What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-09-11 compared with 2023-06-09 · 300 added, 269 removed, 86 unchanged (87% of the section changed)

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

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AVERSA™ transdermal abuse deterrent technology.

Our primary business is the development of a portfolio of transdermal

pharmaceutical products.

Our lead product is our abuse deterrent fentanyl transdermal system which will require approval from the Food

and Drug Administration (“FDA”) and substantial additional capital for research and development.

Our abuse deterrent transdermal

product under development has the potential to provide clinicians and patients with an extended-release transdermal fentanyl product for

use in managing chronic pain requiring around the clock opioid therapy combined with properties designed to deter the abuse and misuse

of fentanyl patches.

In addition, we believe that our abuse deterrent technology can be broadly applied to various transdermal products

and our strategy is to follow the development of our abuse deterrent fentanyl transdermal system with the development of abuse deterrent

transdermal products for pharmaceuticals that have risks or a history of abuse.

Our primary business is the development of a portfolio

of transdermal pharmaceutical products.

Our lead product is our abuse deterrent fentanyl transdermal system which will require approval

from the Food and Drug Administration (“FDA”) and substantial additional capital for research and development.

Our abuse deterrent

transdermal product under development has the potential to provide clinicians and patients with an extended-release transdermal fentanyl

product for use in managing chronic pain requiring around the clock opioid therapy combined with properties designed to deter the abuse

and misuse of fentanyl patches.

In addition, we believe that our abuse deterrent technology can be broadly applied to various transdermal

products and our strategy is to follow the development of our abuse deterrent fentanyl transdermal system with the development of abuse

deterrent transdermal products for pharmaceuticals that have risks or a history of abuse.

We received on January 28, 2022 an Issue Notification

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System,” that protects our Aversa™ technology platform.

Transdermal Pharmaceutical Products

Through October 31, 2018, our business was the development of a line

of consumer and health products that are delivered through a transdermal or topical patch.

Following our acquisition of 4P Therapeutics

on August 1, 2018, our focus expanded to include prescription pharmaceuticals, and we are seeking to develop and seek FDA approval on

a number of transdermal pharmaceutical products under development by 4P Therapeutics.

Most of our planned consumer products require FDA approval for sale

in the United States, and we have not sought to obtain, and we do not plan to seek to obtain, FDA approval to market these products in

the United States at this time.

Through October 31, 2018, our business was the

development of a line of consumer and health products that are delivered through a transdermal or topical patch.

Following our acquisition

of 4P Therapeutics on August 1, 2018, our focus expanded to include prescription pharmaceuticals, and we are seeking to develop and seek

FDA approval on a number of transdermal pharmaceutical products under development by 4P Therapeutics.

Most of our planned consumer products require

FDA approval for sale in the United States, and we have not sought to obtain, and we do not plan to seek to obtain, FDA approval to market

these products in the United States at this time.

Following our acquisition of selected assets from Pocono Coated Products, LLC (“Pocono”),

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at this time to launch our own consumer products.

4P Therapeutics has not generated any revenue from any of its products

under development.

Rather, prior to our acquisition, 4P Therapeutics generated revenue to provide cash for its operations through contract

research and development and related services for a small number of clients in the life sciences field on an as-needed basis.

for the near term, continuing this activity, although we do not anticipate that it will generate significant revenues and, since our acquisition,

it has generated minor gross margins.

We have no long-term contractual obligations, and either party can terminate at any time.

With the change in our focus, our capital requirements have increased

substantially.

The process of developing pharmaceutical products and submitting them for FDA approval is both time consuming and expensive,

with no assurance of obtaining approval from the FDA to market our product in the United States.

We will require approximately $13 million

for research and development of our abuse deterrent fentanyl transdermal system, including clinical manufacturing and clinical trials

that need to be completed in order to obtain FDA approval.

4P Therapeutics has not generated any revenue

from any of its products under development.

Rather, prior to our acquisition, 4P Therapeutics generated revenue to provide cash for its

operations through contract research and development and related services for a small number of clients in the life sciences field on

an as-needed basis.

We are, for the near term, continuing this activity, although we do not anticipate that it will generate significant

revenues and, since our acquisition, it has generated minor gross margins.

We have no long-term contractual obligations, and either party

can terminate at any time.

With the change in our focus, our capital requirements

have increased substantially.

The process of developing pharmaceutical products and submitting them for FDA approval is both time consuming

and expensive, with no assurance of obtaining approval from the FDA to market our product in the United States.

We will require approximately

$13 million for research and development of our abuse deterrent fentanyl transdermal system, including clinical manufacturing and clinical

trials that need to be completed to obtain FDA approval.

