10-Q/A: Avenir Wellness Solutions Restates Earnings Per Share for Q3 2021, Citing Calculation Error

Avenir Wellness Solutions, formerly CURE Pharmaceutical Holding Corp., has filed an amended quarterly report to restate its earnings per share for the nine months ended September 30, 2021, due to an error in calculating weighted average shares outstanding.

Summary

• Avenir Wellness Solutions has amended its Q3 2021 quarterly report to correct an error in the calculation of weighted average shares outstanding, which impacts the presentation of earnings per share.
• The restatement affects the unaudited condensed consolidated statements of operations for the nine months ended September 30, 2021 and 2020.
• The company identified the error during the year ended December 31, 2022.
• The corrected weighted average shares outstanding for the nine months ended September 30, 2021 is 61,462,300, resulting in a net loss per share of $(0.14).
• The original report had a weighted average of 49,294,190 shares and a net loss per share of $(0.18).
• All other information in the amended report remains as of the original filing date, except for the company's name change, corrected IRS Employer Identification Number, and updated address and telephone number.

Sentiment

Score: 4

Explanation: The document reveals a significant error in financial reporting requiring a restatement, and raises concerns about the company's ability to continue as a going concern. While there are some positive aspects, such as the company's efforts to correct the error and update its information, the overall sentiment is negative due to the financial challenges and uncertainties.

Positives

• The company has identified and corrected an error in its financial reporting.
• The company has updated its contact information and name to reflect current details.

Negatives

• The company had to restate its earnings per share due to a calculation error.
• The company has a working capital deficit of approximately $15.9 million as of September 30, 2021.
• The company has an accumulated deficit of approximately $90.1 million as of September 30, 2021.
• The company's operating activities consume the majority of its cash resources.

Risks

• The company anticipates continuing to incur operating losses and negative cash flows from operations.
• The company's ability to continue as a going concern is dependent on securing additional financing and achieving profitable operations.
• There is substantial doubt about the company's ability to continue as a going concern for one year from the issuance of the financial statements.
• The company is currently discussing various financing alternatives with potential investors, but there is no assurance that these funds will be available on acceptable terms.
• The company may need to extend payables, reduce expenditures, or scale back its business plan if it cannot raise sufficient additional funds.

Future Outlook

The company anticipates continuing to incur operating losses and negative cash flows from operations, at least into the near future, as it executes its commercialization and development plans and strategic and business development initiatives. The company believes the funds available through potential financings will be sufficient to meet the company's working capital requirements during the coming year.

Management Comments

• Management believes the funds available through potential financings will be sufficient to meet the company's working capital requirements during the coming year.
• Management is committed to maintaining a strong internal control environment and believes that remediation efforts will represent significant improvements in the control environment.

Industry Context

The company operates in the biopharmaceutical industry, focusing on drug formulation and delivery technologies. The restatement of earnings per share highlights the importance of accurate financial reporting in this sector. The company's focus on novel dosage forms and drug delivery technologies aligns with industry trends towards improving drug safety, efficacy, and patient adherence.

Comparison to Industry Standards

• The company's restatement of earnings per share due to a calculation error is not uncommon in the industry, but it underscores the need for robust internal controls.
• The company's focus on oral dissolving film (OTF) technology is comparable to companies like Aquestive Therapeutics and IntelGenx, which also specialize in advanced drug delivery systems.
• The company's strategy of partnering for marketing and distribution while retaining manufacturing rights is a common approach in the pharmaceutical industry, similar to companies like Catalent and Lonza.
• The company's development of cannabinoid products aligns with the growing trend of exploring the therapeutic potential of cannabinoids, similar to companies like Canopy Growth Corporation and GW Pharmaceuticals.
• The company's acquisition of Sera Labs to expand into the wellness market is a strategy seen in other pharmaceutical companies seeking to diversify their revenue streams.

Legal Proceedings

• The company is involved in a legal proceeding with a vendor for breach of contract, and has filed a cross-complaint.
• The company is unable to determine the potential loss associated with this action.

Related Party Transactions

• The company has entered into an unsecured promissory note with one of its board members.
• The company has a promissory note outstanding to the CEO of Sera Labs.
• The company has received promissory notes from one of its board members in exchange for two promissory notes.

Stakeholder Impact

• Shareholders are impacted by the restatement of earnings per share and the uncertainty surrounding the company's ability to continue as a going concern.
• Employees may be affected by potential cost-cutting measures or changes in the company's business plan.
• Customers may be impacted by potential disruptions in the company's operations or product availability.
• Creditors may be concerned about the company's ability to repay its debts.

Next Steps

• The company will continue to implement measures to remediate the identified material weakness in internal control over financial reporting.
• The company will continue to monitor and evaluate the effectiveness of its internal controls and procedures over financial reporting.
• The company will continue to seek additional financing to meet its working capital requirements.
• The company is negotiating an extension of the maturity date and the amount due on the Series B Note.

Key Dates

Keywords

earnings per share, restatement, weighted average shares, financial reporting, Avenir Wellness Solutions, CURE Pharmaceutical, financial statements, operating losses, going concern, capital raise