NutriBand Inc. 10-Q

ITEM 1A. RISK FACTORS You should carefully consider the key risks described below together with all of the other information included in this report and our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on April 26, 2023, before making an investment decision with regard to our securities. The risks set forth below and in our Form 10-K 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. Because we are an early-stage company with minimal revenue and a history of losses and we expect to continue to incur losses for the foreseeable future, we cannot assure you that we can or will be able to operate profitably. We did not generate any revenue prior to the quarter ended October 31, 2018 and, since then, we have reported only modest revenue from our pharmaceutical transdermal patch business. We are subject to the risks common to start-up, pre-revenue enterprises, including, among other factors, undercapitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of revenues. Drug development companies typically incur substantial losses during the product development and FDA testing phase of the business and do not generate revenues until after the drug has received FDA approval, which cannot be assured, and until the company has started to sell the product. We can give no assurance that we can or will ever be successful in achieving profitability and the likelihood of our success must be considered in light of our early stage of operations. We cannot assure you that we will be able to operate profitably or generate positive cash flow. If we cannot achieve profitability, we may be forced to cease operations and you may suffer a total loss of your investment. Because we do not have a product we can market in the United States, we cannot predict when or whether we will operate profitably. We have not completed the development of our lead product, which is our abuse deterrent fentanyl transdermal system, and we do not have any product that we can market in the United States. 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 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. We face litigation risks in a legal proceeding that could have an adverse effect on our company. On September 21, 2023, we were sued by Joseph Gunnar, LLC, an investment broker-dealer located in New York City (“Gunnar”), in the Supreme Court of the State of New York, County of New York, Commercial Division, claiming damages resulting from the Company’s termination in July 2023 of an engagement letter for our use of Gunnar as an underwriter of a public offering of our common stock. The complaint filed by Gunnar includes claims for damages based on, inter alia, br each of contract, misrepresentations, inducement and fraud in connection with the termination of the proposed offering by us. Our Chief Executive Officer and our President are both named as individual defendants in this case (see the more detailed description of this case in Item 1. Legal Proceedings above in this report). The Company has filed a counterclaim against Gunnar for breach of contract and further claims for misrepresentations, inducement and fraud related to our termination of the engagement letter; and Gunnar has filed an Answer to our Counterclaims. Litigation may be time-consuming, expensive and disruptive to normal business operations, and the outcome of this litigation is difficult to predict. The defense of this lawsuit may result in significant expense and a diversion of management’s time and attention from the operation of our business, which could impede our ability to achieve our business objectives, and an unfavorable outcome may have an adverse effect on our business, financial condition and results of operations. Additionally, any amount that we may be required to pay to satisfy a judgment or settlement of this litigation may not be covered by insurance. Under our By-Laws and the indemnification agreements that we have entered into with our officers and directors, we are required to indemnify and advance expenses to them in connection with their participation in proceedings arising out of their service to us. The outcome of litigation is inherently uncertain. If one or more legal matters in this litigation were resolved against the Company in a reporting period for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected. 27 Our stock price has been and is likely to continue to be volatile and you may not be able to resell shares of our common stock at or above the price you paid, if at all. The trading price of our common stock has experienced fluctuations due to the factors discussed in these risk factors section and elsewhere in this report. In addition, the stock market in general has, and the NASDAQ Global Market and technology companies in particular have, experienced extreme price and volume fluctuations. These trading prices and valuations may not be sustainable. These broad market and industry factors may decrease the market price of our common stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against companies (primarily those that are larger than us) that experienced such volatility. This type of litigation, if instituted against us, regardless of its outcome, could result in substantial costs and a diversion of our management’s attention and resources. Our business is impacted by the following additional key risks : ● Our business could be adversely affected by the effects of health pandemics or epidemics, including the recent outbreak of COVID-19, which was declared by the World Health Organization as a global pandemic, and is resulting in travel and other restrictions to reduce the spread of the disease, including state and local orders across the country, which, among other things, direct individuals to shelter at their places of residence, direct businesses and governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings, and order cessation of non-essential travel. The effects of these orders, government-imposed quarantines and measures we would take, such as work-from-home policies, may negatively impact productivity, disrupt our business and could delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition. Further, quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which could disrupt our supply chain. ● The FDA regulatory process may take longer and be more expensive than we anticipate without any assurance that we will obtain FDA approval. ● If we are not able to obtain FDA approval for our lead product, we may not have the resources to develop any other product, and we may not be able to continue in business. ● We may not be able to launch any products for which we receive FDA marketing approval. ● We may not be able to establish a distribution network for the marketing and sale of any products for which we receive FDA approval. ● We may not be able to establish manufacturing facilities in compliance with FDA good manufacturing practices or to enter into manufacturing agreements for the manufacture of our products in an FDA approved manufacturing facility. ● It may be necessary to us to enter into a joint venture or other strategic relationship in order to develop, perform clinical testing for, manufacture or market any of our proposed products. We may not be able to enter into such a relationship, and any relationship may not be successful, and the other party may have business interests and priorities that are different from ours. ● We may be unable to accurately estimate anticipated expenses, capital requirements and needs for additional financing; 28 ITEM 6. EXHIBITS. Exhibit Number Description of Exhibits 31.1 Section 302 Certificate of Chief Executive Officer. 31.2 Section 302 Certification of Chief Financial Officer 32.1 Section 906 Certificate of Chief Executive Officer and Principal Financial Officer. 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) 29 SIGNATURES In accordance with the requirements of the Exchange Act, the Company has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NUTRIBAND INC. December 13, 2023 By: /s/ Gareth Sheridan Gareth Sheridan, Chief Executive Officer (Principal Executive Officer) December 13, 2023 By: /s/ Gerald Goodman Gerald Goodman, Chief Financial Officer (Principal Financial and Accounting Officer) 30