However, the total cost could be substantially in excess of that amount.

On August 31, 2020, the Company entered into a Purchase Agreement (“Agreement”),

with Pocono Coated Products (“PCP”), pursuant to which PCP agreed to sell the Company all of the assets associated with its

Transdermal, Topical, Cosmetic and Nutraceutical business (the “Assets”).

PCP is the manufacturer of our transdermal consumer

products, and we bought that business from them.

The purchase price for the Assets was (i) $6,000,000 paid in shares of the Company’s

common stock at a value of the average price of the previous 90 days at the date of Closing (the “Shares”);

(ii) a promissory

note of the Company in the principal amount of $1,500,000, which is due upon the earlier of (a) twelve (12) months from issuance, or (b)

immediately following a capital raise of no less than $4,000,000 and/or a public offering of no less than $4,000,000.

The note was repaid

in full in October 2021.

Subsequent to the repayment of the note, the Shares were released from escrow.

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 1,231,200

(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 immediately 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.

As of April 30, 2023, 457,795 Warrants issued

in the IPO have been exercised, with net proceeds to the Company of $2,942,970.

On November 1, 2021, The Board of Directors adopted the 2021 Employee

Stock Option Plan (the “Plan”).

The Company has reserved 408,333 shares to issue and sell upon the exercise of stock options

issued under the Plan.

On November 3, 2021, the Company filed a Registration Statement on Form S-8, to register under the Securities Act

of 1933, as amended, the 408,333 shares of common stock reserved for issuance under the Plan, and on October 12, 2022, a Post-Effective

Amendment to the Form S-8 was filed with the SEC.

In accordance with the Plan, on February 1, 2022, the Company reserved an additional

233,333 shares and on February 1, 2023, the Company reserved an additional 233,333 shares.

On January 21, 2022, the Board approved options

to purchase 190,751 shares of the Company’s common stock under the Plan issued to executive officers and directors of the Company

at an exercise price of $4.16 ($4.58 per share for two of the officers as required by IRS rules).

On August 1, 2022, the Board approved

option grants previously approved by the Compensation Committee for an aggregate of 137,084 shares of common stock at exercise prices

$4.09 or $4.50 per share depending on IRS rules as applicable to the recipient, on September 30, 2022, approved option issuances under

the Plan for an aggregate of 35,000 shares of common stock at an exercise price of $3.59 per share for services provided by the independent

directors, as previously approved by the Compensation Committee.

On December 7, 2022, the Board approved option grants to executive officers

previously approved by the Compensation Committee for an aggregate of 107,500 shares at exercise prices of $3.75 ($4.12 for two of the

officers as required by IRS rules).

On February 1, 2023, the Board approved an option grant to purchase 30,000 shares of common stock

at an exercise price of $3.975 per share previously approved by the Compensation Committee to an executive officer for services.

April 30, 2023, 374,664 shares remain in the Plan.

The Company received a favorable verdict on July 13, 2022 from

the Circuit Court, Orange County, Florida, providing for rescission of the Company’s 2017 acquisition of Advanced Health Brands

and recovery by the Company of the 1,400,000 shares (adjusted for a 1-for-4 reverse stock split effective June 23, 2019 and the 7-for-six

forward stock split effective August 15, 2022) of common stock issued in the acquisition, effectively allowing the Company on July 25,

2022 to cancel 1.4M shares of common stock held by the defendants.

On October 31, 2022, the Company filed the Proxy Statement with the

SEC for its Annual Meeting of Stockholders, for the election of directors held on December 9, 2022, in Orlando, Florida.

This Proxy Statement

is available on our website at HTTPS://Nutriband.com/proxy .

Forward Split of our Common Stock.

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.

On August 31, 2020, the Company closed the purchase

of all of the assets of Pocono Coated Products (“PCP”) associated with its Transdermal, Topical, Cosmetic and Nutraceutical

business (the “Assets”).

pursuant to a Purchase Agreement (“Agreement”), entered into on August 31, 2020.

purchase price for the Assets was (i) $6,000,000 paid in shares of the Company’s common stock at a value of the average price of

the previous 90 days at the date of Closing (the “Shares”);

and (ii) a promissory note of the Company in the principal amount

of $1,500,000, which note was repaid in full in October 2021.

Subsequent to the repayment of the note, on October 25, 2021, the Shares

were released from escrow.

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

1,231,200 (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 immediately exercisable, entitles 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 were separately transferred immediately upon issuance.

31, 2023, 457,795 Warrants issued in the IPO have been exercised, with net proceeds to the Company of $2,942,970.

