Nutriband (NTRB) - 2021 Q4 - Annual Report

Forward Looking Statements Forward Looking Statements This section provides a cautionary statement that actual future results may differ materially due to various risks and uncertainties - Forward-looking statements are subject to risks and uncertainties, and actual results may vary materially[13] - Key risks include: ability to raise financing, terms of financing, effects of COVID-19 pandemic, FDA marketing approval, patent enforcement, clinical trial execution, revenue generation from contract services, distribution network establishment, manufacturing compliance, strategic partnership terms, acquisition evaluation and integration, changes in government regulations, technology development, permits/licenses, personnel retention, legal claims, SEC settlement effects, competition, pricing/reimbursement, expense estimation, international distributor compliance, stock price actions, and general economic conditions[14][17] PART I Item 1. Business The company develops transdermal pharmaceutical products, with development on hold due to financial constraints, focusing on contract manufacturing - Primary business is the development of transdermal pharmaceutical products, with the lead product being an abuse-deterrent fentanyl transdermal system using AVERSA® technology[19] - Current development efforts are on hold due to financial position; the only active business is contract manufacturing and R&D services[20] - Acquired 4P Therapeutics on August 1, 2018, for $2,250,000 (62,500 shares of common stock and $400,000 cash), shifting business focus from consumer products to pharmaceutical transdermal systems[22][29] - Acquired Pocono Coated Products on August 31, 2020, for $6,085,180 in common stock and a $1,500,000 promissory note, gaining transdermal, topical, cosmetic, and nutraceutical business assets and Active Intelligence LLC[30] - Received patent protection for abuse-deterrent transdermal technology in Europe, Japan, Australia, Russia, and Mexico; patent prosecution is ongoing in the United States and other countries[23][77] - Pipeline products include abuse-deterrent fentanyl transdermal system, transdermal delivery systems for exenatide (type 2 diabetes) and FSH (infertility), and a generic scopolamine patch[26][37][38][39][40][41][42][43][44] - As of January 1, 2021, the company had five employees (three full-time, two part-time) and one part-time consultant[50] - The company is subject to extensive government regulation, primarily by the FDA in the United States, requiring preclinical and clinical trials for drug approval, and DEA licensing for controlled substances[51][52][68] Item 1A. Risk Factors The company faces significant risks including suspended product development, a history of losses, and adverse impacts from the COVID-19 pandemic - Pharmaceutical product development operations are suspended due to a lack of funds, requiring significant financing or joint venture agreements to continue[81] - The company has a history of losses and minimal revenue, with no assurance of achieving profitability in the foreseeable future[82] - The COVID-19 pandemic adversely affects the company's ability to raise financing, perform contract services, obtain regulatory approvals, and impacts consumer purchasing behavior[83] - Obtaining FDA marketing approval for drug products is a lengthy, costly, and uncertain process, requiring extensive preclinical and clinical trials[87] - Reliance on third-party contract research organizations (CROs) and manufacturers for clinical trials and commercial production poses risks if they fail to comply with regulations or meet quality standards[88][94][95] - Products, especially fentanyl patches, carry potential severe side effects, exposing the company to significant product liability claims that may exceed insurance coverage[108][109] - Protecting proprietary rights through patents and trade secrets is difficult and costly, with no guarantee of competitive advantage or successful defense against infringement[125][126] - The company is dependent on its chief executive officer and chief operating officer, and the loss of either could materially impair business operations[127] - The market price for common stock may be volatile due to low trading volume, financial performance, regulatory changes, and other external factors[129][130] - The company settled an SEC investigation regarding inaccurate FDA jurisdiction statements, which may