Notes to Unaudited Consolidated Financial
Statements
as of and for the Six Months Ended July
31, 2019 And 2018
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 $2,250,000, consisting of 62,500 shares of common stock, valued
at $1,850,000, and $400,000, and a royalty payable to the former owner of 4P Therapeutics, of 6% on all revenue generated by the
Company from the abuse deterrent intellectual property that had been developed by 4P Therapeutics. The former owner of 4P Therapeutics
has been a director of the Company since April 2018, when the Company entered into the agreement to acquire 4P Therapeutics.
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 is not presently
taking any steps to seek FDA approval of its consumer transdermal products and its consumer products 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 transdermal products.
Reverse
Stock Split and Reduction in Authorized Common Stock
On
June 25, 2019, the Company effected one-for-four reverse split, pursuant to which each share of common stock became and was converted
into 0.25 share of common stock, and the Company decreased its authorized common stock from 100,000,000 shares to 25,000,000 shares.
The reverse split became effective in the marketplace on July 24, 2019. All share and per share information in these financial
statements retroactively reflect the reverse split.
Going
Concern
The
Company’s consolidated financial statements for the six months ended July 31, 2019 have been prepared on a going concern
basis which contemplates the realization of assets and settlement of liabilities in the normal course of business. The Company
did not generate any revenue prior to the quarter ended October 31, 2018. For the six months ended July 31, 2019, the Company
generated revenue of $268,503 on which it recorded cost of revenues of $316,753 and a loss from operations of $1,022,773. The
Company requires substantial funding to execute its strategic business plan. Successful business operations and its transition
to attaining profitability are dependent upon obtaining significant additional financing, generating revenue primarily from its
professional services to cover its overhead, developing its products, and obtaining FDA approval to market any product it develops
and implementing a marketing program for such products. The Company will not be able to generate any revenue from its proposed
transdermal pharmaceutical products without FDA approval. These factors raise substantial doubt about ability of the Company to
continue as a going concern.
NUTRIBAND INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial
Statements
as of and for the Six Months Ended July
31, 2019 And 2018
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
consolidated balance sheet as of July 31, 2019 and the consolidated statements of operations, stockholders’ equity, and
cash flows for the periods presented have been prepared by the Company and are unaudited. The consolidated financial statements
are prepared in accordance with the requirements for unaudited interim periods pursuant to Rule 8-03 of Regulation S-X, and consequently,
do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States
of America. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to
present fairly the financial position, results of operations, changes in stockholders' equity and cash flows for all periods presented
have been made. The information for the consolidated balance sheet as of January 31, 2019 was derived from audited financial statements
of the Company. The Company’s significant accounting policies are found below. These policies should be read in conjunction
with Note 1 in the Company’s audited financial statements for the year ended January 31, 2019.
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.
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 various other 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
The
Company recognized revenue in accordance with Topic 606 “Revenue from Contracts with Customers. Topic 606 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 adopted the guidance under the new revenue standards using the modified retrospective method effective February 1,
2018 and determined no cumulative effect adjusted to retained earnings was necessary upon adoption. Topic 606 requires the Company
to recognize revenues when control of the promised goods or services and receipt of payment is probable. 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.
Upon
adoption, Topic 606 replaced most existing revenue recognition guidance in U.S. GAAP. The adoption of Topic the new revenue recognition
standards did not have any impact on its consolidated financial statements since the Company did not recognize any revenue prior
to the third quarter of 2018, and all revenue is recognized pursuant to Topic 606.
Revenue
Service Types
The
following is a description of the Company’s revenue service types, which include professional services and sale of goods:
|
●
|
Professional
services include contract research and development related services with clients in the life sciences field on an as-needed basis.
Deliverables primarily consist of detailed findings and conclusion reports provided to the client for each given research project
engaged.
|
|
●
|
Sales
revenues are derived from the sale of products. To date, sales related to consumer products sold to the Company’s South
Korean distributor. Upon receipt of a purchase order, the Company has the order filled and shipped.
|
NUTRIBAND INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial
Statements
as of and for the Six Months Ended July
31, 2019 And 2018
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Contracts
with Customers
A
contract with a customer exists when (i) the Company enters 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) the Company determines 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.
