UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended ~~January~~April 3130, 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.)

9841 Washingtonian Blvd #200 Gaithersburg, MD		20878
(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.~~

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		None		None

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.

[X] 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).

[X] 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 [X]	Smaller reporting company [X]
	Emerging growth company [ ]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

[ ] Yes [X] No

As of ~~March~~June 1815, 2021, there were 12,~~432~~929,~~512~~100 shares of the issuer’s common stock, $0.000001 par value per share, issued, as ~~adjusted~~ adjusted for a 1-for-500 reverse stock split which was completed and became effective on January 13, 2021.

VERUS INTERNATIONAL, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		Page No.
PART I – FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Unaudited Financial Statements
	Condensed Consolidated Balance Sheets – January 31, 2021 (Unaudited) and October 31, 2020	3
	Condensed Consolidated Balance Sheets – April 30, 2021 (Unaudited) and October 31, 2020	3
	Condensed Consolidated Unaudited Statements of Operations – Three Months Ended January 31, 2021 and 2020	4
	Condensed Consolidated Unaudited Statements of Operations – Three and Six Months Ended April 30, 2021 and 2020	4
	Condensed Consolidated Unaudited Statements of Stockholders’ Equity – Three Months Ended January 31, 2021 and 2020	5
	Condensed Consolidated Unaudited Statements of Stockholders’ Equity – Six Months Ended April 30, 2021 and 2020	5
	Condensed Consolidated Unaudited Statements of Cash Flows – Three Months Ended January 31, 2021 and 2020	7
	Condensed Consolidated Unaudited Statements of Cash Flows – Six Months Ended April 30, 2021 and 2020	7
	Notes to Condensed Consolidated Unaudited Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3034
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3338
Item 4.	Controls and Procedures	3338
PART II – OTHER INFORMATION		3439
Item 1.	Legal Proceedings	3439
Item 1A.	Risk Factors	3439
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3439
Item 3.	Defaults Upon Senior Securities	3439
Item 5.	Other Information	3439
Item 6.	Exhibits	3540
SIGNATURES		3641

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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” in our Annual Report on Form 10-K for the fiscal year ended October 31, 2020, filed with the SEC on March 19, 2021 and elsewhere in this Quarterly Report on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as required by law.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Verus International, Inc.

Condensed Consolidated Balance Sheets

	January 31, 2021			October 31, 2020
	April 30, 2021			October 31, 2020
	(Unaudited)
Assets
Current Assets
Cash	$	3622,~~995~~890		$	21,483
Accounts receivable, net		5,~~277~~835,~~211~~207			4,933,322
Inventory		6042,~~303~~978			60,378
Prepaid expenses		~~198~~173,~~111~~145			170,874
Other assets		9,434			8,629
Assets of discontinued operations		41			453,809
Total Current Assets		56,~~582~~083,~~095~~695			5,648,495
Property and equipment, net		~~128~~117,~~303~~164			139,444
Operating lease right-of-use asset, net		~~265~~243,~~239~~315			383,225
Intangible asset, net		~~434~~414,~~407~~956			453,858
Total Assets	$	6,~~410~~859,~~044~~130		$	6,625,022
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued expenses	$	2,~~501~~349,~~817~~458		$	2,138,666
Operating lease liability		8990,~~364~~485			178,327
Interest payable		~~168~~249,~~996~~780			161,427
Due to officer		1,801			1,801
Notes payable		1,~~337~~560,~~925~~261			1,337,925
Convertible notes payable, net		~~250~~553,~~006~~346			387,193
Derivative liability		~~240~~724,~~305~~407			180,404
Liabilities of discontinued operations		160,448			592,072
Total Current Liabilities		45,~~750~~689,~~662~~986			4,977,815
Long-Term Liabilities
Notes payable, net of current portion		34,826			34,826
Operating lease liability, net of current portion		~~175~~152,~~876~~830			214,284
Total Liabilities		45,~~961~~877,~~364~~642			5,226,925
Commitments and Contingencies (Note 11)
Stockholders’ Equity
Series A convertible preferred stock, $0.000001 par value; 120,000,000 shares authorized and 28,944,601 shares issued and outstanding at January 31, 2021 and October 31, 2020		29			29
Series A convertible preferred stock, $0.000001 par value; 120,000,000 shares authorized and 28,944,601 shares issued and outstanding at April 30, 2021 and October 31, 2020		29			29
Series B convertible preferred stock, $0.000001 par value; 1,000,000 shares authorized and no shares issued and outstanding at January 31, 2021 and October 31, 2020		-			-
Series B convertible preferred stock, $0.000001 par value; 1,000,000 shares authorized and no shares issued and outstanding at April 30, 2021 and October 31, 2020		-			-
Series C convertible preferred stock, $0.000001 par value; 1,000,000 shares authorized and 680,801 shares issued and outstanding at January 31, 2021 and October 31, 2020		1			1
Series C convertible preferred stock, $0.000001 par value; 1,000,000 shares authorized and 680,801 shares issued and outstanding at April 30, 2021 and October 31, 2020		1			1
Common stock, $0.000001 par value; 7,500,000,000 shares authorized and 12,032,512 and 10,278,867 shares issued at January 31, 2021 and October 31, 2020, respectively (as adjusted for a 1-for-500 reverse stock split as discussed in Note 1)		12			10
Common stock, $0.000001 par value; 7,500,000,000 shares authorized and 12,744,768 and 10,278,867 shares issued at April 30, 2021 and October 31, 2020, respectively (as adjusted for a 1-for-500 reverse stock split as discussed in Note 1)		13			10
Additional paid-in-capital		46,~~046~~271,~~456~~776			45,562,~~841~~840
Shares to be issued		1328,100			-
Accumulated deficit		(4445,~~610~~318,~~918~~431	)		(44,164,783	)
Total Stockholders’ Equity		1981,~~448,680~~488			1,398,097
Total Liabilities and Stockholders’ Equity	$	6,~~410~~859,~~044~~130		$	6,625,022

