What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-05-01 compared with 2023-04-26 · 266 added, 179 removed, 186 unchanged (71% of the section changed)

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statements as a result of certain factors discussed in “Risk Factors” and elsewhere in this report.

It should be noted that current public health

threats could adversely affect our ongoing or planned business operations.

In particular, the novel coronavirus (COVID-19) has resulted

in quarantines, restrictions on travel and other business and economic disruptions.

We cannot presently predict the scope and severity

of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the partners

and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct

our business in the manner and on the timelines presently planned could be materially and adversely impacted.

The measures being taken

by service providers and government agencies to suppress the spread of COVID-19 infection may delay time to production of our planned

abuse deterrent fentanyl transdermal system product and therefor delay the time of filing with FDA for approval.

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

AVERSA™ Abuse Deterrent Transdermal Products

Our primary business is the development of a

portfolio of transdermal pharmaceutical products.

Our lead product under development is AVERSA Fentanyl, our abuse deterrent fentanyl

transdermal system which will require approval from the Food and Drug Administration (“FDA”) and substantial capital for

research and development.

AVERSA Fentanyl 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

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

from the United States Patent and Trademark Office (USPTO) for its United States patent entitled, “Abuse and Misuse Deterrent Transdermal

System,” that protects our Aversa™ technology platform.

deterrent transdermal products for pharmaceuticals that have a risk of abuse, misuse or accidental exposure.

On September 19, 2023, the United States Patent

and Trademark Office (USPTO) granted US Patent No.

11,759,431 for Nutriband's proprietary AVERSA abuse deterrent technology utilizing

taste aversion to address the primary routes of abuse of opioid based transdermal patches.

The issuance of this patent, entitled, "Abuse

and Misuse Deterrent Transdermal Systems," further expands Nutriband's intellectual property protection in the United States for

its portfolio of AVERSA abuse deterrent transdermal products.

Transdermal Pharmaceutical Products

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

we are primarily focused on providing contract manufacturing services and consulting services to 3 rd party brands with no intention

we are primarily focused on providing contract manufacturing services and consulting services to third party brands with no intention

at this time to launch our own consumer products.

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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.

With the change in our focus, our capital requirements 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.

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

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Company all of the assets associated with its Transdermal, Topical, Cosmetic and Nutraceutical business (the “Assets”).

is the manufacturer of our transdermal consumer products, and we bought that business from them.

was the manufacturer of our transdermal consumer products, and we bought that business from them.

The purchase price for the Assets was

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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 October

31, 2022, 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.

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,, and 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.

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, to be held 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

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 January 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.

Forward Split of our

Common Stock.

We filed the amendment set forth in a Certificate of Change with the Secretary of State of Nevada on August 4, 2022.

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.

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

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.

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.

On December 15, 2023, the Company filed the Proxy

Statement with the SEC for its Annual Meeting of Stockholders, to be held January 21, 2024, in Orlando, Florida.

This Proxy Statement

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

On March 20, 2024, our Board of Directors adopted an amendment to the

Company’s 2021 Employees Stock Option Plan (the “Plan”) increasing the number of shares of common stock subject

to the plan (as of March 20, 2024 875,000 shares) to 1,400,00 shares (the “Amendment”).

The plan adopted by the Board on November

1, 2021, provided for an initial 350,000 shares to issue and sell upon the exercise of stock options issued under the Plan.

provides for an automatic annual increase to be added on February 1 of each year equal to the lesser of (i) 250,000 shares of

Common Equity or (ii) five percent (5%) of the total shares of Common Stock outstanding on such date (including for this purpose

any shares of Common Stock issuable upon conversion of any outstanding capital equity of the Company) or (iii) such lesser number

as determined by the Board.

We will submit the Amendment to the Plan to our stockholders for adoption and approval at the 2025 Annual

If the Amendment is not approved by stockholders within one year of adoption by the increase in shares subject to the Plan will

be void, together with any options issued following March 20, 2024 in the period pending approval of the Plan by our stockholders.

