NutriBand Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations for the three and nine months ended October 31, 2022 and 2021 are not necessarily indicative of the results for the entire fiscal year or for any other period. 1 NUTRIBAND INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS October 31, January 31, 2022 2022 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 2,816,318 $ 4,891,868 Accounts receivable 80,455 71,380 Inventory 184,323 131,648 Prepaid expenses 426,105 370,472 Total Current Assets 3,507,201 5,465,368 PROPERTY & EQUIPMENT-net 933,642 979,297 OTHER ASSETS: Goodwill 5,349,039 5,349,039 Operating lease right of use asset 70,599 19,043 Intangible assets-net 808,718 926,913 TOTAL ASSETS $ 10,669,199 $ 12,739,660 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 535,841 $ 639,539 Deferred revenue 201,990 106,267 Operating lease liability-current portion 30,586 19,331 Notes payable-current portion 21,335 14,119 Total Current Liabilities 789,752 779,256 LONG-TERM LIABILITIES: Note payable-net of current portion 105,512 101,119 Operating lease liability-net of current portion 42,369 - Total Liabilities 937,633 880,375 Commitments and Contingencies - - STOCKHOLDERS’ EQUITY: Preferred stock, $ .001 par value, 10,000,000 shares authorized, - 0 - outstanding - - Common stock, $ .001 par value, 291,666,666 shares authorized; 7,843,146 shares issued at October 31, 2022 and 9,187,659 issued at January 31, 2022, 7,803,263 and 9,154,846 shares outstanding as of October 31,2022 and January 31, 2022, respectively 7,803 9,155 Additional paid-in-capital 30,669,580 29,966,132 Accumulated other comprehensive loss ( 304 ) ( 304 ) Treasury stock, 39,883 and 32,813 shares at cost, respectively ( 130,133 ) ( 104,467 ) Accumulated deficit ( 20,815,380 ) ( 18,011,231 ) Total Stockholders’ Equity 9,731,566 11,859,285 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 10,669,199 $ 12,739,660 See notes to unaudited consolidated financial statements 2 NUTRIBAND INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) For the Three Months Ended For the Nine Months Ended October 31, October 31, 2022 2021 2022 2021 Revenue $ 618,003 $ 283,037 $ 1,552,074 $ 930,264 Costs and expenses: Cost of revenues 349,272 207,700 931,061 617,300 Research and development expenses 290,718 161,000 686,401 161,000 Selling, general and administrative expenses 1,049,532 1,452,778 2,726,256 2,487,611 Total Costs and Expenses 1,689,522 1,821,478 4,343,718 3,265,911 Loss from operations ( 1,071,519 ) ( 1,538,441 ) ( 2,791,644 ) ( 2,335,647 ) Other income (expense): Gain on extinguishment of debt - - - 43,214 Interest expense ( 3,966 ) ( 33,380 ) ( 12,505 ) ( 115,268 ) Total other income (expense) ( 3,966 ) ( 33,380 ) ( 12,505 ) ( 72,054 ) Loss before provision for income taxes ( 1,075,485 ) ( 1,571,821 ) ( 2,804,149 ) ( 2,407,701 ) Provision for income taxes - - - - Net loss ( 1,075,485 ) ( 1,571,821 ) ( 2,804,149 ) ( 2,407,701 ) Deemed dividend related to warrant round-down - ( 196,589 ) - ( 196,589 ) Net loss attributable to common shareholders $ ( 1,075,485 ) $ ( 1,768,410 ) $ ( 2,804,149 ) $ ( 2,604,290 ) Net loss per share of common stock-basic and diluted $ ( 0.14 ) $ ( 0.23 ) $ ( 0.32 ) $ ( 0.34 ) Weighted average shares of common stock outstanding - basic and diluted 7,803,264 7,589,457 8,659,522 7,684,741 Other Comprehensive Loss: Net loss $ ( 1,075,485 ) $ ( 1,571,821 ) $ ( 2,804,149 ) $ ( 2,407,701 ) Foreign currency translation adjustment - - - - Total Comprehensive Loss $ ( 1,075,485 ) $ ( 1,571,821 ) $ ( 2,804,149 ) $ ( 2,407,701 ) See notes to unaudited consolidated financial statements 3 NUTRIBAND INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) Nine Months Ended October 31, 2022 Accumulated Common Stock Additional Other Number of Paid In Comprehensive Accumulated Subscription Treasury Total shares Amount Capital Income(Loss) Deficit Payable Stock Balance, February 1, 2022 $ 11,859,285 9,154,846 $ 9,155 $ 29,966,132 $ ( 304 ) $ ( 18,011,231 ) $ - $ ( 104,467 ) Exercise of warrants 296,875 55,417 56 296,819 - - - - Common stock returned in settlement - ( 1,400,000 ) ( 1,400 ) 1,400 - - - - Treasury stock issued for services 93,100 28,583 28 ( 28 ) - - - 93,100 Treasury stock repurchased ( 118,766 ) ( 35,583 ) ( 36 ) 36 - - - ( 118,766 ) Options issued for services 405,221 - - 405,221 - - - - Net loss for the nine months ended October 31, 2022 ( 2,804,149 ) - - - - ( 2,804,149 ) - - Balance, October 31, 2022 $ 9,731,566 7,803,263 $ 7,803 $ 30,669,580 $ ( 304 ) $ ( 20,815,380 ) $ - $ ( 130,133 ) Nine Months Ended October 31, 2021 Accumulated Common Stock Additional Other Number of Paid In Comprehensive Accumulated Subscription Treasury Total shares Amount