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

Verus International, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	January 31,
	April 30,						April 30,
	2021			2020			2021			2020
Revenue	$	3,~~453~~310,~~353~~680		$	64,~~173~~622,~~662~~900		$	6,764,033		$	10,796,562
Cost of revenue		2,~~861~~563,~~348~~644			43,~~906~~695,~~793~~365			5,424,992			8,602,158
Gross Profit		~~592~~747,~~005~~036			1927,~~266,869~~535			1,339,041			2,194,404
Operating Expenses:
Salaries and benefits		36229,~~213~~738			16,~~823~~777,~~007~~149			265,951			8,600,156
Selling and promotions expense		8256,~~030~~471			16112,~~636~~329			138,501			128,965
Legal and professional fees		86,~~168~~808			~~201~~191,~~518~~876			14,976			393,394
General and administrative		~~577~~581,~~291~~511			~~588~~557,~~834~~158			1,158,802			1,145,992
Total Operating Expenses		~~703~~874,~~702~~528			27,~~629~~638,~~995~~512			1,578,230			10,268,507
Operating loss		(~~111~~127,~~697~~492	)		(16,~~363~~710,~~126~~977	)		(239,189	)		(8,074,103	)
Other (Expense) Income:
Interest expense		(6680,~~157~~784	)		(51142,~~580~~099	)		(146,941	)		(193,679	)
Initial derivative liability expense		(279,512	)		-
Amortization of debt discounts and issuance costs		(37,252	)		(173,065	)		(64,764	)		(318,649	)
Amortization of original issue discounts and deferred financing costs		(27,512	)		(145,584	)
Initial derivative liability expense		(520,701	)		-			(800,213	)		-
Loss on extinguishment and settlement of debt		(118	)		(723,773	)
(Loss) gain on change in fair value of derivative liability		(11,235	)		-			27,972			-
Gain on change in fair value of derivative liability		39,207			-
Loss on extinguishment and settlement of convertible notes payable		(34,823	)		-			(34,941	)		(723,773	)
Total Other (Expense) Income		(334,092	)		(920,937	)
Gain on settlement of liabilities		104,774			-			104,774			-
Loss from continuing operations before income taxes		(445,789	)		(2,284,063	)
Total Other (Expense) Income		(580,021	)		(315,164	)		(914,113	)		(1,236,101	)
Income taxes		-			-
Loss from continuing operations before income taxes		(707,513	)		(7,026,141	)		(1,153,302	)		(9,310,204	)
Loss from continuing operations		(445,789	)		(2,284,063	)
Income taxes		-			-			-			-
Discontinued operations (Note 13)
Loss from continuing operations		(707,513	)		(7,026,141	)		(1,153,302	)		(9,310,204	)
Loss from discontinued operations		(346	)		(219,225	)
Discontinued operations (Note 13)
Net loss	$	(446,135	)	$	(2,503,288	)
Loss from discontinued operations		-			(286,980	)		(346	)		(506,205	)
Loss per common share:
Net loss	$	(707,513	)	$	(7,313,121	)	$	(1,153,648	)	$	(9,816,409	)
Loss from continuing operations per common share – basic and diluted	$	(0.04	)	$	(0.49	)
Loss per common share:
Loss from discontinued operations per common share – basic and diluted	$	(0.00	)	$	(0.05	)
Loss from continuing operations per common share – basic and diluted	$	(0.06	)	$	(1.51	)	$	(0.10	)	$	(2.01	)
Loss per common share – basic and diluted	$	(0.04	)	$	(0.54	)
Loss from discontinued operations per common share – basic and diluted	$	-		$	(0.07	)	$	(0.00	)	$	(0.11	)
Weighted average shares outstanding – basic and diluted		11,599,945			4,614,705
Loss per common share – basic and diluted	$	(0.06	)	$	(1.57	)	$	(0.10	)	$	(2.12	)
Weighted average shares outstanding – basic and diluted		12,497,725			4,651,692			12,041,395			4,632,995

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

Verus International, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

For the Three and Six Months Ended ~~January~~April 3130, 2021 and 2020

(Unaudited)

	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, 2020		28,944,601	$	29		-	$	-		680,801	$	1		10,278,867	$	10	$	45,562,~~841~~840	$	-	$	(44,164,783	)	$	1,398,097
Conversion of convertible promissory notes to common stock														1,685,918		2		464,~~651~~652							464,~~653~~654
Issuance of common stock for vendor services														67,728		-		18,964							18,964
Shares of common stock to be issued for vendor services																				13,100					13,100
Net loss																						(446,135	)		(446,135	)
Balance, January 31, 2021		28,944,601	$	29		-	$	-		680,801	$	1		12,032,512	$	12	$	46,046,456	$	13,100	$	(44,610,918	)	$	1,448,680
Conversion of convertible promissory notes to common stock														312,256		-		118,658							118,658
Issuance of common stock for note payable issuance														400,000		1		87,999							88,000
Stock-based compensation for restricted shares under employment contract																		18,663							18,663
Shares of common stock to be issued for vendor services																				15,000					15,000
Net loss																						(707,513	)		(707,513	)
Balance, April 30, 2021		28,944,601	$	29		-	$	-		680,801	$	1		12,744,768	$	13	$	46,271,776	$	28,100	$	(45,318,431	)	$	981,488

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

Verus International, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

For the Three and Six Months Ended ~~January~~April 3130, 2021 and 2020

(Unaudited)

	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	)
Conversion of Preferred Stock A to common stock		(3,125,500	)		(3	)																3						-
Shares to be issued under stock-based compensation																				2,253,238		90,000						2,343,238
Conversion of convertible promissory notes to common stock																30,196		-		877,039								877,039
Shares to be issued for conversion of convertible promissory note to common stock																						465,675						465,675
Net loss																									(2,503,288	)		(2,503,288	)
Balance, January 31, 2020		41,444,601		$	42			-	$	-		430,801	$	-		4,641,753	$	5	$	30,698,497	$	555,678		$	(30,997,878	)	$	256,344
Conversion of Preferred Stock A to common stock																6,251				3		(3	)					-
Shares to be issued under stock-based compensation																				6,606,312								6,606,312
Conversion of convertible promissory notes to common stock																196,776				656,011		(465,675	)					190,336
Beneficial conversion feature for conversion of convertible promissory notes to common stock																				830,162								830,162
Net loss																									(7,313,120	)		(7,313,120	)
Balance, April 30, 2020		41,444,601		$	42			-	$	-		430,801	$	-		4,844,780	$	5	$	38,790,985	$	90,000		$	(38,310,998	)	$	570,034