On April 19, 2024, the Company completed

an $8,400,000 equity financing with European investors (the “Offering”) of 2,100,000 units (“Units”), at a price

of $4.00 per Unit, each Unit consisting of one share of common stock (“Shares”) and a Warrant to purchase two Shares of common

stock, the Warrants having an initial exercise price of $6.43, are exercisable by payment of the exercise price in cash only and expire

April 19, 2029, five years from the date of issuance (“Warrants”).

The Offering was made solely to investors resident outside

the United States and was not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities

laws of any jurisdiction, including any jurisdiction outside the United States, but was made privately by the Company pursuant to the

exemptions from registration provided in the SEC’s Regulation S and other exemptions under the Securities Act.

Years Ended January 31, 2024 and 2023

For the year ended January 31, 2024, we generated

revenue of $2,079,609 and our costs of revenue were $1,329,200, resulting in a gross margin of $750,409.

For the year ended January 31,

2022, we generated revenue of $1,422,154 and our costs of revenue were $917,844, resulting in a gross margin of $504,310 in the subsequent

Our revenue for the year ended January 31, 2023, was derived from sales of $1,785,507 from our transdermal patch manufacturing segment

and $294,102 from contract services from our 4P Therapeutics segment.

The increase in revenue of $657,455 from the transdermal patch manufacturing

segment is primarily due to an increase in demand which has continued in the subsequent year.

The transdermal patch manufacturing segment

increased its margin by 3% during the period.

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 sales and cost of sales remained constant

for our contract services compared to the prior year.

revenue of $2,085,314 and our costs of revenue were $1,223,209.

For the year ended January 31, 2023, we generated revenue of $2,079,609

and our costs of revenue were $1,329,200.

Our revenue for the year ended January 31, 2024, included sales of $1,920,280 from contract

manufacturing services performed in our Pocono Pharmaceuticals (Active Intelligence) segment and $165,034 from contract research and

development services from our 4P Therapeutics segment.

The revenue from the Transdermal Patches segment remained relatively constant

from the prior year.

An increase in demand is expected in the subsequent year.

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

during the year 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 year ended January 31, 2024, our selling,

general and administrative expenses were $3,916,041, primarily legal, accounting, administrative salaries and equity-based payments, compared

to $4,022,824 for the year ended January 31, 2022.

The amount remained relatively constant for the prior year.

general and administrative expenses were $3,773,606, primarily legal, accounting, administrative salaries non-cash compensation from the

issuance of warrants and employee stock options, compared to $3,916,041 for the year ended January 31, 2023.

The decrease from 2023 is

primarily due to a decrease in salaries and wages to executives of the Company.

During the years ended January 31, 2024 and 2023,

the Company recorded an impairment expense of $327,326 and $2,180,836, respectively, due to a write down of Goodwill in connection with

its Pocono acquisition.

The write down of goodwill is attributable primarily to the effects of the pandemic.

The valuation of the reporting

unit does not exceed the carrying amount of goodwill using the value in use or the going concern premise.

During the year January 31, 2023, the Company

incurred research and development expenses on its Aversa Fentanyl product of $982,227, primarily of salaries and development costs from

Kindeva as compared to $411,383 for the year ended January 31, 2022.

the Company recorded an impairment expense of $-0- and $327,326, respectively, due to a write down of Goodwill in connection with its

Pocono acquisition.

The write down of goodwill for the year ended January 31, 2023, was attributable primarily to the effects of the pandemic.

As of January 31, 2024, the valuation of the reporting unit exceeds the carrying amount of goodwill using the value in use or the going

concern premise.

During the year ended January 31, 2024, the Company

incurred a gain on extinguishment of debt of $53,028, consisting primarily of forgiveness of a PPP loan.

There was no gain on extinguishment

of debt during the year ended January 31, 2023.

incurred research and development expenses for its Aversa Fentanyl product of $1,960,425, primarily due to labor and material costs incurred

at our contract manufacturer, Kindeva Drug Delivery, as compared to $982,227 for the year ended January 31, 2023.

