VERUS INTERNATIONAL, INC. - Annual Report: 2021 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

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

	For the fiscal year ended October 31, 2021

☐	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 001-34106

VERUS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware		11-3820796
(State of incorporation)		(I.R.S. Employer Identification No.)

4003 Greenbriar Drive
Stafford, TX		77477
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (301) 329-2700

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common stock, $0.000001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

☐ Yes ☒ No

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 the 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, a 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 Rule12b-2 of the Act).

☐ Yes ☒ No

The aggregate market value of the voting stock and non-voting common equity held by non-affiliates of the registrant as of April 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $8.2 million.

As of April 11, 2022, 56,026,564 shares of common stock were issued as adjusted for a 1-for-500 reverse stock split which was completed and became effective on January 13, 2021.

Documents Incorporated by Reference: None.

Verus International, Inc.

Form 10-K

Table of Contents

PART I

ITEM 1. BUSINESS	4

ITEM 1A. RISK FACTORS	8

ITEM 1B. UNRESOLVED STAFF COMMENTS	17

ITEM 2. PROPERTIES	17

ITEM 3. LEGAL PROCEEDINGS	17

ITEM 4. MINE SAFETY DISCLOSURES	18

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	19

ITEM 6. SELECTED FINANCIAL DATA	19

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	26

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	26

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	26

ITEM 9A. CONTROLS AND PROCEDURES	26

ITEM 9B. OTHER INFORMATION	27

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	28

ITEM 11. EXECUTIVE COMPENSATION	29

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	30

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	40

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES	41

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	42

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact could be deemed forward-looking statements. Statements that include words such as “may,” “will,” “might,” “projects,” “expects,” “plans,” “believes,” “anticipates,” “targets,” “intends,” “hopes,” “aims,” “can,” “should,” “could,” “would,” “goal,” “potential,” “approximately,” “estimate,” “pro forma,” “continue” or “pursue” or the negative of these words or other words or expressions of similar meaning may identify forward-looking statements. For example, forward-looking statements include any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; statements of belief and any statement of assumptions underlying any of the foregoing.

These forward-looking statements are found at various places throughout this Annual Report on Form 10-K and the other documents referred to and relate to a variety of matters, including, but not limited to, other statements that are not purely statements of historical fact. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of management, are not guarantees of performance and are subject to significant risks and uncertainty. These forward-looking statements should not be relied upon as predictions of future events and Verus International, Inc. (the “Company”) cannot assure you that the events or circumstances discussed or reflected in these statements will be achieved or will occur. Furthermore, if such forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by the Company or any other person that the Company will achieve its objectives and plans in any specified timeframe, or at all.

These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. The Company disclaims any obligation to publicly update or release any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Annual Report on Form 10-K or to reflect the occurrence of unanticipated events, except as required by law.

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PART I

Throughout this Annual Report on Form 10-K, the “Company,” “Verus,” “we,” “us,” and “our” refers to Verus International, Inc. and its subsidiaries.

ITEM 1. BUSINESS

Explanatory Note

All references to shares of our common stock contained herein have been adjusted to reflect a 1-for-500 reverse stock split which was completed and became effective on January 13, 2021.

Overview

For the period August 1, 2018 through October 31, 2021, we, through our wholly-owned subsidiary, Verus Foods, Inc. (“Verus Foods”), an international supplier of consumer food products, were focused on international consumer packaged goods, foodstuff distribution and wholesale trade. Our fine food products were sourced in the United States and exported internationally. We marketed consumer food products under our own brand primarily to supermarkets, hotels and other members of the wholesale trade. Initially, we focused on frozen foods, particularly meat, poultry, seafood, vegetables, and french fries with beverages as a second vertical, and in 2018, we added cold-storage facilities and began seeking international sources for fresh fruit, produce and similar perishables, as well as other consumer packaged foodstuff with the goal to create vertical farm-to-market operations.

Through October 31, 2021, we had a significant regional presence in the Middle East and North Africa (“MENA”) and sub-Saharan Africa (excluding The Office of Foreign Assets Control restricted nations), with deep roots in the Gulf Cooperation Council (“GCC”) countries, which included the United Arab Emirates (“UAE”), Oman, Bahrain, Qatar, Kingdom of Saudi Arabia and Kuwait. During the three months ended October 31, 2021, we made a decision to cease operating as an international supplier of consumer food products, whereby we cancelled and settled all supplier and customer contracts to avoid any future significant liabilities. Accordingly, we have classified the operating results and associated assets and liabilities from Verus MENA as discontinued operations in the consolidated financial statements for the years ended October 31, 2021 and 2020 (see Note 16).

In addition to the foregoing, since our acquisition of Big League Foods, Inc. (“BLF”) during April 2019, pursuant to which we acquired a license with Major League Baseball Properties, Inc. (“MLB”) to sell MLB-branded frozen dessert products and confections, we sold pint size ice cream in grocery store-type packaging. In addition, under our confections product line, we sold gummi and chocolate candies. The MLB license covers all 30 MLB teams, and all of our products pursuant to such license featured “home team” packaging that matched the fan base in each region. On December 18, 2020, we and our wholly owned subsidiary, BLF, entered into a letter agreement with ACG Global Solutions, Inc. and Game on Foods, Inc. (“GOF”), whereby for certain consideration, BLF sold, transferred, and assigned all of BLF’s rights, title, and interest in and to all of BLF’s assets to GOF. The assignments of our interests in the MLB and NHL licenses were completed on March 15, 2021 and March 25, 2021, respectively. Accordingly, we have classified the operating results and associated assets and liabilities from BLF as discontinued operations in the consolidated financial statements for the years ended October 31, 2021 and 2020 (see Note 16).

Furthermore, during August 2019, we purchased all of the assets of a french fry business in the Middle East.

Government Regulation

We are subject to the laws and regulations in the countries in which we operate.

Our nutraceutical and food products are subject to local, national and multinational regulations related to labeling, health and nutrition claims, packaging, pricing, marketing and advertising, privacy and related areas. In addition, various jurisdictions regulate our operations by licensing and inspecting the manufacturing plants and facilities of our suppliers, enforcing standards for select products, grading products, and regulating trade practices related to the sale and pricing of our products. Many of the commodities we use in our operations are subject to government agricultural policy and intervention. These policies have substantial effects on prices and supplies and are subject to periodic governmental review.

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Examples of laws and regulations that affect our business include selective taxes, labeling requirements such as front-of-pack labeling and nutrient profiling, marketing restrictions, potential withdrawal of trade concessions as dispute settlement retaliation and sanctions on sales or sourcing of raw materials.

In addition, we are subject to U.S. and foreign anti-corruption laws including the Foreign Corrupt Practices Act (“FCPA”) which prohibits us from providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. Through October 31, 2021, we were also subject to the Export Sales Reporting Program of the United States Department of Agriculture (“USDA”) which monitors U.S. agricultural export sales on a daily and weekly basis. Commodities covered by the program include feed grains, wheat, wheat products, rye, flaxseed, linseed oil, cotton, cottonseed, oilseed products, rice, cattle hides and skins, and beef. In addition to the weekly requirement, daily reporting was required (except for soybean oil) when a single exporter sold in excess of specified amounts of one commodity in one day to a single destination, or cumulative sales were in excess of specified amounts of one commodity during the weekly reporting period to a single destination. In addition to the foregoing, we must comply with The Office of Foreign Assets Control trade sanctions. The Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals targeted against foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction and other threats to national security, foreign policy or economy of the United Stated.

Our failure to comply with any of the foregoing regulations or regulations that we may be subject to may be punishable by civil penalties, including fines, denial of export privileges, injunctions and asset seizures as well as criminal fines and imprisonment.

Market and Competition

Through October 31, 2021, we generated a majority of our revenue from food imported into the GCC countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The GCC has highly developed wholesale, grocery, and retail infrastructures that attract thousands of brands from around the world. According to reports published by Alpen Capital, halal food imports into the GCC are expected to continue growing significantly, while food imports account for the majority of food consumed in the GCC.

Through March 15, 2021, we also generated revenue from domestic U.S. sales of our MLB branded ice cream and gummi and chocolate candies. According to the International Dairy Foods Association, ice cream is an $11 billion industry with 1.4 billion gallons of ice cream and related frozen desserts produced annually in the U.S. and according to the National Confectioners Association, the confectionary industry generates $35 billion annually.

In the branded product space, management believes that our key competitors in the GCC countries in which we operated included The Savola Group and Almarai which are based in Saudi Arabia; Americana Quality which is based in Kuwait; and Al Islami Foods which is based in the UAE and is currently ranked as the world’s largest Halal food vendor, with more than 80 frozen and specialty lines. In addition to the foregoing, we also competed with recognized international brands from multi-line companies such as Nestle and Mondelez International. In the U.S., management believes that our key competitors included premium ice cream brands such as Ben & Jerry’s, Breyers, and Haagen-Dazs and domestic confectionary brands in the gummi and chocolate candy space such as Mars, Mondelez International, and Nestle.

Although many of our competitors have greater financial, distribution and marketing resources than us, management believes there are many categories and niches in which we can successfully compete in the highly-fragmented markets we operate. We offered both Verus Foods-branded products along with products from other brands, particularly from brands that desired to enter the GCC market, but lacked the infrastructure or resources to do so. Furthermore, management believes that we were one of the only U.S. based public companies operating in the GCC that could provide its own branded products and also act as a distributor for other brands across all of the major food sales categories. Management believes that a majority of the suppliers in this space are either non-U.S. based private companies or are public entities with a narrow focus on their own brands.

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Recent Developments

Big League Foods

On December 18, 2020, we and our wholly owned subsidiary, Big League Foods, Inc. (“BLF”), entered into a letter agreement (the “Agreement”) with ACG Global Solutions, Inc. (“ACG”) and Game on Foods, Inc. (“GOF”), whereby for certain consideration, BLF sold, transferred, and assigned all of BLF’s rights, title, and interest in and to all of BLF’s assets to GOF. The assignments of our interests in the MLB and NHL licenses were completed on March 15, 2021 and March 25, 2021, respectively. Accordingly, we have classified the operating results and associated assets and liabilities from BLF as discontinued operations in the consolidated financial statements for the years ended October 31, 2021 and 2020 (see Note 16).

Verus Middle East and North Africa (“MENA”)

Through October 31, 2021, we had a significant regional presence in the Middle East and North Africa (“MENA”) and sub-Saharan Africa (excluding The Office of Foreign Assets Control restricted nations), with deep roots in the Gulf Cooperation Council (“GCC”) countries, which includes the United Arab Emirates, Oman, Bahrain, Qatar, Kingdom of Saudi Arabia and Kuwait. During the three months ended October 31, 2021, we made a decision to cease operating as an international supplier of consumer food products, whereby we cancelled and settled all supplier and customer contracts to avoid any future significant liabilities. Accordingly, we have classified the operating results and associated assets and liabilities from Verus MENA as discontinued operations in the consolidated financial statements for the years ended October 31, 2021 and 2020 (see Note 16).

Financings

On November 5, 2021, the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company issued and sold a convertible promissory note in the principal amount of $78,750 (the “Note”). The Note matures on November 5, 2022, bears interest at a rate of 9% per annum (increasing to 22% per annum upon the occurrence of an Event of Default (as defined in the Note)) and is convertible into shares of the Company’s common stock at a conversion price as specified in the Note, subject to adjustment. The Note may be prepaid by the Company at any time prior to the 180th day after the issuance date of the Note with certain prepayment penalties as set forth therein.

On December 10, 2021, the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company issued and sold a convertible promissory note in the principal amount of $48,750 (the “Note”). The Note matures on December 10, 2022, bears interest at a rate of 9% per annum (increasing to 22% per annum upon the occurrence of an Event of Default (as defined in the Note)) and is convertible into shares of the Company’s common stock at a conversion price as specified in the Note, subject to adjustment. The Note may be prepaid by the Company at any time prior to the 180th day after the issuance date of the Note with certain prepayment penalties as set forth therein.

Litigation

On November 16, 2021, Fulton Bank, N.A. (“Fulton”) commenced a lawsuit against the Company in the United States Circuit Court for Montgomery County, Maryland as a result of the Company not making required payments under the Credit Facility. The Company intends to defend this matter and although the ultimate outcome cannot be predicted with certainty, an adverse ruling against the Company could have a material adverse effect on its financial condition and results of operations.

On December 15, 2021, Donald P. Monaco as trustee of the Donald P. Monaco Insurance Trust, commenced a lawsuit against the Company in the United States Circuit Court for Montgomery County, Maryland as a result of the Company not making required payments under the Monaco Note. The Company intends to defend this matter and although the ultimate outcome cannot be predicted with certainty, an adverse ruling against the Company could have a material adverse effect on its financial condition and results of operations.

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On February 7, 2022, Indeglia & Carney, LLP, commenced a lawsuit against the Company in the United States Circuit Court for Washington County, Maryland as a result of allegations of the Company not making payment of an outstanding balance due for services rendered. The Company intends to defend this matter and although the ultimate outcome cannot be predicted with certainty, an adverse ruling against the Company could have a material adverse effect on its financial condition and results of operations.

On March 10, 2022, AGC Global Solutions, Inc., commenced a lawsuit against the Company in the United States Circuit Court for Montgomery County, Maryland as a result of the Company not making required payments under a promissory note. The Company intends to defend this matter and although the ultimate outcome cannot be predicted with certainty, an adverse ruling against the Company could have a material adverse effect on its financial condition and results of operations.

Employees

As of April 11, 2022, we had 1 full-time employee and 2 part-time employees.

Corporate History

We were incorporated in the state of Delaware under the name Spectrum Gaming Ventures, Inc. on May 25, 1994. On October 10, 1995, we changed our name to Select Video, Inc. On October 24, 2007, we filed a Certificate of Ownership with the Delaware Secretary of State whereby Webdigs, Inc., our wholly-owned subsidiary, was merged with and into us and we changed our name to Webdigs, Inc.

On October 9, 2012, we consummated a share exchange (the “Exchange Transaction”) with Monaker Group, Inc. (formerly known as Next 1 Interactive, Inc.), a Nevada corporation (“Monaker”) pursuant to which we received all of the outstanding equity in Attaché Travel International, Inc., a Florida corporation and wholly owned subsidiary of Monaker (“Attaché”) in consideration for the issuance of 93 million shares of our newly designated Series A Convertible Preferred Stock to Monaker. Attaché owned approximately 80% of a corporation named RealBiz Holdings Inc. which is the parent corporation of RealBiz 360, Inc. (“RealBiz”). As a condition to the closing of the Exchange Transaction, on October 3, 2012, we filed a Certificate of Ownership with the Delaware Secretary of State whereby RealBiz Media Group, Inc., our wholly-owned subsidiary, was merged with and into us and we changed our name to RealBiz Media Group, Inc.

On May 1, 2018, Verus Foods MENA Limited (“Verus MENA”) entered into a Share Purchase and Sale Agreement with a purchaser (the “Purchaser”) pursuant to which Verus MENA sold 75 shares (the “Gulf Agro Shares”) of Gulf Agro Trading, LLC (“Gulf Agro”), representing 25% of the common stock of Gulf Agro, to the Purchaser. In consideration for the Gulf Agro Shares, the Purchaser was assigned certain contracts executed during a specified period of time. Upon the consummation of the transaction contemplated by the Share Purchase and Sale Agreement, the Purchaser obtained a broader license for product distribution. All liabilities of Gulf Agro remained with Gulf Agro. During the three months ended October 31, 2021, we made a decision to cease operating as an international supplier of consumer food products, whereby we cancelled and settled all supplier and customer contracts to avoid any future significant liabilities. Accordingly, we have classified the operating results and associated assets and liabilities from Verus MENA as discontinued operations in the consolidated financial statements for the years ended October 31, 2021 and 2020 (see Note 16).

Effective October 16, 2018, we changed our name from RealBiz Media Group, Inc. to Verus International, Inc. and our ticker symbol to “VRUS.”

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On April 25, 2019, we entered into a stock purchase agreement with BLF and James Wheeler, the sole stockholder of BLF pursuant to which we purchased all of the outstanding capital stock of BLF. Upon the closing of such acquisition, BLF became our wholly-owned subsidiary and we acquired a license with MLB to sell MLB-branded frozen dessert products and confections covering all 30 MLB teams. On December 18, 2020, we and our wholly owned subsidiary, BLF, entered into a letter agreement with ACG Global Solutions, Inc. and Game on Foods, Inc. (“GOF”), whereby for certain consideration, BLF sold, transferred, and assigned all of BLF’s rights, title, and interest in and to all of BLF’s assets to GOF. The assignments of our interests in the MLB and NHL licenses were completed on March 15, 2021 and March 25, 2021, respectively. Accordingly, we have classified the operating results and associated assets and liabilities from BLF as discontinued operations in the consolidated financial statements for the years ended October 31, 2021 and 2020 (see Note 16).

On August 30, 2019, we entered into an asset purchase agreement with a seller (“Seller”), to which we purchased all of the assets of the Seller’s french fry business in the Middle East.

On May 8, 2020, we acquired a 51% interest of ZC Top Apparel Manufacturing, Inc. (“TAM”), a Philippines-based maker of reusable N95 fabric masks and biohazard suits. On October 5, 2020, as a result of TAM’s failure of contractual performance and breach of contract, all obligations under the binding term sheet were rescinded and a demand made for immediate return of the cash consideration of $100,000, that we paid, plus fees and costs to be determined. As we were unsuccessful in collecting the $100,000, at October 31, 2020 we determined the $100,000 uncollectible and wrote-off the balance to loss on disposal of unconsolidated entity within our consolidated statement of operations.

ITEM 1A. RISK FACTORS

An investment in our securities involves significant risks. Before deciding to invest in our securities, you should carefully consider each of the following risk factors and all of the other information set forth in this Annual Report on Form 10-K. Our business and results of operations could be seriously harmed by any of the following risks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial condition and results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

We have no history of profitability.

We commenced operations in 1994 and to date have not generated any profit. We do not have a significant operating history which would provide you with meaningful information about our past or future operations with respect to our international consumer packaged goods, foodstuff distribution and wholesale trade. We have not yet achieved positive cash flow on a monthly basis during any fiscal year including the current fiscal year ended October 31, 2021.

We have had net losses of $5,998,896 and $15,670,193 for the years ended October 31, 2021 and 2020, respectively. Furthermore, we had a working capital deficit of $3,447,103 and surplus of $1,135,227 at October 31, 2021 and 2020, respectively. If we are unable to achieve profitability, we may be unable to continue our operations.

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

Our financial statements as of October 31, 2021 have been prepared under the assumption that we will continue as a going concern for the next twelve months. Our independent registered public accounting firm included in its opinion for the year ended October 31, 2021 an explanatory paragraph referring to our recurring losses from operations and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, reduce expenditures and to generate significant revenue. Our financial statements as of October 31, 2021 did not include any adjustments that might result from the outcome of this uncertainty. The reaction of investors to the inclusion of a going concern statement by our independent registered public accounting firm, and our potential inability to continue as a going concern, in future years could materially adversely affect our share price and our ability to raise new capital or enter into strategic alliances.

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We will require additional financing in the future to fund our operations which may cause dilution to our existing stockholders or restrict our operations.

We will need additional capital in the future to continue to execute our business plan. Therefore, we will be dependent upon additional capital in the form of either debt or equity to continue our operations. At the present time, we do not have arrangements to raise all of the needed additional capital, and we will need to identify potential investors and negotiate appropriate arrangements with them. Our ability to obtain additional financing will be subject to a number of factors, including market conditions, our operating performance and investor sentiment. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms of such financings may include liquidation or other preferences, anti-dilution rights, and other provisions that may adversely affect the rights of our stockholders, including rights, preferences and privileges that are senior to those of our holders of common stock in the event of a liquidation. In addition, debt financing, if available, could include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures, or declaring dividends and may require us to grant security interests in our assets. If we are unable to raise additional capital when required or on acceptable terms we may need to further curtail or cease our operations.

Our indebtedness and liquidity needs could restrict our operations and make us more vulnerable to adverse economic conditions.

Our existing indebtedness may adversely affect our operations and limit our growth, and we may have difficulty repaying our debt when due. If market or other economic conditions deteriorate, our ability to comply with covenants contained in our debt instruments may be impaired. If we violate any of the restrictions or covenants set forth in our debt instruments, all or a significant portion of our indebtedness may become immediately due and payable. Our inability to make payments on our indebtedness when due may have a material adverse effect on our operations and financial condition.

We depend on a small number of customers and the loss of one or more major customers could have a material adverse effect on our business, financial condition and results of operations.

For the year ended October 31, 2021, approximately 36% of accounts receivable were concentrated with two customers and approximately 34% of revenues were concentrated with two customers. For the year ended October 31, 2020, approximately 89% of accounts receivable were concentrated with one customer and approximately 94% of revenues were concentrated with one customer. The loss of one or more of our top customers, or a substantial decrease in demand by any of those customers for our products, could have a material adverse effect on our business, results of operations and financial condition.

Our reliance on distributors and retailers could affect our ability to efficiently and profitably distribute and market our products, maintain our existing customers and expand our business.

Our ability to maintain and expand our customer base, maintain our presence in existing markets and establish a presence in new markets is dependent on our ability to establish and maintain successful relationships with reliable distributors and retailers. Most of our distributors and retailers sell and distribute competing products and our products may represent a small portion of their businesses. The success of our distribution network will depend on the performance of the distributors and retailers. There is a risk that the retailers and distributors that we engage may fail to distribute our products or position our products in localities that may not be receptive to customers. Our ability to incentivize, motivate and retain distributors to manage and sell our products is affected by competition from other companies that have greater resources than we do. To the extent that our distributors and retailers are distracted from selling our products or do not deploy sufficient resources to manage and sell our products, our sales and results of operations could be adversely affected. Furthermore, our distributors’ and retailers’ financial position or market share may deteriorate, which could adversely affect the distribution, marketing and sales activities related to our products thereby having a material adverse effect on our business.

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Our ability to maintain and expand our distribution network and attract additional distributors and retailers depends on a number of factors, some of which are outside our control. Some of these factors include:

	●	the level of demand for our brand and products in a particular geographic location;

	●	our ability to price our products at levels competitive with those of our competitors; and

	●	our ability to deliver products in the quantity and at the time requested by distributors and retailers.

We may not be able to successfully manage all or any of these factors in any of our current or prospective markets which could have a material adverse effect on our results of operation and financial condition.

If we do not adequately manage our inventory levels, our operating results could be adversely affected.

We need to maintain adequate inventory levels to be able to deliver products on a timely basis. Our inventory supply depends on our ability to accurately estimate demand for our products. Our ability to estimate demand for our products is imprecise, particularly for new products, for seasonal promotions and in new markets. If we materially underestimate demand for our products or are unable to maintain sufficient inventory, we may not be able to satisfy demand on a short-term basis. Alternatively, if we overestimate demand for our products, we may have too much inventory on hand, which may result in higher storage costs and the risk of inventory spoilage. If we fail to manage our inventory to meet demand, we could damage our brand and our relationship with our customers which could have a material adverse effect on our operating results and financial condition.

If we do not continually enhance our brand recognition, increase distribution of our products, attract new customers and introduce new products our business may suffer.

The nutraceutical industry is subject to rapid and frequent changes in consumer demands. Because consumers in this industry are constantly seeking new products, our success relies heavily upon our ability to continue to market new products. We may not be successful in introducing or marketing new products on a timely basis, if at all. Our inability to commercialize new products may have an adverse effect on our business, financial condition and results of operations.

Any damage to our brand or reputation could adversely affect our business, financial condition and results of operations.

We must protect and grow the value of our brand to continue to be successful in the future. Any incident that erodes consumer affinity for our brand could significantly reduce our value and damage our business. For example, negative third-party reports regarding our products, whether accurate or not, may adversely impact consumer perceptions. In addition, if we recall certain products irrespective of whether such recall is mandatory or voluntary, the public perception of the quality of our products may be diminished. We may also be adversely affected by news reports or other negative publicity, regardless of their accuracy, regarding other aspects of our business, such as public health concerns, illness and safety. This negative publicity could adversely affect our brand and reputation which could have a material adverse effect on our business and financial condition.

