NutriBand Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA NUTRIBAND INC. January 31, 2024 Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID: 3627 ) F-2 Consolidated Balance Sheet as of January 31, 2024 and 2023 F-3 Consolidated Statements of Operations for the years ended January 31, 2024 and 202 3 F-4 Consolidated Statements of Changes in Stockholder’s Equity for the years ended January 31,2024 and 202 3 F-5 Consolidated Statements of Cash Flows for the years ended January 31, 2024 and 202 3 F-6 Notes to Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Nutriband Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Nutriband Inc. (“the Company”) as of January 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended January 31, 2024 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended January 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. Long-Lived Asset Impairment Assessment Critical Audit Matter Description As described in note 2 to the consolidated financial statements, the Company performs impairment testing for its long-lived assets when events or changes in circumstances indicate that its carrying amount may not be recoverable and exceeds its fair value. Due to challenging industry and economic conditions, the Company tested its long-lived assets during the year ended January 31, 2024. The Company’s evaluation of the recoverability of these long-lived asset groups involved comparing the undiscounted future cash flows expected to be generated by these long-lived asset groups to their respective carrying amounts. The Company’s recoverability analysis requires management to make significant estimates and assumptions related to cash flows over the remaining useful life of these long-lived asset groups. We identified the evaluation of the recoverability analysis for the long-lived assets in the 4P Therapeutics asset group as a critical audit matter because of the significant estimates and assumptions management used in the related cash flow analysis. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort. How the Critical Audit Matter was Addressed in the Audit Our audit procedures related to the following: ● Testing management’s process for developing the undiscounted cash flow model. ● Evaluating the appropriateness of the undiscounted cash flow models used by management. ● Testing the completeness and accuracy of underlying data used in the undiscounted cash flow model. ● Evaluating the significant assumptions used by management, including assumptions related to current and planned costs, future revenues, gross margin and other operating expenses to discern whether they are reasonable considering (i) the current and past performance of the entity; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. ● Professionals with specialized skill and knowledge were utilized by the Firm to assist in the evaluation of the undiscounted cash flow model and underlying assumptions. /s/ Sadler, Gibb & Associates, LLC We have served as the Company’s auditor since 2016. Draper, UT April 30, 2024 F- 2 NUTRIBAND INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS January 31, 2024 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 492,942 $ 1,985,440 Accounts receivable 148,649 113,045 Inventory 168,605 229,335 Prepaid expenses 211,667 365,925 Total Current Assets 1,021,863 2,693,745 PROPERTY & EQUIPMENT-net 774,924 897,735 OTHER ASSETS: Goodwill 5,021,713 5,021,713 Operating lease right of use asset 31,374 62,754 Intangible assets-net 667,280 780,430 TOTAL ASSETS $ 7,517,154 $ 9,456,377 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 680,132 $ 534,679 Deferred revenue 157,502 162,903 Operating lease liability-current portion 34,276 31,291 Notes payable-current portion 127,183 19,740 Total Current Liabilities 999,093 748,613 LONG-TERM LIABILITIES: Note payable-net of current portion 79,826 100,497 Note payable-related party - - Operating lease liability-net of current portion - 34,277 Total Liabilities 1,078,919 883,387 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; 8,869,870 and 7,843,150 shares issued at January 31,2024 and 2023, respectively, 8,859,870 and 7,833,150 shares outstanding as of January 31, 2024 and 2023, respectively 8,860 7,833 Additional paid-in-capital 34,442,339 31,092,807 Accumulated other comprehensive loss ( 304 ) ( 304 ) Treasury stock, 10,000 and 10,000 shares at cost, respectively ( 32,641 ) ( 32,641 ) Accumulated deficit ( 27,980,019 ) ( 22,494,705 ) Total Stockholders’ Equity 6,438,235 8,572,990 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 7,517,154 $ 9,456,377 See notes to consolidated financial statements F- 3 NUTRIBAND INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended January 31, 2024 2023 Revenue $ 2,085,314 $ 2,079,609 Costs and expenses: Cost of revenues 1,223,209 1,329,200 Research and development 1,960,425 982,227 Goodwill impairment - 327,326 Selling, general and administrative 3,773,606 3,916,041 Total Costs and Expenses 6,957,240 6,554,794 Loss from operations ( 4,871,926 ) ( 