During the year ended January 31, 2024, the Company

incurred a loss on extinguishment of debt of $554,423, consisting primarily of the loss on the conversion of $2,000,000 of credit line

note into 1,026,750 shares of the Company’s common stock.

There was no gain or loss on extinguishment of debt during the year ended

January 31, 2023.

We incurred interest expense of $75,815 for the

year ended January 31, 2023, as compared to $118,421 for the year ended January 31, 2022, primarily from the amortization of debt discounts.

As a result of the foregoing, we sustained a net loss of $4,483,474,

or $(0.53) per share (basic and diluted) for the year ended January 31, 2023, compared with a loss of $6,372,715, or $(0.80) per share

(basic and diluted) for the year ended January 31, 2022.

The net loss for 2022 includes a deemed dividend of $196,589 from the settlement

of a warrant round down.

year ended January 31, 2024, as compared to $6,289 for the year ended January 31, 2023.

The increase is primarily due to interest on the

Company’s related party credit line note.

As a result of the foregoing, we sustained a net

loss of $5,485,314, or $(0.69) per share (basic and diluted) for the year ended January 31, 2024, compared with a loss of $4,483,474,

or $(0.53) per share (basic and diluted) for the year ended January 31, 2023.

Liquidity and Capital Resources

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as of January 31, 2023.

The Company received proceeds of approximately $8.8 million from the completion of its public offering,

exercise of warrants and the sale of common stock during the year ended January 31, 2022.

For the year ended January 31, 2023, we used cash of $2,987,198 in

our operations.

The principal adjustments to our net loss of $4,483,474 were depreciation and amortization of $330,143, and stock-based

compensation of $1,019,310, and goodwill impairment of $327,326.

During the year ended January 31, 2024, the Company on March 19, 2023, entered a three-year Credit Line Note facility

for $2 million, to fund its research and development of its Aversa Fentayl product and an amendment thereto on July 13, 2023, increasing

the amount under the credit line to $5 million.

During 2024, the Company drew down a total of $2,000,000 under the credit line.

2023, the $2,000,000 was converted into shares of the Company’s common stock.

On April 19, 2024, the Company completed an

$8,400,000 equity financing with European investors (the “Offering”) of 2,100,000 units (“Units”), at a price

of $4.00 per Unit, each Unit consisting of one share of common stock (“Shares”) and a Warrant to purchase two Shares of common

For the year ended January 31, 2024, we used cash

of $3,527,509 in our operations.

The principal adjustments to our net loss of $5,485,314 were depreciation and amortization of $287,722,

net loss on extinguishment of debt of $554,423 and stock-based compensation of $742,696.

For the year ended January 31, 2024, we used cash

in investing activities of $51,761 primarily for the purchase of equipment.

For the year ended January 31, 2023, we provided cash in financing

activities of $160,074, primarily from the proceeds of $296,875 from the exercise of warrants, offset from the purchase of treasury stock

For the year ended January 31, 2022, we had cash flows of $7,630,693 from financing activities, primarily $9.4 million from

the completion of our public offering, exercise of warrants, and gross proceeds from the sale of common stock offset by a payment on long-term

debt of $1.5 million and the repurchase of treasury stock.

For the year ended January 31, 2024, we provided

cash in financing activities of $2,086,772, primarily from the proceeds of $2,000,000 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 $19,756.

For the year ended January 31, 2023, we

had cash flows of $160,074 from financing activities, primarily of $296,875 from the exercise of warrants, offset by a payment on notes

and the repurchase of treasury stock.

Off Balance Sheet Arrangements

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Critical Accounting Policies

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.

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

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

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and management has the proper authority to execute them within the look-forward period.

As of January 31, 2023, the Company had cash and cash equivalents of

$1,985,440 and working capital of $1,945,132.

For the year ended January 31, 2023, the Company incurred an operating loss of $4,483,474

and used cash flow from operations of $2,987,198.

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 $2,942,970 proceeds from the exercise of

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 Creditline Note facility for $2 million which will permit the Company to draw on the credit line

to fund the Company’s research and development of its Aversa Fentanyl product.

