The agreement provides for an initial term, commencing on the effective date of the agreement and ending on January 31, 2025, and continuing on a year-to-year basis thereafter unless terminated by either party on not less than 30 days’ notice given prior to the expiration of the initial term or any one-year extension. For his services to the Company during the term of the agreement, Mr. Goodman will receive an annual salary of $210,000 per annum, commencing on the effective date of the agreement. As of July 31, 2022, the Company and Mr. Goodman mutually agreed to reduce his annual salary to $110,000.
The Employment Agreements provide for incentive payments as established by the Board of Directors, and the Employment Agreements with Mr. Sheridan and Mr. Melnik provide for a performance bonus as follows:
| Net Operating Profit Before Income Taxes | Performance Bonus | |||
| On the First $10 Million | 3.5 | % | ||
| On the Next $40 Million | 3.5 | % | ||
| On the Next $50 Million | 3.5 | % | ||
| On all Amounts Over $100 Million | 3.5 | % | ||
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Each of the Employment Agreements contains similar provisions for discharge for “cause”, including breach of the Employment Agreement or specified detrimental conduct by the employee, in which cases accrued compensation would payable as provided in the Employment Agreements. The Agreements also provide for termination by the executives for “good reason”, comprising events such as breach of the Agreement by the Company, assignment of duties inconsistent with the Executive’s position, , or in the event of a change in control of the Company. In the event of a termination by the Company without cause, or by the executive for “good reason”, the Company is required to pay to the Executive in a lump sum in cash within 30 days after the date of termination the aggregate of the following amounts:
| A. | the sum of (1) the executive’s annual minimum salary through the date of termination to the extent not theretofore paid, (2) any annual incentive payment earned by the executive for a prior period to the extent not theretofore paid and not theretofore deferred, (3) any annual performance bonus payment earned by the executive for a prior period to the extent not theretofore paid and not theretofore deferred,(4) any accrued and unused vacation pay and (5) any business expenses incurred by the executive that are unreimbursed as of the date of termination; |
| B. | The product of (1) the performance bonus payment and (2) a fraction, the numerator of which is the number of days that have elapsed in the fiscal year of the Company in which the date of termination occurs as of the date of termination, and the denominator of which is 365; |
| C. | the amount equal to the sum of (1) three (3) times the executive’s annual minimum salary; (2) one (1) times the performance bonus payment and (3) one (1) times the incentive payment; |
| D. | In the event executive is not fully vested in any retirement benefits with the Company from pension, profit sharing or any other qualified or non-qualified retirement plan, the difference between the amounts executive would have been paid if he or she had been vested on the date his/her employment was terminated and the amounts paid or owed to the executive pursuant to such retirement plans; |
| E. | The product of (1) the incentive payment and (2) a fraction, the numerator of which is the number of days that have elapsed in the fiscal year of the Company in which the date of termination occurs as of the date of termination, and the denominator of which is 365; and |
| F. | If applicable, the present value of the amount equal to the sum of five (5) years’ Performance Bonus pay with such amount being calculated based on the Performance Bonus paid to the Employee the year prior to Termination. |
In addition, all stock options and warrants outstanding as of the date of termination and held by the executive shall vest in full and become immediately exercisable for the remainder of their full term; all restricted stock shall no longer be restricted to the extent permitted by law, and the Company will use its best efforts, at its sole cost to register such restricted stock as expeditiously as possible.
Gross-up Reimbursement on Excise Taxes Paid by Employee on Certain Payments received from Company
The Employment Agreements of Mr. Sheridan and Mr. Melnik provide that, to the extent any payment under the Employment Agreement to the executive is subject to the excise tax imposed by section 4999 of the Internal Revenue Code, the executive is entitled to a gross-up payment from the Company to reimburse the executive for additional federal, state and local taxes imposed on executive by reason of the excise tax and the Company’s payment of the initial taxes on such amount. The Company is also required to bear the costs and expenses of any proceeding with any taxing authority in connection with the imposition of any such excise tax.
