What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-31 compared with 2023-12-13 · 289 added, 254 removed, 145 unchanged (79% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

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operations and prospects.

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.

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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

over-allotment option was exercised for 184,800 warrants to purchase shares of common stock bringing the total net proceeds to the Company

from the IPO to $5,836,230.

The shares of common stock and Warrants were separately transferred immediately upon issuance.

As of October

30, 2023, 457,794 Warrants issued in the IPO have been exercised, with net proceeds to the Company of $2,942,970.

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

On January 21, 2022, the Board

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

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

On August 1, 2022, the

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

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

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

independent directors, as previously approved by the Compensation Committee.

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

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

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

During the nine months ended October 31, 2023, the Board approved option grants to

purchase 404,500 shares of common stock at exercise prices of $1.93-$3.975 per share previously approved by the Compensation Committee

to executive officers and employees for services.

As of October 31, 2023, 166 shares remain in the Plan.

See Note 8 for further information.

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.

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 Meeting.

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.

As of April 30, 2024, 135,165 shares remain available for issuance of options under the Plan.

The Company received a favorable verdict on July

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fentanyl transdermal system.

On December 27, 2023, the Company issued 1,026,720

shares of common stock in conversion of the outstanding $2,000,000 principal amount, plus accrued interest for the Credit Line Note of

the Company held TII Jet Services LDA;

and on May 14, 2024, TII Jet Services agreed to convert an additional $300,000 of principal of

the Credit Line Note plus accrued interest at a conversion price of $4.00 per share, in exchange for the issuance of 76,230 shares of

common stock.

On April 19, 2024, the Company completed an $8,400,000 equity financing

with European investors, of which $7.12 million is from related parties, (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.

Results of Operations

Three Months Ended October 31, 2023 and 2022

For the three months ended October 31, 2023, we

For the three months ended April 30, 2024, we

generated revenue of $408,532 and our costs of revenue were $243,746.

For the three months ended October 31, 2022, we generated revenue

For the three months ended April 30, 2023, we generated revenue

of $478,942 and our costs of revenue were $254,648.

Our revenue for October 31, 2023, was derived from sales of $427,841 from our Transdermal

Patches segment and $-0- from contract services from our 4P Therapeutics segment.

The revenue from the Transdermal Patches segment remained

relatively constant from the prior year.

An increase in demand continued in the fourth quarter.

The Company’s contract with Sorrento

Therapeutics was completed and 4P Therapeutics devoted most of its time to the development of its Aversa product, our cost of revenue

for our contract research and development services represents our labor cost plus a modest amount of material costs which we passed on

to the client.

Our cost of sales decreased during the period for our contract services in comparison to the prior year as our main contract

has been completed and the balance of the contract is being recognized with limited additional costs.

For the three months ended October 31, 2023, our

Our revenue for April 30, 2024, was derived from sales from contract manufacturing

services performed in our Pocono Pharmaceuticals (Active Intelligence) segment $-0- 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.

in demand is expected in the balance of the current year.

The Company’s contract with Sorrento Therapeutics was completed and 4P

Therapeutics devoted most of its time to the development of its Aversa product, 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.

For the three months ended April 30, 2024, our

selling, general and administrative expenses were $1,078,728 primarily legal, accounting and administrative salaries and non-cash compensation

from the issuance of employee stock options compared to $1,049,532 for the three months ended October 31, 2022.The increase from 2022

is primarily attributable to increases in non-cash equity-based expenses.

During the three months ended October 31, 2023,

the Company incurred research and development expenses of its Aversa Fentanyl product of $551,503, primarily of salaries and increases

in development costs from Kindeva as compared to $290,718 for the three months ended October 31, 2022.

We incurred interest expense of $40,200 for the

three months ended October 31, 2023, as compared to $3,966 for the three months ended October 31, 2022.

The increase is primarily due

to interest in the Company’s related party loans.

As a result of the foregoing, we sustained a net loss

of $1,759,946 or $(0.22) per share (basic and diluted) for the three months ended October 31, 2023, compared with a loss of $1,075,485,

or $(0.14) per share (basic and diluted) for the three months ended October 31, 2022.