As of January 31, 2024,

the Company had cash and cash equivalents of $492,942 and working capital of $22,770.

For the year ended January 31, 2024, the Company

incurred a net loss from operations of $4,871,926 and used cash flow from operations of $3,527,509.

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 has also

received to date $3,239,845 in 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 with a

related party, amended on July 13, 2023, to $5,000,000, which will permit the Company to draw down on the credit line to fund the Company’s

research and development of its Aversa product.

The Company was advanced $2,000,000, all of which was settled by the issuance of common

stock during the year ended January 31, 2024.

The $2,000,000 of debt and accrued interest was converted into 1,026,720 shares of the Company’s

common stock.

On April 19, 2024, the Company received proceeds of $8,400,000 from a private placement of its common stock.

Management has prepared

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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.

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 Pharmaceuticals (Active Intelligence) are included in the Company’s financial statements

from the date of acquisition of September 1, 2020 under Pocono Pharmaceuticals Inc.

The wholly owned subsidiaries are as follows:

Nutriband Ltd.

4P Therapeutics LLC

Pocono Pharmaceuticals

Use of Estimates

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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:

development and manufacturing services for consumer health transdermal, topical and tape

products with revenues listed under sale of goods

revenues derived from the sale of the Company’s consumer transdermal, topical and tape

products with sales listed under sale of goods

research and development services for pharmaceuticals and medical devices for life sciences

customers with revenues listed under services

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.

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.

Cash and cash equivalents

Cash equivalents are

short-term, highly liquid investments that have a maturity of three months or less.

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 the 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, 2024, and 2023, the Company recorded bad debt expenses of $118,364 and $-0-, respectively, for doubtful accounts related to accounts

During the year ended January 31, 2024, the Company entered into an accounts receivable sale agreement for one of its subsidiaries.

The Company received $106,528 in funds against an account receivable that is currently a claim in bankruptcy.

The net accounts receivable

remain on the books of the Company and a corresponding amount has been included as a secured borrowing liability under Notes payable.

As of January 31, 2024, the receivable has been reserved in full.

If the bankruptcy claim is not paid in full by the debtor, the Company

is obligated to pay any difference to the factor.

The loan bears interest at 10%.

The Company adopted ASU 2016-13 during 2023 and implemented

the guidance on expected credit losses.

Inventories are valued

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is comprised of material costs, direct labor costs and other direct costs and related production overheads (based on normal operating

As of January 31, 2023 and 2022, 100% of the inventory consists of raw materials.

As of January 31, 2024, total inventory was $168,605, consisting of work-in-process of $7,466, finished goods of $8,707 and

raw materials of $152,717.

As of January 31, 2023, total inventory was $229,335, consisting of work-in-process of $11,021 and raw materials

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

Furniture and fixtures

and equipment

Intangible Assets

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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.

During the years ended January 31, 2024, and 2023, the Company recorded an impairment charge

of $-0- and $327,326, respectively, reducing the Active Intelligence LLC Goodwill to $3,302,478.

As of January 31, 2024, and 2023, Goodwill

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718 was applied to stock-based compensation for both employees and non-employees.

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

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.

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.

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

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make an adjustment to the valuation allowance which would reduce the provision for income taxes.

Concentration of

Financial instruments

which potentially subject the Company to concentrations of credit risk consist principally of cash.

The Company’s cash and cash

equivalents are concentrated primarily in banks.

At times, such deposits could be in excess of insured limits.

Management believes that

the financial institutions that hold the Company’s financial instruments are financially sound and, accordingly, minimal credit

risk is believed to exist with respect to those financial interests.

As of and for the year ended January 31, 2023, two customers accounted

for 34% and 14% of the Company’s revenue and one customer accounted for 94% of accounts receivable.

As of and for the year ended

January 31, 2022, three customers accounted for 19%, 17% and 13% of the Company’s revenue and three customers accounted for 58%,

21% and 17% of accounts receivable.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis