NUTRIBAND INC. AND SUBSIDIARY
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF AND FOR THE THREE MONTHS ENDED APRIL 30, 2018 AND 2017
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1.
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DESCRIPTION
OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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The
consolidated balance sheet as of April 30, 2018 and the consolidated statements of operations and cash flows for the periods presented
have been prepared by Nutriband, Inc. and Subsidiary (the “Company” or “Nutriband”) and are unaudited. The
consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods, 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, 2018 was derived from audited financial statements
of the Company.
Organization
Nutriband
Inc. (the “Company” or “Nutriband”) was incorporated in the State of Nevada in January 2016.
In January 2016, the Company acquired Nutriband Ltd. (“Nutriband Ltd”), a company registered in Dublin, Ireland,
to enter the health and wellness market with new applications of transdermal patches. Nutriband Ltd. moved manufacturing
and operations to the United States during 2016. Since then, Nutriband Inc. has developed a full line of consumer and
health products which it plans to sell internationally. Through its acquisition and internal development strategy, the
Company is developing a pipeline for transdermal prescription medications. For the Company’s planned operations in
the U.S., it will be subject to the rules of the Food and Drug Administration (“FDA”); the Company plans to
seek FDA clearance, where required, for its transdermal patches and other products marketed in the U.S.
Going
Concern
The
consolidated financial statements for the three months ended April 30, 2018, have been prepared on a going concern basis
which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of
business. The Company has a past history of recurring losses from operations. The Company will require additional
funding to execute its future strategic business plan. Successful business operations and its transition to
attaining profitability are dependent upon obtaining additional financing and achieving a level of revenue to support its
cost structure. These factors raise substantial doubt about the Company’s ability to continue as a going
concern.
Management
acquired Nutriband Ltd. in 2016 to enter the health supplement market. The Company is also exploring some acquisition opportunities
which would expand the Company’s operations into the pharmaceutical field.
Management
believes these proposed acquisitions will be profitable and the cash flows from these operations will enable the Company to fund
the operations of the consolidated group for a period of one year from the issuance of these financial statements. Therefore,
the annual financial statements continue to be prepared on a going concern basis.
Significant
Accounting Policies
The
Company’s significant accounting policies are found below. These policies should be read in conjunction with Note 1 found
in the Company’s Annual Report on Form 10-K for the year ended January 31, 2018.
Principles
of Consolidation
The
consolidated financial statements of the Company include the Company and its wholly-owned subsidiary. All material intercompany
balances and transactions have been eliminated.
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.
Evaluation
of Long-lived Assets
Patents
represent an important component of the Company’s total assets. The Company amortizes its patents on a straight-line basis
over the estimated useful lives of the 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. As of January 31, 2018, the Company
recorded an impairment charge of $2,500,000 and reduced the book value of the patent to be $-0-.
Recently
Adopted Accounting Standards
In
May, 2014 the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606) (“ASU
2014-09””), which amends the existing 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. Subsequently, the FASB issued several other updates related to revenue recognition (collectively with ASU
201-09, the “new revenue standards”). The Company adopted the guidance under the new revenue standards using the
modified retrospective transaction method effective February 1, 2018. The Company does not expect the adoption of the new
revenue standards to have a material impact on its consolidated financial statements.
Accounting
Standards Issued But Not Yet Adopted
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. This guidance is effective for the annual periods and interim periods beginning December
15, 2018. The amendments also require certain quantitave and qualitative disclosures about leasing arrangements. Early adoption
is permitted. The update guidance requires a modified retrospective adoption. We are currently in the process of evaluating this
new standard update
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The
Company has implemented all new pronouncements 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.
Inventory
as of April 30, 2018 and January 31, 2018 are as follows:
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April 30,
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January 31,
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2018
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2018
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Finished goods
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$
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4,133
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$
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4,133
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Work in progress
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-
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-
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Raw materials
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-
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-
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$
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4,133
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$
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4,133
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Short-term
debt-related parties as of April 30, 2018 and January 31, 2018, consists of loans from officers and related parties, that
are interest free and due on demand. As of April 30, 2018 and January 31, 2018, short-term debt amounted to $40,905 and
$14,230, respectively. The loans were paid in full May 2018.