Nine Months Ended October 31, 2023 and 2022

For the nine months ended October 31, 2023, we

generated revenue of $1,560,701 and our costs of revenue were $879,824.

For the nine months ended October 31, 2022, we generated revenue

of $1,552,074 and our costs of revenue were $931,061.

Our revenue for October 31, 2023, was derived from sales of $1,395,701 from our

Transdermal Patches segment and $165,034 from contract services from our 4P Therapeutics segment.

The revenue from the Transdermal Patches

segment increased from the prior year.

An increase in demand continued in the subsequent quarter.

Our cost of revenue for our contract

research and development services represents our labor cost plus a modest amount of material costs which we passed on to the client.

cost of sales decreased during the period for our contract services in comparison to the prior year as our main contract has been completed

and the balance of the contract is being recognized with limited additional costs.

For the nine months ended October 31, 2023, our

selling, general and administrative expenses were $2,849,399 primarily legal, accounting and administrative salaries including non-cash

compensation from the issuance of warrants and employee stock options compared to $2,726,256 for the nine months ended October 31, 2022.The

increase from 2022 is primarily attributable to an increase in investor relations expenses offset by a decrease in salaries and wages

to executives of the Company.

During the nine months ended October 31, 2023,

from the issuance of employee stock options compared to $422,955 for the three months ended April 30, 2024.The increase from 2023 is primarily

attributable to increases in non-cash equity-based expenses.

During the three months ended April 30, 2024,

the Company incurred research and development expenses of its Aversa Fentanyl product of $974,535, primarily of salaries and increases

in development costs from Kindeva as compared to $686,401 for the nine months ended October 31, 2022.

in development costs from Kindeva as compared to $400,430 for the three months ended April 30, 2023.

We incurred interest expense of $8,618 for the

nine months ended October 31, 2023, as compared to $12,505 for the nine months ended October 31, 2022.

The increase is primarily due to

interest in the Company’s related party loans.

three months ended April 30, 2024, as compared to $3,166 for the three months ended April 30, 2023.

The increase is primarily due to interest

in the Company’s related party loans.

As a result of the foregoing, we sustained a net

loss of $3,604,348 or $(0.46) per share (basic and diluted) for the nine months ended October 31, 2023, compared with a loss of $2,804,149,

or $(0.32) per share (basic and diluted) for the nine months ended October 31, 2022.

loss of $1,898,077 or $(0.21) per share (basic and diluted) for the three months ended April 30, 2024, compared with a loss of $1,015,235,

or $(0.13) per share (basic and diluted) for the three months ended April 30, 2023.

Liquidity and Capital Resources

As of October 31, 2023, we had $1,265,323 in cash

As of April 30, 2024, we had $8,347,740 in cash

and cash equivalents and working capital of $7,313,072, as compared with cash and cash equivalents of $492,942 and working capital of

$22,870 as of January 31, 2024.

During the nine months ended October 31, 2023, 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 Fentanyl product, and an amendment thereto

on July 13, 2023, increasing the amount available under the credit line to $5 million.

As of October 31, 2023, the Company had drawn down

a total of $2,000,000 under the credit line.

For the nine months ended October 31, 2023, we

For the three months ended April 30, 2024, we

used cash of $833,926 in our operations.

The principal adjustments to our net loss of $3,604,348 were depreciation and amortization

of $218,382, and the issuance of employee stock options and warrants for services in the amount of $742,696.

For the nine months ended October 31, 2023, we

The principal adjustments to our net loss of $1,898,077 were depreciation and amortization of

$69,101, and the issuance of employee stock options for services in the amount of $422,955.

For the three months ended April 30, 2024, we

used cash in investing activities of $6,195 primarily for the purchase of equipment.

For the nine months ended October 31, 2023, we

provided cash in financing activities of $2,091,776 primarily from the proceeds of $2,000,000 from its line of credit and $106,528 from

a factoring arrangement, offset from the payment on notes of $14,752.

For the three months ended April 30, 2024, we provided cash in financing

activities of $8,694,919.

During the three months ended April 30, 2024, the Company entered into an equity financing agreement with European

investors and received proceeds of $8,400,00, of which $7.12 million is from related parties, to fund its research and development of

its Aversa Fentanyl product.

The Company also received proceeds of $300,000 from its Credit Line Promissory Note.