Employment Agreement with Alan Smith
The Company entered into a three-year employment agreement with Alan Smith, our Chief Operating Officer, effective October 1, 2021, for an initial term of three years through September 30, 2024. For his services to the Company during the term of the agreement, Mr. Smith receives a fixed base salary of $204,000 per year, payable no less frequently than monthly. This base salary is reviewed not later than the end of each calendar year that Mr. Smith is employed by the Company. As of July 31, 2022, the Company and Mr. Smith mutually agreed to reduce his annual salary to $154,000.
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Pension Benefits
We currently have no plans that provide for payments or other benefits at, following, or in connection with retirement of our officers.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
| Number of Shares of Common Stock Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Options Exercise Price | Options Expiration Date | Number of Shares or Units of Stock that Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That | ||||||||||||||||||||||||||
| Name | (#) | (#) | (#) | ($) | ($) | (#) | ($) | (#) | ($) | |||||||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||
| Gareth Sheridan, CEO | 23,333 | - | - | $ | 4.58 | January 21, 2025 | - | - | - | - | ||||||||||||||||||||||||
| 29,167 | - | - | $ | 4.50 | August 2, 2025 | - | - | - | - | |||||||||||||||||||||||||
| 25,000 | - | - | $ | 4.12 | December 8, 2025 | - | - | - | - | |||||||||||||||||||||||||
| 70,000 | - | - | $ | 2.12 | October 27, 2026 | - | - | - | - | |||||||||||||||||||||||||
| Serguei Melnik, President | 23,333 | - | - | $ | 4.58 | January 21, 2025 | - | - | - | - | ||||||||||||||||||||||||
| 29,167 | - | - | $ | 4.50 | August 2, 2025 | - | - | - | - | |||||||||||||||||||||||||
| 25,000 | - | - | $ | 4.12 | December 8, 2025 | - | - | - | - | |||||||||||||||||||||||||
| 70,000 | - | - | $ | 2.12 | October 27, 2026 | - | - | - | - | |||||||||||||||||||||||||
| Alan Smith, COO | 11,667 | - | - | $ | 4.16 | January 21, 2025 | - | - | - | - | ||||||||||||||||||||||||
| 11,667 | - | - | $ | 4.09 | August 2, 2025 | - | - | - | - | |||||||||||||||||||||||||
| 10,000 | - | - | $ | 3.75 | December 8, 2025 | - | - | - | - | |||||||||||||||||||||||||
| 40,000 | - | - | $ | 1.93 | October 27, 2026 | - | - | - | - | |||||||||||||||||||||||||
| Gerald Goodman, CFO | 11,667 | - | - | $ | 4.16 | January 21, 2025 | - | - | - | - | ||||||||||||||||||||||||
| 23,333 | - | - | $ | 4.09 | August 2, 2025 | - | - | - | - | |||||||||||||||||||||||||
| 20,000 | - | - | $ | 3.75 | December 8, 2025 | - | - | - | - | |||||||||||||||||||||||||
| 49,500 | - | - | $ | 1.93 | October 27, 2026 | - | - | - | - | |||||||||||||||||||||||||
| 87,500 | (1) | - | - | $ | 1.93 | October 27, 2026 | - | - | - | - | ||||||||||||||||||||||||
| (1) | This option held by Mr. Goodman is in the form of a common stock purchase warrant. |
Bonuses
Any bonuses granted in the future will relate to meeting certain performance criteria that are directly related to areas within the named executive’s responsibilities with the Company. As we continue to grow, more defined bonus programs may be established to attract and retain our employees at all levels.
Other Director Compensation
There are no agreements or arrangements by which any directors or nominees are to receive compensation or other payments from third parties in return for serving on the Board of Directors.
Pension Benefits
We currently have no plans that provide for payments or other benefits at, following, or in connection with retirement of our officers.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table provides information concerning the beneficial ownership of the Company’s common Stock by each director, certain executive officers, by all directors and officers of the Company as a group as of April 26, 2024. In addition, the table provides information concerning the current beneficial owners, if any, known to the Company to hold more than five percent (5%) of the outstanding common stock of the Company.
