UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 000-55654

NUTRIBAND INC.

(Exact name of registrant as specified in its charter)

NEVADA		81-1118176
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

121 South Orange Ave., Suite 1500, Orlando, FL		32801
(Address of Principal Executive Offices)		(Zip Code)

(407) 377-6695

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	NTRB	The Nasdaq Stock Market LLC
Warrants	NTRBW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the issuer’s common stock, par value $0.001 per share, was 7,833,150 shares as of September 8, 2023.

NUTRIBAND INC.

INDEX

		Page No.
Part I: Financial Information

Item 1	Financial Statements	1
	Condensed Consolidated Balance Sheets as of July 31, 2023 (unaudited) and January 31, 2023	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended July 31, 2023, and 2022 (unaudited)	3
	Consolidated Statements of Stockholders’ Equity for the three and six months ended July 31, 2023, and 2022 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the six months ended July 31, 2023, and 2022 (unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3	Quantitative and Qualitative Disclosures about Market Risk	24
Item 4	Controls and Procedures	24

Part II: Other Information		25

Item 1A	Risk Factors	25

Item 6	Exhibits	26

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following financial statements pursuant to the rules and regulations of the Securities and Exchange Commission.

The results of operations for the three and six months ended July 31, 2023, and 2022 are not necessarily indicative of the results for the entire fiscal year or for any other period.

NUTRIBAND INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	July 31,			January 31,
	2023			2023
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,334,553		$	1,985,440
Accounts receivable-net		223,452			113,045
Inventory		156,921			229,335
Prepaid expenses		558,647			365,925
Total Current Assets		3,273,573			2,693,745

PROPERTY & EQUIPMENT-net		806,423			897,735

OTHER ASSETS:
Goodwill		5,021,713			5,021,713
Operating lease right of use asset		47,064			62,754
Intangible assets-net		723,855			780,430

TOTAL ASSETS	$	9,872,628		$	9,456,377

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	496,778		$	534,679
Deferred revenue		217,890			162,903
Operating lease liability-current portion		32,750			31,291
Notes payable-current portion		126,709			19,740
Total Current Liabilities		874,127			748,613

LONG-TERM LIABILITIES:
Note payable-net of current portion		90,264			100,497
Note payable-related party		2,000,000			-
Operating lease liability-net of current portion		17,529			34,277
Total Liabilities		2,981,920			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; 7,843,150 shares issued at July 31, 2023 and January 31, 2023, 7,833,150 shares outstanding as of July 31,2023 and January 31, 2023, respectively		7,833			7,833
Additional paid-in-capital		31,254,927			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		(24,339,107	)		(22,494,705	)
Total Stockholders’ Equity		6,890,708			8,572,990

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	9,872,628		$	9,456,377

See notes to unaudited consolidated financial statements

NUTRIBAND INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

	For the Three Months Ended						For the Six Months Ended
	July 31,						July 31,
	2023			2022			2023			2022

Revenue	$	655,928		$	456,149		$	1,132,860		$	934,071

Costs and expenses:
Cost of revenues		356,256			304,353			610,904			581,789
Research and development		445,122			277,869			845,552			395,683
Selling, general and administrative		678,738			908,173			1,518,470			1,676,724
Total Costs and Expenses		1,480,116			1,490,395			2,974,926			2,654,196

Loss from operations		(824,188	)		(1,034,246	)		(1,842,066	)		(1,720,125	)

Other income (expense):
Interest income		4,250			-			10,065			-
Interest expense		(9,235	)		(4,429	)		(12,401	)		(8,539	)
Total other expenses		(4,985	)		(4,429	)		(2,336	)		(8,539	)

Loss before provision for income taxes		(829,173	)		(1,038,675	)		(1,844,402	)		(1,728,664	)

Provision for income taxes		-			-			-			-

Net loss	$	(829,173	)	$	(1,038,675	)	$	(1,844,402	)	$	(1,728,664	)

Net loss per share of common stock-basic and diluted	$	(0.11	)	$	(0.12	)	$	(0.24	)	$	(0.20	)