4,475,185 ) Other income (expense): Interest income 16,850 - Loss on extinguishment of debt ( 554,423 ) - Interest expense ( 75,815 ) ( 8,289 ) Total other income (expense) ( 613,388 ) ( 8,289 ) Loss before provision for income taxes ( 5,485,314 ) ( 4,483,474 ) Provision for income taxes - - Net loss $ ( 5,485,314 ) $ ( 4,483,474 ) Net loss per share of common stock-basic and diluted $ ( 0.69 ) $ ( 0.53 ) Weighted average shares of common stock outstanding - basic and diluted 7,954,105 8,459,547 See notes to consolidated financial statements F- 4 NUTRIBAND INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Accumulated Common Stock Additional Other Number of Paid In Comprehensive Accumulated Treasury Year Ended January 31, 2024 Total shares Amount Capital Income(Loss) Deficit Stock Balance, February 1, 2023 $ 8,572,990 7,833,150 $ 7,833 $ 31,092,807 $ ( 304 ) $ ( 22,494,705 ) $ ( 32,641 ) Warrants issued for services 242,840 242,840 Options issued for services 499,856 - - 499,856 - - - Issuance of common stock for note payable and interest 2,607,863 1,026,720 1,027 2,606,836 Net loss for the year ended January 31, 2024 ( 5,485,314 ) - - - - ( 5,485,314 ) - Balance, January 31, 2024 $ 6,438,235 8,859,870 $ 8,860 $ 34,442,339 $ ( 304 ) $ ( 27,980,019 ) $ ( 32,641 ) Accumulated Common Stock Additional Other Number of Paid In Comprehensive Accumulated Treasury Year Ended January 31, 2023 Total shares Amount Capital Income(Loss) Deficit 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 113,155 33,471 32 3,746 - - 109,377 Treasury stock and warrants issued for termination agreement 174,025 25,000 25 92,545 81,455 Treasury stock repurchased ( 119,006 ) ( 35,584 ) ( 35 ) 35 - - ( 119,006 ) Options issued for services 732,130 732,130 Net loss for the year ended January 31, 2023 ( 4,483,474 ) - - - - ( 4,483,474 ) - Balance, January 31, 2023 $ 8,572,990 7,833,150 $ 7,833 $ 31,092,807 $ ( 304 ) $ ( 22,494,705 ) $ ( 32,641 ) See notes to consolidated financial statements F- 5 NUTRIBAND INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended January 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 5,485,314 ) $ ( 4,483,474 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 287,722 330,143 Operating lease expense 31,380 38,813 Loss on extinguishment of debt 554,423 - Reserve for doubtful accounts 118,365 - Treasury stock issued for services - 113,155 Treasury stock and warrants issued for termination agreement - 174,025 Goodwill impairment - 327,326 Stock-based compensation-warrants 242,840 - Stock-based compensation-options 499,856 732,130 Changes in operating assets and liabilities: Accounts receivable ( 153,969 ) ( 41,665 ) Prepaid expenses 154,258 4,547 Inventories 60,730 ( 97,687 ) Deferred revenue ( 5,401 ) 56,636 Operating lease liability ( 31,292 ) ( 36,287 ) Accounts payable and accrued expenses 198,893 ( 104,860 ) Net Cash Used In Operating Activities ( 3,527,509 ) ( 2,987,198 ) Cash flows from investing activities: Purchase of equipment ( 51,761 ) ( 79,304 ) Net Cash Used in Investing Activities ( 51,761 ) ( 79,304 ) Cash flows from financing activities: Proceeds from note payable-related party 2,000,000 - Proceeds from secured borrowing liability 106,528 - Proceeds from exercise of warrants - 296,875 Payment on note payable ( 19,756 ) ( 17,795 ) Purchase of treasury stock - ( 119,006 ) Net Cash Provided by Financing Activities 2,086,772 160,074 Net change in cash ( 1,492,498 ) ( 2,906,428 ) Cash and cash equivalents - Beginning of period 1,985,440 4,891,868 Cash and cash equivalents - End of period $ 492,942 $ 1,985,440 Supplementary information: Cash paid for: Interest $ 7,352 $ 4,266 Income taxes $ - $ - Supplemental disclosure of non-cash investing and financing activities: Adoption of ASC 842 Operating lease asset and liability $ - $ 94,134 Promissory note on equipment purchase $ - $ 22,794 Common stock returned in settlement $ - $ 1,400 Issuance of common stock for extinguishment of debt $ 2,607,863 $ - See notes to consolidated financial statements F- 6 NUTRIBAND INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements as of and for the Years Ended January 31, 2024 and 2023 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 contract development and manufacturing organization with unique process capabilities and experience focused on coated product manufacturing. Pocono helps their customers 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 for transdermal or topical use. F- 7 2. SUMMARY OF SIGNIFICANT 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. 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 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 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 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 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. Management believes the substantial doubt about the ability of the Company to continue as a going concern is alleviated by the above assessment. F- 8 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 under Pocono Pharmaceuticals Inc. The wholly owned subsidiaries are as follows: Nutriband Ltd. 4P Therapeutics LLC Pocono Pharmaceuticals Inc. 