Capital Income(Loss) Deficit Payable Stock Balance, February 1, 2021 $ 7,111,946 7,299,567 $ 7,300 $ 18,870,055 $ ( 304 ) $ ( 11,835,105 ) $ 70,000 $ - Proceeds from sale of common stock and warrants in public offering 5,836,230 1,232,000 1,232 5,834,998 - - - - Proceeds from exercise of warrants 2,062,500 320,833 321 2,062,179 - - - - Cashless exercise of warrants - 17,347 17 ( 17 ) - - - - Issuance of common stock for notes payable 100,000 20,046 20 99,980 - - - - Common stock issued for settlement of liabilities 144,000 28,749 29 143,971 - - - - Warrants issued for services 365,000 - - 365,000 - - - - Common stock issued for proceeds and in payment for license 640,000 94,962 95 699,905 - - ( 60,000 ) - Common stock issued for services 466,900 21,119 21 409,979 - - 56,900 - Settlement of warrant round down 196,589 - - 196,589 - - - - Deemed dividend for warrants ( 196,589 ) - - ( 196,589 ) - - - - Net loss for the nine months ended October 31, 2021 ( 2,407,701 ) - - - - ( 2,407,701 ) - - Balance, October 31, 2021 $ 14,318,875 9,034,623 $ 9,035 $ 28,486,050 $ ( 304 ) $ ( 14,242,806 ) $ 66,900 $ - 4 Three Months Ended October 31, 2022 Accumulated Common Stock Additional Other Number of Paid In Comprehensive Accumulated Subscription Treasury Total shares Amount Capital Income(Loss) Deficit Payable Stock Balance, July 1, 2022 $ 10,401,830 7,803,263 $ 7,803 $ 30,264,359 $ ( 304 ) $ ( 19,739,895 ) $ - $ ( 130,133 ) Options issued for services 405,221 - - 405,221 - - - - Net loss for the three months ended October 31, 2022 ( 1,075,485 ) - - - - ( 1,075,485 ) - - Balance, October 31, 2022 $ 9,731,566 7,803,263 $ 7,803 $ 30,669,580 $ ( 304 ) $ ( 20,815,380 ) $ - $ ( 130,133 ) Three Months Ended October 31, 2021 Accumulated Common Stock Additional Other Number of Paid In Comprehensive Accumulated Subscription Treasury Total shares Amount Capital Income(Loss) Deficit Payable Stock Balance, July 1, 2021 $ 7,316,066 7,415,648 $ 7,416 $ 19,979,939 $ ( 304 ) $ ( 12,670,985 ) $ - $ - Proceeds from sale of common stock and warrants in public offering 5,836,230 1,232,000 1,232 5,834,998 - - - - Proceeds from exercise of warrants 2,062,500 320,833 321 2,062,179 - - - - Cashless exercise of warrants - 17,347 17 ( 17 ) - - - - Issuance of common stock for notes payable 100,000 20,046 20 99,980 - - - - Common stock issued for settlement of liabilities 144,000 28,749 29 143,971 - - - - Warrants issued for services 365,000 - - 365,000 - - - - Settlement of warrant round down 196,589 - - 196,589 - - - - Deemed dividend for warrants ( 196,589 ) - - ( 196,589 ) - - - - Subscription payable 66,900 - - - - - 66,900 - Net loss for the three months ended October 31, 2021 ( 1,571,821 ) - - - - ( 1,571,821 ) - - Balance, October 31, 2021 $ 14,318,875 9,034,623 $ 9,035 $ 28,486,050 $ ( 304 ) $ ( 14,242,806 ) $ 66,900 $ - See notes to unaudited consolidated financial statements 5 NUTRIBAND INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Nine Months Ended October 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 2,804,149 ) $ ( 2,407,701 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 255,925 235,380 Amortization of debt discount - 97,477 Amortization of right of use asset 42,578 - (Gain) loss on extinguisment of debt - ( 43,214 ) Options issued for services 405,221 - Treasury stock issued for services 93,100 - Common stock issued for services - 754,400 Changes in operating assets and liabilities: Accounts receivable ( 9,075 ) ( 37,064 ) Prepaid expenses ( 55,633 ) ( 114,320 ) Inventories ( 52,675 ) ( 72,089 ) Deferred revenue 95,723 152,736 Operating lease liability ( 40,510 ) - Accounts payable and accrued expenses ( 103,698 ) ( 142,394 ) Net Cash Used In Operating Activities ( 2,173,193 ) ( 1,576,789 ) Cash flows from investing activities: Purchase of equipment ( 69,281 ) ( 51,388 ) Net Cash Used in Investing Activities ( 69,281 ) ( 51,388 ) Cash flows from financing activities: Proceeds from sale of common stock - 583,000 Proceeds from sale of common stock in public offering - 5,836,230 Proceeds from the exercise of warrants 296,875 2,062,500 Payment on note payable ( 11,185 ) ( 4,689 ) Payment on related party note payable - ( 1,500,000 ) Payment on finance leases - ( 15,513 ) Purchase of treasury stock ( 118,766 ) - Net Cash Provided by (used in) Financing Activities 166,924 6,961,528 Effect of exchange rate on cash - - Net change in cash ( 2,075,550 ) 5,333,351 Cash and cash equivalents - Beginning of period 4,891,868 151,993 Cash and cash equivalents - End of period $ 2,816,318 $ 5,485,344 Supplementary information: Cash paid for: Interest $ 12,505 $ 9,447 Income taxes $ - $ - Supplemental disclosure of non-cash investing and financing activities: Common stock returned