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

Verus International, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the Three Months Ended
	For the Six Months Ended
	January 31,
	April 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(~~446~~1,~~135~~153,648	)	$	(29,~~503~~816,~~288~~409	)
Adjustments to reconcile net loss to net cash used in operating activities:
Initial derivative liability expense		~~279~~800,~~512~~213			-
Depreciation and amortization		3061,~~591~~182			68123,~~330~~493
Amortization of original issue discounts and deferred financing costs		2764,~~512~~764			~~145~~318,~~584~~649
Loss on extinguishment and settlement of debt		118			723,774
Amortization of beneficial conversion feature		-			80,320
Gain on change in fair value of derivative liability		(39,207	)		-
Loss on extinguishment and settlement of debt		34,941			723,773
Stock-based compensation		(74,186	)		1,653,245
Gain on change in fair value of derivative liability		(27,972	)		-
Gain on settlement of liabilities		(104,774	)		-
Stock-based compensation		(40,523	)		8,236,124
Changes in operating assets and liabilities:
Increase in accounts receivable		(~~343~~901,~~889~~885	)		(12,~~114~~105,~~489~~258	)
Decrease in inventory		7517,400			~~179~~251,~~155~~145
Increase in prepaid expenses		(27,237	)		(124,793	)
Decrease (increase) in prepaid expenses		41,729			(441,322	)
Increase in other assets		(805	)		-
Increase in accounts payable and accrued expenses		~~491~~524,~~104~~302			~~315~~1,~~570~~032,129
(Decrease) increase in right to use and lease obligation, net		(9,385	)		13,650
Increase in customer deposits		-			246,000
Net cash used in operating activities of continuing operations		(111,932	)		(643,262	)
(Decrease) increase in right to use and lease obligation, net		(9,386	)		12,526
Net cash provided by operating activities of discontinued operations		22,144			85,483
Net cash used in operating activities of continuing operations		(694,462	)		(1,338,830	)
Net cash used in operating activities		(89,788	)		(557,779	)
Net cash provided by operating activities of discontinued operations		22,144			84,086
Net cash used in operating activities		(672,318	)		(1,254,744	)
Cash flows from investing activities:
Net cash used in investing activities of continuing operations		-			-
Net cash used in investing activities of discontinued operations		-			(3,000	)
Net cash used in investing activities		-			(3,000	)
Cash flows from financing activities:
Proceeds from issuance of convertible notes payable, net of commissions		~~168~~496,~~300~~400			~~476~~941,000
Proceeds from issuance of notes payable		240,325			354,479
Payments applied to convertible promissory notes		(63,000	)		-
Net cash provided by financing activities of continuing operations		~~105~~673,~~300~~725			~~476~~1,~~000~~295,479
Net increase (decrease) in cash		15,512			(84,779	)
Net increase in cash		1,407			37,735
Cash at beginning of period		21,483			330,151
Cash at end of period	$	3622,~~995~~890		$	~~245~~367,~~372~~886
Supplemental disclosure:
Cash paid for interest	$	18,765		$	410,~~530~~448

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

	For the Three Months Ended
	For the Six Months Ended
	January 31,
	April 30,
	2021		2020
Supplemental disclosure of non-cash investing and financing activities:
Common Stock issued in exchange for conversion of Series A Preferred Stock:
Value	$	-	$	3
Shares		-		6,~~431~~251
Common Stock issued in exchange for conversion of convertible promissory note and accrued interest:
Value	$	464,653	$	153,265
Value (includes beneficial conversion feature)	$	583,310	$	2,363,212
Shares		1,~~685~~998,~~918~~174		30226,~~196~~973
Common Stock issued for note payable issuance:
Value	$	88,000	$	-
Shares		400,000		-
Common Stock issued for vendor services:
Value	$	18,964	$	-
Shares		67,728		-
Common Stock to be issued for vendor services:
Value	$	1328,100	$	-
Shares		48107,~~182~~364		-
Common Stock to be issued in exchange for conversion of convertible promissory note and accrued interest:
Value	$	-	$	465,675
Shares		-		133,050

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

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 1: NATURE OF BUSINESS AND BASIS OF PRESENTATION

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.”

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.

Since August 1, 2018, we, through our wholly-owned subsidiary, Verus Foods, Inc., an international supplier of consumer food products, have been focused on international consumer packaged goods, foodstuff distribution and wholesale trade. Our fine food products are sourced in the United States and exported internationally. We market 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. Verus has also begun to explore new consumer packaged goods (“CPG”) non-food categories, such as cosmetic and fragrances, for future product offerings.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 1: NATURE OF BUSINESS AND BASIS OF PRESENTATION (continued)

We currently have 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. The Company’s long-term goal is to source goods and generate international wholesale and retail CPG sales in North and South America, Europe, Africa, Asia and Australia.

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 covered 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~~ 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 unaudited condensed consolidated financial statements for the ~~three~~six months ended ~~January~~April 3130, 2021 and 2020 (see Note 13).

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

Basis of Presentation

The unaudited condensed consolidated financial information furnished herein reflects all adjustments, consisting only of normal recurring items, which in the opinion of management, are necessary to fairly state the Company’s financial position, results of operations and cash flows for the dates and periods presented and to make such information not misleading. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted pursuant to rules and regulations of the Securities and Exchange Commission (the “SEC”); nevertheless, management of the Company believes that the disclosures herein are adequate to make the information presented not misleading.

The unaudited condensed consolidated financial statements for the ~~three~~six months ended ~~January~~April 3130, 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 have been classified as discontinued operations in the unaudited condensed consolidated financial statements for the ~~three~~six months ended ~~January~~April 3130, 2021 and 2020 (see Note 13). All significant intercompany balances and transactions have been eliminated in the consolidation.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated ~~financial~~ financial statements for the year ended October 31, 2020, contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021. The results of operations for the ~~three~~six months ended ~~January~~April 3130, 2021, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending October 31, 2021.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 1: NATURE OF BUSINESS AND BASIS OF PRESENTATION (continued)

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. Although these temporary office closures created minor disruption to the Company’s business operations, such disruptions to date have not been significant.

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 the Company’s 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

Use of Estimates

The preparation of unaudited condensed 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 unaudited condensed consolidated financial statements and 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, finite-lived intangible assets, accrued expenses, valuation of derivative liabilities, stock-based compensation and the valuation reserve for income taxes.

Reclassifications

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

Concentrations of Credit Risk

Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with high-quality financial institutions. Deposits held with the financial institutions may exceed the amount of insurance provided by the Federal Deposit Insurance Corporation on such deposits, but may be redeemed upon demand. The Company performs periodic evaluations of the relative credit standing of the financial institutions. With respect to accounts receivable, the Company monitors the credit quality of its customers as well as maintains an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Risk

The Company’s food products accounts receivable, net and revenues are geographically concentrated with customers located in the GCC countries. In addition, significant concentrations exist with a limited number of customers. Approximately 5061% of accounts receivable, net at ~~January~~April 3130, 2021 were concentrated with ~~five~~eight customers and approximately 6364% of revenue for the ~~three-~~six months ended ~~January~~April 3130, 2021 were concentrated with ~~seven~~eight 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.

Supplier Risk

The Company purchases substantially all of its food products from a limited number of regions around the world or from a limited number of of suppliers. Increases in the prices of the food 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 food products or our suppliers cease to be available to us, we could experience shortages in our food products or be unable to meet our commitments to customers. Alternative sources of food 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. Approximately 6070% of accounts payable at ~~January~~April 3130, 2021 were concentrated with ~~four~~five suppliers and approximately 48 63% of cost of revenue for the ~~three-~~six months ended ~~January~~April 3130, 2021 were concentrated with ~~five~~eight suppliers.