We have no long-term contracts with our customers which require our customers to purchase a minimum amount of our products. The absence of long-term contracts could result in periods during which we must continue to pay costs and service indebtedness without revenues.

We do not have long-term contacts with our customers which require our customers to purchase a minimum amount of our products. Accordingly, we could have periods during which we have no or limited orders for our products, which will make it difficult for us to operate as we will have to continue paying our expenses and servicing our debt. We cannot provide assurance that we will be able to timely locate new customers, if at all. The periods in which we have no or limited purchase orders for our products could have a material adverse effect on our business and financial condition.

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Severe weather conditions and natural disasters may affect manufacturing facilities and distribution activities which may negatively impact the operating results of our business.

Severe weather conditions and natural disasters, such as fires, floods, droughts, frosts, hurricanes, earthquakes and tornadoes may curtail or prevent the manufacturing or distribution of our products which may have a material adverse effect on our results of operation or financial condition.

Global or regional health pandemics or epidemics, including COVID-19, could negatively impact our business operations, financial performance and results of operations.

Our business and financial results could be negatively impacted by the recent outbreak of COVID-19 or other pandemics or epidemics. The severity, magnitude and duration of the current COVID-19 pandemic, including variant strains of the virus is uncertain, rapidly changing and hard to predict. Since 2020, COVID-19, including variant strains of the virus have significantly impacted economic activity and markets around the world, and it could negatively impact our business in numerous ways, including but not limited to those outlined below:

	●	Commodity costs have become more volatile due to the COVID-19 outbreak and we expect continued commodity cost volatility;

	●	The COVID-19 outbreak could disrupt our supply chain, operations and routes to market or those of our suppliers, customers, distributors and retailers. These disruptions or our failure to effectively respond to them could increase product or distribution costs or cause delays in delivering or an inability to deliver products to our customers;

	●	Disruptions or uncertainties related to the COVID-19 outbreak, including variant strains, for a sustained period of time could result in delays or modifications to our strategic plans and initiatives and hinder our ability to achieve our business objectives;

	●	Illness, travel restrictions or workforce disruptions could negatively affect our supply chain, distribution or other business processes;

	●	Government or regulatory responses to pandemics could negatively impact our business. Mandatory lockdowns or other restrictions on operations have temporarily disrupted our ability to distribute our products in some markets. Continuation or expansion of these disruptions could materially adversely impact our operations and results; and

	●	The COVID-19 outbreak, including variant strains, has increased volatility and pricing in the capital markets and volatility is likely to continue which could have a material adverse effect on our ability to obtain financing.

These and other impacts of the COVID-19 or other global or regional health pandemics or epidemics could have the effect of heightening many of the other risks described in this “Risk Factors” section such as those relating to our reputation, brands, product sales, results of operations or financial condition. We might not be able to predict or respond to all impacts on a timely basis to prevent near- or long-term adverse impacts to our results. The ultimate impact of these disruptions also depends on events beyond our knowledge or control, including the duration and severity of any outbreak and actions taken by parties other than us to respond to them. Any of these disruptions could have a negative impact on our business operations, financial performance and results of operations, which impact could be material.

Our international operations exposed us to regulatory, economic, political and social risks in the countries in which we operated.

Through October, 31, 2021, the international nature of our operations involved a number of risks, including changes in regulations, tariffs, taxes and exchange controls, economic downturns, inflation and political and social instability including retaliation, war, and civil unrest in the countries in which we operated. Moreover, consumers in different countries may have varying tastes, preferences and nutritional opinions. In the event management determines it feasible, we cannot be certain that we will be able to enter and successfully compete in foreign markets.

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Doing business outside the United States required us to comply with the laws and regulations of various foreign jurisdictions, which placed restrictions on our operations, trade practices, partners and investment decisions. In particular, our operations were subject to anti-corruption and trade control laws and regulations, including, but not limited to, the FCPA and the Export Sales Reporting Program. The FCPA prohibited us from providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. In the future, in the event management determines it feasible, our expansion outside the United States and our development of new partnerships and joint venture relationships worldwide could increase the risk of FCPA violations in the future. We had operations and dealt with governmental clients in countries known to experience corruption, including certain emerging countries in the Middle East. Our activities in those countries created the risk of unauthorized payments or offers of payments by one of our former employees or former third parties that we engaged that could be in violation of various laws including the FCPA and other anti-corruption laws, even though those parties were not always subject to our control. As a result of doing business in foreign countries and with foreign partners, we were exposed to a heightened risk of violating anti-corruption laws. In addition, we were subject to the Export Sales Reporting Program which monitors U.S. agricultural export sales on a daily and weekly basis, and we had to comply with OFAC trade sanctions. Violations of anti-corruption, export and other regulations we may be subject to may be punishable by civil penalties, including fines, denial of export privileges, injunctions and asset seizures as well as criminal fines and imprisonment.

Disruptions in the worldwide economy may adversely affect our business, financial condition and results of operations.

Adverse and uncertain economic conditions may impact distributor, retailer and consumer demand for our products. In addition, our ability to manage normal commercial relationships with our suppliers, distributors, retailers and consumers may suffer. Consumers may shift to purchasing lower-priced products during economic downturns, making it more difficult for us to sell our premium products. During economic downturns, it may be more difficult to persuade existing consumers to continue to use our brand or persuade new consumers to select our brand without price promotions. Furthermore, during economic downturns, distributors and retailers may reduce their inventories of our products. Our results of operations depend upon, among other things, our ability to maintain and increase sales volume with our existing distributors and retailers, to attract new consumers and to provide products that appeal to consumers at prices they are willing and able to pay. Prolonged unfavorable economic conditions may have an adverse effect on our results of operation and financial condition.

We purchase substantially all of our products from a limited number of suppliers. Price increases and shortages in products could adversely affect our operating results.

We purchase substantially all of our products from a limited number of suppliers. Increases in the prices of the products which we purchase could adversely affect our operating results if we are unable to offset the effect of these increased costs through price increases, and we can provide no assurance that we will be able to pass along such increased costs to our customers. Furthermore, if we cannot obtain sufficient products or our suppliers cease to be available to us, we could experience shortages in our products or be unable to meet our commitments to customers. Alternative sources of products, if available, may be more expensive. Any such failure to supply or delay caused by our supplies may have a material adverse effect on our operating results.

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Price increases may not be sufficient to cover increased costs, or may result in declines in sales volume due to price elasticity in the marketplace.

We may be able to pass some or all input costs to our customers by increasing the selling price of our products or decreasing the size of our products; however, higher product prices or decreased product sizes may also result in a reduction in sales volume and/or consumption. If we are not able to increase our selling prices or reduce product sizes sufficiently, or in a timely manner, to offset increased input costs, including packaging, freight, direct labor, overhead and employee benefits, or if our sales volume decreases significantly, there could be a negative impact on our financial condition and results of operations.

We operate in a highly competitive industry.

The nutraceutical industry is intensely competitive and consolidation in this industry continues. We face competition in the areas of brand recognition, taste, quality, price, advertising/promotion, convenience and service. A number of our competitors are larger than us and have substantial financial, marketing and other resources as well as substantial international operations. In addition, reduced barriers to entry are creating new competition. Furthermore, in order to protect our existing market share or capture increased market share in this highly competitive environment, we may be required to increase expenditures for promotions and advertising and continue to introduce and establish new products. Due to inherent risks in the marketplace associated with advertising and new product introductions, including uncertainties about trade and consumer acceptance, increased expenditures may not prove successful in maintaining or enhancing our market share and could impact our operating results. In addition, we may incur increased credit and other business risks because we operate in a highly competitive environment.

Our business operations could be disrupted if our information technology systems fail to perform adequately.

The efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively manage our business data, communications, supply chain, order entry and fulfillment, and other business processes. The failure of our information technology systems to perform as we anticipate could disrupt our business and could result in transaction errors, processing inefficiencies, and the loss of sales and customers, causing our business and results of operations to suffer. In particular, as we grow, we need to make sure that our information technology systems are upgraded and integrated throughout our business and able to generate reports sufficient for management to run our business. In addition, our information technology systems may be vulnerable to damage, interruption or security breaches from circumstances beyond our control, including fire, natural disasters, system failures, cyber-attacks, corporate espionage, and viruses. Any such damage, interruption or security breach could have a material adverse effect on our business.

We may be subject to significant liability and may have to recall our products if the consumption of any product manufactured or marketed by us causes injury, illness or death. Regardless of whether such claims against us are valid, they may be expensive to defend and may generate negative publicity, both of which could materially adversely affect our business, operating results and financial condition.

The sale of products for human consumption involves the risk of injury to consumers. Such injuries may result from tampering by unauthorized third parties or product contamination or spoilage, including the presence of bacterial contamination, foreign objects, substances, chemicals, other agents or residues introduced during production processes. Our products may also be subject to product tampering, contamination or spoilage or be mislabeled or otherwise damaged which may result in a product recall.

We are dependent on our third-party manufacturers for compliance with rules and regulations with respect to production of many of our products. Although we believe that we and our manufacturers are in material compliance with all applicable laws and regulations, if the consumption of our products causes or is alleged to have caused an illness in the future, we may become subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding an illness, injury or death could have a material adverse effect on our business, results of operations and financial condition.

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The nutraceutical industry has been subject to a growing number of claims, including class action lawsuits based on the nutritional content of products as well as disclosure and advertising practices. In the future we may be subject to these types of claims and proceedings and, even if we are successful in defending such claims, publicity about these matters may harm our reputation and adversely affect our results. Regardless of whether any claims against us are valid, or whether we are ultimately held liable, claims may be expensive to defend and may divert time and money away from our operations, which could have a material adverse effect on our performance. Furthermore, a significant judgment could materially and adversely affect our financial condition or results of operations.

We are dependent upon key personnel whose loss may adversely impact our business.

Our success materially depends upon the expertise, experience and continued service of our management and other key personnel, including but not limited to, our current Chairman of the Board of Directors, Apurva Dhruv. If we lose the services of Apurva Dhruv or any of other member of management, our business would be materially and adversely affected.

Our future success also depends upon our ability to attract and retain highly qualified management personnel and other employees. Any difficulties in obtaining, retaining and training qualified employees could have a material adverse effect on our results of operation or financial condition. The process of identifying such personnel with the combination of skills and attributes required to carry out our business plan is often lengthy. Any difficulties in obtaining and retaining qualified managers and employees could have a material adverse effect on our results of operation or financial condition.

We may fail to realize all of the anticipated benefits of any entities which we acquire, such benefits may take longer to realize than expected or we may encounter significant difficulties integrating acquired businesses into our operations. If our acquisitions do not achieve their intended benefits, our business, financial condition, and results of operations could be materially and adversely affected.

We believe that businesses that we acquire will result in certain benefits, including certain cost synergies and operational efficiencies; however, to realize these anticipated benefits, the businesses we acquire must be successfully combined with our business. The combination of independent businesses is a complex, costly, and time-consuming process that will require significant management attention and resources. The integration process may disrupt the businesses and, if implemented ineffectively, would limit the expected benefits of these acquisitions to us. The failure to meet the challenges involved in integrating acquired businesses and realizing anticipated benefits could cause an interruption of, or a loss of momentum in, our activities and could adversely affect our results of operations.

The overall integration of acquired businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer and other business relationships, and diversion of management’s attention. The difficulties of combining the operations of companies include, among others:

	●	the diversion of management’s attention to integration matters;

	●	difficulties in achieving anticipated cost savings, synergies, business opportunities, and growth prospects from the combinations;

	●	difficulties in the integration of operations and systems; and

	●	conforming standards, controls, procedures, accounting and other policies, business cultures, and compensation structures between the two companies.

Many of these factors are outside of our control and any one of these factors could result in, among other things, increased costs and decreases in the amount of expected revenues, which could materially adversely impact our business, financial condition, and results of operations. In addition, even if we are able to successfully integrate acquired businesses, the full benefits, including the synergies, cost savings, revenue growth, or other benefits that are expected, may not be achieved within the anticipated time frame, or at all. All of these factors could decrease or delay the expected accretive effect of the acquisitions, and negatively impact our business, operating results, and financial condition.

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Risks Relating to Our Securities

Certain provisions of the Delaware General Corporation Law (“DGCL”), our Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), and our Amended and Restated Bylaws (“Bylaws”) may have anti-takeover effects that could discourage, delay or prevent a change in control, which may cause our stock price to decline.

Our Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders. Our Certificate of Incorporation authorizes us to issue up to 125,000,000 shares of preferred stock. This preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further action by stockholders. The terms of any series of preferred stock may include voting rights (including the right to vote as a series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions. The issuance of any preferred stock could materially adversely affect the rights of the holders of our common stock, and therefore, reduce the value of our common stock. In particular, specific rights granted to holders of preferred stock could be used to restrict our ability to merge with, or sell our assets to, a third party and thereby preserve control by the present management. We have designated (i) 120,000,000 shares of preferred stock as Series A Convertible Preferred Stock, of which 28,944,601 are outstanding, (ii) 1,000,000 shares of preferred stock as Series B Convertible Preferred Stock, none of which are outstanding and (iii) 1,000,000 shares of preferred stock as Series C Convertible Preferred Stock, of which 680,801 shares are outstanding.

Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging potential acquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, our Certificate of Incorporation, Bylaws and Delaware law, as applicable, among other things:

	●	provide the board of directors with the ability to alter the Bylaws without stockholder approval;

	●	provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum; and

	●	provide that special meetings of stockholders may be called only by our board.

If we fail to comply with the rules under the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”) related to internal controls and procedures in the future, or, if we discover material weaknesses and other deficiencies in our internal controls over financial reporting, our stock price could decline significantly and raising capital could be more difficult.

Section 404 of Sarbanes-Oxley requires annual management assessments of the effectiveness of our internal controls over financial reporting. If we fail to comply with the rules under Sarbanes-Oxley related to disclosure controls and procedures in the future, or, if we discover material weaknesses and other deficiencies in our internal controls over financial reporting, our stock price could decline significantly and raising capital could be more difficult. If material weaknesses or significant deficiencies are discovered or if we otherwise fail to achieve and maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of Sarbanes-Oxley. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.

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Our common stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.

Rule 15g-9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our common stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

We have never paid cash dividends and have no plans to pay cash dividends in the future

Holders of shares of our common stock are entitled to receive such dividends as may be declared by our board of directors. To date, we have paid no cash dividends on our capital stock and we do not expect to pay cash dividends in the foreseeable future. We intend to retain future earnings, if any, to provide funds for operations of our business. Therefore, any return investors in our capital stock may have will be in the form of appreciation, if any, in the market value of their shares of common stock.

If we fail to remain current in our reporting requirements, we could be removed from the OTC Pink which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

As a company listed on the OTC Pink and subject to the reporting requirements of the Exchange Act, we must be current with our filings pursuant to Section 13 or 15(d) of the Exchange Act in order to maintain price quotation privileges on the OTC Pink. If we fail to remain current in our reporting requirements, we could be removed from the OTC Pink. As a result, the market liquidity of our securities could be severely adversely affected by limiting the ability of broker-dealers to trade our securities and the ability of stockholders to sell their securities in the secondary market.

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Our common stock could be subject to extreme volatility.

The trading price of our common stock may be affected by a number of factors, including events described in the risk factors set forth in this Annual Report and in our other reports filed with the SEC from time to time, as well as our operating results, financial condition and other events or factors. In addition to the uncertainties relating to future operating performance and the profitability of operations, factors such as variations in interim financial results or various, and unpredictable, factors, many of which are beyond our control, may have a negative effect on the market price of our common stock. In recent years, broad stock market indices, in general, and smaller capitalization companies, in particular, have experienced substantial price fluctuations. In a volatile market, we may experience wide fluctuations in the market price of our common stock. In addition, securities markets have, from time to time, experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may have a material adverse effect the market price of our common stock.

Financial reporting obligations of being a public company in the United States are expensive and time-consuming, and our management will be required to devote substantial time to compliance matters.

As a publicly traded company we incur significant legal, accounting and other expenses. The obligations of being a public company in the United States require significant expenditures and places significant demands on our management and other personnel, including costs resulting from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules require the establishment and maintenance of effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance practices, among many other complex rules that are often difficult to implement, monitor and maintain compliance with. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted from the OTC Pink, among other potential problems.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES

The Company has one operating lease for its corporate office and domestic warehouse operations in Stafford, Texas. Through February 8, 2021, our corporate office was located at 9841 Washingtonian Blvd., Suite 390, Gaithersburg, MD 20878, and consisted of 2,798 square feet for $7,644 per month. Effective February 8, 2021, we terminated this sublease and entered into a short-term lease for corporate office space at 9841 Washingtonian Blvd., Suite 200, Gaithersburg MD 20878, which was subsequently terminated. Our corporate office and domestic warehouse operations are located at 4003 Greenbriar Drive, Stafford, TX 77477, and consists of 10,100 square feet of warehouse and office space for $8,383 per month, through expiration on November 30, 2023.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in matters may arise from time to time that may harm our business.

On April 4, 2019, Auctus Fund, LLC (“Auctus”) commenced a lawsuit against the Company in the United States District Court for the District of Massachusetts. On August 27, 2019 the Company filed a motion to dismiss this lawsuit. On September 30, 2019, Auctus responded by filing a First Amended Complaint. The Company then filed a second motion to dismiss on October 24, 2019. On February 25, 2020, the court issued a decision dismissing the securities laws and unjust enrichment and breach of fiduciary duty claims and retaining the breach of contract, breach of covenant of good faith, fraud and deceit, and negligent misrepresentation-and the Massachusetts Consumer Protection Act claims. The Company filed its Answer to the complaint on March 10, 2020. The case remains pending in the District of Massachusetts. This case stems from a securities purchase agreement and convertible note issued in May 2017, a securities purchase agreement and convertible note issued in July 2018, the spin-off of the Company’s real estate division into NestBuilder including the issuance of shares of NestBuilder in the spin-off to the Company’s stockholders and an inducement agreement, release and payoff agreement executed by the parties in February 2019 whereby the Company settled the balance of outstanding amounts owed to Auctus in consideration for cash and shares of NestBuilder. Auctus has requested that the court grant it injunctive and equitable relief and specific performance with respect to the Company’s obligations; determine that the Company is liable for all damages, losses and costs and award Auctus actual losses sustained; award Auctus costs including, but not limited to, costs required to prosecute the action including attorneys’ fees; and punitive damages. The Company intends to continue to defend this matter and although the ultimate outcome cannot be predicted with certainty, based on the current information available, the Company does not believe the ultimate liability, if any, will have a material adverse effect on its financial condition or results of operations.

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On April 23, 2021, a class action lawsuit was commenced against the Company in the United States District Court for the District of Maryland and alleges various violations of the federal securities laws under the Securities Exchange Act of 1934. On November 9, 2021, a Confidential Settlement Agreement and General Release (“Settlement Agreement”) was entered into by and between all parties.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock is currently quoted on the OTC Pink tier of the OTC Markets under the symbol “VRUS”. Our common stock was listed on the following tiers of the OTC Markets under the following symbols: (i) we began trading on the OTC Markets (on the Grey Market) on October 14, 2008 under the symbol “WBDG” (ii) on November 10, 2008, our common stock began trading under the symbol “WBDG” on the OTCQB; (iii) on September 21, 2011, our common stock began trading under the symbol “WBDG” on the OTC Pink tier of the OTC Markets; (iv) on June 6, 2012, our common stock began trading under the symbol “WBDG” on the OTCQB; (v) on November 2, 2012, we changed our symbol to “RBIZ” (vi) on April 10, 2018, our common stock began trading under the symbol “RBIZ” on the OTC Pink tier of the OTC Markets, (vii) on October 16, 2018, our common stock began trading under the symbol “VRUS” on the OTC Pink tier of the OTC Markets, (viii) on July 17, 2019, our common stock began trading under the symbol “VRUS” on the OTCQB, and (viii) on February 16, 2021, our common stock began trading under the symbol “VRUS” on the OTC Pink. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Stockholders

As of April 11, 2022, we had approximately 240 holders of record of our common stock.

Dividend Policy

We have not paid any dividends on our common stock and do not anticipate paying any such dividends in the near future. Instead, we intend to use any earnings for future acquisitions and expanding our business.

Recent Sales of Unregistered Securities

The following securities were issued in reliance on the exemptions from registration under the Securities Act in Section 4(a)(2) of the Securities Act and Regulation D thereunder. The sale of these securities; did not involve any solicitation or advertisement, were for investment purposes only and not for resale, and did not include more than 35 non-accredited investors. The securities were issued with restrictions on the resale of the securities.

On January 26, 2022, the Company issued 2,641,026 shares of common stock at approximately $0.004 per share pursuant to a convertible promissory note.

On January 21, 2022, the Company issued 1,824,813 shares of common stock at approximately $0.004 per share pursuant to a convertible promissory note.

On January 20, 2022, the Company issued 1,833,333 shares of common stock at approximately $0.004 per share pursuant to a convertible promissory note.

On January 18, 2022, the Company issued 1,844,444 shares of common stock at approximately $0.005 per share pursuant to a convertible promissory note.

On January 12, 2022, the Company issued 1,846,154 shares of common stock at approximately $0.005 per share pursuant to a convertible promissory note.

On January 7, 2022, the Company issued 1,851,852 shares of common stock at approximately $0.005 per share pursuant to a convertible promissory note.

On January 5, 2022, the Company issued 3,745,361 shares of common stock at approximately $0.005 per share pursuant to two convertible promissory notes.

On January 4, 2022, the Company issued 1,842,105 shares of common stock at approximately $0.006 per share pursuant to a convertible promissory note.

On January 3, 2022, the Company issued 1,412,698 shares of common stock at approximately $0.006 per share pursuant to a convertible promissory note.

On December 29, 2021, the Company issued 3,018,654 shares of common stock at approximately $0.007 per share pursuant to two convertible promissory notes.

On December 22, 2021, the Company issued 1,404,875 shares of common stock at approximately $0.006 per share pursuant to a convertible promissory note.

On December 20, 2021, the Company issued 1,387,908 shares of common stock at approximately $0.006 per share pursuant to a convertible promissory note.

On December 17, 2021, the Company issued 1,674,625 shares of common stock at approximately $0.006 per share pursuant to a convertible promissory note.

On December 15, 2021, the Company issued 1,287,551 shares of common stock at approximately $0.006 per share pursuant to a convertible promissory note.

On December 13, 2021, the Company issued 1,286,737 shares of common stock at approximately $0.006 per share pursuant to a convertible promissory note.

On December 10, 2021, the Company issued 1,254,403 shares of common stock at approximately $0.006 per share pursuant to a convertible promissory note.

On November 29, 2021, the Company issued 1,143,823 shares of common stock at approximately $0.01 per share pursuant to a convertible promissory note.

On November 1, 2021, the Company issued 881,636 shares of common stock at approximately $0.02 per share pursuant to a convertible promissory note.

ITEM 6. SELECTED FINANCIAL DATA

As a smaller reporting company, we are not required to provide the information required by this item.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read this discussion together with the financial statements, related notes and other financial information included elsewhere in this Annual Report on Form 10-K. The following discussion contains assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors,” and elsewhere in this Annual Report on Form 10-K. To the extent that this Annual Report on Form 10-K contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of our Company, please be advised that our actual financial condition, operating results and business performance may differ materially from that projected or estimated by us in forward-looking statements and thus you should not unduly rely on these statements.

Explanatory Note

All references to shares of our common stock contained herein have been adjusted to reflect a 1-for-500 reverse stock split which was completed and became effective on January 13, 2021.

Overview

Furthermore, during August 2019, we purchased all of the assets of a french fry business in the Middle East.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Recent Developments

Big League Foods

Verus Middle East and North Africa (“MENA”)

Through October 31, 2021, we had a significant regional presence in the Middle East and North Africa (“MENA”) and sub-Saharan Africa (excluding The Office of Foreign Assets Control restricted nations), with deep roots in the Gulf Cooperation Council (“GCC”) countries, which includes the United Arab Emirates, Oman, Bahrain, Qatar, Kingdom of Saudi Arabia and Kuwait. During the three months ended October 31, 2021, we made a decision to cease operating as an international supplier of consumer food products, whereby we cancelled and settled all supplier and customer contracts to avoid any future significant liabilities. Accordingly, we have classified the operating results and associated assets and liabilities from Verus MENA as discontinued operations in the consolidated financial statements for the years ended October 31, 2021 and 2020 (see Note 16).