Weighted average shares of common stock outstanding - basic and diluted		7,833,150			8,409,141			7,833,150			8,779,933

Other Comprehensive Loss:

Net loss	$	(829,173	)	$	(1,038,675	)	$	(1,844,402	)	$	(1,728,664	)

Foreign currency translation adjustment		-			-			-			-

Total Comprehensive Loss	$	(829,173	)	$	(1,038,675	)	$	(1,844,402	)	$	(1,728,664	)

See notes to unaudited consolidated financial statements

NUTRIBAND INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Six Months Ended July 31, 2023

										Accumulated
				Common Stock				Additional		Other
				Number of				Paid In		Comprehensive			Accumulated			Treasury
	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		87,090							87,090

Options issued for services		75,030			-		-		75,030		-			-			-

Net loss for the six months ended July 31, 2023		(1,844,402	)		-		-		-		-			(1,844,402	)		-

Balance, July 31, 2023	$	6,890,708			7,833,150	$	7,833	$	31,254,927	$	(304	)	$	(24,339,107	)	$	(32,641	)

Six Months Ended July 31, 2022

													Accumulated
				Common Stock						Additional			Other
				Number of						Paid In			Comprehensive			Accumulated			Treasury
	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		93,100			28,583			28			(28	)		-			-			93,100

Treasury stock repurchased		(118,766	)		(35,583	)		(36	)		36			-			-			(118,766	)

Net loss for the six months ended July 31, 2022		(1,728,664	)		-			-			-			-			(1,728,664	)		-

Balance, July 31, 2022	$	10,401,830			7,803,517		$	7,803		$	30,264,359		$	(304	)	$	(19,739,895	)	$	(130,133	)

Three Months Ended July 31, 2023

										Accumulated
				Common Stock				Additional		Other
				Number of				Paid In		Comprehensive			Accumulated			Treasury
	Total			shares		Amount		Capital		Income(Loss)			Deficit			Stock
Balance, May 1, 2023	$	7,719,881			7,833,150	$	7,833	$	31,254,927	$	(304	)	$	(23,509,934	)	$	(32,641	)

Warrants issued for services		-							-

Options issued for services		-			-		-		-		-			-			-

Net loss for the three months ended July 31, 2023		(829,173	)		-		-		-		-			(829,173	)		-

Balance, July 31, 2023	$	6,890,708			7,833,150	$	7,833	$	31,254,927	$	(304	)	$	(24,339,107	)	$	(32,641	)

Three Months Ended July 31, 2022

													Accumulated
				Common Stock						Additional			Other
				Number of						Paid In			Comprehensive			Accumulated			Treasury
	Total			shares			Amount			Capital			Income(Loss)			Deficit			Stock
Balance, May 1, 2022	$	11,080,110			9,123,604		$	9,128		$	29,966,159		$	(304	)	$	(18,701,220	)	$	(193,653	)

Exercise of warrants		296,875			55,417			56			296,819			-			-			-

Common stock returned in settlement		-			(1,400,000	)		(1,400	)		1,400			-			-			-

Treasury stock issued for services		93,100			28,583			28			(28	)		-			-			93,100

Treasury stock repurchased		(29,580	)		(8,747	)		(9	)		9			-			-			(29,580	)

Net loss for the three months ended July 31, 2022		(1,038,675	)		-			-			-			-			(1,038,675	)		-

Balance, July 31, 2022	$	10,401,830			7,803,517		$	7,803		$	30,264,359		$	(304	)	$	(19,739,895	)	$	(130,133	)

See notes to unaudited consolidated financial statements

NUTRIBAND INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Six Months Ended
	July 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(1,844,402	)	$	(1,728,664	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		150,511			156,146
Amortization of right of use asset		15,690			29,967
Reserve for doubtful accounts		11,837			-
Common stock and treasury stock issued for services		-			93,100
Stock-based compensation-options and warrants		162,120			-
Changes in operating assets and liabilities:
Accounts receivable		(122,244	)		(75,177	)
Prepaid expenses		(192,722	)		(90,539	)
Inventories		72,414			(30,182	)
Deferred revenue		54,987			39,647
Operating lease liability		(15,289	)		(28,370	)
Accounts payable and accrued expenses		(37,901	)		(18,678	)
Net Cash Used In Operating Activities		(1,744,999	)		(1,652,750	)

Cash flows from investing activities:
Purchase of equipment		(2,624	)		(68,009	)
Net Cash Used in Investing Activities		(2,624	)		(68,009	)

Cash flows from financing activities:
Proceeds from note payable-related party		2,000,000			-
Proceeds from secured loan liability		106,528			-
Proceeds from exercise of warrants		-			296,875
Payment on note payable		(9,792	)		(4,660	)
Purchase of treasury stock		-			(118,766	)
Net Cash Provided by Financing Activities		2,096,736			173,449

Effect of exchange rate on cash		-			-

Net change in cash		349,113			(1,547,310	)

Cash and cash equivalents - Beginning of period		1,985,440			4,891,868

Cash and cash equivalents - End of period	$	2,334,553		$	3,344,558

Supplementary information:

Cash paid for:
Interest	$	2,407		$	8,539

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	$	-		$	32,843

Common stock returned in settlement	$	-		$	1,400

See notes to unaudited consolidated financial statements

NUTRIBAND INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

as of and for the Six Months Ended July 31, 2023 and 2022

1.	ORGANIZATION AND DESCRIPTION OF BUSINESS

Organization

Nutriband Inc. (the “Company”) is a Nevada corporation, incorporated on January 4, 2016. In January 2016, the Company acquired Nutriband Ltd, an Irish company which was formed by the Company’s chief executive officer in 2012 to enter the health and wellness market by marketing transdermal patches. References to the Company relate to the Company and its subsidiaries unless the context indicates otherwise.

On August 1, 2018, the Company acquired 4P Therapeutics LLC (“4P Therapeutics”) for $2,250,000, consisting of 250,000 shares of common stock, valued at $1,850,000, and $400,000, and a royalty of 6% on all revenue generated by the Company from the abuse deterrent intellectual property that had been developed by 4P Therapeutics payable to the former owner of 4P Therapeutics. The former owner of 4P Therapeutics has been a director of the Company since April 2018, when the Company entered into an agreement to acquire 4P Therapeutics. The former owner resigned as a director in January 2022.

4P Therapeutics is engaged in the development of a series of transdermal pharmaceutical products, that are in the preclinical stage of development. Prior to the acquisition of 4P Therapeutics, the Company’s business was the development and marketing of a range of transdermal consumer patches. Most of these products are considered drugs in the United States and cannot be marketed in the United States without approval by the Food and Drug Administration (the “FDA”). The Company entered a feasibility agreement as an initial step to seek FDA approval of its consumer transdermal products and its consumer products which are not being marketed in the United States.

With the acquisition of 4P Therapeutics, 4P Therapeutics’ drug development business became the Company’s principal business. The Company’s approach is to use generic drugs that are off patent and incorporate them into the Company’s transdermal drug delivery system. Although these medications have received FDA approval in oral or injectable form, the Company needs to conduct a transdermal product development program which will include the preclinical and clinical trials that are necessary to receive FDA approval before we can market any of our pharmaceutical products.

On August 25, 2020, the Company formed Pocono Pharmaceuticals Inc. (“Pocono Pharmaceuticals”), a wholly owned subsidiary of the Company. On August 31, 2020, the Company acquired certain assets and liabilities associated with the Transdermal, Topical, Cosmetic, and Nutraceutical business of Pocono Coated Products LLC (“PCP”). The net assets were contributed to Pocono Pharmaceuticals. Included in the transaction, Pocono Pharmaceuticals also acquired 100% of the membership interests of Active Intelligence LLC (“Active Intelligence”).