Off Balance Sheet Arrangements

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Critical Accounting Policies

Going Concern Assessment

Management assesses liquidity and going concern

uncertainty in the Company’s condensed financial statements to determine whether there is sufficient cash on hand and working capital,

including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements

are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP.

As part of this

assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts,

projections, estimates and will make certain key assumptions, including timing and nature of projected cash expenditures or programs,

its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors.

Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays

in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management

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

As of October 31, 2023, the Company had cash and

cash equivalents of $1,265,323 and working capital of $1,281,963.

For the nine months ended October 31, 2023, the Company incurred a loss

from operations of $3,565,577 and used cash flow from operations of $2,809,269.

The Company has generated operating losses since its inception

and has relied on sales of securities and issuance of third-party and related-party debt to support cash flow from operations.

2021, the Company consummated a public offering and received net proceeds of $5,836,230.

The Company also received to date $3,239,845

proceeds from the exercise of warrants.

The Company has used these proceeds to fund operations and will continue to use the funds as needed.

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

line 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.

Management has prepared estimates of operations

for the next twelve months and believes that sufficient funds will be generated from operations to fund its operations for one year from

the date of the filing of these condensed consolidated financial statements, which indicates improved operations and the Company’s

ability to continue operations as a going concern.

The impact of COVID-19 on the Company’s business has been considered in these

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

Management believes the substantial doubt about

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

however, it is too early to know the

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

Use of Estimates

The preparation of the consolidated financial

statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates

and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets

and liabilities.

On an ongoing basis, the Company evaluates its estimates including, but not limited to, those related to such items as

income tax exposures, accruals, depreciable/useful lives, allowance for doubtful accounts and valuation allowances.

The Company bases

its estimates on historical experience and on other various assumptions that are believed to be reasonable under the circumstances, the

results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent

from other sources.

Concern Assessment

assesses liquidity and going concern uncertainty in the Company’s condensed financial statements to determine whether there is sufficient

cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date

the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”,

as defined in GAAP.

As part of this assessment, based on conditions that are known and reasonably knowable to management, management will

consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including timing and nature of projected

cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if

necessary, among other factors.

Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing

curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can

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

As of April 30, 2024, the Company had cash and cash equivalents of

$8,347,740 and working capital of $7,313,082.

For the three months ended April 30, 2024, the Company incurred a net loss from operations

of $1,898,077 and used cash flow from operations of $833,926.

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.

The Company has used these

proceeds from the sales of securities and issuance of third-party and related party debt 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.

On April 19, 2024, the Company received proceeds of $8,400,000 from equity financing with European

investors, of which $7.12 million is from related parties.

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.

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

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:

Therapeutics LLC

Pharmaceuticals Inc.

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

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.

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

ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when

products are transferred to a customer.

The Company recognizes revenue based on the five criteria for revenue recognition established

under Topic 606:

1) identify the contract, 2) identify separate performance obligations, 3) determine the transaction price, 4) allocate

the transaction price among the performance obligations, and 5) recognize revenue as the performance obligations are satisfied.

Accounts Receivable

Trade accounts receivables are recorded at the net

invoice value and are not interest bearing.

The Company maintains allowances for doubtful accounts for estimated losses from the inability

of its customers to make required payments.

The Company determines its allowances by both specific identification of customer accounts

where appropriate and the application of historical loss to non-applicable accounts.

For the nine months ended October 31, 2023 and 2022,

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

nine months ended October 31, 2023, the Company entered into an accounts receivable sale agreement for one of its subsidiaries.

received $106,528 in funds against an accounts 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.

bankruptcy claim is not paid in full by the debtor, the Company is obligated to pay any difference to the factor.

The bankruptcy

claim has not yet been settled by the bankruptcy court.

Inventories are valued at the lower of cost and

reasonable value determined using the first-in, first-out (FIFO) method.

Net realized value is the estimated selling price in the ordinary

course of business, less applicable variable selling expenses.

The cost of finished goods and work in process is comprised of material

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

As of October

31, 2023, total inventory was $174,641, consisting of work-in-process of $30,089 and raw materials of $144,552.

As of January 31, 2023,

total inventory was $229,335, consisting of work-in-process of $11,021 and raw materials of $218,334.