On November 1, 2021, The Board of Directors adopted

the 2021 Employee Stock Option Plan (the “Plan”).

The Company has reserved 408,333 shares to issue and sell upon the exercise

of stock options issued under the Plan.

On November 3, 2021, the Company filed a Registration Statement on Form S-8, to register under

the Securities Act of 1933, as amended, the 408,333 shares of common stock reserved for issuance under the Plan, and on October 12, 2022,

a Post-Effective Amendment to the Form S-8 was filed with the SEC.

In accordance with the Plan, on February 1, 2022, the Company reserved

an additional 233,333 shares and on February 1, 2023, the Company reserved an additional 233,333 shares.

On January 21, 2022, the Board

approved options to purchase 190,751 shares of the Company’s common stock under the Plan issued to executive officers and directors

of the Company at an exercise price of $4.16 ($4.58 per share for two of the officers as required by IRS rules).

On August 1, 2022, the

Board approved option grants previously approved by the Compensation Committee for an aggregate of 137,084 shares of common stock at exercise

prices $4.09 or $4.50 per share depending on IRS rules as applicable to the recipient, on September 30, 2022, approved option issuances

under the Plan for an aggregate of 35,000 shares of common stock at an exercise price of $3.59 per share for services provided by the

independent directors, as previously approved by the Compensation Committee.

On December 8, 2022, the Board approved option grants to

executive officers previously approved by the Compensation Committee for an aggregate of 107,500 shares at exercise prices of $3.75 ($4.12

for two of the officers as required by IRS rules).

On February 1, 2023, the Board approved an option grant to purchase 30,000 shares of

common stock at an exercise price of $3.975 per share previously approved by the Compensation Committee to an executive officer for services.

As of July 31, 2023, 374,666 shares remain in the Plan.

The Company received a favorable verdict on July

13, 2022 from the Circuit Court, Orange County, Florida, providing for rescission of the Company’s 2017 acquisition of Advanced

Health Brands and recovery by the Company of the 1,400,000 shares (adjusted for a 1-for-4 reverse stock split effective June 23, 2019

and the 7-for-six forward stock split effective August 15, 2022) of common stock issued in the acquisition, effectively allowing the Company

on July 25, 2022 to cancel 1.4M shares of common stock held by the defendants.

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.

We 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 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 of common stock 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 authorized 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.

7:6 forward 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 of common stock 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

In connection with the Stock Split, which did not require shareholder approval under the Nevada corporation law, the number of

authorized 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.

On October 31, 2022, the Company filed the Proxy

Statement with the SEC for its Annual Meeting of Stockholders, for the election of directors held on December 9, 2022, in Orlando, Florida.

This Proxy Statement is available on our website at HTTPS://Nutriband.com/proxy .

The Company on July 13, 2023 entered into an amended three-year $5,000,000 credit line facility (replacing the $2,000,000 facility that

we had entered into on March 19, 2023), drawdowns under which bear interest at the rate of 7% per annum.

The credit line provides the

Company with available financing through the FDA approval process and into commercial scale manufacturing, for the Company’s patented

lead product, AVERSA™ Fentanyl, an abuse-deterrent fentanyl transdermal system.

Results of Operations

Three Months Ended April 30, 2023 and 2022

For the three months ended April 30, 2023, we

generated revenue of $476,932 and our costs of revenue were $254,648 resulting in a gross margin of $222,284.

For the three months ended

April 30, 2022, we generated revenue of $477,922 and our costs of revenue were $277,436, resulting in a gross margin of $200,486.

revenue for April 30, 2023, was derived from sales of $401,057 from our Transdermal Patches segment and $75,875 from contract services

from our 4P Therapeutics segment.

Three Months Ended July 31, 2023 and 2022

For the three months ended July 31, 2023, we generated

revenue of $655,928 and our costs of revenue were $356,256 resulting in a gross margin of $299,672.

For the three months ended July 31,

2022, we generated revenue of $456,149 and our costs of revenue were $304,353, resulting in a gross margin of $151,796.

Our revenue for

July 31, 2023, was derived from sales of $566,769 from our Transdermal Patches segment and $89,159 from contract services from our 4P

Therapeutics segment.

The revenue from the Transdermal Patches segment remained relatively constant from the prior year.

increase in demand continued in the subsequent quarter.

Our cost of revenue for our contract research and development services represents

our labor cost plus a modest amount of material costs which we passed on to the client.

Our cost of sales decreased during the period

for our contract services in comparison to the prior year as our main contract has been completed and the balance of the contract is being

recognized with limited additional costs.