in settlement $ 1,400 $ - Common stock issued for settlement of notes payable $ - $ 100,000 Common stock issued for prepaid consulting $ - $ 400,000 Non-cash payment for license agreement $ - $ 57,000 Common stock issued for subscription payable $ - $ 70,000 Adoption of ASC 842 Operating lease asset and liability $ 94,134 $ - Promissory note on equipment purchase $ 32,843 $ - Settlement of liabilities for common stock $ - $ 144,000 Deemed dividend in connection with warrant round down $ - $ 144,000 Cashless exercise of warrant $ - $ 15 See notes to unaudited consolidated financial statements 6 NUTRIBAND INC. AND SUBSIDIARIES Notes to Unaudited Consolidated Financial Statements as of and for the Nine Months Ended October 31, 2022 and 2021 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 250,000 shares of common stock, valued at $1,850,000, and $400,000, and a royalty of 6% on all revenue generated by the Company from the abuse deterrent intellectual property that had been developed by 4P Therapeutics payable to the former owner of 4P Therapeutics. 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. The former owner resigned as a director in January 2022. 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 100 % of the membership interests of Active Intelligence LLC (“Active Intelligence”). Pocono Pharmaceuticals is a coated products manufacturing entity organized to take advantage of unique process capabilities and experience. Pocono helps their customer 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. The tape has transdermal and topical properties. This tape is used as the same as traditional kinesiology tape. In December 2019, COVID-19 emerged and has subsequently spread world-wide. The World Health Organization has declared COVID-19 a pandemic resulting in federal, state and local governments and private entities proscribing various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining people who may have been exposed to the virus. The effect of these orders, government imposed quarantines and measures the Company and suppliers and customers it works with might have to take, such as work-at-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 disruptions in our operations, 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 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. 7 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unaudited Financial Statements The consolidated balance sheet as of October 31, 2022, and the consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the periods presented have been prepared by the Company and are unaudited. 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 results of the nine months ended October 31, 2022, are not necessarily indicative of the results to be expected for the full year. The consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in Nutriband’s Annual Report on Form 10-K for the year ended January 31, 2022. Certain information and footnote disclosures required under generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted from these consolidated financial statements pursuant to the rules and regulations, including interim reporting requirements of the U.S. Securities and Exchange Commission (“SEC”). The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosures of contingent amounts in our consolidated financial statements and accompanying footnotes. Actual results could differ from estimates. The Company’s significant accounting policies are summarized in Note 1 in the Company’s Annual Report on Form 10-K for the year ended January 31, 2022. There were no significant changes to these accounting policies during the nine months ended October 31, 2022. 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. The 7:6 forward stock 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 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 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. 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 October 31, 2022, we had cash and cash equivalents of $ 2,816,318 and working capital of $ 2,717,449 . For the nine months ended October 31, 2022, the Company incurred an operating loss of $ 2,791,644 and use cash flow from operations of $ 2,173,193 . 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 also received to date $ 3,239,845 proceeds from the exercise of warrants. The Company has used these proceeds to fund operations and will continue to use the funds as needed. 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. The impact of COVID-19 on the Company’s business has been considered in these assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to normal operations. 