Pocono Pharmaceuticals is a coated products manufacturing entity organized to take advantage of unique process capabilities and experience. Pocono helps their 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. The tape has transdermal and topical properties. This tape is used the same as traditional kinesiology tape.

In December 2019, COVID-19 emerged and has subsequently spread world-wide. The World Health Organization has declared COVID-19 a pandemic resulting in federal, state and local governments and private entities proscribing various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining people who may have been exposed to the virus. The effect of these orders, government imposed quarantines and measures the Company and suppliers and customers it works with might have to take, such as work-at-home policies, may negatively impact productivity, disrupt our business and could delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and disruptions in our operations, operating results and financial condition. Further, quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns, or other restrictions on the conduct of business could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which could disrupt our supply chain.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Financial Statements

The consolidated balance sheet as of July 31, 2023, and the consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the periods presented have been prepared by the Company and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations, changes in stockholders’ equity and cash flows for all periods presented have been made. The results for the six months ended July 31, 2023, are not necessarily indicative of the results to be expected for the full year. The consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in Nutriband’s Annual Report on Form 10-K for the year ended January 31, 2023.

Certain information and footnote disclosures required under generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted from these consolidated financial statements pursuant to the rules and regulations, including interim reporting requirements of the U.S. Securities and Exchange Commission (“SEC”). The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosures of contingent amounts in our consolidated financial statements and accompanying footnotes. Actual results could differ from estimates.

The Company’s significant accounting policies in Note 2 in the Company’s Annual Report on Form 10-K for the year ended January 31, 2023. There were no significant changes to these accounting policies during the six months ended July 31, 2023.

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 July 31, 2023, the Company had cash and cash equivalents of $2,334,553 and working capital of $2,399,446. For the six months ended July 31, 2023, the Company incurred an operating loss of $1,884,402 and used cash flow from operations of $1,744,999. The Company has generated operating losses since its inception and has relied on sales of securities and issuance of third-party and related-party debt to support cash flow from operations. In October 2021, the Company consummated a public offering and received net proceeds of $5,836,230. The Company also received to date $3,239,845 proceeds from the exercise of warrants. The Company has used these proceeds to fund operations and will continue to use the funds as needed. 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. As of July 31, 2023, the Company was advanced $2,000,000.

Management has prepared estimates of operations for the next twelve months and believes that sufficient funds will be generated from operations to fund its operations for one year from the date of the filing of these condensed consolidated financial statements, which indicates improved operations and the Company’s ability to continue operations as a going concern. The impact of COVID-19 on the Company’s business has been considered in these assumptions; however, it is too early to know the full impact of COVID-19 or its timing on a return to normal operations.

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

Principles of Consolidation

The consolidated financial statements of the Company include the Company and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated. The operations of 4P Therapeutics are included in the Company’s financial statements from the date of acquisition of August 1, 2018, and the operations of Pocono and Active Intelligence are included in the Company’s financial statements from the date of acquisition of September 1, 2020 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.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash on deposit and 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 July 31, 2023, the Company’s balances of approximately $1.47 million exceeded federally insured limits.

Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to a customer. The Company recognizes revenue based on the five criteria for revenue recognition established under Topic 606: 1) identify the contract, 2) identify separate performance obligations, 3) determine the transaction price, 4) allocate the transaction price among the performance obligations, and 5) recognize revenue as the performance obligations are satisfied.

Revenue Types

The following is a description of the Company’s revenue types, which include professional services and sale of goods:

●

Service revenues include the contract of research and development related services with the Company’s clients in the life sciences field on an as-needed basis. Deliverables primarily consist of detailed findings and conclusion reports provided to the client for each given research project engaged.

●

Product revenues are derived from the sale of the Company’s consumer transdermal and coated products. Upon the reception of a purchase order, we have the order filled and shipped.