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 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 the Company performs professional service work, it recognizes revenue when it has the right
to invoice the customer for the work completed, which typically occurs on a monthly basis for the work performed during that month.
All
revenue recognized in the statement of operations is revenue from contracts with customers.
Disaggregation
of Revenues
The
Company disaggregates its revenue from contracts with customers by service type and by geographical location. The following tables
set forth revenue by service type and by geographical location.
Revenue
by service type:
|
|
Three months ended
July 31,
|
|
|
Six months ended
July 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Sale of goods
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
142,450
|
|
|
$
|
-
|
|
Services
|
|
|
74,913
|
|
|
|
-
|
|
|
|
126,053
|
|
|
|
-
|
|
Total
|
|
$
|
74,913
|
|
|
$
|
-
|
|
|
$
|
268,503
|
|
|
$
|
-
|
|
Revenue
by geographic location:
|
|
Three months ended
July 31,
|
|
|
Six months ended
July 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
United States
|
|
$
|
74,913
|
|
|
$
|
-
|
|
|
$
|
126,053
|
|
|
$
|
-
|
|
Non-United States
|
|
|
-
|
|
|
|
-
|
|
|
|
142,450
|
|
|
|
-
|
|
Total
|
|
$
|
74,913
|
|
|
$
|
-
|
|
|
$
|
268,503
|
|
|
$
|
-
|
|
Property,
Plant and Equipment
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 5 years as follows:
Lab equipment
|
|
|
5 years
|
|
Furniture, fixtures and equipment
|
|
|
3 years
|
|
NUTRIBAND INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial
Statements
as of and for the Six Months Ended July
31, 2019 And 2018
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Intangibles
Assets
Intangibles
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 acquisition
in 2018 has 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, and more frequently as circumstances warrant, and written
down only in the period in which the recorded value of such assets exceed their fair value. The Company does not amortize goodwill
in accordance with ASC 350.
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 fair market value of the long-lived asset and the
related net 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 July
31, 2019 and 2018, there were 57,500 and 182,500 common stock equivalents outstanding, respectively, that were not included in
the calculation of dilutive earnings per share as their effect would be anti-dilutive.
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).
For
the six months ended July 31, 2018, the Company accounts for stock-based compensation issued to non-employees and consultants
in accordance with the provisions of ASC 505-50, “Equity - Based Payments to Non-Employees.” Measurement of share-based
payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or
services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at
the earlier of performance commitment date or performance completion date. As of February 1, 2019, pursuant to ASU 2018-07, ASC
718 was applied to stock-based compensation for both employees and non-employees.
NUTRIBAND INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial
Statements
as of and for the Six Months Ended July
31, 2019 And 2018
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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 adopted ASU 2016-02 as amended effective February 1, 2019 using the modified retrospective approach. In connection with
the adoption, the Company elected to utilize the Comparative Under 840 Option whereby the Company will continue to present prior
period financial statements and disclosures under ASC 840. In addition, the Company elected the transition package of three practical
expedients permitted under the standard, which eliminates the requirements to reassess prior conclusions about lease identification,
lease classification and initial direct costs. The Company completed the necessary changes to its accounting policies, processes,
disclosure and internal control over financial reporting.
Adoption
of the new standard resulted in the recording of right-to-use assets in the amount of $28,827 and lease liabilities related to
operating leases in the amount of $28,827 on the Company’s consolidated balance sheet as of February 1, 2019. See Note 10,
Leases, for Topic 842 disclosures in connection with the adoption of ASU 2016-02.
Recent
Accounting Standards
The
Company has implemented all new pronouncements, including the adoption of ASC 842 and 718, that are in effect and that may impact
its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been
issued that might have a material impact on its consolidated financial statements or results of operations.
3.