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: ● Contract development and manufacturing services for consumer health transdermal, topical and tape products with revenues listed under sale of goods ● Product revenues derived from the sale of the Company’s consumer transdermal, topical and tape products with sales listed under sale of goods ● Contract 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. F- 9 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: Years Ended January 31, 2024 2023 Revenue by type Sale of goods $ 1,920,280 $ 1,785,507 Services 165,034 294,102 Total $ 2,085,314 $ 2,079,609 Years Ended January 31, 2024 2023 Revenue by geographic location: United States $ 2,085,314 $ 2,079,609 Foreign - - $ 2,085,314 $ 2,079,609 Cash and cash equivalents. Cash and cash equivalents include cash on hand, cash on deposit in money market accounts. The Company considers short-term highly liquid investments with an original maturity date of three months or less that are not part of an investment pool to be cash equivalents. As of January 31, 2024, the Company has no balances that exceed federally insured limits. 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 the required payments. The Company determines its allowances by both the 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 receivable. 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, 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. F- 10 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 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 $ 134,691 . As of January 31, 2023, total inventory was $ 229,335 , consisting of work-in-process of $ 11,021 and raw materials of $ 218,334 . 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 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 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. F- 11 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 January 31, 2024, and 2023, there were 2,157,873 and 1,778,006 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. 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 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. F- 12 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 accounts receivable, prepaid expenses, accounts payable and accrued expenses, and deferred revenue approximate their fair value due to the short maturities of these financial instruments. Recent Accounting Standards In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), The ASU introduces a new credit loss methodology. Current Expected Credit Loss (“CECL”), which requires earlier recognition of credit losses, which also provides additional transparency about credit risk. Since its original issuance in 2016, the FASB has issued several updates to the original ASU. The Company adopted ASU 2016-13 during the year ended January 31, 2024. The adoption of ASU 2016-13 did not have a material impact on the Company’s balance sheet or statement of operations. F- 13 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 January 31, 2024 2023 Lab equipment $ 144,585 $ 144,585 Machinery and equipment 1,292,389 1,240,628 Furniture and fixtures 19,643 19,643 1,456,617 1,404,856 Less: Accumulated depreciation ( 681,693 ) ( 507,121 ) Net Property and Equipment $ 774,924 $ 897,735 Depreciation expenses amounted to $ 174,572 and $ 183,660 for the years ended January 31, 2024, and 2023, respectively. During the years ended January 31, 2024, and 2023, depreciation expenses of $ 131,360 and $ 139,689 , respectively, have been allocated to cost of goods sold. 4. INCOME TAXES The Company adopted the provisions of ASC 740, “Income Taxes, (“ASC 740”). As a result of the implementation of ASC 740, the Company recognized no adjustment in the net liability for unrecognized income tax benefits. The Company believes there are no potential uncertain tax positions, and all tax returns are correct as filed. Should the Company recognize a liability for uncertain tax positions, the Company will separately recognize the liability for uncertain tax positions on its balance sheet. Included in any liability or uncertain tax positions, the Company will also set up a liability for interest and penalties. The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of the current provision for income taxes. There is no U.S. tax provision due to losses from U.S. operations for the years ended January 31, 2024 and 2023. Deferred income taxes are provided for the temporary differences between the financial reporting and tax basis of the Company’s assets and liabilities. The principal item giving rise to deferred taxes is the net operating loss carryforward in the U.S. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has set up a valuation allowance for losses for certain carryforwards that it believes may not be realized. F- 14 The provision for income taxes consists of the following: Years Ended January 31, 2024 2023 Current Federal $  - $ - Foreign - - Deferred Federal - - Foreign - - A reconciliation of taxes on income computed at the federal statutory rate to amounts provided is as follows: Years Ended January 31, 2024 2023 Book Income (loss from operations) $ ( 1,151,916 ) $ ( 941,530 ) Common stock issued for services 155,966 168,768 Impairment expense - 68,738 Unused operating losses 995,950 704,024 Income tax expense $ - $ - As of January 31, 2024, the Company recorded a deferred tax asset associated with a net operating loss (“NOL”) carryforward of approximately $ 15,800,000 that was fully offset by a valuation allowance due to the determination that it was more likely than not that the Company would be unable to utilize those benefits in the foreseeable future. The Company’s NOL expires in 2041. The tax effect of the valuation allowance increased by approximately $ 1,151,916 during the year ended January 31, 2024. On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) significantly revised U.S. corporate income tax law by, among other things, reducing the corporate rate from 34 % to 21 %. Because the Company recognizes a valuation allowance for the entire balance, there is no net impact on the Company’s balance sheet or results of operations. F- 15 The types of temporary differences between tax basis of assets and liabilities and their financial reporting amounts that give rise to the deferred tax liability and deferred tax asset and their approximate tax effects are as follows: January 31, 2024 2023 Net operating loss carryforward (expire through 2040) $ ( 3,312,698 ) $ ( 2,316,748 ) Stock issued for services $ ( 1,455,848 ) ( 1,299,882 ) Intangible impairment expense $ ( 1,051,714 ) ( 1,051,714 ) Valuation allowance $ 5,820,260 4,668,344 Net deferred taxes $ - $ - 5. NOTES PAYABLE Notes Payable Active Intelligence, entered into an agreement with the Carolina Small Business Development Fund for a line of credit of $ 160,000 due October 16, 2028 , 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, 2024, the Company made $ 15,378 of principal payments. As of January 31, 2024, the amount due was $ 85,249 , of which $ 16,129 is current. As of January 31, 2023, the amount due was $ 100,627 . 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 $ 410 per month. The loan is secured by automobile. As of January 31, 2024, the amount due was $ 15,232 of which $ 4,456 is current. As of January 31, 2023, the amount due was $ 19,610 . Note payable-related party. On July 17, 2023, the Company entered an amended Credit Line Note agreement, for an increased $ 5,000,000 credit line facility Note, with TII Jet Services LDA, a shareholder of the Company (replacing the $ 2,000,000 facility with the same lender that the Company entered on March 17, 2023). Outstanding advances under the Note bears interest at 7 % per annum. The promissory note is due and payable in full on March 19, 2026. Interest is payable annually on December 31 of each year during the term of the note. During the year ended January 31, 2024, the Company received $ 2,000,000 on the Note. In December 2023, the Company converted the balance of the credit facility of $ 2,000,000 and $ 53,476 of accrued interest into 1,026,520 shares of common stock. The fair value of the common stock was $ 2,554,423 resulting in a $ 554,423 loss on extinguishment. As of January 31, 2024, the balance due was $- 0 -. The Company recorded interest expense of $ 60,453 for the year ended January 31, 2024. Secured borrowing liability. The Company entered into an accounts receivable sale agreement for one of its subsidiaries in connection with a bankruptcy claim. The Company received $ 106,528 and recorded the transaction as a secured loan payable against the account receivable. The sale of the account receivable balance was to an outside third party, whereby if the bankruptcy court does not pay the balance in full, the Company will owe back the unpaid portion. The loan is classified as a current liability as the Company expects the bankruptcy will be resolved in the next twelve months. The loan bears interest at 10 %. For the year ended January 31, 2024, the Company recorded interest expense of $ 5,470 . Interest expenses for the year ended January 31, 2024, and 2023, were $ 75,815 and $ 6,289 , respectively. F- 16 6. INTANGIBLE ASSETS As of January 31, 2024, and 2023, intangible assets consisted of intellectual property and trademarks, customer base, and license agreement, net of amortization, as follows: January 31, 2024 2023 Customer base $ 314,100 $ 314,100 Intellectual property and trademarks 817,400 817,400 Total 1,131,500 1,131,500 Less: Accumulated amortization ( 464,220 ) ( 351,070 ) Net Intangible Assets $ 667,280 $ 780,430 In February 2021, the Company acquired an IP license from Rambam Med-Tech Ltd. for $ 50,000 . 