For the three months ended April 30, 2023, our

An increase in

demand continued in the subsequent quarter.

Our cost of revenue for our contract research and development services represents our labor

cost plus a modest amount of material costs which we passed on to the client.

Our cost of sales decreased during the period for our contract

services in comparison to the prior year as our main contract has been completed and the balance of the contract is being recognized with

limited additional costs.

For the three months ended July 31, 2023, our

selling, general and administrative expenses were $678,738 primarily legal, accounting and administrative salaries compared to $908,173

for the three months ended April 30, 2022.The increase from 2022 is primarily attributable to non-cash equity-based expenses of approximately

During the three months ended April 30, 2023, the Company incurred

research and development expenses of its Aversa Fentanyl product of $ 400,430, primarily of salaries and increases in development costs

from Kindeva as compared to $117,184 for the three months ended April 30, 2022.

for the three months ended July 31, 2022.The decrease from 2022 is primarily attributable to decreases in non-cash equity-based expenses

and administrative salaries.

During the three months ended July 31, 2023, the

Company incurred research and development expenses of its Aversa Fentanyl product of $ 445,122, primarily of salaries and increases in

development costs from Kindeva as compared to $277,869 for the three months ended July 31, 2022.

We incurred interest expense of $9,235 for the

three months ended April 3, 2023, as compared to $4,110 for the three months ended April 30, 2022.

three months ended July 31, 2023, as compared to $4,429 for the three months ended July 31, 2022.

As a result of the foregoing, we sustained a net

loss of $1,015,229 or $(0.13) per share (basic and diluted) for the three months ended April 30, 2023, compared with a loss of $689,989,

or $(0.08) per share (basic and diluted) for the three months ended April 30, 2022.

loss of $829,173 or $(0.11) per share (basic and diluted) for the three months ended July 31, 2023, compared with a loss of $1,038,675,

or $(0.12) per share (basic and diluted) for the three months ended July 31, 2022.

Six Months Ended July 31, 2023 and 2022

For the six months ended July 31, 2023, we generated

revenue of $1,132,860 and our costs of revenue were $610,904 resulting in a gross margin of $521,956.

For the six months ended July 31,

2022, we generated revenue of $934,071 and our costs of revenue were $581,789, resulting in a gross margin of $352,282.

Our revenue for

July 31, 2023, was derived from sales of $967,826 from our Transdermal Patches segment and $165,034 from contract services from our 4P

Therapeutics segment.

The revenue from the Transdermal Patches segment increased from the prior year.

An increase in demand continued

in the subsequent quarter.

Our cost of revenue for our contract research and development services represents our labor cost plus a modest

amount of material costs which we passed on to the client.

Our cost of sales decreased during the period for our contract services in

comparison to the prior year as our main contract has been completed and the balance of the contract is being recognized with limited

additional costs.

For the six months ended July 31, 2023, our selling,

general and administrative expenses were $1,518,470 primarily legal, accounting and administrative salaries compared to $1,676,624 for

the six months ended July 31, 2022.The decrease from 2022 is primarily attributable to a decrease in salaries and wages offset by an increase

in investor relations expenses.

During the six months ended July 31, 2023, the

Company incurred research and development expenses of its Aversa Fentanyl product of $ 845,552, primarily of salaries and increases in

development costs from Kindeva as compared to $395,683 for the six months ended July 31, 2022.

We incurred interest expense of $12,401 for the

six months ended July 31, 2023, as compared to $8,539 for the six months ended July 31, 2022.

As a result of the foregoing, we sustained a net

loss of $1,844,402 or $(0.24) per share (basic and diluted) for the six months ended July 31, 2023, compared with a loss of $1,728,664,

or $(0.20) per share (basic and diluted) for the six months ended July 31, 2022.

Liquidity and Capital Resources

As of April 30, 2023, we had $1,278,075 in cash

As of July 31, 2023, we had $2,334,553 in cash

and cash equivalents and working capital of $2,399,446, as compared with cash and cash equivalents of $1,985,440 and working capital of

$1,945,132 as of January 31, 2023.

During the three months ended April 30, 2023, the Company entered into a three year Credit Line Note

facility for $2 million, to fund its research and development of its Aversa Fentanyl product.

For the three months ended April 30, 2023, we

used cash of $749,864 in our operations.

During the six months ended July 31, 2023, the Company on March 19, 2023, entered into a three-year

Credit Line Note facility for $2 million, to fund its research and development of its Aversa Fentanyl product, and an amendment thereto

on July 13, 2023, increasing the amount available under the credit line.

At July 31, 2023, the Company had drawn down a total of $2,000,000

under the credit line.