8 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 and Active Intelligence are included in the Company’s financial statements from the date of acquisition of September 1, 2020. The wholly owned subsidiaries are as follows: Nutriband Ltd. 4P Therapeutics LLC Pocono Pharmaceuticals Inc. Active Intelligence LLC 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: ● Service revenues include the contract of research and development related services with the Company’s 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. ● Product revenues are derived from the sale of the Company’s consumer transdermal and coated products. Upon the reception of a purchase order, we have the order filled and shipped. 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. 9 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. Disaggregation of Revenues The Company disaggregates its revenue from contracts with customers by type and by geographical location. See the tables: Nine Months Ended Three Months Ended October 31, October 31, 2022 2021 2022 2021 Revenue by type Sale of goods $ 1,325,127 $ 724,288 $ 394,904 $ 183,037 Services 228,947 205,976 61,245 100,000 Total $ 1,554,074 $ 930,264 $ 456,149 $ 283,037 Nine Months Ended Three Months Ended October 31, October 31, 2022 2021 2022 2021 Revenue by geographic location: United States $ 1,554,074 $ 843,664 $ 456,149 $ 283,037 Foreign - 86,600 - - $ 1,554,074 $ 930,264 $ 456,149 $ 283,037 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 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 nine months ended October 31, 2022 and 2021, the Company recorded no bad debt expense for doubtful accounts related to account receivable. 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 October 31, 2022 and January 31, 2022, 100 % of the inventory consists of raw materials. 10 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 year ended January 31, 2022, the Company recorded an impairment charge of $ 2,180,836 reducing the Active Intelligence LLC Goodwill to $ 3,629,813 . As of October 31, 2022 and January 31, 2022, Goodwill amounted to $ 5,349,039 . 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 October 31, 2022, and 2021, there were 1,645,506 and 1,572,825 common stock equivalents outstanding, 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). As of February 1, 2019, pursuant to ASC 2018-07, ASC 718 was applied to stock-based compensation for both employees and non-employees. 11 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. 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 cash and cash equivalents, accounts receivable, prepaid expenses, and accrued expenses approximate their fair value due to the short maturities of these financial instruments. 12 Reclassification The Company has reclassified prior year amounts to show the allocation of depreciation expense to cost of goods sold. Recent Accounting Standards In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which clarifies how to properly account for deferred revenue in a business combination. ASU 2021-08 is effective for periods after December 15, 2022. The Company adopted ASU 2021-08 on February 1, 2022. The adoption of ASU 2021-08 did not have a material effect on the Company’s consolidated financial statements. 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 October 31, January 31, 2022 2022 Lab equipment $ 144,585 $ 144,585 Machinery and equipment 1,230,605 1,138,530 Furniture and fixtures 19,643 19,643 1,394,833 1,302,758 Less: Accumulated depreciation ( 461,191 ) ( 323,461 ) Net Property and Equipment $ 933,642 $ 979,297 Depreciation expense amounted to $ 137,730 and $ 138,017 for the nine months ended October 31, 2022 and 2021, respectively. During the nine months ended October 31, 2022 and 2021, depreciation expense of $ 104,767 and $ 104,132 , respectively, have been allocated to cost of goods sold. 4. NOTES PAYABLE Notes Payable On March 21, 2020, the Coronavirus Aid Relief and Economic Security Act (“CARES ACT” was enacted. The CARES ACT established the Paycheck Protection Program (“PPP”) which funds small businesses through federally guaranteed loans. Under the PPP, companies are eligible for forgiveness of principal and interest if the proceeds are used for eligible payroll costs, rent and utility costs. On June 17, 2020, the Company’s subsidiary, 4P Therapeutics, was advanced $34,870 under the PPP, all of which was forgiven as of April 30, 2021. The Company recorded a gain on the extinguishment of debt of $34,870 during the nine months ended July 31, 2021. In July 2020, a minority shareholder made an additional loan to the Company in the amount of $ 100,000 . The loan is interest-free and due upon demand. In October 2021, the loan was converted into 17,182 common shares of the Company. The shares were issued at fair market value and no gain or loss was recorded for the transaction. 