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 issued 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. The Company recorded a termination expense of $ 174,025 during the year ended January 31, 2023. Which is included in selling, general and administrative expenses. The Company expensed the balance of the agreement of $ 33,334 during the year ended January 31, 2023, which is included in selling, general and administrative expenses. Amortization expenses for the years ended January 31, 2024, and 2023 amounted to $ 113,150 and $ 146,483 , respectively. Year Ended January 31, 2025 $ 113,109 2026 113,109 2027 113,109 2028 113,109 2029 113,109 2030 and thereafter 101,735 $ 667,280 7. RELATED PARTY TRANSACTIONS Activity during the year ended January 31, 2024 a) On February 1, 2023, options to purchase 30,000 shares of the Company’s common stock were issued to an executive of the Company at a price of $ 3.975 per share. The options vest immediately and expire in three years . The fair value of the options issued for services amounted to $ 75,030 and was expensed during the year ended January 31, 2024. F- 17 b) In September and October 2023, options to purchase 374,500 shares of common stock to executives and directors of the Company at a price of $ 1.93 , $ 2.12 and $ 2.65 per share. The options vest immediately and expire in three years . The fair value of the options issued amounted to $ 424,826 and was expensed during the year ended January 31, 2024. c) On October 26, 2023, warrants to purchase 87,500 shares of the Company’s common stock were issued to the Chief Financial Officer at a price of $ 1.93 per share. The warrant expires in three years . The fair value of the warrants issued amounted to $ 93,450 and was expensed during the year ended January 31, 2024. d) On July 17, 2023, the Company entered an amended Credit Line Note facility with TII Jet Services LDA, a shareholder of the Company, for a credit facility of $ 5 million (replacing the $ 2,000,000 facility with the same lender that the Company entered on March 17, 2023). See Note 5 for further information. TII Jet Services LDA is owned 100 % by a shareholder of the Company. During the year ended January 31, 2024, the Company received $ 2,000,000 from the credit facility. In December 2023, TII Jet Services LDA converted the balance of the credit facility of $ 2,000,000 and $ 53,436 of accrued interest into 1,026,520 shares of the Company’s common stock. Activity during the year ended January 31, 2023 a) In May 2022, the Company issued stock awards to the Company’s CEO and the 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 a compensation expense of $ 53,200 in connection with the issuance of the shares. b) 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 $ 399,075 and was expensed during the year ended January 31, 2023. c) 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 five years . The fair value of the options issued for services amounted to $ 85,995 and was expensed during the year ended January 31, 2023 d) On December 7, 2022, options to purchase 107,500 shares of the Company’s common stock were issued to executives of the Company at prices of $ 3.53 and $ 3.88 per share. The options vest immediately and expire in three years . The fair value of the options issued amounted to $ 245,170 and was expensed during the year ended January 31, 2023. 8. 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. F- 18 Common Stock On June 25, 2019, the Company effected a one-for-four reverse stock split, pursuant to which each outstanding share of common stock was changed into 0.25 shares of common stock, and the Company decreased its authorized common stock in the same ratio 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 Board of Directors of the Company approved a 7-for-6 forward stock split, effective for trading purposes as of August 12, 2022, pursuant to which each shareholder as of the August 15, 2022 record date received one (1) additional share for each six (6) shares held as of the record date. Pursuant to the operation of the amendment providing for the forward stock split filed with the Secretary of State of Nevada on August 4, 2022, the authorized common stock of the Company was increased from 250,000,000 shares to 291,666,666 shares in connection with the forward split. Activity during the Year Ended January 31, 2024 (a) As of January 31, 2024, the Company holds 10,000 of its shares comprising $ 32,641 of treasury stock. There was no activity during the year ended January 31, 2024. (b) In December 2024, TII Jet Services LDA converted $ 2,000,000 of its outstanding credit facility and $ 53,436 of accrued interest into 1,026,720 shares of the Company’s common stock. The fair value of the common stock at the date of issuance was $ 2,554,423 , resulting in a $ 554,423 loss on extinguishment. Activity during the Year Ended January 31, 2023 (a) In March and May 2022, the Company purchased 35,584 shares of its common stock for $ 119,006 and recorded the purchase as Treasury Stock. In May and December 2022, the Company issued 33,397 shares of stock awards to management, directors and employees from the treasury shares and recorded compensation expense of $ 113,155 In December 2022, the Company issued 25,000 shares from the treasury shares to non-employees in connection of the termination of the Rambam license agreement. As of January 31, 2023, the Company held 10,000 of its shares comprising $ 32,641 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 11 for further information. F- 19 9. 