affect its market perception and ability to list on a stock exchange[134] - Material weaknesses in internal controls over financial reporting exist, potentially affecting investor confidence and capital raising efforts[135] Item 1B. Unresolved Staff Comments The company has no unresolved staff comments to report Item 2. Properties The company leases a shared office and manufacturing space but does not own any real property - The company does not own any real property[139] Leased Properties | Property Type | Location | Monthly Cost | Agreement Type | | :------------ | :------- | :----------- | :------------- | | Shared Office Space | Orlando, FL | $149 | Lease | | Manufacturing Space | Cherryville, NC | $4,200 | Verbal, Month-to-month | Item 3. Legal Proceedings The company settled an SEC proceeding and is engaged in ongoing litigation to recover common stock from a rescinded acquisition - SEC administrative cease-and-desist proceeding settled on December 26, 2018, for violations related to inaccurate statements about FDA jurisdiction over consumer products in Form 10 and 10-K filings[140][141] - Ongoing legal actions in Florida and New York to rescind the acquisition of Advanced Health Brands, Inc and recover 1,200,000 shares of common stock due to alleged misrepresentation and fraudulent conduct[142][143] Item 4. Mine Safety Disclosures This item is not applicable to the company PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the OTCQB market under the symbol NTRB with approximately 83 holders of record - Common stock is traded on the OTCQB market under the symbol NTRB[146] - As of April 1, 2021, there were approximately 83 holders of record for the common stock[7][147] - No equity plans exist, except for employment agreements that may allow compensation in common stock[147] Item 6. Selected Financial Data This section summarizes key financial data for fiscal years 2021 and 2020 from audited consolidated financial statements Statement of Operations Information (Years Ended January 31) | Metric | 2021 | 2020 | | :------------------------------------------ | :----------- | :----------- | | Revenue | $943,702 | $370,647 | | Cost of revenue | $582,378 | $549,107 | | Selling, general and administrative expenses | $2,957,269 | $1,790,980 | | Derivative expense | $- | $767,650 | | Net (loss) | $(2,932,828) | $(2,721,627) | | Net (loss) per share (basic and diluted) | $(0.51) | $(0.50) | | Weighted average shares outstanding | 5,770,944 | 5,423,956 | Balance Sheet Information (As of January 31) | Metric | 2021 | 2020 | | :---------------------- | :----------- | :----------- | | Current assets | $314,188 | $43,181 | | Working capital deficiency | $(2,254,418) | $(1,979,141) | | Accumulated deficit | $(11,835,105) | $(8,902,277) | | Stockholders' equity | $7,111,946 | $175,433 | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue increased significantly in FY2021, but the company continues to incur net losses and a working capital deficiency - The company's primary business is the development of transdermal pharmaceutical products, but development efforts are on hold due to financial position and the effects of the COVID-19 pandemic, with current operations focused on contract services[153][154] - Capital requirements have substantially increased for pharmaceutical product development, with an estimated budget of $5.0 million for the abuse-deterrent fentanyl transdermal system, which could be exceeded[158] Key Financial Results (Years Ended January 31) | Metric | 2021 | 2020 | Change (YoY) | | :------------------------------------------ | :----------- | :----------- | :----------- | | Revenue | $943,702 | $370,647 | +154.6% | | Cost of revenue | $582,378 | $549,107 | +6.06% | | Gross margin | $361,324 | $(178,460) | N/A (from negative to positive) | | Selling, general and administrative expenses | $2,957,269 | $1,790,980 | +65.12% | | Net loss | $(2,932,828) | $(2,721,627) | +7.76% (larger loss) | | Net loss per share (basic and diluted) | $(0.51) | $(0.50) | +2.0% (larger loss per share) | - Revenue for FY2021 was derived from contract R&D ($206,183), sales of consumer transdermal products to a South Korean distributor ($583,324), and sales from the Pocono acquisition ($154,195)[163] - The increase in selling, general and administrative expenses in FY2021 was primarily due to non-cash compensation to officers and directors of $1,954,875[164] Liquidity and Capital Resources (As of January 31) | Metric | 2021 | 2020 | Change (YoY) | | :---------------------- | :----------- | :----------- | :----------- | | Cash and cash equivalents | $151,993 | $10,181 | +1392.9% | | Working capital deficiency | $(2,254,418) | $(1,979,141) | +13.9% (larger deficiency) | | Net Cash Used In Operating Activities | $(297,065) | $(894,470) | -66.8% (less cash used) | | Net Cash Provided by Financing Activities | $371,873 | $430,250 | -13.5% | | Proceeds from sale of common stock and warrants | $515,108 | $- | N/A | | Repayment of convertible debt (incl. fee) | $(339,131) | $- | N/A | - Management believes the substantial doubt about going concern has been resolved as of January 31, 2021, due to increased sales commitments, decreased overhead, received equity funding, and positive cash flow from a recent acquisition[171] Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, these disclosures are not required Item 8. Financial Statements and Supplementary Data This section indicates the audited financial statements begin on page F-1 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were not effective as of January 31, 2021 - Disclosure controls and procedures were not effective as of January 31, 2021, due to limited internal audit function, very limited staff, and recent acquisitions[186] - Internal controls over financial reporting were not effective as of January 31, 2021, with material weaknesses identified in internal audit functions, inadequate financial statement review, lack of segregation of duties, and insufficient monitoring of complex transactions[187] - Management has implemented plans to address weaknesses, including adding qualified accounting personnel, establishing additional monitoring controls over financial statements, and improving detailed accounting review of revenue and accounts receivable/payable transactions[188] Item 9B. Other Information The company reports no other information required under this item PART III Item 10. Directors, Executive Officers and Corporate Governance This section lists the company's executive officers and directors, committee structures, and notes non-compliance with certain filing requirements - The company's executive officers include Gareth Sheridan (CEO), Sean Gallagher (Executive Chairman), Gerald Goodman (CFO), Alan Smith (COO & President of 4P Therapeutics), Patrick Ryan (CTO), Jeff Patrick (CSO), and Larry Dillaha (CMO)[193] - The Board of Directors includes Gareth Sheridan, Sean Gallagher, Serguei Melnik, Michael Myer, Radu Bujoreanu, Steven P. Damon, Vsevolod Grigore, Mark Hamilton, and Stefan Mancas[193] - The Audit Committee is comprised of Mark Hamilton (Chairman), Radu Bujoreanu, and Stefan Mancas. The Compensation Committee is comprised of Mark Hamilton and Radu Bujoreanu[210][211] - Five directors—Radu Bujoreanu, Steven Damon, Mark Hamilton, Stefan Mancas, and Vsevolod Grigore—are considered independent based on the NASDAQ definition[212] - Several officers and directors have not filed their Form 3 or Form 4 reports under Section 16(a) of the Securities Exchange Act of 1934[213] Item 11. Executive Compensation This section details compensation for top executives for fiscal years 2021 and 2020, primarily consisting of salary and stock awards Summary Compensation Table (Years Ended January 31) | Name and Principal Position | Year | Salary ($) | Stock Awards ($) | Option/Incentive Plan Awards ($) | Total ($) | | :-------------------------- | :--- | :--------- | :--------------- | :------------------------------- | :-------- | | Gareth Sheridan, CEO | 2021 | 60,000 | 150,000 | - | 210,000 | | | 2020 | 42,000 | - | - | 67,000 | | Sean Gallagher, President | 2021 | - | 150,000 | - | 150,000 | | | 2020 | - | 60,000 | - | 60,000 | | Jeff Patrick, Chief Scientific Officer | 2021 | - | - | - | - | | | 2020 | - | 60,000 | 252,700 | 312,700 | - Gareth Sheridan's annual salary increased to $60,000 in FY2021 and is set to increase to $170,000 per annum upon the company receiving at least $2,500,000 from public or private equity financings[216] - Sean Gallagher's employment agreement provided for an annual salary of $60,000, payable in stock or cash, which terminated on January 1, 2020[217] - Jeff Patrick's employment agreement provided for annual compensation of $60,000, payable in cash or stock, which terminated on January 31, 2020[218] - There were no outstanding equity awards at January 31, 2021[220] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details