13 Active Intelligence, the Company’s newly acquired subsidiary, entered into an agreement with the Carolina Small Business Development Fund for a line of credit of $160,000 due October 16, 2029, with interest of 5% per year. The amount assumed was $ 139,184 . The loan requires monthly payments of principal and interest of $ 1,697 . During the year ended January 31, 2022, principal and interest payments of $ 8,344 were forgiven under the Cares Act. The amount, $ 8,344 , has been recorded as a gain on the forgiveness of debt. During the nine months ended October 31, 2022, the Company made $ 11,185 of principal payments. As of October 31, 2022, the amount due was $ 106,158 , of which $ 17,010 is current. On April 3, 2022, the Company entered into a retail installment agreement for the purchase of an automobile. The contract price was $32,274, of which $22,795 was financed. The agreement is for five years bearing interest at 2.95% per annum with payments of $495 per month. The loan is secured by automobile. As of October 31, 2022, the amount due was $20,599 of which $4,325 is current. Finance Leases Pocono had two finance leases secured by equipment. The leases mature in 2025 and 2026. The incremental borrowing rate is 5.0 %. The amount due on the leases was $ 121,544 , all of which was paid during the year ended January 2022. Related Party Payable On August 31, 2020, in connection with the Company’s acquisition of Pocono Products LLC, the Company issued to Pocono Coated Products LLC a promissory note, net of debt discount, in the amount of $1,332,893 with interest accruing at an annual rate of 0.17%, due on August 28, 2021, or immediately following the earlier of a capital raise of no less than $4,000,000 and/or a public offering of no less than $4,000,000. The members of Pocono Coated Products LLC, which include Mike Myer who is a related party, are shareholders of the Company. During the three months ended April 30, 2021, the Company recorded amortization of debt discount of $ 36,554 . In October 2021, the note in the amount of $ 1,500,000 was paid in full. Interest expense for the nine months ended October 31, 2022, was $ 12,505 . Interest expense for the three months ended October 31, 2021, was $ 115,268 including the amortization of debt discount of $ 97,477 and interest expense of $ 17,791 . 5. INTANGIBLE ASSETS As of October 31, 2022 and January 31, 2022, intangible assets consisted of intellectual property and trademarks, customer base, and license agreement, net of amortization, as follows: October 31, January 31, 2022 2022 Customer base $ 314,100 $ 314,100 License agreement - 50,000 Intellectual property and trademarks 817,400 817,400 Total 1,131,500 1,181,500 Less: Accumulated amortization ( 322,782 ) ( 254,587 ) Net Intangible Assets $ 808,718 $ 926,913 14 In February 2021, the Company acquired an IP license for $ 50,000 , see Note 10- “Rambam Agreement” for further discussion regarding the license agreement. The value of the intangible assets, consisting of intellectual property, license agreement and customer base has been recorded at their fair value by the Company and are being amortized over a period of three to ten years . The Company terminated the license agreement in October 2022. The Company expensed the balance of the agreement of $ 33,334 during the nine months ended October 31, 2022, which is included in selling, general and administrative expenses. Amortization expense for the nine months ended October 31, 2022, and 2021 was $ 118,195 and $ 97,363 , respectively. Year Ended January 31, 2023 $ 28,277 2024 113,109 2025 113,109 2026 113,109 2027 113,109 2028 and thereafter 328,005 $ 808,718 6. RELATED PARTY TRANSACTIONS a) In connection with the acquisition of Pocono, the Company recorded various transactions and operations through Pocono Coated Products LLC, of which Mike Myer was a member and a related party. During the year ended January 31, 2022, the Company was advanced $ 7,862 in finance payments. As of January 31, 2022, the balance due Pocono was paid in full. The Company also issued a note in the amount of $1,500,000 to Pocono Coated Products LLC. In October 2021, the related party note payable was repaid. See Note 4 for further discussion. b) In May 2022, the Company issued stock awards to the Company’s CEO and independent members of the Board of Directors. The CEO received 11,667 shares and the four directors received 1,167 shares each. The Company recorded compensation expense of $ 53,200 in connection with the issuance of the shares. c) On August 2, 2022, 137,084 options to purchase shares of the Company’s common stock were issued to executives of the Company at prices of $ 4.09 and $ 4.50 per share. The options vest immediately and expire in three years. The fair value of the options issued for services amounted to $ 329,691 and was expensed during the nine months ended October 31, 2022. d) On September 30, 2022, 35,000 options to purchase shares of the Company’s common stock were issued to the independent directors of the Company at a price of $ 3.59 per share. The options vest immediately and expire in three years. The fair value of the options issued for services amounted to $ 75,530 and was expensed during the nine months ended October 31, 2022. 