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 non-employees of the Company during the year ended January 31, 2024. On March 7, 2023, the Company issued 30,000 warrants to purchase the Company’s common shares to Barandnic Holdings Ltd. for services provided. The warrants are exercisable at a price of $ 4.00 per share and expire five years from the date of issuance. On October 27, 2023, the Company issued 145,833 warrants to purchase the Company’s common shares to management ( 87,500 warrants were issued to the Chief Financial Officer) and non-employees of the Company. The warrants are exercisable at a price of $ 1.93 per share and expire in three years from the date of issuance. These warrants replace previously issued warrants that have now been cancelled. The Company used the Black-Scholes valuation model to record the fair value. The valuation model used a dividend rate of 0 %; expected term of 1.5 years; volatility rates of 152.10 - 174.45 %; and a risk-free rate of 4.31 %- 4.84 %. Non-cash compensation for the year ended January 31, 2024, amounted to $ 242,840 . Exercise Remaining Intrinsic Shares Price Life Value Outstanding, January 31, 2022 1,435,622 $ 6.91 3.93 years $ - Granted 25,000 7.50 5.00 years - Expired/Cancelled ( 97,534 ) 5.36 - - Exercised ( 55,417 ) 5.36 - - Outstanding, January 31, 2023 1,307,671 6.43 3.34 years - Granted 175,833 2.28 2.97 years - Expired/Cancelled ( 200,466 ) 6.33 - - Exercised - - - - Outstanding - January 31, 2024 1,283,038 $ 5.88 2.97 years $ 99,166 Exercisable - January 31, 2024 1,283,038 $ 5.88 2.97 years $ 99,166 The following table summarizes additional information relating to the warrants outstanding as of January 31, 2024: Range of Exercise Prices Number Outstanding Weighted Average Remaining Contractual Life(Years) Weighted Average Exercise Price for Shares Outstanding Number Exercisable Weighted Average Exercise Price for Shares Exercisable Intrinsic Value $ 4.00 30,000 4.10 $ 4.00 30,000 $ 4.00 $ - $ 6.43 1,082,205 2.68 $ 6.43 1,082,205 $ 6.43 $ - $ 1.93 145,833 2.74 $ 1.93 145,833 $ 1.93 $ 99,166 $ 7.50 25,000 3.77 $ 7.50 25,000 $ 7.50 $ - F- 20 Option s 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. See Note 7 for the issuance of related party options. On November 1, 2021, the Board of Directors adopted the 2021 Employee Stock Option Plan (the “Plan”). The Company has reserved 408,333 shares for issuance and sale upon the exercise of stock options. 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. The options vest immediately and expire in three years. Under the Plan, options may be granted which are intended to qualify as Incentive Stock Options (“ISO’s”) under Section 422 of the Internal Revenue Code of 1986 (the “Code”) or which are not (“non-ISO’s”) intended to qualify as Incentive Stock Options thereunder. The Plan also provides for restricted stock awards representing shares of common stock that are issued subject to such restrictions on transfer and other incidents of ownership and such forfeiture conditions as the Board of Directors, or the committee administering the Plan composed of directors who qualify as “independent” under Nasdaq rules, may determine. 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. As of January 31, 2024, 166 shares remain available and issuance under the Plan. During the year ended January 31, 2024, 404,500 options to purchase shares of the Company’s common stock were issued to executive officers and employees at prices of $ 1.93 -$ 3.975 per share. The options vest immediately and expire three years from the date of issuance. The fair value of the options issued for services amounted to $ 499,856 and was recorded during the year ended January 31, 2024. The Company used the Black-Scholes valuation model to record the fair value. The valuation model used a dividend rate of 0 %; expected term of 1.5 years; volatility rates of 121.52 - 143.54 %; and a risk-free rate of 3.00 - 4.5 %. During the year ended January 31, 2023, 279,584 options to purchase shares of the Company’s common stock were issued to executive officers and directors of the Company at prices of $ 3.59 to $ 4.50 per share. The options vest immediately and expire three years from the date of issuance. The fair value of the options issued for services amounted to $ 732,130 and was recorded during the year ended January 31, 2023. The Company used the Black-Scholes valuation model to record the fair value. The valuation model used a dividend rate of 0 %; expected term of 1.5 years; volatility rate of 152.10 - 174.45 %; and a risk-free rate of 3 %. The following table summarizes additional information relating to the options outstanding as of January 31, 2024. Shares Exercise Price Remaining Life Intrinsic Value Outstanding, January 