PROPERTY AND EQUIPMENT
|
|
July 31,
|
|
|
January 31,
|
|
|
|
2019
|
|
|
2018
|
|
Lab equipment
|
|
$
|
144,585
|
|
|
$
|
144,585
|
|
Furniture, fixtures and equipment
|
|
|
19,643
|
|
|
|
19,643
|
|
|
|
|
164,228
|
|
|
|
164,228
|
|
Less: Accumulated depreciation
|
|
|
(35,640
|
)
|
|
|
(18,081
|
)
|
Net Property and Equipment
|
|
$
|
128,588
|
|
|
$
|
146,147
|
|
Depreciation
expense amounted to $17,559 and $347 for the six months ended July 31, 2019 and 2018, respectively.
4. DEBT
On
September 12, 2017, the Company borrowed $15,000 on an interest-free basis from a minority stockholder. In April 2018, the Company
borrowed an additional $25,000 from the minority stockholder. In July 2019, the Company borrowed an additional $50,000. The loans
are interest free and due upon demand. The balance due on such loans was $90,000 on July 31, 2019, and $40,000 on January 31,
2019, which is included in notes payable.
NUTRIBAND INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial
Statements
as of and for the Six Months Ended July
31, 2019 And 2018
5. ACQUISITION
OF BUSINESS
On
August 1, 2018, the Company acquired 100% of the membership interests of 4P Therapeutics, pursuant to an agreement dated April
5, 2018, for $2,250,000, consisting of 62,500 shares of common stock, valued at $1,850,000, and $400,000, and a royalty payable
to the former owner of 4P Therapeutics, of 6% on all revenue generated by us from the abuse deterrent intellectual property that
had been developed by 4P Therapeutics. The primary purpose of the acquisition is to acquire the intellectual property of 4P Therapeutics
and complete the development and seek FDA approval on a number of transdermal pharmaceutical products under development by 4P
Therapeutics which are in the preclinical stage. As a result of the acquisition of 4P Therapeutics, the Company has a pipeline
of potential products. Acquisition costs, which were minimal, have been expensed as incurred in accordance with ASC 350.
Details
of the net assets acquired are as follows:
|
|
Fair Value Recognized
|
|
|
|
On Acquisition
|
|
Equipment
|
|
$
|
160,065
|
|
Customer base
|
|
|
136,500
|
|
Intellectual property
|
|
|
191,900
|
|
Trademark
|
|
|
42,300
|
|
Goodwill
|
|
|
1,719,235
|
|
Net assets acquired
|
|
$
|
2,250,000
|
|
Satisfied by:
|
|
|
|
|
Common stock issued
|
|
$
|
(1,850,000
|
)
|
Cash outflows on acquisition
|
|
|
(400,000
|
)
|
The
following unaudited pro forma condensed financial information presents the combined results of operations of the Company and 4P
Therapeutics as if the acquisition occurred as of the beginning of six-month period ended July 31, 2018. The unaudited pro forma
condensed financial information is not intended to represent or be indicative of the consolidated results of operations of the
Company that would have been reported had the acquisition occurred at the beginning of the period presented and should not be
taken as being representation of the future consolidated results of operations of the Company.
|
|
Six months ended
July 31, 2018
|
|
|
|
As Reported
|
|
|
Pro Forma
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
331,864
|
|
Net loss
|
|
$
|
(2,326,870
|
)
|
|
$
|
(2,421,391
|
)
|
Loss per share of common stock (basic and diluted)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.46
|
)
|
6. INTANGIBLE
ASSETS AND GOODWILL
At
July 31, 2019 and January 31, 2019, intangible assets consisted of intellectual property, customer base and trademarks, net of
amortization, as follows:
|
|
July 31,
|
|
|
January 31,
|
|
|
|
2019
|
|
|
2019
|
|
Customer base
|
|
$
|
136,500
|
|
|
$
|
136,500
|
|
Intellectual property
|
|
|
234,200
|
|
|
|
234,200
|
|
Goodwill
|
|
|
1,719,235
|
|
|
|
1,719,235
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,089,935
|
|
|
|
2,089,935
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated amortization
|
|
|
(37,465
|
)
|
|
|
(18,930
|
)
|
|
|
|
|
|
|
|
|
|
Net Intangible Assets
|
|
$
|
2,052,470
|
|
|
$
|
2,071,005
|
|
NUTRIBAND INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial
Statements
as of and for the Six Months Ended July
31, 2019 And 2018
6.