the beneficial ownership of common stock by principal stockholders, directors, and executive officers as of April 1, 2021 Principal Stockholders (As of April 1, 2021) | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percentage | | :----------------------------------- | :---------------------------------------- | :--------- | | Gareth Sheridan | 1,510,000 | 23.76% | | Vitalie Botgros | 455,000 | 7.167% | | Serguei Melnik | 717,500 | 11.29% | | Steven Damon | 41,750 | <1% | | Sean Gallagher | 33,572 | <1% | | Stefan Mancas | 1,625 | <1% | | Mark Hamilton | 1,250 | <1% | | Radu Bujoreanu | - | <1% | | Dr. Jeff Patrick | 21,072 | <1% | | Patrick Ryan | 2,500 | <1% | | All officers and directors as a group (14 individuals) | 2,402,522 | 37.80% | - As of April 1, 2021, there were 6,356,269 shares of common stock outstanding[7][222] Item 13. Certain Relationships and Related Transactions, and Director Independence This section discloses related party transactions, including advances from officers and significant stock issuances to insiders - During the year ended January 31, 2021, Serguei Melnik and Dr. Alan Smith advanced $18,128 to the company, which was fully repaid[226] - On January 31, 2020, 8,572 shares were issued to Sean Gallagher and Strategic Pharmaceutical Consulting LLC (controlled by Jeff Patrick) for services, valued at $120,000 each[227] Common Stock Issued to Officers and Directors (January 5, 2021) | Recipient | Shares Issued | | :------------------------------------------ | :------------ | | Gareth Sheridan, CEO and Director | 10,000 | | Sean Gallagher, Executive Chairman and Director | 10,000 | | Serguei Melnik, Director | 10,000 | | Michael Myer, President of Pocono Pharma and Director | 5,000 | | Radu Bujoreanu, Director | 12,500 | | Steven P. Damon, Director | 10,000 | | Mark Hamilton, Director | 12,500 | | Stefan Mancass, Director | 12,500 | | Vsevolod Grigore, Director | 5,000 | | Patrick Ryan, Chief Technical Officer | 5,000 | | Gerald Goodman, Chief Financial Officer | 10,000 | | Alan Smith, Chief Operating Officer and President of 4P Therapeutics | 6,825 | | Vitalie Botgros, Consultant | 5,000 | | Former directors (Michael Doron, Thomas Cooney, Jay Moore) | 16,000 | | All stock issuances were valued by the Board at $15.00 per share. | | - Five directors (Radu Bujoreanu, Steven P. Damon, Mark Hamilton, Stefan Mancas, and Vsevolod Grigore) are independent based on the NASDAQ definition[230] Item 14. Principal Accounting Fees and Services This section outlines fees paid to the independent accountants for audit and other professional services during fiscal years 2021 and 2020 Fees Billed by Independent Accountants (Years Ended January 31) | Category | 2021 ($) | 2020 ($) | | :--------------- | :------- | :------- | | Audit fees | 63,500 | 42,469 | | Audit – related fees | 0 | 0 | | Tax fees | 0 | 0 | | All other fees | 65,637 | 23,325 | - All other fees in 2021 and 2020 relate to professional services for the proposed registration statement and acquisition audit[234] - The company's policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants, and all services in the past two fiscal years were board-approved[235] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists all exhibits and financial statement schedules filed as part of the Form 10-K report - The exhibits include foundational corporate documents, key agreements (securities purchase, acquisition, distribution, employment, license), and certifications[243] Item 16. Form 10-K Summary This item is marked as not applicable Financial Statements Report of Independent Registered Public Accounting Firm The independent auditor issued an unqualified opinion on the consolidated financial statements and highlighted several critical audit matters - The independent auditor issued an unqualified opinion, stating that the financial statements present fairly the company's financial position and results of operations in conformity with GAAP[252] - Critical Audit Matters identified include: Long-Lived Asset Impairment Assessment, Goodwill Impairment Assessment, Business Combinations, and Evaluation of a Going Concern, due to significant estimates and assumptions requiring high auditor judgment[256][257][261][263][267] Consolidated Balance Sheets The balance sheets show an increase in total assets and stockholders' equity, alongside a growing working capital deficiency Consolidated Balance Sheet Highlights (As of January 31) | Metric | 2021 ($) | 2020 ($) | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | 151,993 | 10,181 | | Total Current Assets | 314,188 | 43,181 | | Property & Equipment-net | 1,076,626 | 111,029 | | Goodwill | 7,529,875 | 1,719,235 | | Total Assets | 9,927,419 | 2,197,755 | | Total Current Liabilities | 2,568,606 | 2,022,322 | | Total Liabilities | 2,815,473 | 2,022,322 | | Working capital deficiency | (2,254,418) | (1,979,141) | | Accumulated deficit | (11,835,105) | (8,902,277) | | Total Stockholders' Equity | 7,111,946 | 175,433 | Consolidated Statements of Operations and Comprehensive Loss The statements show a significant revenue increase in FY2021 but also a larger net loss due to increased operating and interest expenses Consolidated Statements of Operations and Comprehensive Loss (Years Ended January 31) | Metric | 2021 ($) | 2020 ($) | | :------------------------------------------ | :----------- | :----------- | | Revenue | 943,702 | 370,647 | | Cost of revenues | 582,378 | 549,107 | | Selling, general and administrative expenses | 2,957,269 | 1,790,980 | | Loss from operations | (2,595,945) | (1,969,440) | | Derivative expense | - | (767,650) | | Gain on change in fair value of derivative | 22,096 | 88,876 | | Interest expense | (280,686) | (73,413) | | Net loss | (2,932,828) | (2,721,627) | | Net loss per share (basic and diluted) | (0.51) | (0.50) | | Weighted average shares outstanding | 5,770,944 | 5,423,956 | | Total Comprehensive Loss | (2,932,828) | (2,721,879) | Consolidated Statements of Changes in Stockholder's Equity (Deficit) These statements illustrate movements in equity, reflecting significant increases in paid-in capital from stock issuances for acquisitions and services Consolidated Statements of Changes in Stockholder's Equity (Deficit) Highlights (Years Ended January 31) | Metric | February 1, 2019 | January 31, 2020 | January 31, 2021 | | :-------------------------------- | :--------------- | :--------------- | :--------------- | | Common Stock (shares) | 5,423,956 | 5,441,100 | 6,256,772 | | Common Stock (amount) | $5,424 | $5,441 | $6,257 | | Additional Paid In Capital | $8,579,890 | $9,072,573 | $18,871,098 | | Accumulated Deficit | $(6,180,650) | $(8,902,277) | $(11,835,105) | | Total Stockholders' Equity | $2,404,612 | $175,433 | $7,111,946 | | Net loss for the year | N/A | $(2,721,627) | $(2,932,828) | | Issuance of common stock for acquisition | N/A | N/A | $6,085,180 | | Issuance of common stock for services | N/A | N/A | $2,004,875 | | Reclassification of warrants from liability to equity | N/A | N/A | $906,678 | Consolidated Statements of Cash Flows The statements detail cash flows from activities, showing negative operating cash flow but positive financing cash flow in 2021 Consolidated Statements of Cash Flows Highlights (Years Ended January 31) | Cash Flow Activity | 2021 ($) | 2020 ($) | | :------------------------------------------ | :----------- | :----------- | | Net Cash Used In Operating Activities | (297,055) | (894,470) | | Net Cash Used in Investing Activities | 66,994 | - | | Net Cash Provided by Financing Activities | 371,873 | 430,250 | | Net change in cash | 141,812 | (464,472) | | Cash and cash equivalents - End of period | 151,993 | 10,181 | | Common stock and note issued for acquisition (non-cash) | 7,418,073 | - | | Derivative liability warrant reclassed to equity (non-cash) | 906,678 | - | | Common stock issued for settlement of debt (non-cash) | 287,500 | - | Notes to Consolidated Financial Statements These notes provide detailed information on accounting policies, acquisitions, financial instruments, and the resolution of going concern doubt 1. Organization and Summary of Significant Accounting Policies This note details the company's formation, acquisitions, and the resulting shift in business focus to transdermal pharmaceutical development - Nutriband Inc. was incorporated on January 4, 2016, and acquired Nutriband Ltd. in 2016[279] - Acquired 4P Therapeutics LLC on August 1, 2018, for $2,250,000, shifting the company's principal business to transdermal pharmaceutical product development[280][282] - Formed Pocono Pharmaceuticals Inc. on August 25, 2020, and acquired assets/liabilities of Pocono Coated Products LLC and 100% of Active Intelligence LLC on August 31, 2020[283][284] - The COVID-19 pandemic may negatively impact productivity, disrupt business, and delay clinical programs and timelines[285] - A one-for-four reverse stock split was