Short-term
debt as of April 30, 2018 and January 31, 2018, consists of a loan from South County Dublin Council that is interest free with
monthly payments of $75. The loan is due October 2017. As of January 31, 2018, and 2017, the total balance of long-term debt (current
portion) amounted to $1,797 and $1,820, respectively. The loans were paid in full May 2018.
On
September 12, 2017, the Company received an interest-free loan from TII Jet Services LDA in the amount of $15,000. The Company
received an additional advance of $25,000 during April 2018. The loan is interest free and due upon demand. As of April 30, 2018
and January 31, 2018, the balance due was $40,000 and $15,000, respectively, and amount is included in short-term debt.
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4.
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RELATED
PARTY TRANSACTIONS
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a)
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As
of April 30, 2018 and January 31, 2018, Ann Sheridan, mother of the Chief Executive Officer
and a Director of Nutriband Limited (Ireland), advanced the Company $10,105 and $10,230,
respectively, for operating capital. The advance is interest free and due on demand.
The advance was repaid in full May 2018.
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b)
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During
the year ended January 31, 2018, the Chief Financial Officer advanced $8,250 to the Company,
all of which was repaid as of January 31, 2018. Additionally, the Company had amounts
owed to the CFO for payments made on behalf of the Company of $30,800 and $4,000 as of
April 30, 2018 and January 31, 2018, respectively. The amounts were repaid in full May
2018.
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The
Company recorded the fair value of 110,000 shares valued at $277,500 during the three months ended April 30, 2018 and
reflected the issuance of these shares as common stock to be issued as of April 30, 2018.
The
following table summarizes the changes in warrants outstanding and the related price of the shares of the Company’s common
stock issued to non-employees of the Company.
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Exercise
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Remaining
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Intrinsic
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Shares
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Price
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Life
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Value
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Outstanding, February 1, 2018
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730,000
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$
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1.58
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1.35
years
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-
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Granted
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-
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-
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-
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-
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Expired/Cancelled
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-
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-
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-
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-
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Exercised
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-
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-
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-
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-
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Outstanding-period ending April 30, 2018
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730,000
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$
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1.58
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1.10
years
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$
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-
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Exercisable - period ending April 30, 2018
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650,000
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$
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1.35
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0.97
years
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$
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-
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Basic
earnings per common share are computed by dividing net earnings by the weighted average number of common shares outstanding during
the period. Diluted earnings per common share are computed by dividing net earnings by the weighted average number
of common shares and potential common shares outstanding during the period. Potential common shares consist of outstanding
common stock purchase warrants. As of April 30, 2018 there were 730,000 common stock equivalents outstanding, that were not included
in the calculation of dilutive earnings per share as their effect would be anti-dilutive.
On
April 5, 2018, the Company entered into an acquisition agreement to acquire a 100% interest in 4P Therapeutics Inc. in exchange
for $400,000 and 250,000 shares of common stock of the Company. The shares will be issued and payment made upon the completion
of the certified audit of 4P Therapeutics Inc. 4P Therapeutics Inc. will become the pharmaceutical and development arm of Nutriband
with specific focus on Transdermal and Topical Technologies, prescription drugs and clinical development.
On
May 2, 2018, the Company received proceeds of $1 million from Barandnic Holdings Ltd. in connection with the sale of 250,000 shares
of the Company’s common stock. In connection with the sale, the purchaser received a five-year warrant to purchase 250,000
shares at an exercise price of $4.00 per share. On May 27, 2018, Barandic Holdings Ltd. exercised 125,000 common stock warrants
and the Company received proceeds of $500,000.
On
May 16, 2018, the Company issued 160,000 shares of common stock for services. The fair value of the common stock issued was $602,500,
of which $277,500 was expensed during the three months ended April 30, 2018.
On
June 13, 2018, the Company signed a letter of intent to acquire 100% of Carmel Biosciences, a pharmaceutical company that addresses
critical needs in new drug and liquid reformulation for cardiovascular and metabolic therapies. The Company plans to complete
the acquisition, valued at approximately $3.8 million, through payment of the issuance of 450,000 shares of the Company’s
common stock. In December 2007, Carmel Biosciences received FDA approval for PREXXARTAN, the first and only approved oral liquid
dosage form of the angiotensin receptor block (ARB) valsartan in the Unite States.