Financings

Litigation

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations for the Years Ended October 31, 2021 and 2020

Continuing Operations

Revenue

Our revenue decreased to $488,589 for the year ended October 31, 2021, compared to $870,251 for the year ended October 31, 2020, a decrease of $381,662 or 44%. The decrease is the result of prior year revenue of $820,000 from a one-time biohazard gown order through our Pachyderm Labs subsidiary which did not recur during the current year, partially offset by increased nutraceutical revenue with existing and new customers.

Cost of Revenues

Cost of revenue totaled $207,143 for the year ended October 31, 2021, compared to $694,515 for the year ended October 31, 2020, a decrease of $487,372 or 70%. The decrease is the result of lower revenue and related product costs.

Operating Expenses

Our operating expenses, which include salaries and benefits, stock-based compensation, selling and promotions expense, legal and professional fees, and general and administrative expenses decreased to $1,349,448 for the year ended October 31, 2021, compared to $10,274,783 for the year ended October 31, 2020, a decrease of $8,925,335, or 87%. The decrease is primarily due to a decrease of $8445,704 in stock-based compensation expense related to performance warrants earned by our former Chief Executive Officer and a restricted common stock grant to our former Chief Financial Officer, coupled with lower expenses across salaries and benefits, selling and promotions expense, and legal and professional fees categories. The decrease in operating expenses was partially offset by an increase in accounts receivable allowance of $198,000 due to the past due status of certain accounts receivable invoices.

Other Income (Expenses)

Our other income (expense), net decreased by $5,147,231 for the year ended October 31, 2021. The decrease is primarily the result of decreases in interest expense, amortization of original issue discounts and deferred financing costs, loss on convertible note payable extinguishment / settlement, loss on equity issuances under S-1 registration statement, and loss on disposal of subsidiary, coupled with gain on change in fair value of derivative liability, gain on forgiveness of Paycheck Protection Program loan, and gain on settlement of liabilities. This decrease was partially offset by an increase in initial derivative liability expense.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Net Loss from Continuing Operations

We generated a net loss from continuing operations of $2,136,679 for the year ended October 31, 2021, compared to a net loss of $16,314,955 for the year ended October 31, 2020, a decrease of $14,178,276. The decrease in net loss from continuing operations is primarily driven by the decrease in operating expenses and other expenses, coupled with the increase in gross profit as disclosed above.

Discontinued Operations

Our discontinued operations generated $8,828,080 of revenue, incurred cost of revenue of $7,082,736 and operating expenses of $5,607,561, and generated a net loss of $3,862,217 from discontinued operations for the year ended October 31, 2021. During the year ended October 31, 2020, our discontinued operations generated $20,877,110 of revenue, incurred cost of revenue of $17,685,647 and operating expenses of $2,538,882, and generated net income of $644,764 from discontinued operations.

Liquidity and Capital Resources; Anticipated Financing Needs

At October 31, 2021, we had $66,022 of cash on-hand, an increase of $59,872 from $6,150 at October 31, 2020.

Net cash used in operating activities of continuing operations was $4,740,896 for the year ended October 31, 2021, an increase of $3,734,974 from $1,005,922 used during the year ended October 31, 2020. The increase in net cash used in operating activities of continuing operations was primarily due to a net decrease in non-cash charges, coupled with an increase in accounts receivable and decrease in accounts payable, partially offset by a decrease in net loss, coupled with a decrease in prepaid expenses.

There was no net cash used in investing activities of continuing operations for the year ended October 31, 2021. Net cash used in investing activities of continuing operations for the year ended October 31, 2020 totaled $239,223 consisting of $139,223 for capital expenditures and a $100,000 investment in an unconsolidated entity.

We have financed our operations since inception primarily through proceeds from equity and debt financings and revenue derived from operations. During the year ended October 31, 2021, net cash provided by financing activities was $916,925 as compared to $2,378,773 during the year ended October 31, 2020. The decrease in net cash provided by financing activities of continuing operations was primarily due to lower net proceeds from the issuance of convertible notes payable and notes payable, and lower proceeds from the sale of common stock, coupled with higher payments applied to convertible promissory notes. Our continued operations primarily depend upon our ability to raise additional capital from various sources including equity and debt financings, as well as our revenue derived from operations. We can give no assurances that any additional capital that we are able to obtain will be sufficient to meet our needs or will be on favorable terms. Based on our current plans, we believe that our cash provided from the above sources may not be sufficient to enable us to meet our planned operating needs for the next twelve months.

Impact of COVID-19 Pandemic

A novel strain of coronavirus, COVID-19, surfaced during December 2019 and has spread around the world, including to the United States. During March 2020, COVID-19 was declared a pandemic by the World Health Organization. During certain periods of the pandemic thus far, a number of U.S. states and various countries throughout the world had been under governmental orders requiring that all workers remain at home unless their work was critical, essential, or life-sustaining. As a result of these governmental orders, we temporarily closed our domestic and international offices and required all of our employees to work remotely. As economic activity has begun and continues recovering, the impact of the COVID-19 pandemic on our business has been more reflective of greater economic and marketplace dynamics. Furthermore, in light of variant strains of the virus that have emerged, the COVID-19 pandemic could once again impact our operations and the operations of our customers and vendors as a result of quarantines, illnesses, and travel restrictions.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The full impact of the COVID-19 pandemic on our financial condition and results of operations will depend on future developments, such as the ultimate duration and scope of the pandemic, its impact on our employees, customers, and vendors, in addition to how quickly normal economic conditions and operations resume and whether the pandemic impacts other risks disclosed in Item 1A “Risk Factors” within this Annual Report on Form 10-K. Even after the pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred as a result of the pandemic. Therefore, we cannot reasonably estimate the impact at this time. We continue to actively monitor the pandemic and may determine to take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, vendors, and shareholders.

Critical Accounting Policies

We have identified the policies below as critical to our understanding of the results of our business operations. We discuss the impact and any associated risks related to these policies on our business operations throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results.

In the ordinary course of business, we have made a number of estimates and assumptions in preparing our financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Actual results could differ significantly from those estimates and assumptions. The following critical accounting policies are those that are most important to the portrayal of our consolidated financial statements. For a summary of our significant accounting policies, including the critical accounting policies discussed below, refer to Note 2 – “Summary of Significant Accounting Policies” included in the notes to consolidated financial statements for the year ended October 31, 2021 included elsewhere in this Annual Report on Form 10-K.

We consider the following accounting policies to be those most important to the portrayal of our results of operations and financial condition:

Revenue Recognition

We recognize revenue in accordance with the Financial Accounting Standards Board’s (“FASB”), Accounting Standards Codification (“ASC”) ASC 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

Revenue is derived from the sale of consumable and non-consumable products. The Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives the Company offers to its customers and their customers. In the event any discounts, sales incentives, or similar arrangements are agreed to with a customer, such amounts are estimated at time of sale and deducted from revenue. Sales taxes and other similar taxes are excluded from revenue (see Note 8).

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Income Taxes

We account for income taxes using an asset and liability approach to financial accounting and reporting for income taxes. Accordingly, deferred tax assets and liabilities arise from the difference between the tax basis of an asset or liability and its reported amount in the consolidated financial statements. Deferred tax amounts are determined using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided under currently enacted tax law. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense or benefit is the tax payable or refundable, respectively, for the period plus or minus the change in deferred tax assets and liabilities during the period. we have recorded a full valuation allowance for our net deferred tax assets as of October 31, 2021 and 2020 because realization of those assets is not reasonably assured.

We will recognize a financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.

We believe our income tax filing positions and deductions will be sustained upon examination and, accordingly, no reserves, or related accruals for interest and penalties has been recorded at October 31, 2021 and 2020.

Share-Based Compensation

We compute share based payments in accordance with the provisions of ASC Topic 718, Compensation – Stock Compensation and related interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the grants.

Restricted stock awards are granted at the discretion of the compensation committee of our board of directors (the “Board of Directors”). These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of our common stock on the grant date.

We estimate the fair value of stock options and warrants by using the Black-Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of our common stock over the expected term of the option. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term.

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. We are required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest.

We account for share–based payments granted to non–employees in accordance with ASC 505–50, “Equity Based Payments to Non–Employees.” We determine the fair value of the stock–based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more readily determinable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Accounts Receivable

We regularly review outstanding receivables and provide for estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, we make judgments regarding our customers’ ability to make required payments, economic events, and other factors. As the financial condition of these parties’ change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. We maintain reserves for potential credit losses, and such losses traditionally have been within our expectations. At October 31, 2021, we determined $198,000 was required for an allowance for doubtful accounts due to the past due status of certain accounts receivable invoices. At October 31, 2020, we determined there was no requirement for an allowance for doubtful accounts.

New Accounting Standards

Refer to Note 2 to our audited consolidated financial statements included in this Annual Report on Form 10-K for a discussion of recently adopted and to be adopted accounting standards.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information required by this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See financial statements starting on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of October 31, 2021 to determine whether our disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed in our reports under the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

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Based on this evaluation, because of our limited resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as of October 31, 2021. Management has identified control deficiencies regarding the lack of segregation of duties. Management of the Company believes that these material weaknesses are due to the small size of the Company’s accounting staff. The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of such remediation.

To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As we grow, we expect to increase our number of employees, which should enable us to implement adequate segregation of duties within the internal control framework.

These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our consolidated financial statements may not be prevented or detected on a timely basis. In light of this material weakness, we performed additional analyses and procedures in order to conclude that our audited consolidated financial statements for the year ended October 31, 2021, included in this Annual Report on Form 10-K were fairly stated in accordance with GAAP. Accordingly, management believes that despite our material weaknesses, our consolidated audited financial statements for the year ended October 31, 2021 are fairly stated, in all material respects, in accordance with GAAP.

Management’s Report On Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller companies face additional limitations. Smaller companies employ fewer individuals and find it difficult to properly segregate duties. Smaller companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of October 31, 2021. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on that evaluation, our management concluded that, as of October 31, 2021, our internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company does not have an interim or full-time Chief Financial Officer.

Attestation Report on Internal Control Over Financial Reporting

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting due to the rules of the SEC for smaller reporting companies.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended October 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

On August 9, 2021, Neerav Sangani was appointed as a member of the Board of Directors of the Company.

On June 7, 2021, Thomas Butler Fore resigned from the Board of Directors of the Company. Mr. Fore’s resignation was not due to any disagreement with the Company.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Directors, Executive Officers, and Other Key Employees

The following table sets forth the names and ages of the members of our Board of Directors and our executive officers and the positions held by each as of April 11, 2022.

Name	Age	Position(s)

Apurva Dhruv	41	Chief Executive Officer and Chairman

Neerav Sangani	49	Director

Biographies for the members of our Board of Directors and our management team are set forth below.

Apurva Dhruv – Chief Executive Officer and Chairman

Apurva Dhruv has served as our Chairman of the Board of Directors since May 18, 2021, served as our Chief Executive Officer since February 17, 2021, and served as our President of Verus Foods (Americas) from August 28, 2020 through February 17, 2021. Mr. Dhruv is an entrepreneur with deep roots in consumer and wholesale operations, having owned and operated companies involved in product creation and placement over the last decade. Mr. Dhruv entered the CBD industry during 2018 and has been part of the industry-wide effort to greenfield and build CBD distribution networks, providing access to trends and relationships in this evolving industry. Mr. Dhruv is an expert on retail distribution, with significant relationships and experience in a variety of product categories, particularly at the convenience store level.

Neerav Sangani – Director

Mr. Sangani has an extensive background in the retail and wholesale industries. He is currently the CEO of Enjay Traders and President of MTM Foods / T&M Foods, both within the retail and wholesale industries. He is also a licensed realtor within the stats of Florida. He has more than 25 years of experience in the retail and wholesale industries. The Board believes that Mr. Sangani’s experience in the retail and wholesale industries qualifies him well to help lead the Company towards continued growth and success.

Family Relationships

There are no family relationships among our executive officers and directors.

Involvement in Certain Legal Proceedings

We are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy, insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set forth under Item 401(f) of Regulation S-K.

Corporate Governance

Board Committees

The Company presently does not have an audit committee, compensation committee or nominating and corporate governance committee or committee performing similar functions, as management believes that the Company is in an early stage of development to form such committees. The board of directors acts in place of such committees. The Company currently does not have an audit committee financial expert for the same reason that it does not have board committees.

Code of Business Conduct and Ethics

The Company has adopted a Code of Business Conduct and Ethics which is applicable to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the Code of Business Conduct and Ethics is filed as an exhibit to our Annual Report on Form 10-K for the fiscal year ended October 31, 2018 filed with the SEC on March 19, 2019. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to our directors, principal executive and financial officers will be included in a Current Report on Form 8-K, which we will file within four business days following the date of the amendment or waiver.

Changes in Nominating Procedures

None.

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ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the compensation paid to our principal executive officer (“named executive officer”) and the other executive officers during our fiscal years ended October 31, 2021 and 2020.

Name and Position	Year		Salary ($)		Bonus		Stock Awards ($)			Option Awards		Non- Equity Incentive		Other ($)		Total ($)
Apurva Dhruv (1)		2021	$	113,333	$	-	$	-		$	-	$	-	$	-	$	113,333
Chief Executive Officer and Director		2020	$	-	$	-	$	-		$	-	$	-	$	-	$	-

Anshu Bhatnagar (2)		2021	$	189,583	$	-	$	-		$	-	$	-	$	-	$	189,583
Former Chief Executive Officer and Director		2020	$	320,833	$	-	$	8,927,299	(5)	$	-	$	-	$	-	$	9,248,132

Christopher Cutchens (3)		2021	$	16,667	$	-	$	-		$	-	$	-	$	-	$	16,667
Former Chief Financial Officer		2020	$	91,667	$	-	$	180,000	(6)	$	-	$	-	$	-	$	271,667

Neerav Sangani (4)		2021	$	-	$	-	$	5,000	(7)	$	-	$	-	$	-	$	5,000
Director		2020	$	-	$	-	$	-		$	-	$	-	$	-	$	-

(1)	Apurva Dhruv has served as our Chairman of the Board of Directors since May 18, 2021, and served as our Chief Executive Officer since February 17, 2021,

(2)	Anshu Bhatnagar served as our Chairman of the Board of Directors through May 18, 2021, and as our Chief Executive Officer through February 17, 2021.

(3)	On December 9, 2020, Mr. Cutchens resigned as the Company’s Chief Financial Officer and completed an agreed upon transition by January 8, 2021.

(4)	On August 9, 2021, Mr. Sangani was appointed as a member of the Board of Directors.

(5)	The amount represents the grant date fair value of awards earned as computed in accordance with FASB ASC Topic 718. The annual expense for the 2020 stock awards relates to warrants to purchase shares of the Company’s common stock that are granted under the provisions of the former Chief Executive Officer’s employment agreement and are immediately vested upon being earned and an issuance of Series C convertible preferred stock. For additional information regarding assumptions underlying the valuations of these stock awards and the calculation method, please refer to Note 12 to our consolidated financial statements.

(6)	The amount represents the grant date fair value of awards earned as computed in accordance with FASB ASC Topic 718. The annual expense for the 2020 stock awards relates to common stock granted on June 1, 2019 under the provisions of the former Chief Financial Officer’s employment agreement and are immediately vested upon being earned.

(7)	The amount represents the grant date fair value of awards earned as computed in accordance with FASB ASC Topic 718. The annual expense for the 2021 stock award relates to common stock granted on October 31, 2021 under the provisions of the Director agreement and is immediately vested upon being granted.

Outstanding Equity Awards at Fiscal Year End

At October 31, 2021, there are 201,613 shares of the Company’s common stock to be issued to its board member under the provisions of the Director agreement for services performed for the fiscal quarter ended October 31, 2021.

Director Compensation

Our non-employee directors have elected to forego any cash compensation for participating in board of directors and committee meetings until such time as we become profitable over the course of an entire fiscal year, at which time the board of directors may reconsider the structure of its director compensation. However, effective November 1, 2019, our non-employee directors began receiving shares of our common stock as compensation for participating in board of directors and committee meetings in an amount of $5,000 of our common stock per quarter, aggregating to $20,000 of our common stock per year. In general, director compensation will be subject to review and adjustment from time to time at the discretion of our board of directors. At October 31, 2021, we had one non-employee directors as a member of our board of directors.

Employment Agreements

Apurva Dhruv Employment Agreement

On February 17, 2021, the Company entered into an employment agreement (the “Dhruv Employment Agreement”) with Apurva Dhruv pursuant to which Mr. Dhruv shall serve as Chief Executive Officer of the Company. The term of the Dhruv Employment Agreement will continue unless terminated pursuant to the terms of the Dhruv Employment Agreement. Pursuant to the terms of the Dhruv Employment Agreement, Mr. Dhruv shall be entitled to receive three forms of compensation to include cash-based salary, annual cash-based bonus, and annual grants of restricted common stock. Pursuant to the terms of the Dhruv Employment Agreement, Mr. Dhruv shall, among other things, (i) receive an annual base salary of $160,000 which may be increased at the sole discretion of the Company’s Board, (ii) an annual cash bonus at the sole discretion of the Board, (iii) a bonus in an amount equal to up to 50% of Mr. Dhruv’s then base salary at the sole discretion of the Board, and (iv) an initial grant of 500,000 restricted shares of the Company’s common stock that shall vest 25% on the 1^st, 2^nd, 3^rd, and 4^th anniversaries of the Dhruv Employment Agreement.

Mr. Dhruv’s employment may be terminated by the Company for Cause or Without Cause (as defined in the Dhruv Employment Agreement) or by Mr. Dhruv for any reason.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information as of April 11, 2022, as to each person or group who is known to us to be the beneficial owner of more than 5% of our outstanding voting securities and as to the security and percentage ownership of each of our executive officers and directors and of all of our officers and directors as a group. As of April 11, 2022, we had 56,026,564 shares of common stock issued (as adjusted for a 1-for-500 reverse stock split as discussed in Note 1), 28,944,601 shares of Series A Preferred Stock outstanding and 680,801 shares of Series C Preferred Stock outstanding.

Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power over securities. Except in cases where community property laws apply or as indicated in the footnotes to this table, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder.

Shares of common stock that are currently exercisable or convertible within 60 days of April 11, 2022 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage beneficial ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

Amount and Nature of Beneficial Ownership
Name and Address (1)	Common Stock Ownership			Percentage of Common Stock Ownership			Series A Preferred Stock Ownership		Percentage of Series A Preferred Stock			Series C Preferred Stock Ownership		Percentage of Series C Preferred Stock			Percentage of Total Voting Power(2)
Officers and Directors:
Apurva Dhruv(3)(4)		100,000			*	%		-		-	%		-		-	%		*	%
Neerav Sangani (4)		10,000			*	%		-		-	%		-		-	%		*	%
All Officers and Directors as a Group (2 Persons)		110,000			*	%		-		-	%		-		-	%		*	%
5% Stockholders:
Anshu Bhatnagar		1,457,114	(5)		2.5	%		100,000		*			645,801		94.9	%		18.5	%
Monaker Group, Inc. (6)(7)		-			-	%		16,344,601		56.5	%		-		0	%		*
Monaco Investment Partners, LP (8)		-			-	%		12,500,000		43.2	%		-		-	%		*
Donald P. Monaco (9)		-			-	%		12,500,000		43.2	%		20,000		2.9	%		*

* Less than one percent.

(1) Unless otherwise indicated, the address of the stockholder is c/o Verus International, Inc., 4003 Greenbriar Drive, Stafford, TX 77477.

(2) Holders of our common stock are entitled to one vote per share, holders of our Series A Convertible Preferred Stock are entitled to 0.0001 votes per share and holders of our Series C Preferred Stock are entitled to 20 votes per share. Accordingly, as of April 11, 2022, holders of our common stock are entitled to 56,026,564 votes, holders of our Series A Preferred Stock are entitled to 57,889 votes and holders of our Series C Preferred Stock are entitled to 13,616,020 votes.

(3) Excludes 300,000 shares of common stock which vests in three equal installments on February 17, 2023, February 17, 2024, and February 17, 2025.

(4) Member of the Board of Directors.

(5) Includes 1,457,114 shares of common stock issuable upon exercise of warrants.

(6) William Kerby is the Chief Executive Officer of Monaker Group, Inc, and in such capacity has voting and dispositive power over the securities held by such entity.

(7) Share amounts are pursuant to Monaker Group, Inc.’s Quarterly Report on Form 10-K for the year ended February 28, 2021.

(8) Donald P. Monaco is the Managing Partner of Monaco Investment Partners, LP, and in such capacity has voting and dispositive power over the securities held by such entity.

(9) Share amounts include 12,500,000 shares of Series A Preferred Stock held by Monaco Investment Partners, LP and 20,000 shares of Series C Preferred Stock held by Monaco Investment Partners II, LP. Donald P. Monaco is the Managing Partner of Monaco Investment Partners, LP, and Monaco Investment Partners II, LP, and in such capacity has voting and dispositive power over the securities held by each entity.

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Securities Authorized for Issuance under Equity Compensation Plans.

The following provides information concerning compensation plans under which our equity securities are authorized for issuance as of October 31, 2021 (as adjusted for a 1-for-500 reverse stock split as discussed in Note 1):

	(a)		(b)		(c)
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted- average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders (1)		-		-		-
Equity compensation plans not approved by security holders (2)(3)		-	$	5,000.00		66,320
Total		-	$	5,000.00		66,320

	(1)	On October 6, 2020, our board of directors and shareholders adopted the 2020 Equity Incentive Plan (the “2020 Plan”).

	(2)	On July 24, 2015, our board of directors adopted the 2015 Stock Incentive Plan (the “2015 Plan”), on December 26, 2018, our board of directors adopted the 2018 Equity Incentive Plan (the “2018 Plan”), and on October 6, 2020, our board of directors adopted the 2020 Equity Incentive Plan (the “2020 Plan”).

	(3)	See Note 12 to the consolidated financial statements for more information on restricted stock grants.

2015 Stock Incentive Plan

Purpose

On July 24, 2015, our board of directors adopted the 2015 Plan. The purpose of our 2015 Plan is to further align the interests of employees, directors, and non-employee consultants with those of our stockholders. The 2015 Plan is also intended to advance the interests of the Company and its stockholders by attracting, retaining and motivating key personnel upon whose judgment, initiative and effort the successful conduct of the Company’s business is largely dependent.

Authorized Shares

The 2015 Plan authorizes the issuance of 67,040 shares of common stock, subject to adjustment. As of October 31, 2021, we have issued 720 shares of common stock under the 2015 Plan.

Administration

Our board of directors administers the 2015 Plan and has full power to grant awards including stock options and stock awards pursuant such plan. In addition, the board of directors has the authority to, among other things, (i) determine the persons eligible to participate in the 2015 Plan, and (ii) the terms of the awards including, but not limited to, (A) time or times at which, awards may be granted, (B) the number of shares, units or other rights subject to each award, (C) the exercise or purchase price of an award (if any), (D) the time or times at which an award will become vested or exercisable, (E) the performance goals and other conditions of an award and (F) the duration of the award. The board of directors also has discretionary authority to interpret the 2015 Plan and to make all other determinations necessary or advisable for administration of the 2015 Plan.

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Stock Options

The board of directors may grant eligible participants incentive stock option and nonqualified stock options under the 2015 Plan. The exercise price of options granted under the 2015 Plan may not be less than 85% of the fair market value of our common stock on the date of grant; provided, however, that the exercise price for a participant who owns more than 10% of the voting power of all classes of our outstanding stock shall not be less than 110% of the fair market value of our common stock on the date of grant. The term of a stock option may not exceed 10 years. The board of directors will determine the methods of payment of the exercise price of an option, which may include cash, shares or other form of payment acceptable to the board of directors.