effected on June 25, 2019, becoming effective in the marketplace on July 24, 2019[286] - Management believes the substantial doubt about going concern has been resolved as of January 31, 2021, due to increased sales commitments, decreased overhead, equity funding, and positive cash flow from recent acquisition[287] - The consolidated financial statements include Nutriband Ltd., 4P Therapeutics LLC, and Pocono Pharmaceuticals Inc. (including Active Intelligence LLC)[288] - Adopted ASU No. 2014-09 (Topic 606) for revenue recognition effective February 1, 2018, recognizing revenue when control of goods/services is transferred and payment is probable[292] Disaggregation of Revenues (Years Ended January 31) | Revenue by Type | 2021 ($) | 2020 ($) | | :---------------- | :------- | :------- | | Sale of goods | 737,519 | 124,958 | | Services | 206,183 | 245,679 | | Total | 943,702 | 370,637 | | Revenue by Geographical Location | 2021 ($) | 2020 ($) | | :------------------------------- | :------- | :------- | | United States | 360,378 | 245,679 | | Foreign | 583,324 | 124,958 | | Total | 943,702 | 370,637 | - Intangible assets (trademarks, intellectual property, customer base) are amortized over ten years. Goodwill is reviewed annually for impairment and not amortized[302][303] - The company records a full valuation allowance against its net operating loss (NOL) carryforward due to uncertainty of realization[312] - Cash and cash equivalents are concentrated in banks. In FY2021, one customer accounted for 62% of revenues, and two customers accounted for 67% and 13% of accounts receivable[314] - Derivative liabilities are valued using Level 3 inputs (Monte Carlo Model) and are reflected at fair value on the balance sheet[320][321] 2. Acquisition of Business This note details the acquisition of Pocono Coated Products and Active Intelligence for a total purchase price of $7,418,073 - On August 31, 2020, the company acquired certain assets and liabilities from Pocono Coated Products LLC and 100% of Active Intelligence LLC[326] - The purchase price was $7,418,073, consisting of 608,519 shares of common stock (valued at $6,085,180) and a promissory note of $1,332,893 (net of debt discount)[326] Net Assets Acquired (Fair Value on Acquisition Date) | Asset/Liability | Fair Value ($) | | :-------------------------- | :------------- | | Cash | 66,994 | | Accounts receivable | 1,761 | | Inventory | 42,613 | | Equipment and fixtures | 1,056,935 | | Customer base | 177,600 | | Intellectual property and trademarks | 583,200 | | Goodwill | 5,810,640 | | Accounts payable and accrued expenses | (26,104) | | Deferred revenue | (26,851) | | Debt | (268,715) | | Net assets acquired | 7,418,073 | Unaudited Pro Forma Condensed Financial Information (Years Ended January 31) | Metric | 2021 (Proforma) ($) | 2020 (Proforma) ($) | | :-------------------------- | :------------------ | :------------------ | | Net revenue | 1,369,761 | 1,993,472 | | Net loss | (3,001,178) | (2,732,727) | | Loss per common share | (0.52) | (0.45) | - Since the acquisition date, Pocono and Active Intelligence generated net revenues of $154,195 and incurred a net loss of $40,068[331] 3. Property and Equipment This note provides a breakdown of the company's property and equipment, net of accumulated depreciation Property and Equipment, Net (As of January 31) | Category | 2021 ($) | 2020 ($) | | :-------------------- | :----------- | :----------- | | Lab equipment | 144,585 | 144,585 | | Machinery and equipment | 1,053,966 | - | | Furniture and fixtures | 22,612 | 19,643 | | Less: Accumulated depreciation | (144,537) | (53,199) | | Net Property and Equipment | 1,076,626 | 111,029 | - Depreciation expense amounted to $91,338 for the year ended January 31, 2021, compared to $35,118 for 2020[332] 4. Income Taxes This note explains that no U.S. tax provision was recorded due to operating losses, with deferred tax assets fully offset by a valuation allowance - No U.S. tax provision was recorded for the years ended January 31, 2021, and 2020, due to losses from U.S. operations[334] - As of January 31, 2021, the company recorded a deferred tax asset of approximately $5,300,000 from net operating loss (NOL) carryforwards, fully offset by a valuation allowance[335] - The valuation allowance increased by approximately $810,000 during the year ended January 31, 2021[335] Deferred Tax Assets and Liabilities (As of January 31) | Category | 2021 ($) | 2020 ($) | | :------------------------------------ | :----------- | :----------- | | Net operating loss carryforwards | (1,106,339) | (698,308) | | Stock issued for services | (844,520) | (436,904) | | Intangible impairment expense | (525,000) | (525,000) | | Valuation allowance | 2,475,859 | 1,660,212 | | Net deferred taxes | - | - | 5. Notes Payable/Convertible Debt This note details the company's various debt obligations, including a PPP loan, related party loans, and a significant acquisition-related note - 4P Therapeutics received a $34,870 PPP loan (0.98% interest, due June 17, 2022), outstanding as of January 31, 2021[337] - Minority shareholder loans totaling $275,000 were converted into 25,000 shares of common stock in March 2020, resulting in a $12,500 loss on extinguishment. An additional $100,000 interest-free loan from the minority shareholder was outstanding as of January 31, 2021[338] - Active Intelligence has a $160,000 line of credit (5% interest, due October 16, 2029), with $129,078 outstanding as of January 31, 2021[339] Finance Lease Minimum Payments (Years Ending January 31) | Year | Amount ($) | | :-------------------- | :----------- | | 2022 | 24,738 | | 2023 | 26,295 | | 2024 | 27,948 | | 2025 | 26,361 | | 2026 and thereafter | 16,202 | | Total | 121,543 | - A promissory note of $1,332,893 (net of debt discount) was issued to Pocono Coated Products LLC (a related party) on August 31, 2020, with 0.17% interest, due August 28, 2021[341] - Convertible notes in the principal amount of $270,000 (issued October 2019) were prepaid on March 25, 2020, for $345,565 (including a $69,131 prepayment fee), reducing the derivative liability to zero[342][346] - Interest expense for the year ended January 31, 2021, was $280,686, primarily from the amortization of debt discounts ($272,130)[347] 6. Intangible Assets and Goodwill This note details the company's intangible assets and goodwill, their associated amortization, and annual impairment review Intangible Assets, Net (As of January 31) | Category | 2021 ($) | 2020 ($) | | :------------------------------- | :----------- | :----------- | | Customer base | 314,100 | 136,500 | | Intellectual property and trademarks | 817,400 | 234,200 | | Total | 1,131,500 | 370,700 | | Less: Accumulated amortization | (124,770) | (56,000) | | Net Intangible Assets | 1,006,730 | 314,700 | - Amortization expense for intangible assets was $68,770 for the year ended January 31, 2021, and $37,070 for 2020[348] Estimated Amortization of Intangible Assets | Year Ended January 31 | Total ($) | | :-------------------- | :---------- | | 2022 | 113,150 | | 2023 | 113,150 | | 2024 | 113,150 | | 2025 | 113,150 | | 2026 and thereafter | 554,130 | | Total | 1,006,730 | - Goodwill amounted to $7,529,875 as of January 31, 2021, including $5,810,640 recorded from the acquisition of Pocono Coated Products LLC and Active Intelligence LLC[303] 7. Derivative Liabilities This note explains the accounting for derivative liabilities, detailing their reclassification to equity and the change in fair value Summary of Fair Value of Level 3 Financial Liabilities (Derivative Liabilities) | Metric | January 31, 2021 ($) | | :------------------------------------ | :------------------- | | Balance at the beginning of the period | 928,774 | | Derivative liability warrants reclassed to equity | (906,678) | | Change in value of embedded conversion option | (22,096) | | Balance at the end of the period | - | - The company uses Level 3 inputs for valuation, employing the Monte Carlo Model based on various assumptions for expected volatility, risk-free interest rate, and expected term[350][351] 8. Related Party Transactions This note outlines transactions with related parties, including stock-based compensation, officer advances, and transactions with an acquired entity - An option to purchase 25,000 shares granted to an executive officer expired unexercised in May 2019, with a fair value of $252,700 expensed[352] - During FY2021, the company issued 51,825 shares of common stock, valued at $777,375, to executive officers and 78,500 shares, valued at $1,177,500, to current and former independent directors[353] - Advances from the Chief Financial Officer and Chief Operating Officer totaling $29,067 as of January 31, 2020, were fully repaid by January 31, 2021[340][353] - Transactions with Pocono Coated Products LLC (a related entity) included $68,780 in revenue, $33,479 in material purchases, $23,310 in paid expenses, and $6,763 in finance payments[353] 9. Stockholder's Equity This note details changes in equity, including an increase in authorized common shares and significant issuances for placements, acquisitions, and services - The company's authorized capital includes 10,000,000 shares of Preferred Stock, par value $0.001, with no shares outstanding. The Series A Convertible Preferred Stock was terminated in June 2019[354][355] - A one-for-four reverse stock split was effected on June 25, 2019. Authorized common shares were increased from 25,000,000 to 250,000,000 on January 27, 2020[356] - In March 2020, the company issued 46,828 units (common stock and warrants) in a private placement, raising $515,108[357] - In March 2020, 25,000 shares of common stock were issued to convert $275,000 in minority shareholder loans, resulting in a $12,500 loss on extinguishment[358] - On August 31, 2020, 608,519 shares of common stock, valued at $6,085,180, were issued for the acquisition of Pocono Coated Products LLC[360] - On December 31, 2020, 130,325 shares of common stock, valued at $1,954,875, were issued for services to executive officers and directors[361] - As of January 31, 2021, the company had a subscription payable of $70,000, including $60,000 from BPM Inno Ltd. and $10,000 for consulting services[365] 10. Warrants and Options This note summarizes changes in outstanding warrants and options, highlighting the reclassification of derivative liability warrants to equity Changes in Warrants Outstanding (Years Ended January 31) | Metric | 2021 (Shares) | 2020 (Shares) | | :------------------------------------ | :-------------- | :-------------- | | Outstanding, beginning of period | 70,000 | 182,500 | | Granted | 91,828 | 50,000 | | Expired/Cancelled | (20,000) | (162,500) | | Outstanding, end of period | 141,828 | 70,000 | | Weighted average exercise price (end of period) | $11.99 | $18.93 | | Remaining contractual life (end of period) | 2.16 years | 2.08 years | - As of January 31, 2021, 141,828 warrants were outstanding and exercisable, with a weighted average exercise price of $11.99 and a remaining contractual life of 2.16 years[365] - A derivative liability for warrants in the amount of $906,678 was reclassed to additional paid-in capital as of January 31, 2021[365] - No stock options were outstanding as of January 31, 2020, or January 31, 2021[367] 11. Leases This note describes the company's current lease arrangements for office and manufacturing space - The company leases a shared office space in Orlando for $149 per month and manufacturing space in Cherryville, North Carolina, for $4,200 per month under a verbal month-to-month agreement[139][368] - Finance leases for equipment are detailed in Note 5[368] 12. Commitments and Contigencies This note outlines ongoing litigation, executive employment agreements, and recent license and distribution agreements - The company is involved in ongoing legal actions in Florida and New York to rescind the acquisition of Advanced Health Brands, Inc. and recover 1,200,000 shares of common stock due to alleged fraud[369][370][371] - Gareth Sheridan's employment agreement provides for an annual salary of $42,000 (increased to $60,000 in FY2021), with a potential increase to $170,000 upon securing $2,500,000 in financing[372] - A License Agreement with Rambam Med-Tech Ltd. (December 9, 2020) grants the company rights to develop the RAMBAM Closed System Transfer Device (CSTD) for an initial $50,000 license fee (paid February 2021)[373] - An agreement with BPM Inno Ltd. (November 13, 2020) grants BPM exclusive agency rights for Rambam and a 4.5% commission on related revenues, with territorial distribution rights[374] 13. Subsequent Events This note reports significant events after the fiscal year-end, including new agreements and stock issuances - On March 10, 2021, the Distribution Agreement with BPM Inno Ltd. was finalized, granting BPM distribution rights for medical products in Israel and a right of first refusal in certain other countries[378] - On February 25, 2021, BPM Inno Ltd. completed the purchase of 81,395 shares of common stock for $700,000 under a Stock Purchase Agreement dated December 7, 2020[378] - On February 10, 2021, 12,500 shares of common stock, valued at $350,000, were issued for a consulting fee related to the Rambam License Agreement[378] - On February 25, 2021, 5,602 shares of common stock, valued at $60,000, were issued for consulting services[378]