Contracts with Customers

A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

Contract Liabilities

Deferred revenue is a liability related to a revenue producing activity for which revenue has not been recognized. The Company records deferred revenue when it receives consideration from a contract before achieving certain criteria that must be met for revenue to be recognized in conformity with GAAP.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For the Company’s different revenue service types, the performance obligation is satisfied at different times. The Company’s performance obligations include providing products and professional services in the area of research. The Company recognizes product revenue performance obligations in most cases when the product has shipped to the customer. When we perform professional service work, we recognize revenue when we have the right to invoice the customer for the work completed, which typically occurs over time on a monthly basis for the work performed during that month.

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

Disaggregation of Revenues

The Company disaggregates its revenue from contracts with customers by type and by geographical location. See the tables:

	Six Months Ended July 31,				Three Months Ended July 31,
	2023		2022		2023		2022
Revenue by type
Sale of goods	$	967,826	$	796,894	$	566,769	$	394,904
Services		165,034		137,177		89,159		61,245
Total	$	1,132,860	$	934,071	$	655,928	$	456,149

	Six Months Ended July 31,				Three Months Ended July 31,
	2023		2022		2023		2022
Revenue by geographic location:
United States	$	1,132,860	$	934,071	$	655,928	$	456,149
Foreign		-		-		-		-
	$	1,132,860	$	934,071	$	655,928	$	456,149

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 six months ended July 31, 2023 and 2022, the Company recorded bad debt expense of $11,836 and $-0-, respectively, for doubtful accounts related to accounts receivable. During the six months ended July 31, 2023, the Company entered into an assignment agreement to sell account receivable for one of its subsidiaries. The Company received $106,528 in funds against an account receivable of $118,675 of 4P Therapeutics that is currently a claim in bankruptcy. 4P Therapeutics recorded a bad debt expense of $11,836 against the receivable. The net accounts receivable remain on the books of the Company and a corresponding amount has been included as a secured loan payable. The account receivable of $118,365 is collateralized to secure liability. If the bankruptcy claim is not paid in full by the debtor, the Company is obligated to pay any difference to the factor.

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 July 31, 2023, total inventory was $156,921, consisting of work-in-process of $34,467 and raw materials of $122,454. 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, 2023 and 2022, the Company recorded an impairment charge of $327,326 and $2,180,836, respectively, reducing the Active Intelligence LLC Goodwill to $3,302,478. As of July 31, 2023 and January 31, 2023, Goodwill amounted to $5,021,713 and $5,021,713, respectively.

Long-lived Assets

Management reviews long-lived assets for potential impairment whenever significant events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment exists when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. If an impairment exists, the resulting write-down would be the difference between the fair market value of the long-lived asset and the related book value.

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 July 31, 2023, and 2022, there were 1,783,373 and 1,570,954 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 the guidance for right-of-use accounting for all leases and records the operating lease liabilities on its balance sheet. The Company completed the necessary changes to its accounting policies, processes, disclosure and internal control over financial reporting.

Research and Development Expenses

Research and development costs are expensed as incurred.

Income Taxes

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

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent they believe these assets will more-likely-than-not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event the Company was to determine that it would be able to realize its deferred income tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

Fair Value Measurements

FASB ASC 820, “Fair Value Measurements and Disclosure” (“ASC 820”), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value.

The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis during the reporting period. The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:

Level 1	-	Observable inputs such as quoted market prices in active markets.

Level 2	-	Inputs other than quoted prices in active markets that are either directly or indirectly observable.

Level 3	-	Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The carrying value of the Company’s financial instruments, including 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

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

	July 31, 2023			January 31, 2023
Lab equipment	$	144,585		$	144,585
Machinery and equipment		1,243,252			1,240,628
Furniture and fixtures		19,643			19,643
		1,407,480			1,404,856
Less: Accumulated depreciation		(601,057	)		(507,121	)
Net Property and Equipment	$	806,423		$	897,735

Depreciation expenses amounted to $93,936 and $91,237 for the six months ended July 31, 2023 and 2022, respectively. During the six months ended July 31, 2023 and 2022, depreciation expenses of $72,445 and $69,845, respectively, have been allocated to cost of goods sold.