The amounts and percentage of stock beneficially owned are reported based on regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days after April 26, 2024. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities in which he has no economic interest. The percentage of common stock beneficially owned is based on 10,969,870 shares of common stock outstanding as of April 26 , 2024.
| Name and Address(1) of Beneficial Owner (Management and Directors) | Shares of Common Stock Owned Directly | Shares of Derivative Securities Owned Beneficially | Total Beneficial Ownership Including Option Grants | Percentage of Issued and Outstanding Common Stock | ||||||||||||
| Gareth Sheridan | 1,761,667 | 245,000 | 2,006,667 | 17.89 | % | |||||||||||
| Serguei Melnik(2) | 820,418 | 245,000 | 1,065,418 | 9.50 | % | |||||||||||
| Stefani Mancas | 14,125 | 25,583 | 39,708 | * | ||||||||||||
| Mark Hamilton | 17,208 | 28,500 | 45,708 | * | ||||||||||||
| Radu Bujoreanu | 15,750 | 29,333 | 45,083 | * | ||||||||||||
| Irina Gram | 1,167 | 18,000 | 19,167 | * | ||||||||||||
| Dr. Jeff Patrick | 36,612 | 160,000 | 196,612 | 1.77 | % | |||||||||||
| Alan Smith | 48,893 | 143,334 | 192,227 | 1.73 | % | |||||||||||
| Gerald Goodman(3) | 26,250 | 267,000 | 293,250 | 2.61 | % | |||||||||||
| All officers and directors as a group (9 individuals) | 2,742,000 | 1,161,750 | 3,903,840 | 32.18 | % | |||||||||||
| Other Beneficial Owners | ||||||||||||||||
| Vitalie Botgros(4) | 1,972,539 | 1,310,000 | 3,282,539 | 26.73 | % | |||||||||||
| Serguei Glinka(5) | 825,000 | 1,650,000 | 2,475,000 | 19.61 | % | |||||||||||
| * | Less than One (1%) Percent. |
| (1) | The address for each director and officer, unless indicated otherwise, is c/o Nutriband, Inc., 121 South Orange Ave., Suite 1500, Orlando, FL 32801. |
| (2) | Includes 29,167 shares owned by Mr. Melnik’s wife, as to which Mr. Melnik disclaims beneficial ownership, and 58,334 shares held under the UGMA for the benefit of his minor children. |
| (3) | Gerald Goodman holds 26,250 shares directly and has been granted three-year options under the Company’s 2021 Employee Stock Option Plan to purchase an aggregate of 267,000 shares of common stock at exercise prices ranging from $1.93 per share to $4.16 per share. Mr. Goodman also was issued on October 22, 2021 a stock purchase warrant for the purchase of 87,500 shares of common stock, exercisable at $4.20 per share. On October 27, 2023, this warrant was replaced by a new three-year warrant expiring October 27, 2026, exercisable at $1.93 per share, for the same number of shares, |
| (4) | Mr. Botgros, to the knowledge of the Company based on a Schedule 13-D filing on January 23, 2024, is the ultimate beneficial owner of 1,347,524 shares of common stock held by TII Jet Services Ltd., which is wholly owned by Nociata Holding Limited, a Cyprus company owned by Mr. Botgros. Nociata Holding Limited purchased 525,000 shares of common stock in Nutriband’s equity financing that was completed April 19, 2024, and TII Jet Services Ltd. purchased 130,000 shares of common stock in that financing, which results in Mr. Botgros having an estimated beneficial ownership of 1,972,539 shares of common stock and of warrants to purchase 1,310,000 shares of common stock based on available records. Mr. Botgros’ address is c/o Nociata Holding Limited, 1Apriliou, 47 Demetriou Bldg., 2,1st Floor, Flat/Office 12, 3117 Limassol, Cyprus. |
| (5) | Mr. Glinka purchased 825,000 shares of common stock and 1,650,000 warrants in Nutriband’s equity financing that was completed April 19, 2024. Mr. Glinka’s address is 13 Morfu Str., Matina Court FL 402, 3012 Limassol, Cyprus. The Company has no further information as to additional shares of common stock, if any, held by Mr. Glinka. |
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To our knowledge, all beneficial owners named in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them.