7. 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 10,000,000 shares of Preferred Stock, par value $ 0.001 per share. 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. Common Stock On June 25, 2019, the Company effected a one-for-four reverse stock split, pursuant to which each share of common stock became converted into 0.25 shares of common stock, and the Company decreased its authorized common stock from 100,000,000 to 25,000,000 shares. On January 27, 2020, the Company amended its Articles of Incorporation to increase its authorized common shares from 25,000,000 authorized shares to 250,000,000 authorized shares. On July 26, 2022, the Company effected a 7-for-6 forward stock split pursuant to which each shareholder of record as of the August 15, 2022, record date received one (1) additional share for each six (6) shares held as of the record date. 15 On August 4, 2022, the Company amended its Articles of Incorporation to increase its authorized common shares from 250,000,000 authorized shares to 291,666,666 authorized shares. Activity during the Nine Months Ended October 31, 2022 (a) In March and May 2022, the Company purchased 35,583 shares of its common stock for $ 118,766 and recorded the purchase as Treasury Stock. In May 2022, the Company issued 28,583 shares of stock awards to management, directors and employees from the treasury shares and recorded the fair value of the compensation expense of $ 93,100 . As of July 31, 2022, the Company holds 39,811 of its shares comprising the $ 130,133 of treasury stock. (b) On July 29, 2022, the Company received proceeds of $ 296,875 from the exercise of warrants and issued 55,417 shares of common stock. (c) In July 2022, the Company cancelled 1,400,000 shares received in connection with the settlement of a lawsuit. See Note 10 for further information. Activity during the Nine Months Ended October 31, 2021 (a) On February 25, 2021, in connection with the Company’s License Agreement with Rambam, pursuant to a Stock Purchase Agreement with BPM Inno Ltd (“BPM”), the Company issued 94,962 shares of common stock to BPM and received proceeds of $700,000 to be applied to product development expenses under the License Agreement. The Company entered into the Stock Purchase Agreement with BPM in December 2020 and received a payment of $60,000 which is included in Stockholders’ Equity as Subscription Payable in the Company’s consolidated balance sheet as of January 31, 2021. In February 2021, BPM advanced a payment for the Company to Rambam in the amount of $57,000 for the license fee. The balance of the funds of $583,000 was received in February 2021. On February 15, 2021, the Company issued 14,583 shares of common stock, valued at $350,000, for consulting fees in connection with the Rambam License Agreement discussed in Note 10. (b) On February 25, 2021, the Company issued 6,536 shares of common stock, valued at $ 60,000 , for consulting services pursuant to a consultant agreement commencing December 1, 2020. The Company has reflected $ 10,000 representing 1,090 shares as Subscription Payable in the Stockholders’ Equity in the Company’s consolidated balance sheet as of January 31, 2021. (c) 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 1,232,000 (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 immediate 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. (d) On October 19, 2021, the Company issued 320,833 shares of its common stock and received proceeds of $ 2,062,500 from the exercise of 320,833 public warrants. (e) On October 25, 2021, the Company issued 20,005 shares of its common stock in exchange for the extinguishment of debt in the amount of $ 100,000 . See Note 5 for further details. (f) On October 25, 2021, the Company issued 31,082 shares, valued at $ 144,000 , for consulting services in connection with research and development expenses. The shares were issued in settlement of liabilities. (g) On October 5, 2021, in connection with the Company’s IPO, two former debtholders were issued an additional 84,233 warrants at an exercise of $ 5.36 per share in accordance with the anti-dilution provisions of their agreement. The fair value of the warrants issued amounted to $ 196,589 and the Company recorded the transaction as adeemed dividend related to the warrant round down. In October 2021, one of the debtholders exercised 42,117 warrants as a cashless warrant and was issued 17,381 shares of common stock. 