INTANGIBLE ASSETS AND GOODWILL, continued
The
value of the intangible assets, consisting of intellectual property and customer base has been recorded at their fair value by
the Company after completing a valuation and are being amortized over a period of ten years. Amortization expense for the six
months ended July 31, 2019 and 2018 was $18,535 and $-0- respectively.
No
value has been given to the potential royalty payable to the former owner since the royalty is contingent upon the Company generating
revenue from any source and there is no marketable product and there are material uncertainties, including the need for FDA approval,
as to whether or when any revenue will be generated from the intellectual property subject to the royalty. If any royalties are
paid to the former owner of 4P Therapeutics, the royalties will be expensed as incurred and treated as a cost of revenue.
Intangible assets consist of:
|
|
|
|
|
|
|
|
|
|
Intellectual property
|
|
$
|
234,200
|
|
Accumulated amortization
|
|
|
(23,815
|
)
|
Book value at July 31, 2019
|
|
$
|
210,385
|
|
|
|
|
|
|
Customer base
|
|
$
|
136,500
|
|
Accumulated amortization
|
|
|
(13,650
|
)
|
Book value at July 31, 2019
|
|
$
|
122,850
|
|
Total Intangible Assets, Net
|
|
$
|
333,235
|
|
|
|
|
|
|
|
|
Trademarks and
Intellectual
|
|
|
Customer
|
|
|
|
|
Estimated Amortization:
|
|
Property
|
|
|
Base
|
|
|
Total
|
|
Year Ended January 31,
|
|
|
|
|
|
|
|
|
|
2020
|
|
$
|
11,710
|
|
|
$
|
6,825
|
|
|
$
|
18,535
|
|
2021
|
|
|
23,420
|
|
|
|
13,650
|
|
|
|
37,070
|
|
2022
|
|
|
23,420
|
|
|
|
13,650
|
|
|
|
37,070
|
|
2023
|
|
|
23,420
|
|
|
|
13,650
|
|
|
|
37,070
|
|
2024 and thereafter
|
|
|
128,415
|
|
|
|
75,075
|
|
|
|
203,490
|
|
|
|
$
|
210,385
|
|
|
$
|
122,850
|
|
|
$
|
333,235
|
|
7. RELATED
PARTY TRANSACTIONS
|
a)
|
The
former owner of 4P Therapeutics has been a director of the Company since April 2018, when the Company entered into an agreement
to acquire 4P Therapeutics. See Note 4 in connection with the terms of the acquisition of 4P Therapeutics from the former owner.
The former owner was not a director of the Company when the acquisition agreement was signed.
|
|
b)
|
During
the six months ended July 31, 2018, the Company issued:
|
|
(i)
|
68,000
shares of common stock, valued at $1,419,300, issued to executive officers and their
affiliates;
|
|
(ii)
|
7,500
shares of common stock, valued at $222,000, issued to the Company’s independent
directors;
|
|
(iii)
|
2,500
shares of common stock, valued at $74,000, issued to the Company’s advisory board
member; and
|
|
(iv)
|
2,500
shares of common stock, valued at $48,600, issued to a non-affiliated party for services.
|
|
c)
|
On
February 19, 2019, the Company granted an executive officer an option to purchased 25,000
shares of the Company’s common stock at an exercise price equal to 75% of the market
price on the date the Company receives notice of exercise. The fair value of the warrant
on the date of grant using the Black Scholes model was $252,700 and was expensed during
the six months ended July 31, 2019. The warrant expired unexercised on May 19, 2019.