For the six months ended July 31, 2023, we used

cash of $1,744,999 in our operations.

The principal adjustments to our net loss of $1,844,402 were depreciation and amortization of $150,511,

and the issuance of employee stock options and warrants for services in the amount of $162,120.

For the three months ended April 30, 2023, we

used cash in investing activities of $2,624 primarily for the purchase of equipment.

For the three months ended April 30, 2023, we

provided cash in financing activities of $45,123 primarily from the proceeds of $50,000 from its line of credit, offset from the payment

on notes of $4,877.

For the six months ended July 31, 2023, we used

cash in investing activities of $2,624 primarily for the purchase of equipment.

For the six months ended July 31, 2023, we provided

cash in financing activities of $2,096,736 primarily from the proceeds of $2,000,000 from its line of credit and $106,528 from a factoring

arrangement, offset from the payment on notes of $9,792.

Off Balance Sheet Arrangements

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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 April 30, 2023, the Company had cash and cash equivalents of

$1,278,075 and working capital of $1,209,099.

For the three months ended April 30, 2023, the Company incurred an operating loss of $1,015,229

and used cash flow from operations of $749,864.

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

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 July 31, 2023, the Company had cash and

cash equivalents of $2,334,553 and working capital of $2,399,446.

For the six months ended July 31, 2023, the Company incurred an operating

loss of $1,844,402 and used cash flow from operations of $1,744,999.

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.

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.

In March 2023, the Company

entered into a three-year $2,000,000 Credit Line Note facility which will permit the Company to draw down on the credit line to fund the

Company’s research and development of its Aversa product.

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;

it is too early to know the full impact of COVID-19 or its timing on a return to normal operations.

Management believes the substantial doubt

about the ability of the Company to continue as a going concern is alleviated by the above assessment.

however, it is too early to

know the full impact of COVID-19 or its timing on a return to normal operations.

In March 2023, the Company entered into a three-year $2,000,000 Credit Line Note facility, amended on July 13, 2023, to increase the credit

line to $5 million, which will permit the Company to draw down on the credit line to fund the Company’s research and development

of its Aversa product.

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

however, it is too early to know the full impact of COVID-19 or its timing on a return to normal operations.

Management believes the substantial doubt about

the ability of the Company to continue as a going concern is alleviated by the above assessment.

however, it is too early to know the

full impact of COVID-19 or its timing on a return to normal operations.

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.

results could differ from those 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:

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 from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the accounting standards for revenue

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.

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 years ended January 31, 2023 and 2022, the Company recorded

no bad debt expense for doubtful accounts related to account 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 six months ended July 31, 2023 and 2022,

the Company recorded bad debt expense of $11,836 and $-0-, respectively, for doubtful accounts related to account receivable related to

a factoring arrangement.

Inventories are valued at the lower of cost and

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costs, direct labor costs and other direct costs and related production overheads (based on normal operating capacity).

As of April 30,

As of July 31,

2023, total inventory was $156,921, consisting of work-in-process of $34,467 and raw materials of $122,454.

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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

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.

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

Under the guidance, other intangible assets with definite lives are amortized over their estimated useful lives.

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 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 years ended

January 31, 2023 and 2022, the Company recorded an impairment charge of $327,326 and $2,180,836, respectively, reducing the Active Intelligence

LLC Goodwill to $3,302,478.

As of April 30, 2023 and January 31 2023, Goodwill amounted to $5,021,713 and $5,021,713, respectively.

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 years ended January 31, 2023 and 2022, the Company recorded an impairment charge of $327,326 and $2,180,836,

respectively, reducing the Active Intelligence LLC Goodwill to $3,302,478.

As of July 31, 2023 and January 31 2023, Goodwill amounted

to $5,021,713 and $5,021,713, respectively.

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.

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 April 30, 2023, and 2022, there were 1,783,373 and 1,626,373 common stock equivalents outstanding, that

were not included in the calculation of dilutive earnings per share as their effect would be anti-dilutive.

Basic earnings per share of common stock is computed

by dividing net earnings by the weighted average number of shares of common stock outstanding during the period.

Diluted earnings

per share is computed by dividing net earnings by the weighted average number of shares of common stock and potential shares of common

stock outstanding during the period.

Potential shares of common stock consist of shares issuable upon the exercise of outstanding

options and common stock purchase warrants.

As of July 31, 2023, and 2022, there were 1,783,373 and 1,570,955 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.

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.

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.

Research and Development Expenses

Research and development costs are expensed as incurred.

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.

Research and development costs are expensed as

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.

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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

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What changed 10-Q

Item 2. Management’s Discussion and Analysis