4.	NOTES PAYABLE

Notes Payable

Active Intelligence, the Company’s newly acquired subsidiary, entered into an agreement with the Carolina Small Business Development Fund for a line of credit of $160,000 due October 16, 2029, with interest of 5% per year. The amount assumed was $139,184. The loan requires monthly payments of principal and interest of $1,697. During the six months ended July 31, 2023, the Company made $7,983 of principal payments. As of July 31, 2023, the amount due was $93,021, of which $15,725 is current.

On April 3, 2022, the Company entered into a retail installment agreement for the purchase of an automobile. The contract price was $32,274, of which $22,795 was financed. The agreement is for five years bearing interest at 2.95% per annum with payments of $495 per month. The loan is secured by automobile. As of July 31, 2023, the amount due was $17,424 of which $4,456 is current.

Line of Credit

On July 17, 2023, the Company entered into 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 into 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 July 31, 2026. Interest is payable annually on December 31 of each year during the term of the note. During the six months ended July 31,2023, the Company was advanced $2,000,000 on the Note. The Company recorded interest expense of $7,002 for the six months ended July 31, 2023.

Secured Borrowing Liability

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 claim was $118,675 and 4P Therapeutics recorded a bad debt expense of $11,836 during the six months ended July 31, 2023. 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 buyer as of July 31, 2023. Any amounts not paid by the Debtor on the claim will bear 10% interest to be paid by 4P Therapeutics. See Note 2 for further information.

Interest expenses for the six months ended July 31, 2023 and 2022, were $12,401 and $8,539, respectively.

5.	INTANGIBLE ASSETS

As of July 31, 2023 and January 31 2023, intangible assets consisted of intellectual property and trademarks, customer base, and license agreement, net of amortization, as follows:

	July 31, 2023			January 31, 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		(407,645	)		(351,070	)
Net Intangible Assets	$	723,855		$	780,430

Amortization expenses for the six months ended July 31, 2023, and 2022 was $56,575 and $64,909, respectively.

Year Ended January 31,
2024	$	56,534
2025		113,109
2026		113,109
2027		113,109
2028		113,109
2029 and thereafter		214,885
	$	723,855

6.	RELATED PARTY TRANSACTIONS

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 six months ended July 31, 2023.

On July 17, 2023, the Company entered into 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 into on March 17, 2023). See Note 4 for further information. TII Jet Services LDA is owned 100% by a shareholder of the Company.

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.

7.	STOCKHOLDERS’ EQUITY

Preferred Stock

On January 15, 2016, the board of directors of the Company approved a certificate of amendment to the articles of incorporation and changed the authorized capital stock of the Company to include and authorize 10,000,000 shares of Preferred Stock, par value $0.001 per share.

On May 24, 2019, the board of directors created a series of preferred stock consisting of 2,500,000 shares designated as the Series A Convertible Preferred Stock (“Series A Preferred Stock”). On June 20, 2019, the Series A preferred Stock was terminated, and the 2,500,000 shares were restored to the status of authorized but unissued shares of Preferred Stock, without designation as to series, until such stock is once more designated as part of a particular series by the board of directors.

Common Stock

On June 25, 2019, the Company effected a one-for-four reverse stock split, pursuant to which each share of common stock became converted into 0.25 shares of common stock, and the Company decreased its authorized common stock from 100,000,000 to 25,000,000 shares.

On January 27, 2020, the Company amended its Articles of Incorporation to increase its authorized common shares from 25,000,000 authorized shares to 250,000,000 authorized shares.

On July 26, 2022, the 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 Six Months Ended July 31, 2023

	(a)	As of July 30, 2023, the Company holds 10,000 of its shares comprising $32,641 of treasury stock. There was no activity during the six months ended July 31, 2023.

	Activity during the Six Months Ended July 31, 2022

(a)

In March and May 2022, the Company purchased 35,583 shares of its common stock for $118,766 and recorded the purchase as Treasury Stock. In May 2022, the Company issued 28,583 shares of stock awards to management, directors and employees from the treasury shares and recorded compensation expense of $93,100. As of July 31, 2022, the Company held 39,811 of its shares comprising $130,133 of treasury stock.

