| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Forward
Stock Split On July 26,
2022, our Board of Directors approved the amendment to our Articles of Incorporation to effect a 7 for 6 forward stock split (the “Stock
Split”) of our outstanding common stock. The Company filed the amendment set forth in a Certificate of Change with the Secretary
of State of Nevada on August 4, 2022. The 7:6 forward stock split was effective for trading purposes on the Nasdaq Capital Market on August
12, 2022. Each shareholder of record as of the August 15, 2022 record date received one (1) additional share for each six (6) shares held
as of the record date. No fractional shares of common stock were issued in connection with the Stock Split. Instead, all shares were rounded
up to the next whole share. In connection with the Stock Split, which did not require shareholder approval under the Nevada corporation
law, the number of shares of common stock of the Company was increased in the same ratio as the shares of outstanding common stock were
increased in the Stock Split, from 250,000,000 authorized shares to 291,666,666 authorized shares. All share and
per share information in these financial statements retroactively reflect the forward stock split. Going
Concern Assessment Management
assesses liquidity and going concern uncertainty in the Company’s condensed financial statements to determine whether there is sufficient
cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date
the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”,
as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will
consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including timing and nature of projected
cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if
necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing
curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can
be achieved and management has the proper authority to execute them within the look-forward period. As of January
31, 2023, the Company had cash and cash equivalents of $1,985,440 and working capital of $1,945,132. For the year ended January 31, 2023,
the Company incurred an operating loss of $4,483,474 and used cash flow from operations of $2,987,198. The Company has generated operating
losses since its inception and has relied on sales of securities and issuance of third-party and related-party debt to support cash flow
from operations. In October 2021, the Company consummated a public offering and received net proceeds of $5,836,230. The Company also
received to date $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 which will permit
the Company to draw down on the credit line to fund the Company’s research and development of its Aversa product.
Management
has prepared estimates of operations for the next twelve months and believes that sufficient funds will be generated from operations to
fund its operations for one year from the date of the filing of these condensed consolidated financial statements, which indicates improved
operations and the Company’s ability to continue operations as a going concern. The impact of COVID-19 on the Company’s business
has been considered in these 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. The wholly owned subsidiaries are as follows: Nutriband
Ltd. 4P
Therapeutics LLC Pocono
Pharmaceuticals Inc. Active
Intelligence LLC 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 equivalents are short-term, highly liquid investments that have
a maturity of three months or less. 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:
Years Ended
January 31,
2023 2022
Revenue by type
Sale of goods $ 1,785,507 $ 1,179,620
Services 294,102 242,534
Total $ 2,079,609 $ 1,422,154
Years Ended
January 31,
2023 2022
Revenue by geographic location:
United States $ 2,079,609 $ 1,335,554
Foreign - 86,600
$ 2,079,609 $ 1,422,154 Accounts
receivable Trade accounts
receivables are recorded at the net invoice value and are not interest bearing. The Company maintains allowances for doubtful accounts
for estimated losses from the inability of its customers to make required payments. The Company determines its allowances by both specific
identification of customer accounts where appropriate and the application of historical loss to non-applicable accounts. For the years
ended January 31, 2023 and 2022, the Company recorded no bad debt expense for doubtful accounts related to account receivable. Inventories Inventories are valued at the lower of cost and reasonable value determined
using the first-in, first-out (FIFO) method. Net realized value is the estimated selling price in the ordinary course of business, less
applicable variable selling expenses. The cost of finished goods and work in process is comprised of material costs, direct labor costs
and other direct costs and related production overheads (based on normal operating capacity). As of January 31, 2023, total inventory
was $29,335, consisting of work in process of $11,021 and raw materials of $218,334. As of January 31, 2022, 100% of the inventory consists
of raw materials. Property,
Plant and Equipment Property and
equipment represent an important component of the Company’s assets. The Company depreciates its plant and equipment on a straight-line
basis over the estimated useful life of the assets. Property, plant and equipment is stated at historical cost. Expenditures for minor
repairs, maintenance and replacement parts which do not increase the useful lives of the assets are charged to expense as incurred. All
major additions and improvements are capitalized. Depreciation is computed using the straight-line method. The lives over which the fixed
assets are depreciated range from 3 to 20 years as follows:
Lab Equipment 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 January 31, 2023 and 2022, Goodwill
amounted to $5,021,713 and $5,349,039, 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 January 31, 2023, and 2022, there were 1,778,006 and
1,503,171 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. 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. Concentration
of Credit Risk Financial instruments
which potentially subject the Company to concentrations of credit risk consist principally of cash. The Company’s cash and cash
equivalents are concentrated primarily in banks. At times, such deposits could be in excess of insured limits. Management believes that
the financial institutions that hold the Company’s financial instruments are financially sound and, accordingly, minimal credit
risk is believed to exist with respect to those financial interests. As of and for the year ended January 31, 2023, two customers accounted
for 34% and 14% of the Company’s revenue and one customer accounted for 94% of accounts receivable. As of and for the year ended
January 31, 2022, three customers accounted for 19%, 17% and 13% of the Company’s revenue and three customers accounted for 58%,
21% and 17% of accounts receivable. 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
cash and cash equivalents, accounts receivable, prepaid expenses, inventories, deferred revenue, accounts payableand accrued expenses
approximate their fair value due to the short maturities of these financial instruments. Recent
Accounting Standards In October
2021, the FASB issued ASU 2021-08, Business Combinations (Topic805): Accounting for Contract Assets and Contract Liabilities from Contracts
with Customers, which clarifies how to properly account for deferred revenue in a business combination. ASU 2021-08 is effective for periods
after December 15, 2022. The Company adopted ASU 2021-08 on February 1, 2022. The adoption of ASU 2021-08 did not have a material effect
on the Company’s consolidated financial statements. 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. |