16 (h) On October 22, 2021, the Company issued 145,833 warrants for services to the Company’s CFO and a service provider in connection with the Company’s IPO. The warrants are exercisable at $ 4.20 per share and expire in three years . The fair value of the warrants issued was $ 365,000 . 8. 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 management ( 87,500 warrants were issued to the Chief Financial Officer) and non-employees of the Company during the year ended January 31, 2022. Exercise Remaining Intrinsic Shares Price Life Valu e Outstanding, January 31, 2021 165,466 $ 11.99 2.16 years $ - Granted 1,770,068 6.19 4.70 years - Expired/Cancelled - - - - Exercised ( 499,912 ) 6.43 - - Outstanding, January 31, 2022 1,435,622 6.91 3.93 years - Granted - - - - Expired/Cancelled ( 97,534 ) 5.36 - - Exercised ( 55,417 ) 5.36 - - Outstanding- October 31, 2022 1,282,671 $ 6.41 3.56 years $ 11,667 Exercisable - October 31, 2022 1,282,671 $ 6.41 3.56 years $ 11,667 The following table summarizes additional information relating to the warrants outstanding as of October 31, 2022: Weighted Average Weighted Average Weighted Average Range of Exercise Number Remaining Contractual Exercise Price for Shares Number Exercise Price for Shares Intrinsic Prices Outstanding Life(Years) Outstanding Exercisable Exercisable Value $ 12.00 54,633 0.75 $ 12.00 54,633 $ 12.00 $ - $ 6.43 1,082,205 4.18 $ 6.43 1,082,205 $ 6.43 $ - $ 4.20 145,833 2.23 $ 4.20 145,833 $ 4.20 $ 11,667 17 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. Exercise Remaining Intrinsic Shares Price Life Value Outstanding, January 31, 2021 - $ - - Granted 190,751 4.26 2.97 years - Expired/Cancelled - - - Exercised - - - Outstanding, January 31, 2022 190,751 - - Granted 172,084 4.13 3.00 years - Expired/Cancelled - - - Exercised - - - Outstanding- October 31, 2022 362,835 $ 4.20 2.49 years $ 56,815 Exercisable - October 31, 2022 362,835 $ 4.20 2.49 years $ 56,815 The following table summarizes additional information relating to the options outstanding as of October 31, 2022: Range of Exercise Number Remaining Contractual Exercise Price for Shares Number Exercise Price for Shares Intrinsic Prices Outstanding Life(Years) Outstanding Exercisable Exercisable Value $ 4.58 46,666 2.48 $ 4.58 46,666 $ 4.58 $ - $ 4.16 144,085 2.48 $ 4.16 144,085 $ 4.16 $ 17,702 $ 4.50 58,334 2.90 $ 4.50 58,334 $ 4.50 $ - $ 4.09 78,750 2.75 $ 4.09 78,750 $ 4.09 $ 14,963 $ 3.59 35,000 2.92 $ 3.59 35,000 $ 3.59 $ 24,150 18 9 SEGMENT REPORTING Nine Months Ended Three Months Ended October 31, 2022 October 31, 2022 Transdermal Contract Transdermal Contract Patches Services Total Patches Services Total Revenue $ 1,325,127 $ 226,947 $ 1,552,074 $ 528,233 $ 89,770 $ 618,003 Gross profit 619,018 1,905 620,923 254,906 13,285 268,191 Gross profit % 47 % 1 % 40 % 48 % 15 % 43 % Nine Months Ended Three Months Ended October 31, 2021 October 31, 2021 Revenue $ 724,288 $ 205,976 $ 930,264 $ 207,587 $ 75,450 $ 283,037 Gross profit 318,341 ( 5,377 ) 312,964 69,812 5,525 75,337 Gross profit % 44 % ( 3 %) 34 % 34 % 7 % 27 % 10. COMMITMENTS AND CONTIGENCIES Legal Proceedings Following a three-day trial, on July 20, 2022, the Orange County Circuit Court entered a Final Judgment in favor of Nutriband for breach of contract, replevin and rescission to rescind in the May 22, 2017 Share Exchange Agreement involving Nutriband, Advanced Health Brands Inc., and TD Therapeutics Inc. The Court directed the return and cancellation of the 1,400,000 Nutriband shares (adjusted for the 1-for-4 reverse stock split effective June 23, 2019 and the 7-for-6 forward stock split effective August 15, 2022) previously issued to Raymond Kalmar, Paul Murphy, Michelle Polly-Murphy and John Baker. Thereafter, by Settlement Agreement and Release dated August 19, 2022, all parties agreed that the above-referenced Final Judgment in favor of Nutriband is binding and enforceable, no appeal would be taken, related Ohio and New York lawsuits were dismissed and all of the original Nutriband share certificates issued to Raymond Kalmar, Paul Murphy, Michelle Polly-Murphy and John Baker were returned to Nutriband. Employment Agreements 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 . 