(b)

On July 29, 2022, the Company received proceeds of $296,875 from the exercise of warrants and issued 55,417 shares of common stock.

(c)

In July 2022, the Company cancelled 1,400,000 shares received in connection with the settlement of a lawsuit. See Note 9 for further information.

8.	OPTIONS and WARRANTS

Warrants

The following table summarizes the changes in warrants outstanding and the related price of the shares of the Company’s common stock issued to non-employees of the Company during the six months ended July 31, 2023. On March 7, 2023, the Company issued 30,000 warrants to purchase the Company’s common shares to Barandic 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.

	Shares			Exercise Price		Remaining Life		Intrinsic 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		30,000			4.00		4.60 years		-

Expired/Cancelled		(54,633	)		12.00		-		-

Exercised		-			-		-		-

Outstanding- July 31, 2023		1,283,038		$	6.14		3.02 years	$	-

Exercisable - July 31, 2023		1,283,038		$	6.14		3.02 years	$	-

The following table summarizes additional information relating to the warrants outstanding as of July 31, 2023:

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		4.60	$	4.00		30,000	$	4.00	$	-
$	6.43		1,082,205		3.18	$	6.43		1,082,205	$	6.43	$	-
$	4.20		145,833		1.23	$	4.20		145,833	$	4.20	$	-
$	7.50		25,000		4.28	$	7.50		25,000	$	7.50	$	-

Options

The following table summarizes the changes in options outstanding and the related price of the shares of the Company’s common stock issued to employees of the Company. 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 to issue and sell 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 July 31, 2023, 374,666 shares remain in the Plan.

During the six months ended July 31, 2023, 30,000 options to purchase shares of the Company’s common stock were issued to an executive officer at a price of $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 $75,030 and was recorded during the six months ended July 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 143.54%; and a risk-free rate of 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%.

	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		30,000		3.98		2.51 years		-

Expired/Cancelled		-		-		-

Exercised		-		-		-

Outstanding- July 31, 2023		500,335	$	4.12		2.06 years	$	19,475

Exercisable - July 31, 2023		500,335	$	4.12		2.06 years	$	19,475

The following table summarizes additional information relating to the options outstanding as of July 31, 2023:

Range of Exercise Prices		Number Outstanding		Remaining Contractual Life(Years)		Exercise Price for Shares Outstanding		Number Exercisable		Exercise Price for Shares Exercisable		Intrinsic Value

$	3.59		35,000		4.17	$	3.59		35,000	$	3.59	$	10,850
$	3.75		57,500		2.36	$	3.75		57,500	$	3.75	$	8,625
$	3.98		30,000		2.51	$	3.98		30,000	$	3.98	$	-
$	4.09		78,750		2.01	$	4.09		78,750	$	4.09	$	-
$	4.12		50,000		2.36	$	4.12		50,000	$	4.12	$	-
$	4.16		144,083		1.48	$	4.16		144,083	$	4.16	$	-
$	4.50		58,334		2.01	$	4.50		58,334	$	4.50	$	-
$	4.58		46,667		1.48	$	4.58		46,667	$	4.58	$	-

			500,334		2.06	$	4.12		500,334	$	4.12	$	19,475

9.	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 customer 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-decision maker, who is our chief executive officer, in making resource allocation decisions for our segments. Our chief-decision maker evaluates segment performance to the GAAP measure of gross profit.

	Six Months Ended July 31,					Three Months Ended July 31,
	2023		2022			2023		2022
Net sales
Pocono Pharmaceuticals	$	967,826	$	796,894		$	566,769	$	394,904
4P Therapeutics		165,034		137,177			89,159		61,245
		1,132,860		934,071			655,928		456,149
Gross profit
Pocono Pharmaceuticals		400,061		364,112			236,731		166,053
4P Therapeutics		121,895		(11,830	)

SEC Form 10-Q filed by Nutriband Inc.