Stock Awards

The board of directors may grant eligible participants restricted stock awards. The deemed issuance price of shares of common stock subject to each stock award shall not be less than 85% of the fair market value of our common stock on the date of grant; provided, however, that the deemed issuance price of shares of common stock subject to each stock award shall not be less than 100% of the fair market value of our common stock on the date of grant for a participant who owns more than 10% of the voting power of all classes of our outstanding stock.

Plan Amendment or Termination

The 2015 Plan expires ten years from the date of adoption by the board of directors. In addition, the board of directors at any time and from time to time and in any respect, amend or modify the 2015 Plan.

2018 Equity Incentive Plan

Summary

Our 2018 Plan was adopted by our board of directors on December 26, 2018. Having an adequate number of shares available for future equity compensation grants is necessary to promote our long-term success and the creation of stockholders value by:

	●	Enabling us to continue to attract and retain the services of key service providers who would be eligible to receive grants;

	●	Aligning participants’ interests with stockholders’ interests through incentives that are based upon the performance of our common stock;

	●	Motivating participants, through equity incentive awards, to achieve long-term growth in the Company’s business, in addition to short-term financial performance; and

	●	Providing a long-term equity incentive program that is competitive as compared to other companies with whom we compete for talent.

The 2018 Plan permits the discretionary award of incentive stock options (“ISOs”), nonstatutory stock options (“NQSOs”), restricted stock, restricted stock units (“RSUs”), stock appreciation rights (“SARs”), other equity awards and/or cash awards to selected participants. The 2018 Plan will remain in effect until the earlier of (i) December 26, 2028 and (ii) the date upon which the 2018 Plan is terminated pursuant to its terms, and in any event subject to the maximum share limit of the 2018 Plan.

The 2018 Plan provides for the reservation of 299,800 shares of common stock for issuance thereunder (the “Share Limit”), and provides that the maximum number of shares that may be issued pursuant to the exercise of ISOs is 299,800 (the “ISO Limit”). The number of shares available for issuance under the 2018 Plan constitutes approximately 10% of our issued and outstanding shares of common stock as of the date of Board approval.

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Key Features of the 2018 Plan

Certain key features of the 2018 Plan are summarized as follows:

	●	If not terminated earlier by our board of directors, the 2018 Plan will terminate on December 26, 2028.

	●	Up to a maximum aggregate of 299,800 shares of common stock may be issued under the 2018 Plan. The maximum number of shares that may be issued pursuant to the exercise of ISOs is also 299,800.

	●	The 2018 Plan will generally be administered by either the board or a committee comprised solely of independent members of our board of directors (the “Committee”). The Committee will be the compensation committee unless otherwise designated by our board of directors. Our board of directors may designate a separate committee to make awards to employees who are not officers subject to the reporting requirements of Section 16 of the Exchange Act.

	●	Employees, consultants and board members are eligible to receive awards, provided that the Committee has the discretion to determine (i) who shall receive any awards, and (ii) the terms and conditions of such awards.

	●	Awards may consist of ISOs, NQSOs, restricted stock, RSUs, SARs, other equity awards and/or cash awards.

	●	Stock options and SARs may not be granted at a per share exercise price below the fair market value of a share of our common stock on the date of grant.

	●	Stock options and SARs may not be repriced or exchanged without stockholder approval.

	●	The maximum exercisable term of stock options and SARs may not exceed ten years.

	●	Awards are subject to recoupment of compensation policies adopted by the Company.

Eligibility to Receive Awards. Employees, consultants and board members of the Company and certain of our affiliated companies are eligible to receive awards under the 2018 Plan. The Committee determines, in its discretion, the selected participants who will be granted awards under the 2018 Plan.

Shares Subject to the 2018 Plan. The maximum number of shares of Common Stock that can be issued under the 2018 Plan is 299,800 shares.

The shares underlying forfeited or terminated awards (without payment of consideration), or unexercised awards become available again for issuance under the 2018 Plan. No fractional shares may be issued under the 2018 Plan. No shares will be issued with respect to a participant’s award unless applicable tax withholding obligations have been satisfied by the participant.

Administration of the 2018 Plan. The 2018 Plan will be administered by our board or our compensation committee which shall consist of independent board members, acting as the Committee. With respect to certain awards issued under the 2018 Plan, the members of the Committee also must be “Non-Employee Directors” under Rule 16b-3 of the Exchange Act. Subject to the terms of the 2018 Plan, the Committee has the sole discretion, among other things, to:

	●	Select the individuals who will receive awards;

	●	Determine the terms and conditions of awards (for example, performance conditions, if any, and vesting schedule);

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	●	Correct any defect, supply any omission, or reconcile any inconsistency in the 2018 Plan or any award agreement;

	●	Accelerate the vesting, extend the post-termination exercise term or waive restrictions of any awards at any time and under such terms and conditions as it deems appropriate, subject to the limitations set forth in the 2018 Plan;

	●	Permit a participant to defer compensation to be provided by an award; and

	●	Interpret the provisions of the 2018 Plan and outstanding awards.

The Committee may suspend vesting, settlement, or exercise of awards pending a determination of whether a selected participant’s service should be terminated for cause (in which case outstanding awards would be forfeited). Awards may be subject to any policy that the board may implement on the recoupment of compensation (referred to as a “clawback” policy). The members of the board, the Committee and their delegates shall be indemnified by the Company to the maximum extent permitted by applicable law for actions taken or not taken regarding the 2018 Plan. In addition, the Committee may use the 2018 Plan to issue shares under other plans or sub-plans as may be deemed necessary or appropriate, such as to provide for participation by non-U.S. employees and those of any of our subsidiaries and affiliates.

Types of Awards.

Stock Options. A stock option is the right to acquire shares at a fixed exercise price over a fixed period of time. The Committee will determine, among other terms and conditions, the number of shares covered by each stock option and the exercise price of the shares subject to each stock option, but such per share exercise price cannot be less than the fair market value of a share of our common stock on the date of grant of the stock option. The exercise price of each stock option granted under the 2018 Plan must be paid in full at the time of exercise, either with cash, or through a broker-assisted “cashless” exercise and sale program, or net exercise, or through another method approved by the Committee. Stock options granted under the 2018 Plan may be either ISOs or NQSOs. In order to comply with Treasury Regulation Section 1.422-2(b), the 2018 Plan provides that no more than 299,800 shares may be issued pursuant to the exercise of ISOs.

SARs. A SAR is the right to receive, upon exercise, an amount equal to the difference between the fair market value of the shares on the date of the SAR’s exercise and the aggregate exercise price of the shares covered by the exercised portion of the SAR. The Committee determines the terms of SARs, including the exercise price (provided that such per share exercise price cannot be less than the fair market value of a share of our common stock on the date of grant), the vesting and the term of the SAR. Settlement of a SAR may be in shares of common stock or in cash, or any combination thereof, as the Committee may determine. SARs may not be repriced or exchanged without stockholder approval.

Restricted Stock. A restricted stock award is the grant of shares of our common stock to a selected participant and such shares may be subject to a substantial risk of forfeiture until specific conditions or goals are met. The restricted shares may be issued with or without cash consideration being paid by the selected participant as determined by the Committee. The Committee also will determine any other terms and conditions of an award of restricted stock.

RSUs. RSUs are the right to receive an amount equal to the fair market value of the shares covered by the RSU at some future date after the grant. The Committee will determine all of the terms and conditions of an award of RSUs. Payment for vested RSUs may be in shares of common stock or in cash, or any combination thereof, as the Committee may determine. RSUs represent an unfunded and unsecured obligation for us, and a holder of a stock unit has no rights other than those of a general creditor.

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Other Awards. The 2018 Plan also provides that other equity awards, which derive their value from the value of our shares or from increases in the value of our shares, may be granted. In addition, cash awards may also be issued. Substitute awards may be issued under the 2018 Plan in assumption of or substitution for or exchange for awards previously granted by an entity which we (or an affiliate) acquire.

Limited Transferability of Awards. Awards granted under the 2018 Plan generally are not transferrable other than by will or by the laws of descent and distribution. However, the Committee may in its discretion permit the transfer of awards other than ISOs.

Change in Control. In the event that we are a party to a merger or other reorganization or similar transaction, outstanding 2018 Plan awards will be subject to the agreement pertaining to such merger or reorganization. Such agreement may provide for (i) the continuation of the outstanding awards by us if we are a surviving corporation, (ii) the assumption or substitution of the outstanding awards by the surviving entity or its parent, (iii) full exercisability and/or full vesting of outstanding awards, or (iv) cancellation of outstanding awards either with or without consideration, in all cases with or without consent of the selected participant. The Committee will decide the effect of a change in control of the Company on outstanding awards.

Amendment and Termination of the 2018 Plan. The Board generally may amend or terminate the 2018 Plan at any time and for any reason, except that it must obtain stockholder approval of material amendments to the extent required by applicable laws, regulations or rules.

2020 Equity Incentive Plan

Summary

Our 2020 Plan was adopted by our board of directors and by the stockholders on October 6, 2020. Having an adequate number of shares available for future equity compensation grants is necessary to promote our long-term success and the creation of stockholder value by:

	●	Enabling us to continue to attract and retain the services of key service providers who would be eligible to receive grants;

	●	Aligning participants’ interests with stockholders’ interests through incentives that are based upon the performance of our Common Stock;

	●	Motivating participants, through equity incentive awards, to achieve long-term growth in the Company’s business, in addition to short-term financial performance; and,

	●	Providing a long-term equity incentive program that is competitive as compared to other companies with whom we compete for talent.

The 2020 Plan will permit the discretionary award of incentive stock options (“ISOs”), nonstatutory stock options (“NQSOs”), restricted stock, restricted stock units (“RSUs”), stock appreciation rights (“SARs”), other equity awards and/or cash awards to selected participants. The 2020 Plan will remain in effect until the earlier of (i) October 31, 2030 and (ii) the date upon which the 2020 Plan is terminated pursuant to its terms, and in any event subject to the maximum share limit of the 2020 Plan.

The 2020 Plan provides for the reservation of 1,500,000 shares of common stock for issuance thereunder. The number of shares available for issuance under the 2020 Plan constitutes approximately 15% of issued and outstanding shares of common stock as of the date of Board approval.

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Key Features of the 2020 Plan

Certain key features of the 2020 Plan are summarized as follows:

	●	If not terminated earlier by the Board, the 2020 Plan will terminate on October 31, 2030.

	●	Up to a maximum aggregate of 1,500,000 shares of common stock may be issued under the 2020 Plan. The maximum number of shares to be issued to the exercise of ISOs shall comply with Treasury Regulation Section 1.422-2(b). The 2020 Plan is limited to issue that number of shares exercisable for the first time by any individual during any calendar year whose aggregate fair market value does not exceed $100,000.

	●	The 2020 Plan will generally be administered by a committee comprised solely of independent members of the Board. This committee will be the compensation committee unless otherwise designated by the Board (the “Committee”). If no committee has been appointed, the full Board shall constitute the committee. The Board may designate a separate committee to make awards to employees who are not officers subject to the reporting requirements of Section 16 of the Exchange Act.

	●	Employees, consultants and Board members are eligible to receive awards, provided that the Committee has the discretion to determine (i) who shall receive any awards, and (ii) the terms and conditions of such awards.

	●	Awards may consist of ISOs, NQSOs, restricted stock, RSUs, SARs, other equity awards and/or cash awards.

	●	Stock options and SARs may not be granted at a per share exercise price below the fair market value of a share of our Common Stock on the date of grant.

	●	Stock options and SARs may not be repriced or exchanged without stockholder approval.

	●	The maximum exercisable term of stock options and SARs may not exceed ten years.

	●	Awards are subject to recoupment of compensation policies adopted by the Company.

Eligibility to Receive Awards. Employees, consultants and Board members of the Company and certain of our affiliated companies are eligible to receive awards under the 2020 Plan. The Committee determines, in its discretion, the selected participants who will be granted awards under the 2020 Plan.

Shares Subject to the 2020 Plan. The maximum number of shares of Common Stock that can be issued under the 2020 Plan is 1,500,000 shares.

The shares underlying forfeited or terminated awards (without payment of consideration), or unexercised awards become available again for issuance under the 2020 Plan. The 2020 Plan also imposes certain share grant limits such as the limit on grants to non-employee directors described above and other limits that are intended to comply with the legal requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) and which are discussed elsewhere in this proposal. No fractional shares may be issued under the 2020 Plan. No shares will be issued with respect to a participant’s award unless applicable tax withholding obligations have been satisfied by the participant.

Administration of the 2020 Plan. The 2020 Plan will be administered by the Committee. Subject to the terms of the 2020 Plan, the Committee has the sole discretion, among other things, to:

●

Select the individuals who will receive awards;

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	●	Determine the terms and conditions of awards (for example, performance conditions, if any, and vesting schedule);

	●	Correct any defect, supply any omission, or reconcile any inconsistency in the 2020 Plan or any award agreement;

	●	Accelerate the vesting, extend the post-termination exercise term or waive restrictions of any awards at any time and under such terms and conditions as it deems appropriate, subject to the limitations set forth in the 2020 Plan;

	●	Permit a participant to defer compensation to be provided by an award; and

	●	Interpret the provisions of the 2020 Plan and outstanding awards.

The Committee may suspend vesting, settlement, or exercise of awards pending a determination of whether a selected participant’s service should be terminated for cause (in which case outstanding awards would be forfeited). Awards may be subject to any policy that the Board may implement on the recoupment of compensation (referred to as a “clawback” policy). The members of the Board, the Committee and their delegates shall be indemnified by the Company to the maximum extent permitted by applicable law for actions taken or not taken regarding the 2020 Plan. In addition, the Committee may use the 2020 Plan to issue shares under other plans or sub-plans as may be deemed necessary or appropriate, such as to provide for participation by non-U.S. employees and those of any of our subsidiaries and affiliates.

Types of Awards

Stock Options. A stock option is the right to acquire shares at a fixed exercise price over a fixed period of time. The Committee will determine, among other terms and conditions, the number of shares covered by each stock option and the exercise price of the shares subject to each stock option, but such per share exercise price cannot be less than the fair market value of a share of our Common Stock on the date of grant of the stock option. The fair market value of a share of our Common Stock for the purposes of pricing our awards shall be equal to the closing price for our Common Stock as reported by the OTCQB or such other principal trading market on which our securities are traded on the date of determination. Stock options may not be repriced or exchanged without stockholder approval, and no re-load options may be granted under the 2020 Plan.

Stock options granted under the 2020 Plan may be either ISOs or NQSOs. As required by the Code and applicable regulations, ISOs are subject to various limitations not imposed on NQSOs. For example, the exercise price for any ISO granted to any employee owning more than 10% of our Common Stock may not be less than 110% of the fair market value of the Common Stock on the date of grant, and such ISO must expire no later than five years after the grant date. The aggregate fair market value (determined at the date of grant) of Common Stock subject to all ISOs held by a participant that are first exercisable in any single calendar year cannot exceed $100,000. ISOs may not be transferred other than upon death, or to a revocable trust where the participant is considered the sole beneficiary of the stock option while it is held in trust. In order to comply with Treasury Regulation Section 1.422-2(b), the 2020 Plan is limited to issue that number of shares exercisable for the first time by any individual during any calendar year whose aggregate fair market value does not exceed $100,000.

A stock option granted under the 2020 Plan generally cannot be exercised until it becomes vested. The Committee establishes the vesting schedule of each stock option at the time of grant. The maximum term for stock options granted under the 2020 Plan may not exceed ten years from the date of grant although the Committee may establish a shorter period at its discretion. The exercise price of each stock option granted under the 2020 Plan must be paid in full at the time of exercise, either with cash, or through a broker-assisted “cashless” exercise and sale program, or net exercise, or through another method approved by the Committee. The optionee must also make arrangements to pay any taxes that are required to be withheld at the time of exercise.

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SARs. A SAR is the right to receive, upon exercise, an amount equal to the difference between the fair market value of the shares on the date of the SAR’s exercise and the aggregate exercise price of the shares covered by the exercised portion of the SAR. The Committee determines the terms of SARs, including the exercise price (provided that such per share exercise price cannot be less than the fair market value of a share of our Common Stock on the date of grant), the vesting and the term of the SAR. The maximum term for SARs granted under the 2020 Plan may not exceed ten years from the date of grant, subject to the discretion of the Committee to establish a shorter period. Settlement of a SAR may be in shares of Common Stock or in cash, or any combination thereof, as the Committee may determine. SARs may not be repriced or exchanged without stockholder approval.

Restricted Stock. A restricted stock award is the grant of shares of our Common Stock to a selected participant and such shares may be subject to a substantial risk of forfeiture until specific conditions or goals are met. The restricted shares may be issued with or without cash consideration being paid by the selected participant as determined by the Committee. The Committee also will determine any other terms and conditions of an award of restricted stock. In determining whether an award of restricted stock should be made, and/or the vesting schedule for any such award, the Committee may impose whatever conditions to vesting it determines to be appropriate. During the period of vesting, the participant will not be permitted to transfer the restricted shares but will generally have voting and dividend rights (subject to vesting) with respect to such shares.

RSUs. RSUs are the right to receive an amount equal to the fair market value of the shares covered by the RSU at some future date after the grant. The Committee will determine all of the terms and conditions of an award of RSUs, including the vesting period. Upon each vesting date of an RSU, a selected participant will become entitled to receive an amount equal to the number of shares indicated in the grant notice, or, if expressed in dollar terms, the fair market value of the shares on the settlement date. Payment for vested RSUs may be in shares of Common Stock or in cash, or any combination thereof, as the Committee may determine. Settlement of vested stock units will generally occur at or around the time of vesting but the Committee may permit a participant to defer such compensation until a later point in time. Stock units represent an unfunded and unsecured obligation for us, and a holder of a stock unit has no rights other than those of a general creditor.

Other Awards. The 2020 Plan also provides that other equity awards, which derive their value from the value of our shares or from increases in the value of our shares, may be granted. In addition, cash awards may also be issued. Substitute awards may be issued under the 2020 Plan in assumption of or substitution for or exchange for awards previously granted by an entity which we (or an affiliate) acquire.

Limited Transferability of Awards. Awards granted under the 2020 Plan generally are not transferrable other than by will or by the laws of descent and distribution. However, the Committee may in its discretion permit the transfer of awards other than ISOs. Generally, where transfers are permitted, they will be permitted only by gift to a member of the selected participant’s immediate family or to a trust or other entity for the benefit of the selected participant and/or member(s) of his or her immediate family.

Termination of Employment, Death or Disability. The 2020 Plan generally determines the effect of the termination of employment on awards, which determination may be different depending on the nature of the termination, such as terminations due to cause, resignation, death, or disability and the status of the award as vested or unvested, unless the award agreement or a selected participant’s employment agreement or other agreement provides otherwise.

Dividends and Dividend Equivalents. Any dividend equivalents distributed in the form of shares under the 2020 Plan will count against the 2020 Plan’s maximum share limit. The 2020 Plan also provides that dividend equivalents will not be paid or accrue on unexercised stock options or unexercised SARs. Dividends and dividend equivalents that may be paid or accrue with respect to unvested. Awards shall be subject to the same vesting conditions as the underlying award and shall only be distributed to the extent that such vesting conditions are satisfied.

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Adjustments upon Changes in Capitalization.

In the event of the following actions:

	●	stock split of our outstanding shares of Common Stock;

	●	stock dividend;

	●	dividend payable in a form other than shares in an amount that has a material effect on the price of the shares;

	●	consolidation;

	●	combination or reclassification of the shares;

	●	recapitalization;

	●	spin-off; or

	●	other similar occurrences,

then the following shall each be equitably and proportionately adjusted by the Committee:

	●	maximum number of shares that can be issued under the 2020 Plan (including the ISO share grant limit);

	●	number and class of shares issued under the 2020 Plan and subject to each award;\

	●	exercise prices of outstanding awards; and

	●	number and class of shares available for issuance under the 2020 Plan.

Change in Control. In the event that we are a party to a merger or other reorganization or similar transaction, outstanding 2020 Plan awards will be subject to the agreement pertaining to such merger or reorganization. Such agreement may provide for (i) the continuation of the outstanding awards by us if we are a surviving corporation, (ii) the assumption or substitution of the outstanding awards by the surviving entity or its parent, (iii) full exercisability and/or full vesting of outstanding awards, or (iv) cancellation of outstanding awards either with or without consideration, in all cases with or without consent of the selected participant. The Board or the Committee need not adopt the same rules for each award or selected participant.

The Committee will decide the effect of a change in control of the Company on outstanding awards. The Committee may, among other things, provide that awards will fully vest and/or be canceled upon a change in control, or fully vest upon an involuntary termination of employment following a change in control. The Committee may also include in an award agreement provisions designed to minimize potential negative income tax consequences for the participant or the Company that could be imposed under the golden parachute tax rules of Code Section 280G.

Term of the 2020 Plan. The 2020 Plan is in effect until October 31, 2030 or until earlier terminated by the Board. Outstanding awards shall continue to be governed by their terms after the termination of the 2020 Plan.

Governing Law. The 2020 Plan shall be governed by the laws of the State of Delaware (which is the state of our incorporation) except for conflict of law provisions.

Amendment and Termination of the 2020 Plan. The Board generally may amend or terminate the 2020 Plan at any time and for any reason, except that it must obtain stockholder approval of material amendments to the extent required by applicable laws, regulations or rules.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; DIRECTOR INDEPENDENCE

Related-Party Transactions

During our fiscal years ended October 31, 2021 and October 31, 2020 neither we nor any of our directors, executive officers, or to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest (other than equity and other compensation, termination, change in control and other arrangements, which are described elsewhere in this Annual Report on Form 10-K) in any transaction in which the amount of the transaction exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years.

Related-Party Transaction Policy

We have adopted a formal policy regarding approval of transactions with related parties. For purposes of our policy only, a related person transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and any related person are, were or will be participants in which the amount involved exceeds the lesser of $120,000 or 1% of our total assets at the end of our last completed fiscal year. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. A related person is any executive officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and any entity owned or controlled by such persons.

Under the policy, if a transaction has been identified as a related person transaction, including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation, our management must present information regarding the related person transaction to our audit committee, or, if audit committee approval would be inappropriate, to another independent body of our board of directors, for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. Under the policy, we will collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder to enable us to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In addition, under our code of business conduct and ethics, our employees and directors will have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest. In considering related person transactions, our audit committee, or other independent body of our board of directors, will take into account the relevant available facts and circumstances including, but not limited to:

	●	the risks, costs and benefits to us;

	●	the impact on a director’s independence in the event that the related person is a director, immediate family member of a director or an entity with which a director is affiliated;

	●	the availability of other sources for comparable services or products; and

	●	the terms available to or from, as the case may be, unrelated third parties or to or from employees generally.

The policy requires that, in determining whether to approve, ratify or reject a related person transaction, our audit committee, or other independent body of our board of directors, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our audit committee, or other independent body of our board of directors, determines in the good faith exercise of its discretion.

Director Independence

Although our common stock is not listed on any national securities exchange, for purposes of independence we use the definition of independence applied by The Nasdaq Stock Market.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The aggregate fees billed by our principal independent registered public accounting firm for the indicated services for each of the last two fiscal years were as follows:

	2021		2020
Audit fees	$	30,000	$	36,500
Audit related fees		15,000		22,500
Tax fees		-		-
All other fees		-		-
Total	$	45,000	$	59,000

Audit Fees. The fees identified under this caption were for professional services rendered by our independent public registered accounting firm for the 2021 and 2020 fiscal years in connection with the audit of our annual financial statements. The amounts also include fees for services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings and engagements for the years identified. Effective December 8, 2020, Boyle, CPA, LLC (“Boyle CPA”), was appointed by our board of directors as the Company’s independent registered public accounting firm, replacing RBSM, LLP (“RBSM”), the Company’s prior independent registered public accounting firm since August 19, 2020. Audit fees billed by Boyle CPA for professional services rendered for the 2021 fiscal year were $30,000. Audit fees billed by Boyle CPA and AD for professional services rendered for the 2020 fiscal year were $30,000 and $6,500, respectively.