31, 2022 190,751 $ 4.26 2.97 years Granted 279,584 3.93 3.00 years - Expired/Cancelled - - - Exercised - - - Outstanding, January 31, 2023 470,335 4.13 2.53 years Granted 404,500 2.18 2.68 years - Expired/Cancelled - - - Exercised - - - Outstanding- January 31, 2024 874,835 $ 3.23 2.31 years $ 214,460 Exercisable - January 31, 2024 874,835 $ 3.23 2.31 years $ 214,460 F- 21 The following table summarizes additional information relating to the options outstanding as of January 31, 2024: Prices Outstanding Life(Years) Shares Outstanding Exercisable Shares Exercisable Value $ 1.93 214,500 2.74 $ 1.93 214,500 $ 1.93 $ 145,860 $ 2.12 140,000 2.74 $ 2.12 140,000 $ 2.12 $ 68,600 $ 2.65 20,000 2.63 $ 2.65 20,000 $ 2.65 $ - $ 3.59 35,000 3.67 $ 3.59 35,000 $ 3.59 $ - $ 3.75 57,500 1.85 $ 3.75 57,500 $ 3.75 $ - $ 3.98 30,000 2.01 $ 3.98 30,000 $ 3.98 $ - $ 4.09 78,750 1.50 $ 4.09 78,750 $ 4.09 $ - $ 4.12 50,000 1.85 $ 4.12 50,000 $ 4.12 $ - $ 4.16 144,083 0.97 $ 4.16 144,083 $ 4.16 $ - $ 4.50 58,334 1.50 $ 4.50 58,334 $ 4.50 $ - $ 4.58 46,668 0.97 $ 4.58 46,668 $ 4.58 $ - 874,835 2.06 $ 3.23 874,835 $ 3.23 $ 214,460 10. SEGMENT REPORTING We organize and manage our business by the following two segments which meet the definition of reportable segments under ASC280-10, Segment Reporting: Sales of Goods and Services. These segments are based on the type of products or services provided and are the same as our business units. Separate financial information is available and regularly reviewed by our chief officer decision maker, in making resource allocation decisions for our segments. Our chief officer decision maker evaluates segment performance to the GAAP measure of gross profit. Years Ended January 31, 2024 2023 Net sales Pocono Pharmaceuticals $ 1,920,280 $ 1,785,597 4P Therapeutics 165,034 294,102 2,085,314 2,079,699 Gross profit Pocono Pharmaceuticals 744,391 726,702 4P Therapeutics 117,714 23,702 862,105 750,404 Operating expenses Selling, general and administrative-Pocono Pharmaceuticals 606,275 577,930 Selling, general and administrative-4P Therapeutics 236,953 103,181 Selling, general and administrative-Corporate 2,930,378 3,234,930 Research and development-4P Therapeutics 1,960,425 982,227 Goodwill impairment-Pocono Pharmacueticals - 327,326 5,734,031 5,225,594 Depreciation and Amortization Pocono Pharmaceuticals $ 222,159 $ 264,156 Corporate 13,986 - 4P Therapeutics 51,577 65,987 $ 287,722 $ 330,143 F- 22 The following table presents information about net sales and property and equipment, net of accumulated depreciation, in the United States and elsewhere. Years Ended January 31, 2024 2023 Net sales United States $ 2,085,314 $ 2,079,699 Outside the United States - - $ 2,085,314 $ 2,079,699 January 31, January 31, 2024 2023 Property and equipment, net of accumulated depreciation United States $ 774,924 $ 897,735 Outside the United States - - $ 774,924 $ 897,735 Assets Corporate $ 344,192 $ 1,745,731 Pocono Pharmaceuticals 5,079,293 5,400,814 4P Therapeutics 2,093,369 2,309,832 $ 7,516,854 $ 9,456,377 11. COMMITMENTS AND CONTIGENCIES Employment Agreements The Company entered into three-year employment agreements with Gareth Sheridan, our CEO, and Serguei Melnik, our President, effective February 1, 2022 . The agreement also provides that the executives will continue as directors and officers of the Company for the respective terms thereof. 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 . 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, AVERSA Fentanyl, based on its proprietary AVERSA abuse deterrent transdermal technology and Kindeva’s FDA-approved transdermal fentanyl patch (fentanyl transdermal system). The feasibility agreement provides for adapting Kindeva’s commercial transdermal manufacturing process to incorporate AVERSA technology in the fentanyl transdermal system. F- 23 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 feasibility Workplan was completed in February 2024. The estimated cost to complete the feasibility Workplan was approximately $ 2.5 million. Nutriband made an advance deposit of $ 250,000 in January 2022, to be applied against the final invoices. As of January 31, 2024, Nutriband has incurred expenses of $ 2,369,508 and the net deposit of $ 138,250 after application to final invoices is included in prepaid expenses. In January 2024, Nutriband signed a commercial development and clinical supply agreement with Kindeva Drug Delivery for development of AVERSA Fentanyl using Kindeva’s FDA-approved fentanyl patch. Kindeva will perform commercial manufacturing process development and clinical supplies manufacturing for the human abuse potential clinical study required by the FDA in support of a New Drug Application. The agreement replaces the previous feasibility agreement between the two companies which was focused on adapting Kindeva’s commercial transdermal manufacturing process to incorporate AVERSA abuse deterrent transdermal technology. The estimated cost to complete the commercial process development and clinical supplies manufacturing is approximately $ 8.1 million and the expected timing of FDA submission is twelve to eighteen months. 