|
NUTRIBAND INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial
Statements
as of and for the Six Months Ended July
31, 2019 And 2018
8. COMMON
STOCK
During
the six months ended July 31, 2018, the Company issued:
|
(i)
|
68,000
shares of common stock, valued at $1,419,300, issued to executive officers and their affiliates;
|
|
(ii)
|
7,500
shares of common stock, valued at $222,000, issued to the Company’s independent directors;
|
|
(iii)
|
2,500
shares of common stock, valued at $74,000, issued to the Company’s advisory board member; and
|
|
(iv)
|
2,500
shares of common stock, valued at $48,600, issued to a non-affiliated party for services.
|
On
May 2, 2018, the Company sold to an unrelated party for $1.0 million, 62,500 shares stock and 30-day warrants to purchase 62,500
shares of common stock at $16.00 per share. On May 27, 2018, the unrelated party exercised warrants to purchase 31,250 shares
of common stock for proceeds of $500,000 and on June 2, 2018, warrants to purchase 31,250 shares of common stock expired unexercised.
On
July 31, 2018, the Company issued 62,500 shares of common stock valued at $1,850,000 representing a portion of the purchase price
for the equity of 4P Therapeutics. See Notes 4 and 6.
In
November 2018, one of the defendants in the legal proceedings with Advanced Health Brands, Inc., returned 50,000 shares of common
stock that had been issued to her, and these shares were cancelled as of January 31, 2019.
On
May 24, 2019, the Board of Directors created a series of preferred stock consisting of 2,500,000 shares designated as the Series
A Convertible Preferred Stock (“Series A Preferred Stock”). On June 20, 2019, the Series A preferred Stock was terminated
and the 2,500,000 shares were restored to the status of authorized but unissued shares of Preferred Stock, without designation
as to series, until such stock is once more designated as part of a particular series by the Board of Directors.
9. WARRANTS
AND OPTIONS
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.
|
|
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Life
|
|
|
Value
|
|
Outstanding, January 31, 2019
|
|
|
182,500
|
|
|
$
|
6.32
|
|
|
|
0.35 years
|
|
|
$
|
4,101,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired/Cancelled
|
|
|
(125,000
|
)
|
|
|
2.80
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding-period ending July 31, 2019
|
|
|
57,500
|
|
|
$
|
14.00
|
|
|
|
0.50 years
|
|
|
$
|
1,466,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - period ending July 31, 2019
|
|
|
57,500
|
|
|
$
|
14.00
|
|
|
|
0.50 years
|
|
|
$
|
1,466,250
|
|
The
following table summarizes additional information relating to the warrants outstanding at July 31, 2019:
Range of
|
|
|
Number
|
|
|
Remaining Contractual
|
|
|
Exercise Price for
Shares
|
|
|
Number
|
|
|
Exercise Price for
Shares
|
|
Exercise Prices
|
|
|
Outstanding
|
|
|
Life(Years)
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14.00
|
|
|
|
57,500
|
|
|
|
0.50
|
|
|
$
|
14.00
|
|
|
|
57,500
|
|
|
$
|
14.00
|
|
NUTRIBAND INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial
Statements
as of and for the Six Months Ended July
31, 2019 And 2018
9.
WARRANTS AND OPTIONS, continued
The
following table summarizes the changes in options outstanding and the related price of the shares of the Company’s common
stock issued to non-employees of the Company.
|
|
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Life
|
|
|
Value
|
|
Outstanding, January 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
25,000
|
|
|
|
25.64
|
|
|
|
0.05 years
|
|
|
|
232,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired/Cancelled
|
|
|
(25,000
|
)
|
|
|
25.64
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding-period ending July 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - period ending July 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
10. LEASES
The
Company has operating leases for its facilities used for research and development, sales and administration. These leases have
remaining lease terms of less than one year. Certain of these leases contain options to extend the term of the lease and certain
of these leases contain options to terminate the lease within a specified period of time. The options to extend or terminate a
lease are included in the lease term when it is reasonably likely that the Company will elect that option. The Company is not
a party to any material sublease arrangements.
The
components of lease expense, which are included in cost of revenues and general and administrative expense, based on the underlying
uses of the right of use asset, were as follows:
|
|
Six Months Ended
|
|
|
|
July 31, 2019
|
|
Amortization of right-of-use asset
|
|
$
|
9,609
|
|
Interest on lease liability
|
|
|
1,145
|
|
Operating lease costs
|
|
|
-
|
|
Total Lease Cost
|
|
$
|
10,754
|
|
Supplementary
cash flow information related to leases are as follows:
|
|
Six Months Ended
|
|
|
|
July 31, 2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
9,609
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
|
Operating leases
|
|
$
|
28,827
|
|
NUTRIBAND INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial
Statements
as of and for the Six Months Ended July
31, 2019 And 2018
10.
LEASES, continued
Supplementary
balance sheet information related to leases are as follows:
Operating Leases:
|
|
|
|
Operating lease right-of -use assets
|
|
$
|
19,218
|
|
Operating lease liabilities
|
|
|
19,652
|
|
|
|
|
|
|
Weighted-Average Remaining Lease Term:
|
|
|
|
|
Operating leases
|
|
|
1.00
|
|
|
|
|
|
|
Weighted-Average Discount Rate:
|
|
|
|
|
Operating leases
|
|
|
9.24
|
%
|
Our
discount rate is based on our incremental borrowing rate.
Maturities
of lease liabilities were as follows as of July 31, 2019:
|
|
Operating
|
|
Year Ending January 31,
|
|
Leases
|
|
2020-remaining
|
|
$
|
10,320
|
|
2021-remaining
|
|
|
10,320
|
|
Total undiscounted cash flows
|
|
|
20,640
|
|
Less: imputed interest
|
|
|
(988
|
)
|
Present value of lease liabilities
|
|
$
|
19,652
|
|
11. CONTINGENCIES
On
July 27, 2018, the Company commenced an action in the Circuit Court of the Ninth Judicial Circuit in and for Orange County, Florida,
against Advanced Health Brands, Inc., Raymond Kalmar, Paul Murphy, Michelle Polly-Murphy, Laura Fillman and John Baker, together
with a Motion for Temporary Injunction Without Notice and a Motion for Prejudgment Writ of Replevin arising from the Company’s
decision to seek to rescind for misrepresentation the agreement by which the Company acquired advanced Health Brans, Inc. for
1,250,000 shares of common stock valued at $2,500,000 and seek return of the shares. On August 2, 2018, the court entered a Temporary
Injunction Without Notice and an Order to Show Cause against the defendants. Defendants Kalmar, Murphy, Polly-Murphy, and Baker
have filed a Motion to Dismiss our Verified Complaint, Motion to Dissolve Temporary Injunction Without Notice and Response to
Order to Show Cause, and Motion to Compel Arbitration. On January 4, 2019, the court in the Advanced Health Brands, Inc. litigation
dismissed the Company’s complaint with prejudice, and directed the defendants to assign the Company within 30 days, the
six patents never duly transferred to the Company. On February 1, 2019, the Company appealed the court’s order. In November
2018, one of the defendants returned the 50,000 shares that had been issued to her, and these shares were cancelled as of January
31, 2019.
On
August 22, 2018, four of the defendants in the Florida action described in the previous paragraph filed a complaint against the
Company in the Franklin County, Ohio Court of Common Pleas seeking a declaratory judgment permitting them to sell the shares of
common stock they received pursuant to the acquisition agreement. The parties have agreed to a stay pending the outcome of the
Florida litigation.
On
April 29, 2019, the Company filed a securities fraud action in the U.S. District Court for the Eastern District of New York against
Raymond Kalmar, Paul Murphy, Michelle Polly-Murphy, Advanced Health Brands and TD Therapeutic, Inc. In the complaint the Company
alleges that in 2017, the defendants fraudulently and deceitfully obtained 1,250,000 shares of common stock by orchestrating a
months-long scheme to defraud us. We are seeking the return of the 1,200,000 shares of common stock and monetary damages resulting
from the defendants’ fraudulent conduct. The defendants filed a motion to dismiss.
12. SUBSEQUENT
EVENTS
On
August 14, 2019, the Company borrowed an additional $50,000 from a minority stockholder, bringing the total loans from the minority
stockholder to $140,000. See Note 4.