Changes in Control
We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
UPDATE
On February 1, 2023, the Board of Directors ratified and authorized the issuance of Option Award Agreements with respect option grants approved February 1, 2023, by the Compensation Committee, to officers and directors as set forth in the table below.
| Name | No. of Shares | |||||||||
| Jeff Patrick, Chief Scientific Officer | 30,000 | $ | 3.98 | Services Rendered in fiscal 2024 | ||||||
On September 18, 2023, the Board of Directors ratified and authorized the issuance of Option Award Agreements with respect option grants approved September 18, 2023, by the Compensation Committee, to officers and directors as set forth in the table below.
| Name | No. of Shares | |||||||||
| Jeff Patrick, Chief Scientific Officer | 20,000 | $ | 2.65 | Services Rendered in fiscal 2024 | ||||||
On October 19, 2023, the Board of Directors ratified and authorized the issuance of Option Award Agreements with respect option grants approved October19, 2023, by the Compensation Committee modified a common stock purchase warrant issued to Gerald Goodman, as set forth in the table below.
| Name | No. of Shares | No. of Warrants | ||||||||||||
| Gareth Sheridan, CEO | 70,000 | - | $ | 2.12 | Services Rendered in fiscal 2024 | |||||||||
| Serguei Melnik, Chairman & President | 70,000 | - | $ | 2.12 | Services Rendered in fiscal 2024 | |||||||||
| Gerald Goodman, CFO | 49,500 | - | $ | 1.93 | Services Rendered in fiscal 2024 | |||||||||
| Alan Smith, Chief Operating Officer | 40,000 | - | $ | 1.93 | Services Rendered in fiscal 2024 | |||||||||
| Jeff Patrick, Chief Scientific Officer | 40,000 | - | $ | 1.93 | Services Rendered in fiscal 2024 | |||||||||
| Gerald Goodman, CFO | - | 87,500 | $ | 1.93 | Services Rendered in fiscal 2024 | |||||||||
Independent Directors
Four of our directors, Mark Hamilton, Radu Bujoreanu, Stefani Mancas and Irina Gram are independent directors based on the NASDAQ definition of independent director.
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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table sets forth the fees billed by our independent accountants, Sadler, Gibb & Associates, LLC, for each of our last two years for the categories of services indicated.
| Year Ended January 31 |
||||||||
| 2024 | 2023 | |||||||
| Audit fees | $ | 118,800 | $ | 86,640 | ||||
| Audit – related fees | 20,100 | 6,500 | ||||||
| Tax fees | - | - | ||||||
| All other fees | $ | - | $ | - | ||||
Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements and review of our interim financial statements.
Audit-Related Fees. Audit-related services consist of fees billed by our independent registered public accounting firms for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit Fees.”
All other fees relate to professional services rendered in connection with our registration statements and acquisition audits.
Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services. Under our audit committee’s policy, pre-approval is generally provided for particular services or categories of services, including planned services, project based services and routine consultations. In addition, the audit committee may also pre-approve particular services on a case-by-case basis. Our board approved all services that our independent accountants provided to us in the past two fiscal years.
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PART IV
ITEM 15. Exhibits.