Cash and Cash Equivalents

For purposes of balance sheet presentation and reporting of cash flows, the Company considers all unrestricted demand deposits, money ~~market~~ 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 ~~January~~April 3130, 2021 or October 31, 2020. 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 ~~January~~April 3130, 2021 and October 31, 2020, the Company’s cash balances did not exceed the FDIC limit.

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 ~~January~~April 3130, 2021 and October 31, 2020, the Company determined there was no requirement for an allowance for doubtful accounts.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Inventory

Inventory is stated at the lower of net realizable value or cost, determined on the first-in, first-out basis. 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

The Company amortizes its one intangible asset, certain acquired customer contracts, on a straight-line basis over the estimated useful life of the asset.

Property and Equipment

All expenditures on the acquisition for 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.

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.

Fair Value of Financial Instruments

The Company accounts for the fair value of 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.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial instruments consist principally of cash, accounts receivable, prepaid expenses, accounts payable, accrued liabilities and current ~~and~~ and long-term debt. 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. At ~~January~~April 3130, 2021, the Company had a Level 3 financial instrument related to its derivative liability.

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”). Revenue is 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 7).

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

Shipping and Handling Costs

Shipping and handling costs for freight expense on goods shipped are included in cost of sales. Freight expense on goods shipped for the ~~three~~ ~~months~~six months ended ~~January~~April 3130, 2021 and 2020 was $~~266~~486,~~939~~196 and $~~250~~456,~~853~~625, respectively.

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. The Company estimates the fair value of stock options and warrants by using the Black-Scholes option valuation model.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Derivative Instruments

The Company enters into 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

The Company has one non-U.S. subsidiary, where the functional currency is the United Arab Emirates dirham (“AED”). The Company’s foreign subsidiary maintains 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.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

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 unaudited condensed consolidated financial statements were as follows:

Balance sheet:

	January 31, 2021		October 31, 2020
	April 30, 2021		October 31, 2020
Period-end AED: USD exchange rate	$	0.~~27228~~27229	$	0.27229

Income statement:

	January 31, 2021		January 31, 2020
	For the Three Months Ended				For the Six Months Ended
Average Quarterly AED: USD exchange rate	$	0.27228	$	0.27230
	April 30,				April 30,
	2021		2020		2021		2020
Average Period AED: USD exchange rate	$	0.27228	$	0.27229	$	0.27228	$	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.

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, 2020, 2019, 2018 and 2017 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 tax years ended October 31, 2020 and 2019.

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.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

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 three and six months ended ~~January~~April 3130, 2021 and 2020, as we incurred a net loss for those periods. At ~~January~~April 3130, 2021, there were outstanding warrants to purchase ~~approximately~~ approximately 2,~~810~~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, approximately 107,000 shares of the Company’s common stock to be issued, and approximately 25,~~200~~400,000 shares of the Company’s common stock issuable upon the conversion of convertible notes payable which may dilute future EPS. At ~~January 31~~April 30, 2020, there were outstanding warrants to purchase approximately 12,~~700~~620,000 shares of the Company’s common stock, approximately 169,000 shares of the Company’s common stock issuable upon the conversion of Series A and Series C convertible preferred stock, approximately ~~148~~30,000 shares of the Company’s common stock to be issued, and approximately ~~101~~ 420,000 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 international food industries, and its prospects for success are tied indirectly to interest rates and the worldwide demand for the Company’s food and beverage products.

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.

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 unaudited condensed consolidated financial statements.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Standards Not Yet Adopted

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.

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 unaudited condensed consolidated financial statements.

NOTE 3: GOING CONCERN

The accompanying unaudited condensed 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 a net loss from continuing operations of $~~445~~1,~~789~~153,302 and negative cash flows from continuing operations of $~~111~~694,~~932~~462 for the ~~three~~six months ended ~~January~~April 3130, 2021. At ~~January~~April 3130, 2021, the Company had a working capital surplus of $~~831~~393,~~433~~709, and an ~~accumulated~~ accumulated deficit of $4445,~~610~~318,~~918~~431. 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 unaudited condensed 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 from the date of this report and to fund the growth of our 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 recent 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.

NOTE 4: PREPAID EXPENSES

Prepaid expenses total $~~198~~173,~~111~~145 and $170,874 at ~~January~~April 3130, 2021 and October 31, 2020, respectively, and consist mainly of prepaid rent, ~~prepaid~~ prepaid consulting, and deposits on purchases.

NOTE 5: LEASES

At ~~January~~April 3130, 2021, the Company ~~had~~was ~~two~~party ~~operating~~to ~~leases,~~ one ~~for~~operating ~~its~~leases ~~corporate office in Gaithersburg, Maryland, and one~~ for its domestic warehouse operations in Stafford, Texas. Effective February 8, 2021, the Company terminated the operating lease for its corporate office and Gaithersburg, Maryland and entered into a new, short-term lease. The Company also has a 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.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 5: LEASES (continued)

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 ~~January~~April 3130, 2021.

For the ~~three~~six months ended ~~January~~April 3130, 2021, the Company had operating lease costs of $5484,~~206~~347, which are included in general and administrative expenses in the unaudited consolidated statements of operations. For the ~~three~~six months ended ~~January~~April 3130, 2021, the Company made ~~operating~~ operating lease cash payments of $1266,~~575~~405, which are included in cash flows from operating activities of continuing operations in the unaudited consolidated statements of cash flows. At ~~January~~April 3130, 2021, the Company had operating lease costs of $418,~~632~~ 081 accrued for future payment, which are included in accounts payable and accrued expenses in the unaudited consolidated balance sheets.

At ~~January~~April 3130, 2021, the remaining lease term for our domestic warehouse operations is 3731 months, and the discount rate is 5%. Future ~~annual~~ annual minimum cash payments required under this operating type lease at ~~January~~April 3130, 2021 are as follows:

Future Minimum Lease Payments:
Remainder of fiscal year 2021	$	7550,~~447~~298
2022		100,~~598~~596
2023		100,~~595~~596
2024		8,383
Total Minimum Lease Payments	$	~~285~~259,~~023~~873
Less: amount representing interest		(1916,~~783~~558	)
Present Value of Lease Liabilities	$	~~265~~243,~~240~~315
Less: current portion		(8990,~~364~~485	)
Long-Term Portion	$	~~175~~152,~~876~~830

NOTE 6: INTANGIBLE ASSET, NET

At ~~January~~April 3130, 2021, intangible asset, net, consists of a single intangible asset of certain acquired customer contracts.

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~~ 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 unaudited condensed consolidated financial statements for the ~~three~~six months ended ~~January~~April 3130, 2021 and 2020 (see Note 13).

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 6: INTANGIBLE ASSET, NET (continued)

Acquired Customer Contracts

The acquired customer contracts were purchased for $544,630 (2,000,000 United Arab Emirates Dirham) 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.