Audit-Related Fees. The fees identified under this caption were for review of our financial statements included in our quarterly reports on Form 10-Q and were not reported under the caption “Audit Fees.” This category may include fees related to the performance of audits and attestation services not required by statute or regulations, and accounting consultations about the application of generally accepted accounting principles to proposed transactions. All audit-related fees billed for the 2021 fiscal year were billed solely by Boyle. Audit-related fees billed by AD and RBSM for professional services rendered for the 2020 fiscal year were $15,000 and $7,500, respectively.

Tax Fees. The fees identified under this caption were for tax compliance, tax planning, tax advice and corporate tax services. Corporate tax services encompass a variety of permissible services, including technical tax advice related to tax matters; assistance with withholding-tax matters; assistance with state and local taxes; preparation of reports to comply with local tax authority transfer pricing documentation requirements; and assistance with tax audits.

Approval Policy. Our board of directors approves in advance all services provided by our independent registered public accounting firm. All engagements of our independent registered public accounting firm in fiscal years 2021 and 2020 were pre-approved by the board of directors.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statements

Description		Pages
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets		F-2
Consolidated Statements of Operations and Other Comprehensive Loss		F-3
Consolidated Statement of Changes In Stockholders’ (Deficit) Equity		F-4
Consolidated Statements of Cash Flows		F-5
Notes to the Consolidated Financial Statements		F-6

Exhibit Number		Description
3.1		Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 of Form 10-12b filed on June 20, 2008)
3.2		Amendment to Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.2 of Form 10-12b filed on June 20, 2008)
3.3		Certificate of Ownership Merging Webdigs, Inc. with and into Select Video, Inc. (Incorporated by reference to Exhibit 3.3 of Form 10-Q filed on June 17, 2019)
3.4		Certificate of Amendment to Certificate of Incorporation (Incorporated by reference to Exhibit 3.12 of Form 10-K filed on March 26, 2018)
3.5		Certificate of Ownership (Incorporated by reference to Exhibit 3.1 of Form 8-K filed on October 15, 2012)
3.6		Amendment to the Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.6 of Form 10-K filed on February 13, 2015)
3.7		Certificate of Designations for Series B Convertible Preferred Stock (Incorporated by reference to Exhibit 3.8 of Form 10-K filed on February 13, 2015)
3.8		Certificate of Designations of Series C Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 of Form 8-K filed on May 8, 2015)
3.9		Amendment to Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 of Form 8-K filed on April 10, 2017)
3.10		Amendment to Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 of Form 8-K filed on February 27, 2018)
3.11		Certificate of Amendment to Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 of Form 8-K filed on October 16, 2018)
3.12		Second Amended and Restated Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of Verus International, Inc. (Incorporated by reference to Exhibit 3.1 of Form 8-K filed on February 12, 2019)
3.13		Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.3 of Form 10-12b filed on June 20, 2008)
3.14		Amendment No. 1 to Second Amended and Restated Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of Verus International, Inc. (Incorporated by reference to Exhibit 3.1 of Form 8-K filed on April 11, 2019)
3.15		Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Verus International, Inc. (Incorporated by reference to Exhibit 3.1 of Form 8-K filed on April 18, 2019)
3.16		Certificate of Amendment of the Certificate of Incorporation of Verus International, Inc. (Incorporated by reference to Exhibit 3.1 of Form 8-K filed on January 12, 2021)
4.1+		2015 Stock Incentive Plan (Incorporated by reference to Exhibit 4.1 of Form S-8 filed on August 7, 2015)
4.2+		2018 Equity Incentive Plan (Incorporated by reference to Exhibit 4.2 of Form 10-K filed on March 19, 2019)
4.3		Description of the Registrant’s Securities (Incorporated by reference to Exhibit 4.3 of Form 10-K filed on April 13, 2020)
4.4+		2020 Equity Incentive Plan (Incorporated by reference to Appendix B of Definitive Information Statement filed on November 6, 2020)

-42-

10.1+		Employment Agreement with Anshu Bhatnagar (Incorporated by reference to Exhibit 10.1 of Form 8-K/A filed on January 31, 2017)
10.2		Contribution and Spin-off Agreement (Incorporated by reference to Exhibit 10.1 of Form 8-K filed on November 3, 2017)
10.3		First Amendment to Contribution and Spin-Off Agreement dated January 29, 2018 (Incorporated by reference to Exhibit 10.27 of Form 10-K filed on March 26, 2018)
10.4		Form of Note issued to Donald P. Monaco Insurance Trust on January 26, 2018 (Incorporated by reference to Exhibit 10.1 of Form 8-K filed on February 12, 2018)
10.5		Amendment No. 1 to Note issued to Donald P. Monaco Insurance Trust (Incorporated by reference to Exhibit 10.1 of Form 8-K filed on February 12, 2019)
10.6		Amendment No. 2 to Note issued to Donald P. Monaco Insurance Trust (Incorporated by reference to Exhibit 10.2 of Form 8-K filed on February 12, 2019)
10.7#		Sales Contract by and between Verus Foods, Inc. and Gulf ARGO Trading, LLC dated December 26, 2016 (Incorporated by reference to Exhibit 10.16 on Form 10-K filed on March 19, 2019)
10.8#		Exclusive Distribution Agreement by and between Verus Foods Inc. and Padrone General Trading LLC dated August 18, 2017 (Incorporated by reference to Exhibit 10.17 on Form 10-K filed on March 19, 2019)
10.9		Credit Agreement, dated as of July 31, 2019, by and among Verus International, Inc. and Verus Foods Inc., as Borrowers, and The Columbia Bank, as lender (Incorporated by reference to Form 8-K filed on August 1, 2019)
10.10##		Asset Purchase Agreement, dated as of August 30, 2019, by and among Verus International, Inc. and the Sellers thereto (Incorporated by reference to Form 8-K filed on September 3, 2019)
10.11		Form of Note (Incorporated by reference to Form 8-K filed on April 7, 2020)
10.12+		Employment Agreement by and between Verus International, Inc. and Anshu Bhatnagar (Incorporated by reference to Form 8-K filed on April 29, 2020)
10.13		Form of Common Stock Purchase Agreement (Incorporated by reference to Form 8-K filed on July 2, 2020)
10.14		Form of Registration Rights Agreement (Incorporated by reference to Form 8-K filed on July 2, 2020)
10.15		Form of Letter Agreement (Incorporated by reference to Form 8-K filed on July 24, 2020)
10.16		Amendment No. 3 to Donald P. Monaco Insurance Trust Note (Incorporated by reference to Form 8-K filed on August 20, 2020)
10.17		Amendment No. 4 to Donald P. Monaco Insurance Trust Note (Incorporated by reference to Form 8-K filed on October 30, 2020)
10.18		Special Amendment to note dated March 31, 2020 (Incorporated by reference to Form 8-K filed on December 28, 2020)
10.19		Form of Agreement (Incorporated by reference to Form 8-K filed on December 28, 2020)
10.20+		Employment Agreement by and between Verus International, Inc. and Apurva Dhruv (Incorporated by reference to Form 8-K filed on February 23, 2021)
10.21		Form of Securities Purchase Agreement dated February 1, 2021 (Incorporated by reference to Form 10-K filed on March 9, 2021)
10.22		Form of Note dated February 1, 2021 (Incorporated by reference to Form 10-K filed on March 9, 2021)
10.23		Form of Securities Purchase Agreement dated April 7, 2021 (Incorporated by reference to Form 10-Q filed on June 21, 2021)
10.24		Form of Note dated April 7, 2021 (Incorporated by reference to Form 10-Q filed on June 21, 2021)
10.25		Form of Securities Purchase Agreement dated April 8, 2021 (Incorporated by reference to Form 10-Q filed on June 21, 2021)
10.26		Form of Note dated April 8, 2021 (Incorporated by reference to Form 10-Q filed on June 21, 2021)
10.27		Form of Securities Purchase Agreement dated April 15, 2021 (Incorporated by reference to Form 10-Q filed on June 21, 2021)
10.28		Form of Note dated April 15, 2021 (Incorporated by reference to Form 10-Q filed on June 21, 2021)
10.29		Form of Securities Purchase Agreement dated June 29, 2021 (Incorporated by reference to Form 10-Q filed on September 20, 2021)
10.30		Form of Note dated June 29, 2021 (Incorporated by reference to Form 10-Q filed on September 20, 2021)
10.31		Form of Securities Purchase Agreement dated August 5, 2021 (Incorporated by reference to Form 10-Q filed on September 20, 2021)
10.32		Form of Note dated August 5, 2021 (Incorporated by reference to Form 10-Q filed on September 20, 2021)
10.31		Form of Securities Purchase Agreement dated August 12, 2021 (Incorporated by reference to Form 10-Q filed on September 20, 2021)
10.32		Form of Note dated August 12, 2021 (Incorporated by reference to Form 10-Q filed on September 20, 2021)
10.33*		Form of Securities Purchase Agreement dated November 5, 2021
10.34*		Form of Note dated November 5, 2021
10.35*		Form of Securities Purchase Agreement dated December 10, 2021
10.36*		Form of Note dated December 10, 2021
14.1		Code of Business Conduct and Ethics (Incorporated by reference to Exhibit 14.1 on Form 10-K filed on March 19, 2019)
16.1		Letter from Assurance Dimensions, Inc. (Incorporated by reference to exhibit 16.1 on Form 8-K filed on January 15, 2020)
16.2		Letter from Mayer Hoffman McCann P.C. (Incorporated by reference to exhibit 16.1 on Form 8-K filed on February 24, 2020)
16.3		Letter from Assurance Dimensions, Inc. (Incorporated by reference to exhibit 16.1 on Form 8-K filed on August 25, 2020)
16.4		Letter from RBSM, LLP (Incorporated by reference to exhibit 16.1 on Form 8-K filed on December 11, 2020)

-43-

21.1*		List of Subsidiaries
31.1*		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		Inline XBRL Instance Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
104*		Cover Page Interactive Data File (embedded with the Inline XBRL document

+ Each of these Exhibits constitutes a management contract, compensatory plan, or arrangement.

* Filed herewith.

# The SEC has granted confidential treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

## Pursuant to Item 601(b)(10) of Regulation S-K, certain confidential portions of this exhibit were omitted by means of making such portions with an asterisk because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.

-44-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on this 15^th day of April, 2022.

	Verus International, Inc.

	By:	/s/ Apurva Dhruv
		Apurva Dhruv
		Chief Executive Officer (Principal Executive, Financial, and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities indicated.

Name	Title	Date

/s/ Apurva Dhruv	Chief Executive Officer and Chairman of the Board	April 15, 2022
Apurva Dhruv	(Principal Executive, Financial, and Accounting Officer)

/s/ Neerav Sangani	Director	April 15, 2022
Neerav Sangani

-45-

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and

Board of Directors of Verus International, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Verus International, Inc. (the “Company”) as of October 31, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended October 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended October 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

As discussed in Note 3 to the financial statements, the Company has a history of net losses, has incurred recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans are also described in Note 3. The financial statements do not include adjustments that might result from the outcome of this uncertainty.

Basis of Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounts Receivable

The Company regularly reviews outstanding receivables and provides for estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, the Company makes judgments regarding its customers’ ability to make required payments, economic events, and other factors. As the financial condition of these parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. The Company maintains reserves for potential credit losses, and such losses traditionally have been within its expectations. At October 31, 2021, the Company determined an allowance of $198,000 was necessary.

Our audit procedures to evaluate the appropriateness and accuracy of the accounting and valuation determined by management included confirming the balances with selected customers, reviewing the financial position of significant customers, and reviewing managements’ computations.

Accounting for Embedded Derivative Liabilities Related to Convertible Debentures

As described in Notes 2 and 10 to the financial statements, the Company had convertible debentures that required accounting considerations and significant estimates.

The Company determined that variable conversion features issued in connection with certain convertible debentures required derivative liability classification. These variable conversion features were initially measured at fair value and subsequently have been remeasured to fair value at each reporting period. The Company determined the fair value of the embedded derivatives using the Black-Scholes-Merton option pricing model. The value of the embedded derivative liabilities related to the convertible debentures was $471,219 at October 31, 2021.

/s/ Boyle CPA, LLC

We have served as the Company’s auditor since 2020

Red Bank, NJ

April 15, 2022

331 Newman Springs Road	P (732) 784-1582
Building 1, 4^th Floor, Suite 143	F (732) 510-0665
Red Bank, NJ 07701

F-1

Verus International, Inc.

Consolidated Balance Sheets


	October 31,
	2021			2020
Assets
Current Assets
Cash	$	66,022		$	6,150
Accounts receivable		303,218			50,251
Inventory		145,129			60,378
Prepaid expenses		-			160,663
Other assets		16,144			6,995
Assets of discontinues operations		105,974			5,828,605
Total Current Assets		636,487			6,113,042
Property and equipment, net		85,067			128,755
Operating lease right-of-use asset		198,637			383,225
Total Assets	$	920,191		$	6,625,022

Liabilities and Stockholders’ (Deficit) Equity
Current Liabilities
Accounts payable and accrued expenses	$	638,315		$	664,612
Operating lease liability		92,771			178,327
Interest payable		368,709			161,427
Due to former officer		221,586			1,801
Notes payable		1,533,294			1,337,925
Convertible notes payable, net		530,358			387,193
Derivative liability		471,219			180,404
Liabilities of discontinued operations		227,338			2,066,126
Total Current Liabilities		4,083,590			4,977,815

Operating lease liability, net of current portion		105,866			214,284
Notes payable, net of current portion		-			34,826
Total Liabilities		4,189,456			5,226,925

Commitments and Contingencies (Note 14)		-

Stockholders’ (Deficit) Equity
Series A convertible preferred stock, $0.000001 par value; 120,000,000 shares authorized and 28,944,601 shares issued and outstanding at October 31, 2021 and 2010		29			29

Series B convertible preferred stock, $0.000001 par value; 1,000,000 shares authorized and no shares issued and outstanding at October 31, 2021 and 2020		-			-

Series C convertible preferred stock, $0.000001 par value; 1,000,000 shares authorized and 680,801 shares issued and outstanding at October 31, 2021 and 2020		1			1
Preferred stock value

Common stock, $0.000001 par value; 7,500,000,000 shares authorized and 23,844,566 and 10,278,867 shares issued at October 31, 2021 and 2020, respectively (as adjusted for a 1-for-500 reverse stock split as discussed in Note 1)		24			10

Additional paid-in-capital		46,889,360			45,562,841
Shares to be issued		5,000			-
Accumulated deficit		(50,163,679	)		(44,164,783	)
Total Stockholders’ (Deficit) Equity		(3,269,265	)		1,398,097
Total Liabilities and Stockholders’ (Deficit) Equity	$	920,191		$	6,625,022

The accompanying notes are an integral part of these consolidated financial statements

F-2

Verus International, Inc.

Consolidated Statements of Operations


	For the Years Ended
	October 31,
	2021			2020
Revenue	$	488,589		$	870,251
Cost of revenue		207,143			694,515
Gross Profit		281,446			175,736
Operating Expenses:
Salaries and benefits		277,926			9,059,340
Selling and promotions expense		3,358			71,500
Legal and professional fees		376,840			588,258
General and administrative		691,324			555,685
Total Operating Expenses		1,349,448			10,274,783
Operating loss		(1,068,002	)		(10,099,047	)
Other Income (Expense):
Interest expense		(280,360	)		(1,162,554	)
Amortization of debt discounts and issuance costs		(200,462	)		(532,339	)
Loss on convertible notes payable extinguishment and settlement		(130,152	)		(3,592,381	)
Initial derivative liability expense		(1,026,833	)		(336,329	)
Gain on change in fair value of derivative liability		359,877			69,925
Gain of forgiveness of Paycheck Protection Program loan		104,479			-
Gain on settlement of liabilities		104,774			-
Loss on issuances of common stock under S-1 registration statement		-			(562,230	)
Loss on disposal of unconsolidated entity		-			(100,000	)
Total Other Income (Expense)		(1,068,677	)		(6,215,908	)
Loss from continuing operations before income taxes		(2,136,679	)		(16,314,955	)
Income taxes		-			-
Loss from continuing operations		(2,136,679	)		(16,314,955	)
Discontinued operations (Note 16)
(Loss) income from discontinued operations		(3,862,217	)		644,762
Net loss	$	(5,998,896	)	$	(15,670,193	)

Loss per common share:
Loss from continuing operations per common share - basic and diluted	$	(0.15	)	$	(2.78	)

(Loss) gain from discontinued operations per common share - basic and diluted	$	(0.28	)	$	0.11

Loss per common share - basic and diluted	$	(0.43	)	$	(2.67	)

Weighted average shares outstanding – basic and diluted		13,836,086			5,863,894

The accompanying notes are an integral part of these consolidated financial statements.

F-3

Verus International, Inc.

Consolidated Statement of Changes in Stockholders’ (Deficit) Equity

For the Years Ended October 31, 2021 and 2020

3
	Preferred Stock A						Preferred Stock B				Preferred Stock C				Common Stock				Additional Paid-In		Common Stock to be			Accumulated			Total Stockholders’ Equity
	Shares			Par			Shares		Par		Shares		Par		Shares		Par		Capital		Issued			Deficit			(Deficit)
Balance, October 31, 2019		44,570,101		$	45			-	$	-		430,801	$	-		4,611,557	$	5	$	27,568,220	$	-		$	(28,494,590	)	$	(926,320	)
Shares issued for conversion of Preferred Stock A to Common Stock		(15,625,500	)		(16	)				-				-		31,251		0		16								-
Stock-based compensation for warrants issued																				8,859,550								8,859,550
Common stock issued under stock-based compensation																30,000		0		180,000								180,000
Shares issued for conversion of convertible promissory notes to Common Stock																4,282,326		4		6,539,893								6,539,897
Beneficial conversion feature for conversion of convertible promissory notes to Common Stock																				830,162								830,162
Shares issued for sale of Common Stock																1,271,733		1		1,439,251								1,439,252
Common stock issued for services rendered																52,000		0		78,000								78,000
Preferred Series C stock issued under stock-based compensation												250,000		-						67,749								67,749
Issuance of common stock for note payable issuance
Issuance of common stock for note payable issuance, shares
Stock-based compensation for restricted shares under employment contract
Issuance of common stock for vendor services
Issuance of common stock for vendor services, shares
Reversal of shares of common stock to be issued for vendor services
Net loss		-						-				-				-				-		-			(15,670,193	)		(15,670,193	)
Balance, October 31, 2020		28,944,061		$	29			-	$	-		680,801	$	1		10,278,867	$	10	$	45,562,841	$	-		$	(44,164,783	)	$	1,398,097
Shares issued for conversion of convertible promissory notes to Common Stock																13,097,972		13		1,156,100								1,156,113
Issuance of common stock for note payable issuance								-								400,000		1		88,000								88,001
Stock-based compensation for restricted shares under employment contract														-						63,455								63,455
Issuance of common stock for vendor services										-						67,728		0		18,964								18,964
Shares of common stock to be issued for board member services rendered																						5,000						5,000
Shares of common stock to be issued for vendor services rendered																						43,100						43,100
Reversal of shares of common stock to be issued for vendor services rendered																						(43,100	)					(43,100	)
Net loss		-			-			-		-		-													(5,998,896	)		(5,998,896	)
Balance, October 31, 2021		28,944,601		$	29			-	$	-		680,801	$	1		23,844,566	$	24	$	46,889,360	$	5,000		$	(50,163,679	)	$	(3,269,265	)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Verus International, Inc.

Consolidated Statements of Cash Flows


	For the Years Ended
	October 31,
	2021			2020
Cash flows from operating activities:
Net loss	$	(5,998,896	)	$	(15,670,193	)
Adjustments to reconcile net loss to net cash from operating activities:
Initial derivative liability expense		1,026,833			336,329
Amortization of debt discounts and issuance costs		200,462			532,339
Allowance for accounts receivable		198,000			-
Loss on extinguishment and settlement of debt		130,152			3,592,381
Depreciation and amortization		43,688			10,468
Gain on change in fair value of derivative liability		(359,877	)		(69,925	)
Gain on settlement of liabilities		(104,774	)		-
Gain on forgiveness of Cares Act Paycheck Protection Program loan		(104,479	)		-
Share based compensation		(18,831	)		8,426,873
Beneficial conversion feature for conversion of convertible debt to Common Stock		-			830,162
Loss on equity issuances under S-1 registration statement		-			562,230
Loss on disposal of unconsolidated entity		-			100,000
Changes in operating assets and liabilities:
Increase in accounts receivable		(450,967	)		(50,251	)
Increase in inventory		(84,751	)		(60,378	)
Decrease (increase) in prepaid expenses		160,663			(139,368	)
Increase in other assets		(9,149	)		-
Increase in accounts payable and accrued expenses		640,416			584,025
Decrease (increase) in right to use and lease obligations, net		(9,386	)		9,386
Net cash used in operating activities of continuing operations		(4,740,896	)		(1,005,922	)
Net cash provided by (used in) operating activities of discontinued operations		3,883,843			(1,445,187	)
Net cash used in operating activities		(857,053	)		(2,451,109	)

Cash flows from investing activities:
Capital expenditures		-			(139,223	)
Investment in unconsolidated entity		-			(100,000	)
Net cash used in investing activities of continuing operations		-			(239,223	)
Net cash used in investing activities of discontinued operations		-			(3,000	)
Net cash used in investing activities		-			(242,223	)

Cash flows from financing activities:
Proceeds from issuance of convertible notes payable		739,600			1,221,500
Proceeds from issuance of note payable		240,325			280,251
Payments applied to convertible promissory notes		(63,000	)		-
Proceeds from sale of common stock		-			877,022
Net cash provided by financing activities		916,925			2,378,773

Net increase (decrease) in cash		59,872			(314,559	)
Cash at beginning of period		6,150			320,709

Cash at end of period	$	66,022		$	6,150

Supplemental disclosure:
Cash paid for interest	$	18,765		$	119,095

The accompanying notes are an integral part of these consolidated financial statements.

F-5

	For the Years Ended
	October 31,
	2021		2020
Supplemental disclosure of non-cash investing and financing activities:
Common Stock issued in exchange for conversion of Series A Preferred Stock:
Value	$	-	$	16
Shares		-		3,150,500

Common Stock issued in exchange for note payable and conversion of convertible promissory notes:
Value (includes beneficial conversion feature)	$	1,156,113	$	7,370,059
Shares		13,097,972		4,282,326

Common Stock issued for note payable issuance:
Value	$	88,001	$	-
Shares		400,000		-

Common Stock issued for vendor services:
Value	$	18,964	$	-
Shares		67,728		-

The accompanying notes are an integral part of these consolidated financial statements.

F-6

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 1: ORGANIZATION AND NATURE OF BUSINESS

Explanatory Note

All references to shares of our common stock contained herein have been adjusted to reflect a 1-for-500 reverse stock split which was completed and became effective on January 13, 2021.

Organization and Nature of Business

Verus International, Inc., including its wholly-owned subsidiaries, are collectively referred to herein as “Verus,” “VRUS”, “Company,” “us,” or “we.”

For the period August 1, 2018 through October 31, 2021, we, through our wholly-owned subsidiary, Verus Foods, Inc., an international supplier of consumer food products, were focused on international consumer packaged goods, foodstuff distribution and wholesale trade. Our fine food products were sourced in the United States and exported internationally. We marketed consumer food products under our own brands primarily to supermarkets, hotels, and other members of the wholesale trade. Initially, we focused on frozen foods, particularly meat, poultry, seafood, vegetables, and french fries with beverages as a second vertical, and during 2018, we added cold-storage facilities and began seeking international sources for fresh fruit, produce and similar perishables, as well as other consumer packaged foodstuff with the goal to create vertical farm-to-market operations.

Through October 31, 2021, we had a significant regional presence in the Middle East and North Africa (“MENA”) and sub-Saharan Africa (excluding The Office of Foreign Assets Control restricted nations), with deep roots in the Gulf Cooperation Council (“GCC”) countries, which includes the United Arab Emirates, Oman, Bahrain, Qatar, Kingdom of Saudi Arabia and Kuwait. During the three months ended October 31, 2021, we made a decision to cease operating as an international supplier of consumer food products, whereby we cancelled and settled all supplier and customer contracts to avoid any future significant liabilities. Accordingly, we have classified the operating results and associated assets and liabilities from Verus MENA as discontinued operations in the consolidated financial statements for the years ended October 31, 2021 and 2020 (see Note 16).