19 Rambam Agreement On December 9, 2020, the Company entered into a License Agreement (the “License Agreement”) with Rambam Med-Tech Ltd. (“Rambam”), Haifa, Israel, to develop the RAMBAM Closed System Transfer Device (“CTSD”) and such other products as the parties agree to develop/commercialize. The Company will license from Rambam the full technology, IP, and title to CTSD in the field, with an Initial license fee of $ 50,000 and running royalties on net sales. The $ 50,000 license fee was paid by a third party at the direction of the Company in February 2021, at which time the agreement became effective. As of October 31, 2022, the development of the RAMBAM CSTD Device has been suspended until further notice as preliminary reviews and market research found the product was not commercially viable in its current form. As of November 11, 2022, the Company has terminated the agreement with Rambam and all intellectual property has been returned to Rambam. The Company had entered into a prior agreement, dated November 13, 2020, with BPM Inno Ltd., Kiryat, Israel (“BPM”), that, in consideration of BPM’s introduction of Rambam to the Company, provided for BPM to have the rights as the exclusive of agent of the Company with Rambam and any other parties similarly introduced by BPM, and for a commission payable to BPM by the Company of 4.5% of revenues received by the Company resulting from the introduction of Rambam (and any other companies as to which the exclusive agency of BPM was in effect), and for BPM’s payment of a royalty to Rambam. If the Company fails to commercialize the medical products subject to the License Agreement with Rambam within 36 months, under the November 13, 2020 agreement, BPM and the Company would share 50/50 in the revenues generated from sales of the licensed products from Rambam. This agreement further provides that it will be effective for a period of 10 years, with either party having the right to terminate on notice given 30 days prior to the desired termination, and also provided for certain territorial distribution rights of BPM as are set forth in the March 10, 2021 Distribution Agreement between the Company and BPM. As of October 31, 2022, no revenues have been earned and royalties have been accrued. BPM Distribution and Stock Purchase Agreements On March 10, 2021, the Company finalized the Distribution Agreement with BPM, providing for distribution of the medical products developed and produced under the License Agreement. Under the Distribution Agreement, BPM has the right to distribute the medical products in Israel and has a right of first refusal in relation to all other countries/states, other than United States, Korea, China, Vietnam, Canada and Ecuador, which are termed excluded countries. Kindeva Drug Delivery Agreement On January 4, 2022, the Company signed a feasibility agreement with Kindeva Drug Delivery, L.P. (“Kindeva”) to develop Nutriband’s lead product, AVERSAL Fentanyl, based on its proprietary AVERSAL abuse deterrent transdermal technology and Kindeva’s FDA-approved transdermal fentanyl patch (fentanyl transdermal system). The feasibility agreement is focused on adapting Kindeva’s commercial transdermal manufacturing process to incorporate AVERSAI technology. 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 estimated cost to complete the feasibility Workplan is approximately $1.7 million and the timing to complete will be between eight to twelve months. Nutriband made an advance deposit of $250,000 in January 2022, to be applied against the final invoice. The Workplan has commenced in February 2022, and the parties believe the Workplan will be completed in the time estimated in the agreement. As of October 31, 2022, the Company has incurred expenses of $ 481,979 and the deposit of $ 250,000 is included in prepaid expenses. Lease Agreement On February 1, 2022, Pocono Pharmaceuticals entered into a lease agreement with Geometric Group, LLC for 12,000 square feet of warehouse space currently occupied by Active Intelligence. The monthly rental is $ 3,000 and the lease expires on January 31, 2025 . The lease can be extended for an additional three years at the same monthly rental. The Company recorded a Right of Use asset in the amount of $ 94,134 in connection with the valuation. 11. SUBSEQUENT EVENTS (a) On November 8, 2022, the Company and BPM entered into a termination agreement abandoning all elements of the distribution agreement dated January 15, 2000, between the parties. The Company issued BPM 25,000 shares of its common stock from its treasury shares held by the Company and warrants to purchase 25,000 shares at an exercise price of $ 7.50 per share as part of the termination agreement. (b) On November 15, 2022, the Company issued 4,888 shares of its common stock from its treasury shares held by the Company to two consultants for services provided. 20