The net carrying amount of the intangible asset is as follows:

	Estimated
	Useful Lives	~~January~~April 3130, 2021			October 31, 2020
Intangible asset:
Customer contracts	7 years		544,630			544,630
Accumulated amortization			(~~110~~129,~~223~~674	)		(90,772	)
Intangible assets, net		$	~~434~~414,~~407~~956		$	453,858

As a result of the COVID-19 pandemic, we have considered its potential impact on our global supply chain, operations and routes to ~~market~~ market or those of our suppliers, customers, distributors and retailers. Based on our analysis, we have determined there is currently no indication that the carrying amount of our acquired customer contracts is impaired and not fully recoverable, and therefore no impairment exists at ~~January~~April 3130, 2021.

Amortization expense for the three and six months ended ~~January~~April 3130, 2021 was $19,451 and $38,902, respectively. Amortization expense for the three and six months ended April 30, 2020 was $19,451 and $3251,~~418~~869, respectively.

Annual amortization expense related to the existing net carrying amount of the intangible asset for the next five years is expected to be as follows:

Remainder of fiscal year 2021	$	5838,~~353~~902
Fiscal year 2022	$	77,804
Fiscal year 2023	$	77,804
Fiscal year 2024	$	77,804
Fiscal year 2025	$	77,804
Fiscal year 2026	$	64,838

NOTE 7: REVENUE DISAGGREGATION

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

	For the Three Months Ended						For the Six Months Ended
	January 31,
	April 30,						April 30,
	2021			2020			2021			2020
United Arab Emirates	$	2,~~498~~512,~~593~~781		$	43,~~906~~592,~~843~~222		$	5,011,374		$	8,499,065
Oman		~~488~~251,~~435~~634			~~599~~437,~~580~~047			740,069			1,036,627
Kingdom of Saudi Arabia		~~341~~100,~~291~~386			~~317~~376,~~105~~208			441,677			693,313
Bahrain		~~125~~98,~~034~~035			~~350~~217,~~134~~423			223,069			567,557
Revenue	$	3,453,353		$	6,173,662
United States		347,844			-			347,844			-
Food products		100	%		100	%
Revenue	$	3,310,680		$	4,622,900		$	6,764,033		$	10,796,562
		100	%		100	%
Food products		100	%		100	%		100	%		100	%
		100	%		100	%		100	%		100	%

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 7: REVENUE DISAGGREGATION (continued)

For the ~~three~~six months ended ~~January~~April 3130, 2021, the Company was subject to revenue concentration risk as ~~seven~~eight customers accounted for ~~approximately~~ 63approximately 64% of our total revenue. For the ~~three~~six months ended ~~January~~April 3130, 2020, the Company was subject to revenue concentration risk as seven customers accounted for approximately 6361% of our total revenue.

NOTE 8: 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^thday 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^thday 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.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 8: DEBT (continued)

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 ~~maturity~~180th day after the issuance date of the note with certain prepayment penalties as defined in the note. On February 11, 2021, $36,000 of the outstanding principal balance was converted into 312,256 shares of the Company’s common stock, At ~~January~~April 3130, 2021, the aggregate balance of the convertible promissory note and accrued interest was $9156,~~913~~480. The aggregate balance of the convertible promissory note, net of original issue discount and deferred financing costs at ~~January~~April 3130, 2021 was $8049,~~864~~619.

On January 4, 2021, the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company ~~issued~~ 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. At ~~January~~April 3130, 2021, the aggregate balance of the convertible promissory note and accrued interest was $9597,~~632~~717. The aggregate balance of the convertible promissory note, net of deferred financing costs at ~~January~~April 3130, 2021 was $9192,~~759~~612.

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 180th 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. At ~~January~~April 3130, 2021, the aggregate balance of the convertible promissory note and accrued interest was $8890,~~366~~083. At ~~January~~April 3130, 2021, the aggregate balance of the convertible promissory note, net of original issue discount and deferred financing costs was $7780,~~383~~114.

AtOn ~~January~~April 317, 2021, the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company issued and ~~October~~sold ~~31,~~a ~~2020,~~convertible ~~there~~promissory ~~was~~note in the principal amount of $~~250~~88,~~006~~500. ~~and~~The ~~$387~~note matures on April 7,~~193~~ 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 ~~notes~~shares ~~payable~~of ~~outstanding,~~the ~~net~~Company’s common stock at a conversion price equal to the greater of ~~discounts~~(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 ~~$22~~the note with certain prepayment penalties as defined in the note. At April 30,~~994~~ 2021, the aggregate balance of the convertible promissory note and accrued interest was $3589,~~806~~024. The aggregate balance of the convertible promissory note, ~~respectively~~net of deferred financing costs at April 30, 2021 was $85,230.

During the three months ended January 31, 2021 and 2010, amortization of original issue discount and issuance costs amounted to $27,512 and $145,584, respectively.

During the three months ended January 31, 2021, an aggregate of $284,131 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 three months ended January 31, 2020, an aggregate of $618,941 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.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 8: DEBT (continued)

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^thday 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 April 30, 2021, the aggregate balance of the convertible promissory note and accrued interest was $150,756. At April 30, 2021, the aggregate balance of the convertible promissory note, net of original issue discount and deferred financing costs was $126,388.

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^thday 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 April 30, 2021, the aggregate balance of the convertible promissory note and accrued interest was $143,376. At April 30, 2021, the aggregate balance of the convertible promissory note, net of original issue discount and deferred financing costs was $119,383.

At April 30, 2021 and October 31, 2020, there was $553,346 and $387,193 of convertible notes payable outstanding, net of discounts of $65,154 and $35,806, respectively.

During the six months ended April 30, 2021, amortization of original issue discount and issuance costs amounted to $38,753. During the six months ended April 30, 2020, amortization of original issue discount, issuance costs, beneficial conversion features amounted to $398,969.

During the six months ended April 30, 2021, an aggregate of $320,131 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 six months ended April 30, 2020, an aggregate of $809,276 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.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED APRIL 30, 2021 AND 2020

(UNAUDITED)

NOTE 8: DEBT (continued)

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~~ 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. Through ~~January~~April 3130, 2021, the Company paid an aggregate of $116,152 of accrued interest in accordance with the provisions of the Fourth Note Amendment.

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, ~~subsequent to fiscal year end,~~ 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~~ 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 or more pursuant to the note on or before December 31, 2021 (the “Prepayment”), then the note shall be forgiven and ~~considered~~ 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 ~~January~~April 3130, 2021, the Company has not paid any amount toward the outstanding balance of this promissory note.

2324

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 8: DEBT (continued)

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~~ 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. The Company ~~expects~~has applied for forgiveness and expects to satisfy the requirements for forgiveness of the entire principal and accrued interest balance ~~and will apply for such forgiveness by the deadline~~.