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. MDM Worldwide Agreement In September 2022, the Company entered into a public relations agreement with MDM Worldwide. In connection with the agreement, the Company agreed to issue 20,000 options to MDM Worldwide. In October 2023, the contract was mutually terminated, and no options were issued. For the year ended January 31, 2024, the Company paid MDM Worldwide $ 190,000 . Money Channel Agreement On March 13, 2023, the Company entered into a media advertising agreement with Money Channel Inc. The Company will pay a monthly fee and after ninety days can cancel the agreement. The Company, after 90 days, will also issue options to purchase 50,000 shares of common stock to Money Channel Inc. at an exercise price of $ 4.00 per share. In June 2023, the parties agreed to terminate the agreement by mutual consent. No options were issued. For the year ended January 31, 2024, the Company paid the Money Channel $ 100,000 . Sorrento Therapeutics, Inc. Agreement 4P Therapeutics had unpaid account receivables related to a contract clinical research services agreement in place with Sorrento Therapeutics. On February 13, 2023, Sorrento declared Chapter 11 bankruptcy. On July 25, 2023, 4P Therapeutics assigned its claim under the bankruptcy proceedings from Sorrento Therapeutics Inc. and received proceeds of $ 106,528 . The amount due under the claim was $ 118,675 and 4P Therapeutics recorded a reserve for bad debts of $ 118,675 during the year ended January 31, 2024. Under the agreement with the buyer of the claim, 4P Therapeutics will make proportional restitution and/or repayment of the purchase amount to the extent the claim is disallowed, reduced or not paid at the same time or distribution rate as other general unsecured claims against the Debtor are paid. The Company has recorded the amount of the proceeds as a secured loan payable to the factor as of January 31, 2024. F- 24 Upstream Termination On May 24, 2023, the Company sent notice of the termination of the Securities Facility Services Agreement, dated January 3, 2023, by and between MERJ DEP Ltd. And the Company (“Agreement”), which provided for the dual listing of the Company’s common stock on the MERJ Upstream exchange (“Upstream”), which is operated as a fully registered and licensed integrated securities exchange, clearing system and depository for digital and non-digital securities under the Seychelles security laws. The termination was effective May 31, 2023. Legal Proceedings The Company is currently a defendant in a lawsuit initiated by Joseph Gunnar, LLC (“Gunnar”) and Lucosky Brookman LLP (“LB”) in the Supreme Court of the State of New York, New York County, under Index No.654633/2023. The lawsuit alleges multiple allegations such as breach of contract, fraudulent activities, and tortious interference and seeks damages following the Company’s termination of an engagement letter for assistance with a public stock offering. Gunnar is seeking over $ 500,000 in damages plus punitive damages, while LB is demanding reimbursement of legal fees. In response, the Company denies all allegations, alleging that the engagement letter was unenforceable, and its termination was legally justified. The Company has also initiated counterclaims against Joseph Gunnar & Co., accusing them of intentional interference and breach of fiduciary duty, and is seeking $ 1,000,000 for each claim along with a declaratory judgment affirming the legality and justification of the termination. The plaintiffs have denied these counterclaims. Currently, there are no pending hearings or motions as both parties are engaged in discovery and are attempting to resolve the matter amicably. 12. SUBSEQUENT EVENTS (a) In February and April 2024, the Company received proceeds of $ 300,000 from its Credit Line Facility. (b) On March 20, 2024, 390,000 options to purchase shares of the Company’s common stock were issued to executive officers and employees at prices of $ 2.37 -$ 2.61 per share. The options vest immediately and expire three years from the date of issuance. The fair value of the options issued amounted to $ 450,000 . (c) On March 20, 2024, our Board of Directors adopted an amendment to the Company’s Employee 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 1,400,000 shares (the “Amendment”). The Company will submit the Amendment to the Plan to our stockholders for adoption and approval at the 2025 Annual Meeting. If the Amendment is not approved by stockholders within one year of adoption, 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. (d) 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 residing outside the United States and was not registered under the Security Act of 1933, as amended, (the “Security Act”), or the securities law of any jurisdiction, including 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. F- 25 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.