| * | Filed herewith. |
| † | Executive compensation plan or arrangement. |
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| (1) | Filed as exhibit to the Company’s registration statement on Form 10, which was filed with the Commission on June 2, 2016, and incorporated herein by reference. |
| (2) | Filed as an exhibit to the Company’s report on Form 8-K, which was filed with the Commission on January 27, 2020 and incorporated herein by reference. |
| (3) | Filed as an exhibit to the Company’s report on Form 8-K, which was filed with the Commission on April 10, 2018 and incorporated herein by reference. |
| (4) | Filed as an exhibit to the Company’s annual report on Form 10-K for the year ended January 3, 2019 which was filed with the Commission on April 19, 2019, and incorporated herein by reference. |
| (5) | Filed as an exhibit to the Company’s Registration Statement on Form S-1/A, which was filed with the Commission on May 19, 2020, and incorporated herein by reference. |
| (6) | Filed as an exhibit to the Company’s report on Form 8-K, which was filed with the Commission on November 4, 2019, and incorporated herein by reference. |
| (7) | Filed as an exhibit to the Company’s report on Form 8-K, which was filed with the Commission on September 4, 2020, and incorporated herein by reference. |
| (8) | Filed as exhibits to the Company’s report on Form 8-K, which was filed with the Commission on March 11, 2021, and incorporated herein by reference. |
| (8a) | Filed as an exhibit to the Company’s report on Form 8-K, which was filed with the Commission on September 1, 2021, and incorporated herein by reference. |
| (9) | Filed as an exhibit to Amendment 2 to the Company’s Registration Statement on Form S-1, which was filed with the Commission on October 1, 2022. |
| (10) | Filed as an exhibit to the Company’s Current Report on Form 8-K, which was filed with the Securities and Exchange Commission on October 12, 2021, and incorporated herein by reference. |
| (11) | Filed as an exhibit to the Company’s Registration Statement on Form S-8, which was filed with the Commission on November 5, 2021, and incorporated herein by reference. |
| (12) | Filed as an exhibit to the Company’s Current Report on Form 8-K, which was filed with the Commission on January 27, 2022, and incorporated herein by reference. |
| (13) | Filed as Exhibit 3.1C to the Company’s Current Report on Form 8-K, which was filed with the Commission on August 10, 2022, and incorporated herein by reference. |
| (14) | Filed as an exhibit to the Company’s Registration Statement on Form S-1, which was filed with the Commission on June 26, 2023, and incorporated herein by reference |
| (15) | Filed as Exhibit 4.16 to the Company’s Amendment No. to its Current Report on Form 8-K, which was filed with the Commission on March 28, 2024 and incorporated herein by reference. |
| (16) | Filed as Exhibit 10.30 to the Company’s Current Report on Form 8-K, which was filed with the Commission on July 14, 2023. |
| (17) | Filed as Exhibit No. 10.31 to the Company’s Current Report on Form 8-K, which was filed with the Commission on December 29, 2023. |
| (18) | Filed as Exhibit No. 4.19 to the Company’s Current Report on Form 8-K, which was filed with the Commission on April 23, 2024. |
| (19) | Filed as Exhibit No. 10.32 to the Company’s Current Report on Form 8-K, which was filed with the Commission on April 23, 2024. |
(b) Financial Statement Schedules
All schedules have been omitted because either they are not required, are not applicable or the information is otherwise set forth in the financial statements and related notes thereto.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: April 30, 2024
| NUTRIBAND INC. | ||
| By: | /s/ Gareth Sheridan | |
| Gareth Sheridan | ||
| Chief Executive Officer | ||
| By: | /s/ Gerald Goodman | |
| Gerald Goodman | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
| Signature | Title | Date | ||
| /s/ Gareth Sheridan | Chief Executive Officer and Director | April 30, 2024 | ||
| Gareth Sheridan | ||||
| /s/ Serguei Melnik | Director | April 30, 2024 | ||
| Serguei Melnik | ||||
| /s/ Radu Bujoreanu | Director | April 30, 2024 | ||
| Radu Bujoreanu | ||||
| /s/ Mark Hamilton | Director | April 30, 2024 | ||
| Mark Hamilton | ||||
| /s/ Stefani Mancas | Director | April 30, 2024 | ||
| Stefani Mancas | ||||
| /s/ Irina Gram | Director | April 30, 2024 | ||
| Irina Gram |
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Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Gareth Sheridan, certify that:
1. I have reviewed this annual report on Form 10-K of Nutriband Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting;
| DATE: April 30, 2024 | /s/ Gareth Sheridan |
| Gareth Sheridan, Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Gerald Goodman, certify that:
1. I have reviewed this annual report on Form 10-K of Nutriband Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting;
| DATE: April 30, 2024 | /s/ Gerald Goodman |
| Gerald Goodman, Chief Financial Officer | |
| (Principal Financial Officer) |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Nutriband Inc. (the “Company”) on Form 10-K for the year ended January 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gareth Sheridan, Chief Executive Officer, and I, Gerald Goodman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| April 30, 2024 | /s/ Gareth Sheridan |
| Gareth Sheridan, Chief Executive Officer | |
| (Principal Executive Officer) |
| April 30, 2024 | /s/ Gerald Goodman |
| Gerald Goodman, Chief Financial Officer | |
| (Principal Financial Officer) |