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

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

assets with indefinite lives are tested annually for impairment.

Trademarks, intellectual property and customer base are being amortized

over their estimated useful lives of ten years.

Goodwill represents the difference between the

total purchase price and the fair value of assets (tangible and intangible) and liabilities at the date of acquisition.

Goodwill is reviewed

for impairment annually on January 31, and more frequently as circumstances warrant, and written down only in the period in which the

recorded value of such assets exceeds their fair value.

The Company does not amortize goodwill in accordance with ASC 350.

In connection

with the Company’s acquisition of 4P Therapeutics LLC in 2018, the Company recorded Goodwill of $1,719,235.

On August 31, 2020,

in connection with the Company’s acquisition of Pocono Coated Products LLC and Active Intelligence LLC, the Company recorded Goodwill

of $5,810,640.

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

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

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

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

Long-lived Assets

Management reviews long-lived assets for potential

impairment whenever significant events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

An impairment exists when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value.

The carrying amount

of a long-lived asset is not recoverable if it exceeds the sum of the estimated undiscounted cash flows expected to result from the use

and eventual disposition of the asset.

If an impairment exists, the resulting write-down would be the difference between the fair market

value of the long-lived asset and the related book value.

Earnings per Share

Basic earnings per share of common stock is computed

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

Diluted earnings

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

stock outstanding during the period.

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

options and common stock purchase warrants.

As of October 31, 2023, and 2022, there were 2,157,873 and 1,645,506 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.

expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the

requisite service period (usually the vesting period).

As of February 1, 2019, pursuant to ASC 2018-07, ASC 718 was applied to stock-based

compensation for both employees and non-employees.

Research and Development Expenses

Research and development costs are expensed as

Taxes are calculated in accordance with taxation

principles currently effective in the United States and Ireland.

The Company accounts for income taxes under the

asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences

of events that have been included in the financial statements.

Under this method, deferred tax assets and liabilities are determined

based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for

the year in which the differences are expected to reverse.

The effect of a change in tax rates on deferred tax assets and liabilities

is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to

the extent they believe these assets will more likely than not be realized.

In making such determination, the Company considers

all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable

income, tax planning strategies and recent financial operations.

In the event the Company was to determine that it would be

able to realize its deferred income tax assets in the future in excess of its net recorded amount, the Company would make an adjustment

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

the 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.

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

revenues derived from the sale of the Company’s consumer transdermal, topical and tape products with sales listed under sale of

research and development services for pharmaceutical 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.

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.

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.

recognized in the income statement is considered to be revenue from contracts with customers.

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 April 30, 2024, the Company had $7,879,000

that exceeded federally insured limits.

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 three

months ended April 30, 2024, and 2023, the Company recorded bad debt expenses of $1,200 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 April 30, 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

2013, and implemented the guidance on expected credit losses.

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 April 30, 2024, total inventory was $168,505, consisting of work-in-process of $27,447, finished goods of $26,751

and raw materials of $114,307.

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.

Plant and Equipment

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.

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

Machinery and equipment

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 represents

the difference between the total purchase price and the fair value of assets (tangible and intangible) and liabilities at the date of

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 April 30, 2024, and January 31,

2024, Goodwill amounted to $5,021,713 and $5,021,713, respectively.

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.

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

Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares of common

stock and potential shares of common stock outstanding during the period.

Potential shares of common stock consist of shares issuable

upon the exercise of outstanding options and common stock purchase warrants.

As of April 30, 2024, and 2023, there were 6,747,873 and

1,783,373 common stock equivalents outstanding, that were not included in the calculation of dilutive earnings per share as their effect

would be anti-dilutive.

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.

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.

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.

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.

and Development Expenses

development costs are expensed as incurred.

Taxes are calculated

in accordance with taxation principles currently effective in the United States and Ireland.

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.

records net deferred tax assets to the extent they believe these assets will more-likely-than-not be realized.

In making such

determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary

differences, projected future taxable income, tax planning strategies and recent financial operations.

In the event the Company

was to determine that it would be able to realize its deferred income tax assets in the future in excess of its net recorded amount, the

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES

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What changed 10-Q

Item 2. Management’s Discussion and Analysis