F-7

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 1: ORGANIZATION AND NATURE OF BUSINESS (Continued)

Furthermore, during August 2019, we purchased all of the assets of a french fry business in the Middle East and during May 2020, we acquired a 51% interest of ZC Top Apparel Manufacturing, Inc. (“TAM”), a Philippines-based maker of reusable N95 fabric masks and biohazard suits. On October 5, 2020, as a result of TAM’s failure of contractual performance and breach of contract, all obligations under the binding term sheet were rescinded and a demand made for immediate return of the cash consideration of $100,000, that we paid, plus fees and costs to be determined. As we were unsuccessful in collecting the $100,000, at October 31, 2020 we determined the $100,000 uncollectible and wrote-off the balance to loss on disposal of unconsolidated entity within our consolidated statement of operations.

Impact of COVID-19 Pandemic

A novel strain of coronavirus, COVID-19, surfaced during December 2019 and has spread around the world, including to the United States. During March 2020, COVID-19 was declared a pandemic by the World Health Organization. During certain periods of the pandemic thus far, a number of U.S. states and various countries throughout the world had been under governmental orders requiring that all workers remain at home unless their work was critical, essential, or life-sustaining. As a result of these governmental orders, the Company temporarily closed its domestic and international offices and required all of its employees to work remotely. As economic activity has begun and continues recovering, the impact of the COVID-19 pandemic on our business has been more reflective of greater economic and marketplace dynamics. Furthermore, in light of variant strains of the virus that have emerged, the COVID-19 pandemic could once again impact our operations and the operations of our customers and vendors as a result of quarantines, illnesses, and travel restrictions.

The full impact of the COVID-19 pandemic on the Company’s financial condition and results of operations will depend on future developments, such as the ultimate duration and scope of the pandemic, its impact on the Company’s employees, customers, and vendors, in addition to how quickly normal economic conditions and operations resume and whether the pandemic impacts other risks disclosed in Item 1A “Risk Factors” within this Annual Report on Form 10-K. Even after the pandemic has subsided, the Company may continue to experience adverse impacts to its business as a result of any economic recession or depression that has occurred as a result of the pandemic. Therefore, the Company cannot reasonably estimate the impact at this time. The Company continues to actively monitor the pandemic and may determine to take further actions that alter its business operations as may be required by federal, state, or local authorities or that it determines are in the best interests of its employees, customers, vendors, and shareholders.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation and Presentation

The consolidated financial statements for the years ended October 31, 2021 and 2020 include the operations of BLF effective April 25, 2019, Verus MENA effective May 1, 2018, and Verus Foods, Inc. effective January 2017. The operating results and associated assets and liabilities from BLF and Verus MENA have been classified as discontinued operations in the consolidated financial statements for the years ended October 31, 2021 and 2020 (see Note 16). All significant intercompany balances and transactions have been eliminated in the consolidation.

Reclassifications

Certain reclassifications of prior year amounts have been made to enhance comparability with the current year’s consolidated financial statements, including, but not limited to, presentation of certain items within the consolidated balance sheets, statements of operations, consolidated statements of cash flows, and certain notes to the consolidated financial statements. These reclassifications had no effect on the previously reported net loss.

F-8

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted. Significant estimates include the collectability of accounts receivable, valuations of inventory, estimated useful lives of finite-lived intangible assets, accrued expenses, valuation of derivative liabilities, stock-based compensation, and the valuation reserve for income taxes.

Segment Reporting

Although the Company has a number of operating divisions, separate segment data has not been presented, as they meet the criteria for aggregation as permitted by ASC Topic 280, Segment Reporting.

Concentrations of Credit Risk

The Company places its cash and cash equivalents with high-quality financial institutions. At times, balances in the Company’s cash accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) limit. At October 31, 2021 and 2020, the Company’s cash balances did not exceed the FDIC limit.

The Company’s products accounts receivable, net and revenues as of and for the year ended October 31, 2021 were geographically concentrated with customers located domestically in the United States. In addition, significant concentrations existed with a limited number of customers. Approximately 36% of accounts receivable, net as of October 31, 2021 was concentrated with two customers and approximately 34% of revenues for the year ended October 31, 2021 were concentrated with two customers. Although the loss of one or more of our top customers, or a substantial decrease in demand by any of those customers for our products, could have a material adverse effect on our business, results of operations and financial condition, such risks may be mitigated by our access to credit insurance programs.

The Company purchases substantially all of its products from a limited number of suppliers. Increases in the prices of the products which we purchase could adversely affect our operating results if we are unable to offset the effect of these increased costs through price increases, and we can provide no assurance that we will be able to pass along such increased costs to our customers. Furthermore, if we cannot obtain sufficient products or our suppliers cease to be available to us, we could experience shortages in our products or be unable to meet our commitments to customers. Alternative sources of products, if available, may be more expensive. For periods in which the prices are declining, the Company may be required to write down its inventory carrying cost which, depending on the extent of the differences between market price and carrying cost, could have a material adverse effect on the Company’s consolidated results of operations and financial position.

Cash and Cash Equivalents

For purposes of balance sheet presentation and reporting of cash flows, the Company considers all unrestricted demand deposits, money market funds and highly liquid debt instruments with an original maturity of less than 90 days to be cash and cash equivalents. There were no cash equivalents at October 31, 2021 or October 31, 2020.

F-9

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounts Receivable

The Company regularly reviews outstanding receivables and provides for estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, the Company makes judgments regarding its customers’ ability to make required payments, economic events, and other factors. As the financial condition of these parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. The Company maintains reserves for potential credit losses, and such losses traditionally have been within its expectations. At October 31, 2021, we determined $198,000 was required for an allowance for doubtful accounts due to the past due status of certain accounts receivable invoices. At October 31, 2020, we determined there was no requirement for an allowance for doubtful accounts.

Inventory

Inventory is stated at the lower of net realizable value, determined on the first-in, first-out basis, or cost. Net realizable value is based on estimated selling prices in the ordinary course of business less reasonably predictable costs of completion and transportation. Inventories consist of finished products.

Intangible Assets

Intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets.

Property and Equipment

All expenditures on the acquisition of property and equipment are recorded at cost and capitalized as incurred, provided the asset benefits the Company for a period of more than one year. Expenditures on routine repairs and maintenance of property and equipment are charged directly to operating expense. The property and equipment is depreciated based upon its estimated useful life after being placed in service. Leasehold improvements are depreciated based upon the remaining term of the related lease. The estimated useful lives range from 3 to 7 years based upon asset class. When an asset is retired, sold or impaired, the resulting gain or loss is reflected in earnings. The Company incurred depreciation expense of $43,688 and $10,468 for the years ended October 31, 2021 and 2020, respectively.

Impairment of Long-Lived Assets

In accordance with Accounting Standards Codification (“ASC”) 360-10, “Property, Plant, and Equipment”, the Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. For the years ended October 31, 2021 and 2020, the Company did not impair any long-lived assets.

F-10

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments

The Company measures its financial instruments in accordance with ASC topic 820, “Fair Value Measurements and Disclosures” (ASC 820), formerly SFAS No. 157 “Fair Value Measurements.” ASC 820 defines “fair value” as the 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 market participants on the measurement date.

ASC 820 also describes three levels of inputs that may be used to measure fair value:

Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Financial instruments consist principally of cash, accounts receivable, prepaid expenses, due from affiliates, accounts payable, accrued liabilities and other current liabilities. The carrying amounts of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short-term nature. The fair value of short and long-term debt is based on current rates at which the Company could borrow funds with similar remaining maturities. The carrying amounts approximate fair value. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.

Revenue Recognition

The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s (“FASB”), Accounting Standards Codification (“ASC”) ASC 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

A contract asset is recognized for incremental costs to obtain a customer contract that are recoverable, otherwise such incremental costs are expensed as incurred.

F-11

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cost of Revenues

Cost of revenues represents the cost of the products sold during the periods presented.

Shipping and Handling Costs

Shipping and handling costs for freight expense on goods shipped are included in cost of sales. For the years ended October 31, 2021 and 2020 there was no freight expense on goods shipped as the operating results and associated assets and liabilities from BLF and Verus MENA have been classified as discontinued operations in the consolidated financial statements for the years ended October 31, 2021 and 2020 (see Note 16).

Customer Deposits

From time to time the Company requires prepayments for deposits in advance of delivery of products. Such amounts are initially recorded as customer deposits. The Company recognizes such revenue as it is earned in accordance with revenue recognition policies.

Share-Based Compensation

The Company computes share based payments in accordance with the provisions of ASC Topic 718, Compensation – Stock Compensation and related interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the grants.

Restricted stock awards are granted at the discretion of the compensation committee of the board of directors of the Company (the “Board of Directors”). These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of the Company’s common stock on the grant date.

The Company estimates the fair value of stock options and warrants by using the Black-Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of the Company’s common stock over the expected term of the option. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term.

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. The Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest.

The Company accounts for share–based payments granted to non–employees in accordance with ASC 505–50, “Equity Based Payments to Non–Employees.” The Company determines the fair value of the stock–based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more readily determinable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

F-12

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Derivative Instruments

The Company accounts for financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities as well as related interpretations of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, considering all of the rights and obligations of each instrument.

The Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered consistent with the objective measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of the Company’s common stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility in these estimates and assumption changes.

Convertible Debt Instruments

The Company records debt net of debt discount for beneficial conversion features and warrants, on a relative fair value basis. Beneficial conversion features are recorded pursuant to the Beneficial Conversion and Debt Topics of the Financial Accounting Standards Board (“FASB”) ASC. The amounts allocated to warrants and beneficial conversion rights are recorded as debt discount and as additional paid-in-capital. Debt discount is amortized to interest expense over the life of the debt using the effective interest method.

Foreign Currency Translation and Transactions

Through October 31, 2021, the Company has one non-U.S. subsidiary, where the functional currency was the United Arab Emirates dirham (“AED”). The Company’s foreign subsidiary maintained its records using local currency. The related assets and liabilities of this non-U.S. subsidiary have been translated using end of period exchange rates and stockholders’ equity is translated at the historical exchange rates to the U.S. dollar. Income and expense items were translated using average exchange rates for the period. The resulting translation adjustments, net of income taxes, are reported as other comprehensive income and accumulated other comprehensive income in the stockholder’s equity in accordance with ASC 220 – Comprehensive Income.

F-13

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The exchange rate used to translate amounts in AED into USD for the purposes of preparing the consolidated financial statements were as follows:

Balance sheet:

	October 31,
	2021		2020
Period-end AED: USD exchange rate	$	0.27230	$	0.27229

Income statement:

	Year Ended October 31,
	2021		2020
Average Quarterly AED: USD exchange rate	$	0.27229	$	0.27230

Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.

Income Taxes

The Company accounts for income taxes in accordance with Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes (“ASC 740”). Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities and net operating loss and tax credit carryforwards given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of ASC 740. At October 31, 2021 and 2020, the Company had a full valuation allowance against its deferred tax assets.

ASC 740 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company’s tax returns for its October 31, 2021, 2020, 2019 and 2018 tax years may be selected for examination by the taxing authorities as the statute of limitations remains open.

The Company recognizes expenses for tax penalties and interest assessed by the Internal Revenue Service and other taxing authorities upon receiving valid notice of assessments. The Company has received no such notices for the years ended October 31, 2021 and 2020.

Earnings Per Share

In accordance with the provisions of FASB ASC Topic 260, Earnings per Share, basic earnings per share (“EPS”) is computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating EPS on a diluted basis.

F-14

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In computing diluted EPS, only potential common shares that are dilutive, those that reduce EPS or increase loss per share, are included. The effect of contingently issuable shares are not included if the result would be anti-dilutive, such as when a net loss is reported. Therefore, basic and diluted EPS are computed using the same number of weighted average shares for the years ended October 31, 2021 and 2020 as we incurred a net loss for those periods. At October 31, 2021, there were outstanding warrants to purchase approximately 2,620,000 shares of the Company’s common stock, approximately 194,000 shares of the Company’s common stock issuable upon the conversion of Series A and Series C convertible preferred stock, and approximately 39,000,000 shares of the Company’s common stock issuable upon the conversion of convertible notes payable which may dilute future EPS. At October 31, 2020, there were outstanding warrants to purchase approximately 2,620,000 shares of the Company’s common stock, approximately 194,000 shares of the Company’s common stock issuable upon the conversion of Series A and Series C convertible preferred stock, and approximately 1,534,000 shares of the Company’s common stock issuable upon the conversion of convertible notes payable which may dilute future EPS.

Modification/Extinguishment of Debt

In accordance with ASC 470, a modification or an exchange of debt instruments that adds or eliminates a conversion option that was substantive at the date of the modification or exchange is considered a substantive change and is measured and accounted for as extinguishment of the original instrument along with the recognition of a gain or loss. Additionally, under ASC 470, a substantive modification of a debt instrument is deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. A substantive modification is accounted for as an extinguishment of the original instrument along with the recognition of a gain or loss.

Concentrations, Risks and Uncertainties

A significant portion of the Company’s ongoing operations are related to the nutraceutical products industry, and its prospects for success are tied indirectly to interest rates and the worldwide demand for the Company’s nutraceutical products.

Recently Adopted Accounting Standards

Effective November 1, 2020, the Company adopted ASU 2018-13, Fair Value Measurement (Topic 820), which modified the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concept Statement, including the consideration of costs and benefits. The Company determined the adoption of ASU 2018-13 did not have an impact on its consolidated financial statements.

F-15

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Standards Not Yet Adopted

During May 2021, the FASB issued ASU 2021-04, to clarify and reduce diversity in accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. The standard is effective for the Company as of November 1, 2022, with early adoption permitted. The Company is reviewing the impact of this guidance but does not currently expect the adoption of this guidance to have a material impact on its consolidated financial statements.

During August 2020, the FASB issued ASU 2020-06, to modify and simplify the application of U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. The standard is effective for the Company as of November 1, 2024, with early adoption permitted. The Company is reviewing the impact of this guidance but does not currently expect the adoption of this guidance to have a material impact on its consolidated financial statements.

During December 2019, the FASB issued ASU 2019-12, to amend and simplify the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, and also improve consistent application of and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The standard is effective for the Company as of November 1, 2021, with early adoption permitted. The Company is reviewing the impact of this guidance but does not currently expect the adoption of this guidance to have a material impact on its consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying consolidated financial statements.

NOTE 3: GOING CONCERN

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company has incurred net losses from continuing operations of $2,136,679 and $16,314,955 and has used cash in operating activities of continuing operations of $4,740,896 and $1,005,922 for the years ended October 31, 2021 and 2020, respectively. At October 31, 2021, the Company had a working capital deficit of $3,447,103, and an accumulated deficit of $50,163,679. It is management’s opinion that these facts raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the date of this report, without additional debt or equity financing. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

In order to meet its working capital needs through the next twelve months and to fund the growth of its business, the Company may consider plans to raise additional funds through the issuance of equity or debt. Although the Company intends to obtain additional financing to meet its cash needs, the Company may be unable to secure any additional financing on terms that are favorable or acceptable to it, if at all. The Company’s ability to raise additional capital will also be impacted by the continued COVID-19 pandemic, which such ability is highly uncertain, cannot be predicted, and could have an adverse effect on the Company’s business and financial condition.

F-16

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 4: PREPAID EXPENSES

Prepaid expenses total $0 and $160,663 at October 31, 2021 and 2020, respectively, and consist mainly of deposits on purchases of inventory.

NOTE 5: LEASES

At October 31, 2021, the Company was party to one operating lease for its corporate office and domestic warehouse operations in Stafford, Texas. Effective February 8, 2021, the Company terminated the operating lease for its corporate office at Gaithersburg, Maryland and entered into a new, short-term lease, which the Company subsequently terminated. The Company also terminated its short-term lease for office space in Dubai, UAE.

At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the term, and (3) whether the Company has the right to direct the use of the asset. The Company allocates the consideration in the contract to each lease and non-lease component based on the component’s relative stand-alone price to determine the lease payments. Lease and non-lease components are accounted for separately. Leases are classified as either finance leases or operating leases based on criteria in ASC 842.

At lease commencement, the Company records a lease liability equal to the present value of the remaining lease payments, discounted using the rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. A corresponding ROU asset is recorded, measured based on the initial measurement of the lease liability. ROU assets also include any lease payments made and exclude lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Lease expense for operating leases, consisting of lease payments, is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability. Lease expense for finance leases consists of the amortization of the ROU asset, which is calculated on a straight-line basis over the shorter of the useful life of the asset or the lease term, and interest expense on the lease liability, which is calculated using the effective interest rate method. The Company had no finance leases at October 31, 2021.

For the year ended October 31, 2021, the Company had operating lease costs for continuing operations of $122,392, which are included in general and administrative expenses in the consolidated statements of operations. For the year ended October 31, 2021, the Company made operating lease cash payments for continuing operations of $115,855, which are included in cash flows from operating activities of continuing operations in the consolidated statements of cash flows. At October 31, 2021, the Company had operating lease costs for continuing operations of $8,929 accrued for future payment, which are included in accounts payable and accrued expenses in the consolidated balance sheets.

At October 31, 2021, the remaining lease term for our corporate office and domestic warehouse operations is 25 months, and the discount rate is 5%. Future annual minimum cash payments required under this operating type leases at October 31, 2021 are as follows:


Future Minimum Lease Payments:
2022	$	100,596
2023		100,596
2024		8,383
Total Minimum Lease Payments	$	209,575
Less: amount representing interest		(10,938	)
Present Value of Lease Liabilities	$	198,637
Less: current portion		(92,771	)
Long-Term Portion	$	105,866

F-17

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 6: INTANGIBLE ASSETS, NET

At October 31, 2021, the Company did not have any intangible assets, net.

Through December 18, 2020, the Company held an acquired MLB license intangible and an NHL license intangible, which were assigned to GOF through a letter agreement with ACG Global Solutions, Inc. and GOF, effective December 18, 2020. The assignments of the Company’s interests in the MLB and NHL licenses were completed on March 15, 2021 and March 25, 2021, respectively. Accordingly, we have classified the impairment of these intangibles and the reversal of accrued license royalty fees within discontinued operations in the consolidated financial statements for the years ended October 31, 2021 and 2020 (see Note 16).

Through October 31, 2021, the Company had an intangible asset of acquired customer contracts which were purchased from a third-party frozen foods vendor during September 2019, giving the Company the right to earn revenue under the terms of the acquired customer contracts. During the three months ended October 31, 2021, the Company made a decision to cease operating as an international supplier of consumer food products, whereby the Company cancelled and settled all supplier and customer contracts to avoid any future significant liabilities. Accordingly, we have classified the impairment of this intangible within discontinued operations of the consolidated financial statements for the years ended October 31, 2021 and 2020 (see Note 16).

Note 7: PROPERTY AND EQUIPMENT

At October 31, 2021 and 2020, the Company’s property and equipment are as follows:

	Estimated
October 31,	Useful Lives	2021			2020
Computer equipment	3 years	$	3,115		$	3,115
Leasehold improvements	3 years		136,108			136,108
Accumulated depreciation			(54,156	)		(10,468	)
Property and equipment, net		$	85,067		$	128,755

The Company recorded $43,688 and $10,468 of depreciation expense for the years ended October 31, 2021 and 2020, respectively. For the year ended October 31, 2021, an aggregate of $15,472 of property and equipment impairments related to the discontinued operations of BLF and Verus MENA were recorded within discontinued operations of the consolidated financial statements (see Note 16). There was no property and equipment impairments recorded for the year ended October 31, 2020.

NOTE 8: REVENUE DISAGGREGATION

The following table presents the Company’s revenue by country and major product lines:

SCHEDULE OF NET REVENUE BY COUNTRY


Year Ended October 31,	2021			2020
United States	$	488,589		$	870,251
Revenue	$	488,589		$	870,251

Nutraceutical products		100	%		6	%
Apparel products		-			94	%
Total		100	%		100	%

For the year ended October 31, 2021, the Company was subject to revenue concentration risk as two customers accounted for approximately 34% of our total revenue. For the year ended October 31, 2020, the Company was subject to revenue concentration risk as one customer accounted for approximately 94% of our total revenue.

F-18

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 9: DEBT

Convertible Notes Payable

On April 29, 2020, the Company issued and sold a convertible promissory note to an accredited investor in the principal amount of $165,000 (including a $15,000 original issuance discount). The note matures on April 29, 2021, bears interest at a rate of 8% per annum, (increasing to 18% per annum upon the occurrence of an Event of Default (as defined in the note)) and is convertible into shares of the Company’s common stock at a conversion price of $10.00 per share, subject to adjustment. The note may be prepaid by the Company at any time prior to the maturity date of the Note with certain prepayment penalties as defined in the note. Due to the variable conversion provision contained in the convertible promissory note that became effective upon the VWAP of the Company’s common stock falling below $5.50 at any time after the prepayment date, the Company accounted for this conversion feature as a derivative liability, and recorded a derivative liability of $250,329. On various dates through December 8, 2020, the aggregate outstanding principal and accrued interest of $172,246 was converted into an aggregate of 985,384 shares of the Company’s common stock, fully satisfying this obligation. The Company recorded an aggregate gain on extinguishment of debt of $31,304 as a result of the Company issuing shares of its common stock to satisfy this obligation.

On May 12, 2020, the Company entered into a securities purchase agreement with an accredited investor and issued and sold a convertible promissory note in the principal amount of $153,000. The note matures on May 12, 2021, bears interest at a rate of 9% per annum, (increasing to 22% per annum upon the occurrence of an Event of Default (as defined in the note)) and is convertible into shares of the Company’s common stock at a conversion price equal to the greater of (i) the Fixed Conversion Price (as defined in the note) or (ii) the Variable Conversion Price (as defined in the note), subject to adjustment. The note may be prepaid by the Company at any time prior to the 180^th day after the issuance of the note with certain prepayment penalties as defined in the note. On various dates through November 23, 2020, the aggregate outstanding principal and accrued interest of $159,885 was converted into an aggregate of 900,597 shares of the Company’s common stock, fully satisfying this obligation. The Company recorded an aggregate loss on extinguishment of debt of $78,422 as a result of the Company issuing shares of its common stock to satisfy this obligation.

On July 14, 2020, the Company entered into a securities purchase agreement with an accredited investor and issued and sold a convertible promissory note in the principal amount of $63,000. The note matures on July 14, 2021, bears interest at a rate of 9% per annum, (increasing to 22% per annum upon the occurrence of an Event of Default (as defined in the note)) and is convertible into shares of the Company’s common stock at a conversion price equal to the greater of (i) the Fixed Conversion Price (as defined in the note) or (ii) the Variable Conversion Price (as defined in the note), subject to adjustment. The note may be prepaid by the Company at any time prior to the 180^th day after the issuance of the note with certain prepayment penalties as defined in the note. During January 2021, the Company paid-off the aggregate balance of the convertible promissory note, including accrued interest and prepayment amount, fully satisfying this obligation.

On July 22, 2020, the Company entered into a securities purchase agreement with an accredited investor and issued and sold a convertible promissory note in the principal amount of $90,000 (including a $15,000 original issuance discount). The note matures on July 22, 2021, bears interest at a rate of 4% per annum, (increasing to 24% per annum upon the occurrence of an Event of Default (as defined in the note)) and is convertible into shares of the Company’s common stock at a conversion price of $50.00 per share during the first six months a principal amount is outstanding, and then adjusts to a conversion price of 63% of the lowest closing price during the 20 days prior to conversion, subject to adjustment. The note may be prepaid by the Company at any time prior to the 180^th day after the issuance date of the note with certain prepayment penalties as defined in the note. On various dates through June 29, 2021, the aggregate outstanding principal and accrued interest of $95,292 was converted into an aggregate of 1,084,391 shares of the Company’s common stock, fully satisfying this obligation. The Company recorded an aggregate loss on extinguishment of debt of $32,871 as a result of the Company issuing shares of its common stock to satisfy this obligation.

F-19

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 9: DEBT (Continued)

On January 4, 2021, the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company issued and sold a convertible promissory note in the principal amount of $95,000. The note matures on January 4, 2022, bears interest at a rate of 9% per annum (increasing to 22% per annum upon the occurrence of an Event of Default (as defined in the note)) and is convertible into shares of the Company’s common stock at a conversion price equal to the greater of (i) the Fixed Conversion Price (as defined in the note) or (ii) the Variable Conversion Price (as defined in the note), subject to adjustment. The note may be prepaid by the Company at any time prior to the 180th day after the issuance date of the note with certain prepayment penalties as defined in the note. On January 7, 2021, the proceeds received from this Note were used to prepay the convertible promissory note dated July 14, 2020. On various dates through August 5, 2021, the aggregate outstanding principal and accrued interest of $99,275 was converted into an aggregate of 2,300,857 shares of the Company’s common stock, fully satisfying this obligation. The Company recorded an aggregate loss on extinguishment of debt of $60,335 as a result of the Company issuing shares of its common stock to satisfy this obligation.

On January 13, 2021, the Company issued and sold a convertible promissory note to an accredited investor in the principal amount of $88,000 (including a $4,000 original issuance discount). The note matures on January 13, 2022, bears interest at a rate of 8% per annum (increasing to 24% per annum upon the occurrence of an Event of Default (as defined in the note)). This convertible debenture converts at 60% of the lowest closing price during the 15 days prior to conversion and may be prepaid by the Company at any time prior to the 180^th day after the issuance date of the note with certain prepayment amounts as set forth therein. Due to the variable conversion provisions contained in the convertible promissory note, the Company accounted for this conversion feature as a derivative liability. In connection herewith, the Company recorded a derivative liability of $120,219 and deferred financing costs of $7,200. The original issue discount and deferred financing costs are being amortized over the term of the note. On various dates through October 28, 2021, the aggregate outstanding principal and accrued interest of $92,924 was converted into an aggregate of 4,301,041 shares of the Company’s common stock, fully satisfying this obligation. The Company recorded an aggregate gain on extinguishment of debt of $24,107 as a result of the Company issuing shares of its common stock to satisfy this obligation.

On April 7, 2021, the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company issued and sold a convertible promissory note in the principal amount of $88,500. The note matures on April 7, 2022, bears interest at a rate of 9% per annum (increasing to 22% per annum upon the occurrence of an Event of Default (as defined in the note)) and is convertible into shares of the Company’s common stock at a conversion price equal to the greater of (i) the Fixed Conversion Price (as defined in the note) or (ii) the Variable Conversion Price (as defined in the note), subject to adjustment. The note may be prepaid by the Company at any time prior to the 180th day after the issuance date of the note with certain prepayment penalties as defined in the note. On various dates through October 26, 2021, the aggregate outstanding principal of $78,200 was converted into an aggregate of 3,725,765 shares of the Company’s common stock. The Company recorded an aggregate loss on extinguishment of debt of $58,607 as a result of the Company issuing shares of its common stock. At October 31, 2021, the aggregate balance of the convertible promissory note and accrued interest was $14,580. The aggregate balance of the convertible promissory note, net of deferred financing costs at October 31, 2021 was $9,893.

On April 8, 2021, the Company issued and sold a convertible promissory note to an accredited investor in the principal amount of $150,000 (including a $20,000 original issuance discount). The note matures on April 8, 2022, bears interest at a rate of 8% per annum (increasing to 24% per annum upon the occurrence of an Event of Default (as defined in the note)). This convertible debenture converts at 60% of the lowest closing price during the 15 days prior to conversion and may be prepaid by the Company at any time prior to the 180^th day after the issuance date of the note with certain prepayment amounts as set forth therein. Due to the variable conversion provisions contained in the convertible promissory note, the Company accounted for this conversion feature as a derivative liability. In connection herewith, the Company recorded a derivative liability of $282,500 and deferred financing costs of $5,200. The original issue discount and deferred financing costs are being amortized over the term of the note. At October 31, 2021, the aggregate balance of the convertible promissory note and accrued interest was $156,805. At October 31, 2021, the aggregate balance of the convertible promissory note, net of original issue discount and deferred financing costs was $139,092.

F-20

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 9: DEBT (Continued)

On April 15, 2021, the Company issued and sold a convertible promissory note to an accredited investor in the principal amount of $143,000 (including a $13,000 original issuance discount). The note matures on April 15, 2022, bears interest at a rate of 6% per annum (increasing to 24% per annum upon the occurrence of an Event of Default (as defined in the note)). This convertible debenture converts at 60% of the lowest closing price during the 15 days prior to conversion and may be prepaid by the Company at any time prior to the 180^th day after the issuance date of the note with certain prepayment amounts as set forth therein. Due to the variable conversion provisions contained in the convertible promissory note, the Company accounted for this conversion feature as a derivative liability. In connection herewith, the Company recorded a derivative liability of $238,200 and deferred financing costs of $11,700. The original issue discount and deferred financing costs are being amortized over the term of the note. At October 31, 2021, the aggregate balance of the convertible promissory note and accrued interest was $147,701. At October 31, 2021, the aggregate balance of the convertible promissory note, net of original issue discount and deferred financing costs was $131,834.

On June 29, 2021, the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company issued and sold a convertible promissory note in the principal amount of $85,750. The note matures on June 29, 2022, bears interest at a rate of 9% per annum (increasing to 22% per annum upon the occurrence of an Event of Default (as defined in the note)) and is convertible into shares of the Company’s common stock at a conversion price equal to the greater of (i) the Fixed Conversion Price (as defined in the note) or (ii) the Variable Conversion Price (as defined in the note), subject to adjustment. The note may be prepaid by the Company at any time prior to the 180th day after the issuance date of the note with certain prepayment penalties as defined in the note. At October 31, 2021, the aggregate balance of the convertible promissory note and accrued interest was $88,351. The aggregate balance of the convertible promissory note, net of deferred financing costs at October 31, 2021 was $83,264.

On August 5, 2021, the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company issued and sold a convertible promissory note in the principal amount of $73,750. The note matures on August 5, 2022, bears interest at a rate of 9% per annum (increasing to 22% per annum upon the occurrence of an Event of Default (as defined in the note)) and is convertible into shares of the Company’s common stock at a conversion price equal to the greater of (i) the Fixed Conversion Price (as defined in the note) or (ii) the Variable Conversion Price (as defined in the note), subject to adjustment. The note may be prepaid by the Company at any time prior to the 180th day after the issuance date of the note with certain prepayment penalties as defined in the note. At October 31, 2021, the aggregate balance of the convertible promissory note and accrued interest was $75,345. The aggregate balance of the convertible promissory note, net of deferred financing costs at October 31, 2021 was $70,904.

On August 12, 2021, the Company issued and sold a convertible promissory note to an accredited investor in the principal amount of $110,000 (including a $10,000 original issuance discount). The note matures on August 12, 2022, bears interest at a rate of 6% per annum (increasing to 24% per annum upon the occurrence of an Event of Default (as defined in the note)). This convertible debenture converts at 60% of the lowest closing price during the 15 days prior to conversion and may be prepaid by the Company at any time prior to the 180^th day after the issuance date of the note with certain prepayment amounts as set forth therein. Due to the variable conversion provisions contained in the convertible promissory note, the Company accounted for this conversion feature as a derivative liability. In connection herewith, the Company recorded a derivative liability of $226,620 and deferred financing costs of $8,800. The original issue discount and deferred financing costs are being amortized over the term of the note. At October 31, 2021, the aggregate balance of the convertible promissory note and accrued interest was $111,465. At October 31, 2021, the aggregate balance of the convertible promissory note, net of original issue discount and deferred financing costs was $95,372.

F-21

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 9: DEBT (Continued)

At October 31, 2021 and 2020, there was $530,358 and $387,193 of convertible notes payable outstanding, net of discounts of $42,442 and $35,806, respectively.

During the years ended October 31, 2021 and 2020, amortization of debt discount, issuance costs, and beneficial conversion features amounted to $87,765 and $1,300,002, respectively.

During the year ended October 31, 2021, an aggregate of $649,822 of convertible notes, including accrued interest, were converted into shares of the Company’s common stock and there were payments of an aggregate of $91,457 toward the outstanding balances of convertible notes. During the year ended October 31, 2020, an aggregate of $2,861,517 of convertible notes, including accrued interest, were converted into shares of the Company’s common stock and there were no payments toward the outstanding balances of convertible notes.

At October 31, 2021, the Company was in compliance with the terms of the outstanding convertible notes.

Notes Payable

On January 26, 2019, the Company entered into Amendment No. 1 to the promissory note (the “Monaco Note”) issued in favor of the Donald P. Monaco Insurance Trust on January 26, 2018 in the principal amount of $530,000, with an annual interest rate of 12%, whereby (i) the maturity date of the Monaco Note was extended to January 26, 2020 and (ii) the Company agreed to use its best efforts to prepay the unpaid principal amount of the Monaco Note together with all accrued but unpaid interest thereon on or prior to March 31, 2019.

On February 8, 2019, the Company entered into Amendment No. 2 to the Monaco Note whereby the maturity date of the Monaco Note was extended to November 8, 2019.

Upon maturity on November 8, 2019, the Company was not able to pay the balance due and the interest rate immediately increased to 18% per annum. The note holder agreed to only impose the default interest rate and not proceed with any other default remedies currently available. On August 14, 2020, the Company entered into Amendment No. 3 (the “Third Note Amendment”) to the Monaco Note whereby (i) the timing of payments of principal and interest was amended and (ii) it was acknowledged and agreed that so long as the principal and interest payment schedule, as amended by the Third Note Amendment, is satisfied by the Company, the Company will not be in default pursuant to the payment of principal and interest of the Note. Furthermore, on October 26, 2020, the Company entered into Amendment No. 4 (the “Fourth Note Amendment”) to the Monaco Note whereby amendments were made to (i) the timing of payments of principal and interest, (ii) the determination of status of default, and (iii) the manner and application of payments. On December 15, 2021, Donald P. Monaco as trustee of the Donald P. Monaco Insurance Trust, commenced a lawsuit against the Company in the United States District Court for the District of Maryland as a result of the Company not making required payments under the Monaco Note. The Company intends to defend this matter and although the ultimate outcome cannot be predicted with certainty, an adverse ruling against the Company could have a material adverse effect on its financial condition and results of operations (see Note 17).

Through October 31, 2021, the Company paid an aggregate of $116,152 of accrued interest in accordance with the provisions of the Fourth Note Amendment.

F-22

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 9: DEBT (Continued)

On March 31, 2020, the Company issued and sold a promissory note to an accredited investor in the principal amount of $312,500 (including a $62,500 original issuance discount). The note matures on July 1, 2020, bears interest at a rate of 4% per annum, (increasing to 18% per annum upon the occurrence of an Event of Default (as defined in the note)) and provides a security interest in all of the Company’s equity ownership interest in its wholly owned subsidiary, Big League Foods, Inc (“BLF”). The note may be prepaid by the Company at any time prior to the maturity date with no prepayment penalties. On July 20, 2020, the Company and its wholly owned subsidiary, BLF, entered into a letter agreement (“Agreement”) with the accredited investor to extend the maturity date ninety (90) days to September 29, 2020. The Agreement also provides that BLF will sell certain of its inventory (“Purchased Inventory”) to the accredited investor as an approved Distributor and that the accredited investor will make certain invoice payments to BLF vendors. Upon the sale of Purchased Inventory by the accredited investor, the accredited investor will retain the first $60,000 of proceeds and then apply future proceeds on a per case amount, as specified within the Agreement, as a reduction of the outstanding promissory note balance. Any remaining note balance will be due and payable by the Company upon maturity of the promissory note. Furthermore, on December 18, 2020, the Company and its wholly owned subsidiary, BLF, entered into a special agreement with the accredited investor to extend the maturity date to December 31, 2021, add a prepayment clause to whereby in the event the accredited investor has received a total of $150,000 or more pursuant to the note on or before December 31, 2021 (the “Prepayment”), then the note shall be forgiven and considered paid in full, and add an event of default to whereby until January 1, 2022, the only event of default on the note shall be the Company’s failure to make the Prepayment. Through October 31, 2021, the Company has not paid any amount toward the outstanding balance of this promissory note. On March 10, 2022, AGC Global Solutions, Inc., commenced a lawsuit against the Company in the United States Circuit Court for Montgomery County, Maryland as a result of the Company not making required payments under the promissory note by December 31, 2021. The Company intends to defend this matter and although the ultimate outcome cannot be predicted with certainty, an adverse ruling against the Company could have a material adverse effect on its financial condition and results of operations (see Note 17).

On April 23, 2020, the Company entered into a promissory note with an approved lender in the principal amount of $104,479. The note was approved under the provisions of the Coronavirus, Aid, Relief and Economic Security Act (the “CARES Act”) and the terms of the Paycheck Protection Program of the U.S. Small Business Administration’s 7(a) Loan Program. The note accrues interest for the first six months following the issuance date at a rate of 1% per annum, (increasing to 6% per annum upon the occurrence of an Event of Default (as defined in the note)), and beginning November 23, 2020, requires 18 monthly payments of $5,880 each, consisting of principal and interest until paid in full on April 23, 2022. The note may be prepaid by the Company at any time prior to the maturity date with no prepayment penalties. Additionally, any portion of the note up to the entire principal and accrued interest balance may be forgiven in the event the Company satisfies certain requirements as determined by the CARES Act. On June 21, 2021, the entire principal and accrued interest balance of $105,710 was forgiven by the U.S. Small Business Administration, which satisfied this obligation.

On February 1, 2021, the Company entered into a securities purchase agreement with an accredited investor and issued an 12% promissory note in the principal amount of $303,000 (including a $39,500 original issue discount) to the accredited investor with a maturity date of February 1, 2022. Twelve months of interest is immediately earned by the accredited investor upon the Company receiving proceeds and is included in the required monthly repayments. On February 8, 2021, the Company received net proceeds in the amount of $240,325 as a result of $23,175 being paid for legal and due diligence fees incurred with respect to this securities purchase agreement and convertible promissory note. In accordance with the securities purchase agreement, the Company issued 1) 200,000 restricted shares of its common stock (“Commitment Shares”) to the accredited investor as additional consideration for the purchase of the promissory note and 2) 200,000 restricted shares of its common stock (“Returnable Shares”) to the accredited investor which will be returned to the Company upon timely completion of the required repayment schedule. Repayments of the promissory note shall be made in eight (8) installments each in the amount of $42,420 commencing on July 1, 2021 and continuing thereafter each thirty (30) days until February 1, 2022. This promissory note is only convertible upon an event of default as defined in the promissory note. The original issue discount, deferred financing costs and issuance date fair value of the Commitment Shares are being amortized over the term of the note. As of October 31, 2021, the Company has not made the required monthly payment of $42,420 commencing on July 1, 2021, has not received a notice of default from the accredited investor, and is working with the accredited investor to resolve this matter. At October 31, 2021, the aggregate balance of the promissory note and accrued interest was $366,806. The aggregate balance of the promissory note, net of original issue discount, deferred financing costs and issuance date fair value of the Commitment Shares and Returnable Shares at October 31, 2021 was $265,022.

F-23

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 9: DEBT (Continued)

Revolving Credit Agreement

On July 31, 2019, the Company entered into a secured, $500,000 revolving credit agreement (“Credit Facility”). Borrowings under the Credit Facility may be used to fund working capital needs and bear interest at a one-month LIBOR-based rate plus 300 basis-points (3.080% at October 31, 2021). The Company’s performance and payment obligations under the Credit Facility are guaranteed by substantially all of its assets. The structure of this Credit Facility is a note payable with a revolving credit line feature with a mutual termination provision instead of a stated maturity date. The outstanding balance under the Credit Facility may be prepaid at any time without premium or penalty. Additionally, the Credit Facility contains customary events of default and remedies upon an event of default, including the acceleration of repayment of outstanding amounts under the Credit Facility.

At October 31, 2021, $425,772 was outstanding under the Credit Facility. The Credit Facility contains customary affirmative and negative covenants, including a borrowing base requirement upon each request for an advance from the Credit Facility. On November 16, 2021, Fulton Bank, N.A. (“Fulton”) commenced a lawsuit against the Company in the United States District Court for the District of Maryland as a result of the Company not making required payments under the Credit Facility. The Company intends to defend this matter and although the ultimate outcome cannot be predicted with certainty, an adverse ruling against the Company could have a material adverse effect on its financial condition and results of operations (see Note 17).

NOTE 10: DERIVATIVE LIABILITY

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, Derivatives and Hedging. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operation as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

The derivative liability is measured at fair value on a recurring basis using significant unobservable inputs (Level 3) from October 31, 2020 to October 31, 2021:

	Conversion feature derivative liability
October 31, 2020	$	180,404
Initial fair value of derivative liability charged to other expense		1,026,833
Gain on change in fair value included in earnings		(359,877	)
Derivative liability relieved by conversions of convertible promissory notes		(376,141	)
October 31, 2021	$	471,219

Total derivative liability at October 31, 2021 and 2020 amounted to $471,219 and $180,404, respectively. The change in fair value included in earnings for the year ended October 31, 2021 of $359,877 is due in part to the quoted market price of the Company’s common stock decreasing from $0.48 at October 31, 2020 to $0.02 at October 31, 2021, coupled with substantially reduced conversion prices due to the effect of “ratchet” provisions incorporated within the convertible notes payable.

F-24

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 10: DERIVATIVE LIABILITY (Continued)

The Company used the following assumptions for determining the fair value of the convertible instruments granted under the binomial pricing model with binomial simulations at October 31, 2021:

Expected volatility	163.9% - 727.1	%
Expected term	5.2 – 9.4 months
Risk-free interest rate	0.07% - 0.11	%
Stock price	$ 0.025

The Company recognizes its derivative liabilities as Level 3 and values its derivatives using the methods discussed above. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed are that of volatility and market price of the underlying common stock of the Company.

At October 31, 2021, the Company did not have any derivative instruments that were designated as hedges.

NOTE 11: STOCKHOLDERS’ (DEFICIT) EQUITY

The total number of shares of all classes of stock that the Company shall have the authority to issue is 7,625,000,000 shares consisting of 7,500,000,000 shares of common stock with a $0.000001 par value per share of which 23,844,566 are issued at October 31, 2021 and 125,000,000 shares of preferred stock, par value $0.000001 per share of which (A) 120,000,000 shares have been designated as Series A Convertible Preferred of which 28,944,601 are outstanding at October 31, 2021, (B) 1,000,000 shares have been designated as Series B Convertible Preferred Stock, of which no shares are outstanding at October 31, 2021 and (C) 1,000,000 have been designated as Series C Convertible Preferred Stock, of which 680,801 shares are outstanding at October 31, 2021.

On October 6, 2020, stockholders holding a majority of the voting power of the Company’s issued and outstanding shares of voting stock, executed a written consent approving 1) an amendment to the Company’s Certificate of Incorporation, (the “Certificate of Incorporation”) to effect a consolidation of the issued and outstanding shares of Common Stock, pursuant to which the shares of Common Stock would be combined and reclassified into one share of Common Stock at a ratio of 1-for-500 (the “Reverse Stock Split”), 2) approval of the Company’s 2020 Equity Incentive Plan (the “2020 Plan”) and the reservation of 750,000,000 (1,500,000 post-split) shares of Common Stock for issuance thereunder; and, 3) approval of Amendments to and Restatement of the Company’s Certificate of Incorporation pursuant to the Delaware General Corporation Law Section 242(a)(3) to (a) with the exception of actions to enforce a duty or liability arising from the Exchange Act, which may be brought only in federal court pursuant to Section 27 of the Exchange Act, or claims made under the Securities Act, that may be brought in either state or federal court pursuant to Section 22 of the Exchange Act, adopt Delaware General Corporation Law Section 115 to require that any or all other internal corporate claims, including claims made in the right of the Company, shall be brought solely and exclusively in any or all of the courts of the State of Delaware; and, (b) revise the Certificate of Incorporation to correct and consolidate legacy disclosures, including a description of its common stock and the adoption of Section 155 of the General Delaware Corporation Law, so as to comprise one document with the Delaware Secretary of State in the future.

F-25

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 11: STOCKHOLDERS’ (DEFICIT) EQUITY (Continued)

On November 18, 2020, the Company filed a Certificate of Amendment (the “Amendment”) to its Certificate of Incorporation, to 1) effect a consolidation of the issued and outstanding shares of Common Stock, pursuant to which the shares of Common Stock would be combined and reclassified into one share of Common Stock at a ratio of 1-for-500 (the “Reverse Stock Split”), 2) adopt Delaware General Corporation Law Section 115 to require that any or all other internal corporate claims, including claims made in the right of the Company, shall be brought solely and exclusively in any or all of the courts of the State of Delaware; and, 3) revise the Certificate of Incorporation to correct and consolidate legacy disclosures, including a description of its common stock and the adoption of Section 155 of the General Delaware Corporation Law, so as to comprise one document with the Delaware Secretary of State in the future. On January 13, 2021, the Company’s Reverse Stock Split was completed and became effective.

Common Stock

During the year ended October 31, 2021, the Company:

●

issued 13,097,972 shares of its common stock valued at $1,156,113, as repayment for outstanding principal and interest on convertible promissory notes as requested by the note holders in accordance with contractual terms.

●

issued 400,000 restricted shares of its common stock consisting of 1) 200,000 restricted shares of its common stock (“Commitment Shares”) to an accredited investor as additional consideration for the purchase of a promissory note and 2) 200,000 restricted shares of its common stock (“Returnable Shares”) to an accredited investor which will be returned to the Company upon timely completion of the required repayment schedule.

●

issued 67,728 shares of its common stock to a vendor for services rendered.

	●	recorded 201,613 shares of its common stock valued at $5,000, as shares to be issued to a board member for services rendered.

	●	recorded 227,824 shares of its common stock as shares to be issued to a vendor for services rendered. These shares valued at $43,100 were cancelled and reversed at October 31, 2021.

During the year ended October 31, 2020, the Company:

●

issued 4,282,326 shares of its common stock valued at $7,370,059, which includes aggregate beneficial conversion features of $830,162, as repayment for outstanding principal and interest on convertible promissory notes as requested by the note holders in accordance with contractual terms.

●

issued 31,251 shares of its common stock for the conversion of 15,625,500 shares of its Series A Convertible Preferred stock.

●

issued 30,000 shares of its common stock for the vesting of the first 50% of a 60,000 common stock grant to the Company’s former Chief Financial Officer. The Company recorded $142,500 of stock-based compensation expense during the year ended October 31, 2020, related to this common stock grant.

●

issued 24,483 shares of its common stock to an accredited investor for proceeds of $91,917.

●

issued 52,000 shares of its common stock to a vendor for services rendered, valued at $78,000.

●

issued 50,219 shares of its common stock to its former Chief Executive Officer for proceeds of $20,087.

●

issued 1,197,031 shares of its common stock under a registration statement, valued at $1,327,248.

F-26

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 11: STOCKHOLDERS’ (DEFICIT) EQUITY (Continued)

Common Stock Warrants

At October 31, 2021 and 2020, there were warrants to purchase up to 2,619,114 shares of the Company’s common stock outstanding which may dilute future EPS. There were no warrants earned or granted during the year ended October 31, 2021.

The Company estimates the fair value of each award on the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the table below. Since Black-Scholes option valuation models incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on the historical volatility of the Company’s stock. The Company uses historical data to estimate award exercise and employee termination within the valuation model, whereby separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of granted awards is derived from the output of the option valuation model and represents the period of time that granted awards are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The following assumptions were utilized during the year ended October 31, 2020:

	2020
Expected volatility		194.54% - 399.10	%
Weighted-average volatility		122.01	%
Expected dividends		0	%
Expected term (in years)		5.0
Risk-free rate		0.37% - 1.57	%

The following table sets forth common share purchase warrants outstanding as of October 31, 2021:

			Weighted
			Average
			Exercise		Intrinsic
	Warrants		Price		Value
Outstanding, October 31, 2020		2,619,114	$	2.24	$	-
Warrants granted and issued		-	$	-	$	-
Warrants exercised		-	$	-	$	-
Warrants forfeited		-	$	-	$	-
Outstanding, October 31, 2021		2,619,114	$	2.24	$	-

Common stock issuable upon exercise of warrants		2,619,114	$	2.24	$	-

								Common Stock Issuable
		Common Stock Issuable Upon Exercise of						Upon Warrants
		Warrants Outstanding						Exercisable
				Weighted
		Number		Average		Weighted		Number		Weighted
Range of		Outstanding		Remaining		Average		Exercisable		Average
Exercise		at October 31,		Contractual		Exercise		at October 31,		Exercise
Prices		2021		Life (Years)		Price		2021		Price
$	1.25		1,160,000		0.35	$	1.25		1,160,000	$	1.25
$	3.00		1,457,114		0.82	$	3.00		1,457,114	$	3.00
$	25.00		2,000		1.17	$	25.00		2,000	$	25.00
			2,619,114		0.73	$	2.24		2,619,114	$	2.24

F-27

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 11: STOCKHOLDERS’ (DEFICIT) EQUITY (Continued)

The following table sets forth common share purchase warrants outstanding as of October 31, 2020:

				Weighted
				Average
				Exercise			Intrinsic
	Warrants			Price			Value
Outstanding, October 31, 2019		1,451,410		$	1.72		$	-
Warrants granted and issued		1,172,114		$	3.00		$	-
Warrants exercised		-		$	-		$	-
Warrants forfeited		(4,410	)	$	(32.99	)	$	-
Outstanding, October 31, 2020		2,619,114		$	2.24		$	-

Common stock issuable upon exercise of warrants		2,619,114		$	2.24		$	-

								Common Stock Issuable
		Common Stock Issuable Upon Exercise of						Upon Warrants
		Warrants Outstanding						Exercisable
				Weighted
		Number		Average		Weighted		Number		Weighted
Range of		Outstanding		Remaining		Average		Exercisable		Average
Exercise		at October 31,		Contractual		Exercise		at October 31,		Exercise
Prices		2020		Life (Years)		Price		2020		Price
$	1.25		1,160,000		1.35	$	1.25		1,160,000	$	1.25
$	3.00		1,457,114		2.26	$	3.00		1,457,114	$	3.00
$	25.00		2,000		2.17	$	25.00		2,000	$	25.00
			2,619,114		1.85	$	2.24		2,619,114	$	2.24

Series A Convertible Preferred Stock

On October 14, 2014, the Company filed a certificate of amendment to its Certificate of Designations, Number, Voting Powers, Preferences and Rights of Series A Convertible Preferred Stock with the Delaware Secretary of State pursuant to the July 31, 2014 Board of Directors approval to increase the Series A Convertible Preferred A shares from 100,000,000 shares to 120,000,000 shares. The Series A Convertible Preferred Stock was issued at $0.001 par value and bear dividends at a rate of 10% per annum payable on a quarterly basis when declared by the board of directors. Dividends accrue whether or not they have been declared by the board. At the election of the Company, Preferred Dividends may be converted into Series A Convertible Preferred Stock, with each converted share having a value equal to the market price per share, subject to adjustment for stock splits. In order to exercise such option, the Company delivers written notice to the holder. Each 10,000 shares of Series A Convertible Preferred Stock is convertible at the option of the holder thereof at any time into one share of Common Stock. Each holder of Series A Convertible Preferred Stock shall be entitled to one vote for each whole share of common stock that would be issuable upon conversion of such share on the record date for determining eligibility to participate in the action being taken.

F-28

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 11: STOCKHOLDERS’ (DEFICIT) EQUITY (Continued)

In the event of (a) the sale, conveyance, exchange, exclusive license, lease or other disposition of all or substantially all of the intellectual property or assets of the Company, (b) any acquisition of the Company by means of consolidation, stock exchange, stock sale, merger of other form of corporate reorganization of the Company with any other entity in which the Company’s stockholders prior to the consolidation or merger own less than a majority of the voting securities of the surviving entity, or (c) the winding up or dissolution of the Company, whether voluntary or involuntary (each such event in clause (a), (b) or (c) a “liquidation event”), the Board shall determine in good faith the amount legally available for distribution to stockholders after taking into account the distribution of assets among, or payment thereof over to, creditors of the Company (the “net assets available for distribution”). The holders of the Series A Convertible Preferred Stock then outstanding shall be entitled to be paid out of the net assets available for Distribution (or the consideration received in such transaction) before any payment or distribution shall be made to the holders of any class of preferred stock ranking junior to the Series A Convertible Preferred Stock or to the Common Stock, an amount for each share of Series A Convertible Preferred Stock equal to all accrued and unpaid Preferred Dividends plus the Stated Value, as adjusted (the “Series A Liquidation Amount”).

On February 8, 2019, the Company filed a Second Amended and Restated Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock (the “Second Amended and Restated Series ACOD”), as amended on April 9, 2019 with the Delaware Secretary of State. Pursuant to the Second Amended and Restated Series A COD, the Company designated 120,000,000 shares as Series A Convertible Preferred Stock (the “Series A Preferred Stock”). Each share of Series A Preferred Stock is convertible at any time at the option of the holder into such number of shares of the Company’s common stock determined by dividing the Series A Conversion Price divided by the Series A Stated Value. The “Series A Conversion Price” is $1.00 per share, subject to adjustment, and the “Series A Stated Value is $1.00 per share. Each share of Series A Preferred Stock shall be entitled to vote such number of shares into which the Series A Preferred Stock are convertible into. In addition, from the date the Company issued the First Note until such time that no shares of Series A Preferred Stock are outstanding, each holder of Series A Preferred Stock shall have the right to participate in any subsequent financings of the Company in an amount equal to up to 50% of such financing. In the event of (a) the sale, conveyance, exchange, exclusive license, lease or other disposition of all or substantially all of the intellectual property or assets of the Company, (b) any acquisition of the Company by means of consolidation, stock exchange, stock sale, merger of other form of corporate reorganization of the Company with any other entity in which the Company’s stockholders prior to the consolidation or merger own less than a majority of the voting securities of the surviving entity, or (c) the winding up or dissolution of the Company, whether voluntary or involuntary (each such event in clause (a), (b) or (c) a “Liquidation Event”), the board shall determine in good faith the amount legally available for distribution to stockholders after taking into account the distribution of assets among, or payment thereof over to, creditors of the Company (the “Net Assets Available for Distribution”). The holders of the Series A Preferred Stock then outstanding shall be entitled to be paid out of the Net Assets Available for Distribution (or the consideration received in such transaction) before any payment or distribution shall be made to the holders of any class of preferred stock ranking junior to the Series A Preferred Stock or to the common stock, an amount for each share of Series A Preferred Stock equal to the Series A Stated Value.

F-29

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 11: STOCKHOLDERS’ (DEFICIT) EQUITY (Continued)

During the year ended October 31, 2020, shareholders converted 15,625,500 shares of Series A Preferred Stock into 31251 shares of the Company’s common stock. During the year ended October 31, 2021, there were no conversions of Series A Preferred Stock into shares of the Company’s common stock.

At October 31, 2021 and 2020, there were 28,944,601 shares of Series A Convertible Preferred Stock outstanding.

Series B Convertible Preferred Stock

On July 31, 2014, the Company’s Board of Directors approved the creation of a new Series B Convertible Preferred Stock and on October 14, 2014 the Company filed a Certificate of Designation of Series B Convertible Preferred Stock with the Delaware Secretary of State designating 1,000,000 shares, par value of $0.001 per share, as Series B Convertible Preferred Stock (“Series B Convertible Preferred Stock”). The Series B Convertible Preferred Stock have a stated value of $5.00 per share (the “Series B Stated Value”). The Series B Convertible Preferred Stock accrue dividends at a rate of 10% per annum on the Series B Stated Value of such shares of the Series B Convertible Preferred Stock. Dividends accrue whether or not they have been declared by the board of directors. At the election of the Company, it may satisfy its obligations to pay dividends on the Series B Convertible Preferred Stock by issuing shares of common stock to the holders of Series B Convertible Preferred Stock on a uniform and prorated basis. Each share of Series B Convertible Preferred Stock is convertible at the option of the holder thereof at any time into a number of shares of common stock determined by dividing the Series B Stated Value by the conversion price then in effect. The conversion price for the Series B Convertible Preferred Stock is equal to $0.05 per share, subject to adjustment. Each holder of Series B Convertible Preferred Stock shall be entitled to the number of votes equal to 200 votes for each shares of Series B Convertible Preferred Stock held by them.

Upon the occurrence of a Liquidation Event, the board shall determine in good faith the amount legally available for distribution to stockholders after taking into account the Net Assets Available for Distribution. The holders of the Series B Convertible Preferred Stock then outstanding shall be entitled to be paid out of the Net Assets Available for Distribution (or the consideration received in such transaction) before any payment or distribution shall be made to the holders of any class of preferred stock ranking junior to the Series B Convertible Preferred Stock or to the common stock, an amount for each share of Series B Convertible Preferred Stock equal to all accrued and unpaid preferred dividends plus the Series B Stated Value.

As of October 31, 2021 and 2020, there were no shares of Series B Convertible Preferred Stock outstanding.

Series C Convertible Preferred Stock

On May 5, 2015, the Company filed a Certificate of Designation of Series C Convertible Preferred Stock (the “Series C COD”) with the Delaware Secretary of State. Pursuant to the Series C COD, the Company designated 1,000,000 shares as Series C Convertible Preferred Stock (the “Series C Preferred Stock”). Each share of Series C Preferred Stock is convertible at any time at the option of the holder into such number of shares of the Company’s common stock determined by dividing the Series C Stated Value by the Series C Conversion Price. The “Series C Stated Value” means $5.00 per share, and the “Series C Conversion Price” means $0.05 per share, subject to adjustment.

Each share of Series C Preferred Stock shall be entitled to vote such number of shares equal to 100 votes for each share of common stock into which the Series C Preferred Stock is then convertible into. Shares of Series C Preferred Stock shall accrue dividends at a rate of 10% per annum on the Series C Stated Value which shall be payable when and if declared by the board of directors. Upon the occurrence of a Liquidation Event, the board shall determine in good faith the amount legally available for distribution to stockholders after taking into account the Net Assets Available for Distribution. The holders of the Series C Convertible Preferred Stock then outstanding shall be entitled to be paid out of the Net Assets Available for Distribution (or the consideration received in such transaction) before any payment or distribution shall be made to the holders of any class of preferred stock ranking junior to the Series C Convertible Preferred Stock or to the common stock, an amount for each share of Series C Convertible Preferred Stock equal to all accrued and unpaid preferred dividends plus the Series C Stated Value.

F-30

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 11: STOCKHOLDERS’ (DEFICIT) EQUITY (Continued)

On September 25, 2020, the Board of Directors awarded the Company’s former Chief Executive Officer 250,000 shares of Series C Preferred Stock to ensure his aggregate voting percentage across all classes of voting stock remained in excess of 50.1%.

At October 31, 2021 and 2020, there were 680,801 shares of Series C Convertible Preferred Stock outstanding.

NOTE 12: RELATED PARTY TRANSACTIONS

During the fiscal year ending October 31, 2020, the Company:

	●	issued 30,000 shares of its common stock for the vesting of the first 50% of a 60,000 common stock grant to the Company’s former Chief Financial Officer. The Company recorded $142,500 of stock-based compensation expense during the year ended October 31, 2020, related to this common stock grant.

	●	issued 50,219 shares of its common stock to its former Chief Executive Officer for proceeds of $20,087.

During the fiscal year ending October 31, 2021, there were no related party transactions to report.

NOTE 13: INCOME TAXES

The Company accounts for income taxes taking into account deferred tax assets and liabilities which represent the future tax consequences of the differences between financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year the change is enacted. Due to recurring losses, the Company’s tax provision for the years ended October 31, 2021 and 2020 was $0 and $0, respectively.

The provision for income taxes consisted of the following:

SCHEDULE OF PROVISION FOR INCOME TAX

Year Ended October 31,	2021			2020
Deferred tax benefit (provision):
Federal		470,394			3,695,227
State, net of federal benefit		145,990			1,146,840
Change in valuation allowance		(616,384	)		(4,842,067	)
Income tax provision	$	-		$	-

F-31

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 13: INCOME TAXES (Continued)

The following table presents the difference between the effective tax rate and the U.S. federal statutory income tax rate:

Year Ended October 31,	2021			2020
U.S. federal statutory income tax rate		21.0	%		21.0	%
State taxes, net of federal benefit		7.0	%		7.0	%
Other		2.0	%		0.0	%
Effect of valuation allowance		(29.0	)%		(28.0	)%
Effective income tax rate		0.0	%		0.0	%

Deferred income taxes reflect the net tax effect of temporary difference between the carrying amounts of assets and liabilities. The significant components of the deferred income tax asset (liability) are as follows:


	October 31,
	2021			2020
Deferred tax assets (liabilities):
Net operating loss carryforwards (US)		4,225,528			3,827,744
Deferred stock warrants		3,682,243			3,707,444
Other		285,582			56,029
Depreciation		(23,408	)		(37,646	)
Net deferred tax assets		8,169,955			7,553,571
Valuation allowance		(8,169,955	)		(7,553,571	)
Income tax provision	$	-		$	-

Valuation Allowance

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences will become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company has recorded a full valuation allowance against its net deferred tax assets because it is not currently able to conclude that it is more likely than not that these assets will be realized. The amount of deferred tax assets considered to be realizable could be increased in the near term if estimates of future taxable income during the carryforward period are increased. The valuation allowance increased by $616,384 and $4,842,068 during the fiscal years ended October 31, 2021 and 2020, respectively.

Other Income Tax Related Items

At October 31, 2021 and 2020, the Company has federal net operating loss carryforwards of approximately $15,400,000 and $13,900,000, respectively. Net operating loss carryforwards generated before January 1, 2018 will expire through 2037. Under the Internal Revenue Code Section 382, certain stock transactions which significantly change ownership, including the sale of stock to new investors, the exercise of options to purchase stock, or other transactions between shareholders could limit the amount of net operating loss carryforwards that may be utilized on an annual basis to offset taxable income in future periods. Effective December 22, 2017 a new tax bill was signed into law that reduced the federal income tax rate for corporations from 35% to 21%. The new bill reduced the blended tax rate for the Company from 39.5% to 27.5%. The change in blended tax rate reduced the 2018 net operating loss carry forward deferred tax assets by approximately $1,400,000.

F-32

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 13: INCOME TAXES (Continued)

At October 31, 2021 and 2020, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. The Company does not expect that its unrecognized tax benefits will materially increase within the next twelve months. The Company did not recognize any interest or penalties related to uncertain tax positions at October 31, 2021 and 2020.

Enacted in late 2017, the Tax Cut and Jobs Act (“TCJA”) imposed a one-time tax on earnings held outside the United States (“U.S.”). The Company did not have any earnings subject to this tax. Beginning in 2018, earnings generated outside the U.S. are not subject to U.S. tax when repatriated. If the Company engages in certain business activities, non-U.S. earnings may be required to be include in the income of the U.S. parent company. The TCJA added rules that require the U.S. parent company to include in income certain low taxed income. The Company is subject to these so called GILTI (Global Intangible Low-taxed Income) rules due to its presence in the Middle East. The GILTI tax has been properly reflected in the Company’s tax provision calculation as of October 31, 2021.

During April 2020, the Company received $104,479 under the Small Business Administration’s Paycheck Protection Program (“PPP Loan”) created as part of the recently enacted CARES Act administered by the Small Business Administration (“SBA”). Certain amounts of the loan may be forgiven if they are used towards qualifying expenses as described in the CARES Act. On June 21, 2021, the loan was forgiven in full and there will be no tax impacts to the Company as a result of the loan forgiveness as the loan was used towards qualified expenses that are deductible for income tax purposes.

NOTE 14: COMMITMENTS AND CONTINGENCIES

Contracts and Commitments Executed Pursuant Employment Agreements

On February 17, 2021, Anshu Bhatnagar resigned as Chief Executive Officer of the Company, and on May 18, 2021 resigned as a member of the Board of Directors and the role of Chairman of the Board of Directors of the Company. Upon such resignation, Mr. Bhatnagar’s employment agreement was terminated.

On February 17, 2021, Apurva Dhruv was appointed as Chief Executive Officer of the Company pursuant to the terms of an employment agreement (the “2021 Employment Agreement”) as approved by the Board of Directors of the Company. On May 18, 2021, Mr. Dhruv was appointed as a member of the Board of Directors and will serve in the role of Chairman of the Board of Directors of the Company.

Lease Agreement

The Company incurs rent expense of $8,383 per month for its corporate office and domestic warehouse operations in Stafford, Texas. The term of this operating lease is through November 30, 2023. The Company’s future fiscal year minimum lease payments for its corporate office and domestic warehouse operating lease are as follows:


2022	$	100,596
2023	$	100,596
2024	$	8,383
Total	$	209,575

Rent expense for the Company’s corporate office and domestic warehouse for the fiscal years ending October 31, 2021 and 2020 was $122,392 and $180,520, respectively.

F-33

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 15: LITIGATION

On April 4, 2019, Auctus Fund, LLC (“Auctus”) commenced a lawsuit against the Company in the United States District Court for the District of Massachusetts. On August 27, 2019 the Company filed a motion to dismiss this lawsuit. On September 30, 2019, Auctus responded by filing a First Amended Complaint. The Company then filed a second motion to dismiss on October 24, 2019. On February 25, 2020, the court issued a decision dismissing the securities laws and unjust enrichment and breach of fiduciary duty claims and retaining the breach of contract, breach of covenant of good faith, fraud and deceit, and negligent misrepresentation, and the Massachusetts Consumer Protection Act claims. The Company filed its Answer to the complaint on March 10, 2020. The case remains pending in the District of Massachusetts. This case stems from a securities purchase agreement and convertible note issued in May 2017, a securities purchase agreement and convertible note issued in July 2018, the spin-off of the Company’s real estate division into NestBuilder including the issuance of shares of NestBuilder in the spin-off to the Company’s stockholders and an inducement agreement, release and payoff agreement executed by the parties in February 2019 whereby the Company settled the balance of outstanding amounts owed to Auctus in consideration for cash and shares of NestBuilder. Auctus has requested that the court grant it injunctive and equitable relief and specific performance with respect to the Company’s obligations; determine that the Company is liable for all damages, losses and costs and award Auctus actual losses sustained; award Auctus costs including, but not limited to, costs required to prosecute the action including attorneys’ fees; and punitive damages. The Company intends to continue to defend this matter and although the ultimate outcome cannot be predicted with certainty, based on the current information available, the Company does not believe the ultimate liability, if any, will have a material adverse effect on its financial condition or results of operations.

F-34

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 16: DISCONTINUED OPERATIONS

The Company has classified the operating results and associated assets and liabilities from its BLF subsidiary, of which BLF assets were sold, transferred, and assigned to GOF on December 18, 2020, and from its Verus MENA subsidiary, of which operations as an international supplier of consumer food products ceased during the three months ended October 31, 2021, as discontinued operations in the consolidated financial statements for the years ended October 31, 2021 and 2020.

The assets and liabilities associated with discontinued operations included in our consolidated balance sheets were as follows:


	October 31, 2021						October 31, 2020
	Discontinued		Continuing		Total		Discontinued		Continuing		Total
Assets
Current Assets
Cash	$	2,221	$	66,022	$	68,243	$	15,359	$	6,150	$	21,509
Accounts receivable, net		-		303,218		303,218		5,108,439		50,251		5,158,690
Inventory		-		145,129		145,129		-		60,378		60,378
Prepaid expenses		4,084		-		4,084		56,258		160,663		216,921
Other assets		99,669		16,144		115,813		1,634		6,995		8,629
Total Current Assets		105,974		530,513		636,487		5,181,690		284,437		5,466,127
Property and equipment, net		-		85,067		85,067		18,742		128,756		147,498
Operating lease right-of-use asset, net		-		198,637		198,637		-		383,225		383,225
Intangible asset, net		-		-		-		628,172		-		628,172
Total Assets	$	105,974	$	814,217	$	920,191	$	5,828,604	$	796,418	$	6,625,022

Liabilities
Current Liabilities
Accounts payable and accrued expenses	$	227,338	$	638,315	$	865,653	$	2,066,126	$	664,612	$	2,730,738
Operating lease liability		-		92,771		92,771		-		178,327		178,327
Interest payable		-		368,709		368,709		-		161,427		161,427
Due to former officer		-		221,586		221,586		-		1,801		1,801
Notes payable		-		1,533,294		1,533,294		-		1,337,925		1,337,925
Convertible notes payable, net		-		530,358		530,358		-		387,193		387,193
Derivative liability		-		471,219		471,219		-		180,404		180,404
Total Current Liabilities		227,338		3,856,252		4,083,590		2,066,126		2,911,689		4,977,815
Notes payable, net of current portion		-		-		-		-		34,826		34,826
Operating lease liability, net of current portion		-		105,866		105,866		-		214,284		214,284
Total Liabilities	$	227,338	$	3,962,118	$	4,189,456	$	2,066,126	$	3,160,789	$	5,226,925

F-35

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 16: DISCONTINUED OPERATIONS (Continued)

The revenues and expenses associated with discontinued operations included in our consolidated statements of operations were as follows:


	Year Ended October 31,
	2021									2020
	Discontinued			Continuing			Total			Discontinued			Continuing			Total
Revenue	$	8,828,080		$	488,589		$	9,316,669		$	20,877,110		$	870,251		$	21,747,361
Cost of revenue		7,082,736			207,143			7,289,879			17,685,647			694,515			18,380,162
Gross Profit		1,745,344			281,446			2,026,790			3,191,463			175,736			3,367,199
Salaries and benefits		206,177			277,926			484,103			472,514			9,059,339			9,531,853
Selling and promotions expense		273,831			3,358			277,189			303,681			71,500			375,181
Legal and professional fees		37,284			376,839			414,123			16,961			588,258			605,219
General and administrative		5,090,269			691,325			5,781,594			1,745,727			555,686			2,301,413
Total Operating Expenses		5,607,561			1,349,448			6,957,009			2,538,883			10,274,783			12,813,666
Operating loss		(3,863,217	)		(1,068,002	)		(4,930,219	)		652,580			(10,099,047	)		(9,446,467	)
Other Income (Expense):
Interest expense		-			(280,360	)		(280,360	)		(7,817	)		(1,162,554	)		(1,170,371	)
Initial derivative liability expense		-			(1,026,833	)		(1,026,833	)		-			(336,329	)		(336,329	)
Amortization of original issue discounts and deferred financing costs		-			(200,462	)		(200,462	)		-			(532,339	)		(532,339	)
Loss on extinguishment and settlement of debt		-			(130,152	)		(130,152	)		-			(3,592,381	)		(3,592,381	)
Gain on change in fair value of derivative liability		-			359,877			359,877			-			69,925			69,925
Gain on settlement of liabilities		-			104,774			104,774			-			-			-
Gain on forgiveness of Paycheck Protection Program loan		-			104,479			104,479			-			-			-
Loss on equity issuances under S-1 registration statement		-			-			-			-			(562,230	)		(562,230	)
Loss on disposal of subsidiary		-			-			-			-			(100,000	)		(100,000	)
Total Other (Expense) Income		-			(1,068,677	)		(1,068,677	)		(7,817	)		(6,215,908	)		(6,223,725	)
(Loss) Income before income taxes		(3,862,217	)		(2,136,679	)		(5,998,896	)		644,763			(16,314,955	)		(15,670,192	)
Income taxes		-			-			-			-			-			-
Net (loss) income	$	(3,862,217	)	$	(2,136,679	)	$	(5,998,896	)	$	644,763		$	(16,314,955	)	$	(15,670,192	)

F-36

VERUS INTERNATIONAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2021 and 2020

NOTE 17: SUBSEQUENT EVENTS

Subsequent to October 31, 2021, an aggregate of $191,376 of principal, accrued interest, and fees have been converted into 32,181,998 shares of the Company’s common stock.

On November 9, 2021, a Confidential Settlement Agreement was entered into by and between all parties of the class action lawsuit that was commenced against the Company on April 23, 2021, in the United States District Court for the District of Maryland alleging various violations of the federal securities laws under the Securities Exchange Act of 1934.

On February 16, 2022, as a result of the Company’s failure to timely file its Form 10-K, the Company was in default with respect to certain of its convertible notes. The Company has not received any notification of default from any of its outstanding convertible notes.

F-37