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. At April 30, 2021, the aggregate balance of the promissory note and accrued interest was $339,360. The aggregate balance of the promissory note, net of original issue discount, deferred financing costs and issuance date fair value of the Commitment Shares at April 30, 2021 was $222,336.

Revolving Credit Agreement

On July 31, 2019, the Company entered into a secured, $500,000 revolving credit agreement (“Credit Facility”). Borrowings ~~under~~ 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.~~144~~111% at ~~January~~April 3130, 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 ~~January~~April 3130, 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. The Company was in compliance with all covenants at ~~January~~April 3130, 2021.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED APRIL 30, 2021 AND 2020

(UNAUDITED)

NOTE 9: 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 ~~January~~April 3130, 2021.

	Conversion feature derivative liability
October 31, 2019	$	-
Initial fair value of derivative liability charged to other expense		336,329
Gain on change in fair value included in earnings		(69,925	)
Derivative liability relieved by conversions of convertible promissory notes		(86,000	)
October 31, 2020	$	180,404
Initial fair value of derivative liability charged to other expense		279,512
Gain on change in fair value included in earnings		(39,207	)
Derivative liability relieved by conversions of convertible promissory notes		(180,404	)
January 31, 2021	$	240,305
Initial fair value of derivative liability charged to other expense		520,701
Loss on change in fair value included in earnings		11,235
Derivative liability relieved by conversions of convertible promissory notes		(47,834	)
April 30, 2021	$	724,407

24Total derivative liability at April 30, 2021 and October 31, 2020 amounted to $724,407 and $180,404, respectively. The change in fair value included in earnings of $27,972 is due in part to the quoted market price of the Company’s common stock decreasing from $0.48 at October 31, 2020 to $0.18 at April 30, 2021, coupled with substantially reduced conversion prices due to the effect of “ratchet” provisions incorporated within the convertible notes payable.

The Company used the following assumptions for determining the fair value of the convertible instrument granted under the binomial pricing model with a binomial simulation at April 30, 2021:

Expected volatility		136.8% - 782.2	%
Expected term		2.7 – 11.5 months
Risk-free interest rate		0.01% - 0.05	%
Stock price	$	0.18

The Company recognizes its derivative liabilities as Level 3 and values its derivatives using the methods discussed below. 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 April 30, 2021, the Company did not have any derivative instruments that were designated as hedges.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 9: DERIVATIVE LIABILITY (continued)

Total derivative liability at January 31, 2021 and October 31, 2020 amounted to $240,305 and $180,404, respectively. The change in fair value included in earnings of $39,207 is due in part to the quoted market price of the Company’s common stock decreasing from $0.48 at October 31, 2020 to $0.20 at January 31, 2021, coupled with substantially reduced conversion prices due to the effect of “ratchet” provisions incorporated within the convertible notes payable.

The Company used the following assumptions for determining the fair value of the convertible instrument granted under the binomial pricing model with a binomial simulation at January 31, 2021:

Expected volatility		244.3% - 265.8	%
Expected term		5.7 – 11.4 months
Risk-free interest rate		0.07% - 0.10	%
Stock price	$	0.20

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

NOTE 10: STOCKHOLDERS’ 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 12,~~032~~774,~~512~~768 are issued at ~~January~~April 3130, 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 ~~January~~April 3130, 2021, (B) 1,000,000 shares have been designated as Series B Convertible Preferred Stock, of which no shares are outstanding at ~~January~~April 3130, 2021 and (C) 1,000,000 have been designated as Series C Convertible Preferred Stock, of which 680,801 shares are outstanding at ~~January~~April 3130, 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.

25On 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.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 10: STOCKHOLDERS’ 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 ~~three~~six months ended ~~January~~April 3130, 2021, the Company:

● issued 1,~~685~~998,~~918~~174 shares of its common stock valued at $~~464~~583,~~653~~310, 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 48107,~~182~~364 shares of its common stock as shares to be issued to a vendor for services rendered.

During the ~~three~~six months ended ~~January~~April 3130, 2020, the Company:

● issued 30226,~~196~~973 shares of its common stock valued at $~~877~~2,~~039 and reflected 133~~363,~~050~~212 ~~shares of its common stock valued at $465,675~~ as ~~shares to be issued, as~~ repayment for outstanding principal and interest on a convertible promissory note as requested by the note holder in accordance with contractual terms. ● ~~recorded~~issued 6,251 shares of its common stock ~~as shares to be issued~~ for the conversion of 3,125,500 shares of its Series A Convertible Preferred stock. ● recorded 15,000 shares of its common stock as shares to be issued for the vesting of the first 25% of a 60,000 common stock grant to Christopher Cutchens, the Company’s former Chief Financial Officer. The Company recorded $5697,~~250~~500 of stock-based compensation expense during the ~~three~~six months ended ~~January~~April 3130, 2020, related to this common stock grant.

Common Stock Warrants

At ~~January~~April 3130, 2021, 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 ~~three~~six months ended ~~January~~April 3130, 2021.

2628

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 10: STOCKHOLDERS’ EQUITY (~~DEFICIT) (~~continued)

The following table sets forth common share purchase warrants outstanding at ~~January~~April 3130, 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, January 31, 2021		2,619,114	$	2.24	$	-
Outstanding, April 30, 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 ~~January~~April 3130,		Contractual		Exercise		atAt ~~January~~April 3130,		Exercise
Prices		2021		Life (Years)		Price		2021		Price
$	1,25		1,160,000		10.0985	$	1.25		1,160,000	$	1.25
$	3.00		1,457,114		21.0176	$	3.00		1,457,114	$	3.00
$	25.00		2,000		1.9267	$	25.00		2,000	$	25.00
			2,619,114		1.6036	$	2.24		2,619,114	$	2.24

NOTE 11: COMMITMENTS AND CONTINGENCIES

AtContracts ~~January 31, 2021, the Company had two operating leases, one for its corporate office in Gaithersburg, Maryland,~~ and ~~one~~Commitments ~~for~~Executed ~~its domestic~~Pursuant ~~warehouse~~Employment operations in Stafford, Texas. Effective February 8, 2021, the Company terminated the operating lease for its corporate office and Gaithersburg, Maryland and entered into a new, short-term lease. The Company also has a short-term lease for office space in Dubai, UAE.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

At April 30, 2021, the Company was party to one operating leases for its domestic warehouse operations in Stafford, Texas. Effective February 8, 2021, the Company terminated the operating lease for its corporate office and Gaithersburg, Maryland and entered into a new, short-term lease. The Company also has a short-term lease for office space in Dubai, UAE.

The Company incurs rent expense of $8,383 per month for its domestic warehouse operations in Stafford, Texas. The term of this operating lease is through November 30, 2023.

2729

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 12: 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.

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. The Company intends 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.

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED APRIL 30, 2021 AND 2020

(UNAUDITED)

NOTE 13: DISCONTINUED OPERATIONS

The Company has classified the operating results and associated assets and liabilities from its BLF subsidiary, of which BLF assets ~~were~~ were sold, transferred, and assigned to GOF on December 18, 2020, as discontinued operations in the unaudited condensed consolidated ~~financial~~ financial statements for the ~~three~~six months ended ~~January~~April 3130, 2021 and 2020.

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

	January 31, 2021						October 31, 2020
	April 30, 2021						October 31, 2020
	Discontinued		Continuing		Total		Discontinued		Continuing		Total
Assets
Current Assets
Cash	$	41	$	3622,~~995~~890	$	3722,~~036~~931	$	26	$	21,483	$	21,509
Accounts receivable, net		-		5,~~277~~835,~~211~~207		5,~~277~~835,~~211~~207		225,368		4,933,322		5,158,690
Inventory		-		6042,~~303~~978		6042,~~303~~978		-		60,378		60,378
Prepaid expenses		-		~~198~~173,~~111~~145		~~198~~173,~~111~~145		46,047		170,874		216,921
Other assets		-		9,434		9,434		-		8,629		8,629
Total Current Assets		41		56,~~582~~083,~~054~~654		56,~~582~~083,~~095~~695		271,441		5,194,686		5,466,127
Property and equipment, net		-		~~128~~117,~~303~~164		~~128~~117,~~303~~164		8,~~053~~054		139,444		147,~~497~~498
Operating lease right-of-use asset, net		-		~~265~~243,~~239~~315		~~265~~243,~~239~~315		-		383,225		383,225
Intangible asset, net		-		~~434~~414,~~407~~956		~~434~~414,~~407~~956		174,314		453,858		628,172
Total Assets	$	41	$	6,~~410~~859,~~003~~089	$	6,~~410~~859,~~044~~130	$	453,809	$	6,171,213	$	6,625,022
Liabilities
Current Liabilities
Accounts payable and accrued expenses	$	160,448	$	2,~~501~~349,~~817~~458	$	2,~~662~~509,~~265~~906	$	592,072	$	2,138,666	$	2,730,738
Operating lease liability		-		8990,~~364~~485		8990,~~364~~485		-		178,327		178,327
Interest payable		-		~~168~~249,~~996~~780		~~168~~249,~~996~~780		-		161,427		161,427
Due to officer		-		1,801		1,801		-		1,801		1,801
Notes payable		-		1,~~337~~560,~~925~~261		1,~~337~~560,~~925~~261		-		1,337,925		1,337,925
Convertible notes payable, net		-		~~250~~553,~~006~~346		~~250~~553,~~006~~346		-		387,193		387,193
Derivative liability		-		~~240~~724,~~305~~407		~~240~~724,~~305~~407		-		180,404		180,404
Total Current Liabilities		160,448		45,~~590~~529,~~214~~538		45,~~750~~689,~~662~~986		592,072		4,385,743		4,977,815
Notes payable, net of current portion		-		34,826		34,826		-		34,826		34,826
Operating lease liability, net of current portion		-		~~175~~152,~~876~~830		~~175~~152,~~876~~830		-		214,284		214,284
Total Liabilities	$	160,448	$	45,~~800~~717,~~916~~194	$	45,~~961~~877,~~364~~642	$	592,072	$	4,634,853	$	5,226,925

2831

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~JANUARY~~APRIL 3130, 2021 AND 2020

(UNAUDITED)

NOTE 13: DISCONTINUED OPERATIONS (continued)

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

	Three Months Ended
	January 31,
	April 30,
	2021									2020
	Discontinued			Continuing			Total			Discontinued			Continuing			Total
Revenue	$	~~1,291~~-		$	3,~~453~~310,~~353~~680		$	3,~~454~~310,~~644~~680		$	-24,986		$	64,~~173~~622,~~662~~900		$	64,~~173~~647,~~662~~886
Cost of revenue		-			2,~~861~~563,~~348~~644			2,~~861~~563,~~348~~644			~~133~~216,~~312~~593			43,~~906~~695,~~793~~365			53,~~040~~911,~~105~~958
Gross Profit		~~1,291~~-			~~592~~747,~~005~~036			~~593~~747,~~296~~036			(~~133~~191,~~312~~607	)		1927,~~266,869~~535			1735,~~133,557~~928
Salaries and benefits		~~(10,599~~-	)		36229,~~213~~738			25229,~~614~~738			5766,~~269~~013			16,~~823~~777,~~007~~149			16,~~880~~843,~~276~~162
Selling and promotions expense		-			8256,~~030~~471			8256,~~030~~471			~~1,986~~531			16112,~~636~~329			18112,~~622~~860
Legal and professional fees		-			86,~~168~~808			86,~~168~~808			12,~~986~~151			~~201~~191,~~518~~876			~~203~~194,~~504~~027
General and administrative		~~12,236~~-			~~577~~581,~~291~~511			~~589~~581,~~527~~511			2426,~~672~~571			~~588~~557,~~834~~158			~~613~~583,~~506~~729
Total Operating Expenses		~~1,637~~-			~~703~~874,~~702~~528			~~705~~874,~~339~~528			8595,~~913~~266			27,~~629~~638,~~995~~512			27,~~715~~733,~~908~~778
Operating loss		~~(346~~-	)		(~~111~~127,~~697~~492	)		(~~112~~127,~~043~~492	)		(~~219~~286,~~225~~873	)		(16,~~363~~710,~~126~~977	)		(16,~~582~~997,~~351~~850	)
Other Income (Expense):
Interest expense		-			(6680,~~157~~784	)		(6680,~~157~~784	)		-(107	)		(51142,~~580~~099	)		(51142,~~580~~206	)
Initial derivative liability expense		-			(~~279~~520,~~512~~701	)		(~~279~~520,~~512~~701	)		-			-			-
Amortization of original issue discounts and deferred financing costs		-			(2737,~~512~~252	)		(2737,~~512~~252	)		-			(~~145~~173,~~584~~065	)		(~~145~~173,~~584~~065	)
Loss on extinguishment and settlement of debt		-			(~~118~~34,823	)		(~~118~~34,823	)		-			~~(723,773~~-	)		~~(723,773~~-	)
Gain on change in fair value of derivative liability		-			39,207			39,207			-			-			-
(Loss) Gain on change in fair value of derivative liability		-			(11,235	)		(11,235	)		-			-			-
Total Other (Expense) Income		-			(334,092	)		(334,092	)		-			(920,937	)		(920,937	)
Gain on settlement of liabilities		-			104,774			104,774			-			-			-
Loss before income taxes		(346	)		(445,789	)		(446,135	)		(219,225	)		(2,284,063	)		(2,503,288	)
Total Other (Expense) Income		-			(580,021	)		(580,021	)		(107	)		(315,164	)		(315,271	)
Loss before income taxes		-			(707,513	)		(707,513	)		(286,980	)		(7,026,141	)		(7,313,121	)
Income taxes		-			-			-			-			-			-
Net loss	$	~~(346~~-	)	$	(~~445~~707,~~789~~513	)	$	(~~446~~707,~~135~~513	)	$	(~~219~~286,~~225~~980	)	$	(27,~~284~~026,~~063~~141	)	$	(27,~~503~~313,~~288~~121	)

VERUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED APRIL 30, 2021 AND 2020

(UNAUDITED)

NOTE 13: DISCONTINUED OPERATIONS (continued)

	Six Months Ended
	April 30,
	2021									2020
	Discontinued			Continuing			Total			Discontinued			Continuing			Total
Revenue	$	1,291		$	6,764,033		$	6,765,324		$	24,986		$	10,796,562		$	10,821,548
Cost of revenue		-			5,424,992			5,424,992			349,905			8,602,158			8,952,063
Gross Profit		1,291			1,339,041			1,340,332			(324,919	)		2,194,404			1,869,485
Salaries and benefits		(10,599	)		265,951			255,352			123,283			8,600,156			8,723,439
Selling and promotions expense		-			138,501			138,501			2,517			128,965			131,482
Legal and professional fees		-			14,976			14,976			4,136			393,394			397,530
General and administrative		12,236			1,158,802			51,171,038			51,242			1,145,992			1,197,234
Total Operating Expenses		1,637			1,578,230			1,579,867			181,178			10,268,507			10,449,685
Operating loss		(346	)		(239,189	)		(239,535	)		(506,097	)		(8,074,103	)		(8,580,200	)
Other Income (Expense):
Interest expense		-			(146,941	)		(146,941	)		(108	)		(193,679	)		(193,787	)
Initial derivative liability expense		-			(800,213	)		(800,213	)		-			-			-
Amortization of original issue discounts and deferred financing costs		-			(64,764	)		(64,764	)		-			(318,649	)		(318,649	)
Loss on extinguishment and settlement of debt		-			(34,941	)		(34,941	)		-			(723,773	)		(723,773	)
Gain on change in fair value of derivative liability		-			27,972			27,972			-			-			-
Gain on settlement of liabilities		-			104,774			104,774			-			-			-
Total Other (Expense) Income		-			(914,113	)		(914,113	)		(108	)		(1,236,101	)		(1,236,209	)
Loss before income taxes		(346	)		(1,153,302	)		(1,153,648	)		(506,205	)		(9,310,204	)		(9,816,409	)
Income taxes		-			-			-			-			-			-
Net loss	$	(346	)	$	(1,153,302	)	$	(1,153,648	)	$	(506.205	)	$	(9,310,204	)	$	(9,816,409	)

NOTE 14: SUBSEQUENT EVENTS

On ~~February~~May 118, 2021, ~~the~~Anshu ~~Company~~Bhatnagar ~~entered~~resigned ~~into~~as a ~~Mutual~~member ~~Rescission~~of ~~and Release Agreement (~~the ~~“Rescission~~Board ~~Agreement”) with~~of ~~Eliot’s~~Directors ~~Adult Nut Butter, LLC (“Eliot’s”)~~ and the ~~member~~role ~~owners~~ of ~~Eliot’s~~Chairman ~~(the “Members”) as a result~~ of the ~~parties’~~Board ~~inability to agree upon advancement~~ of ~~Eliot’s~~Directors ~~business operations. Pursuant to the terms~~ of the ~~Rescission Agreement, among other things, all agreements between the parties including (i) Asset Purchase Agreement dated~~ ~~September~~Company. 1,Upon ~~2020,~~such ~~(ii) the Assignment and Assumption Agreement dated September 1~~resignation, ~~2020,~~Mr. ~~(iii) the Bill of Sale dated September 1, 2020, (iv) the Employment Agreement by and between Eliot~~Bhatnagar’s ~~and~~employment ~~Michael~~agreement ~~Kanter~~was ~~dated September 1, 2020, and (v) all related ancillary agreements (collectively, “Original Contracts”) were~~ terminated ~~and the parties released each other from all obligations arising from the Original Contracts~~.

On ~~February~~May 118, 2021, ~~the~~Apurva ~~Company~~Dhruv, ~~entered into a securities purchase agreement with an accredited investor pursuant to which~~ the Company ~~issued~~’s ~~and~~Chief ~~sold~~Financial ~~a promissory note in the principal amount of $303~~Officer,~~000~~ ~~(including~~was aappointed ~~$39,500~~as ~~original issue discount) (the “Note”). The Note matures on February 1, 2022, bears interest at~~ a ~~rate~~member of ~~12% per annum (increasing to 24% per annum upon~~ the ~~occurrence of~~Board ~~an Event~~ of ~~Default~~Directors ~~(as~~and ~~defined~~will serve in the ~~Note)),~~role ~~and~~of isChairman ~~only convertible into shares~~ of the ~~Company’s~~Board ~~common stock upon an Event~~ of ~~Default~~Directors ~~at a conversion price as specified in the Note, subject to adjustment. Payments shall be made in eight (8) installments each in the amount~~ of ~~$42,420 commencing on~~ the ~~fifth (5th) monthly anniversary following the issue date and continuing thereafter each thirty (30) days for eight (8) months. The Note may be prepaid by the~~ Company ~~at any time as set forth therein~~.

On February 17, 2021, Anshu Bhatnagar resigned as Chief Executive Officer of the Company, however, will remain a member of the Board of Directors and retain the role of Chairman of the Board of Directors. Mr. Bhatnagar’s resignation did not involve any disagreement with us or management relating to our operations, policies, practices, or otherwise.33

Additionally, 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 March 15, 2021, the assignment of the Company’s interest in the MLB license was completed in accordance with the letter agreement dated December 18, 2020, with ACG Global Solutions, Inc. and Gam on Foods, Inc.

On March 17, 2021, as a result of the Company’s failure to timely file its Form 10-Q, 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.

On March 25, 2021, the assignment of the Company’s interest in the NHL license was completed in accordance with the letter agreement dated December 18, 2020, with ACG Global Solutions, Inc. and Game on Foods, Inc.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto, and our audited consolidated financial statements and related notes for our fiscal year ended October 31, 2020 found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 19, 2021.

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

Since August 1, 2018, we, through our wholly-owned subsidiary, Verus Foods, Inc. (“Verus Foods”), an international supplier of consumer food products, have been focused on international consumer packaged goods, foodstuff distribution and wholesale trade. Our fine food products are sourced in the United States and exported internationally. We market 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. We have also begun to explore new consumer packaged goods (“CPG”) non-food categories, such as cosmetic and fragrances, for future product offerings.

We currently have 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 (“UAE”), Oman, Bahrain, Qatar, Kingdom of Saudi Arabia and Kuwait. Our long-term goal is to source goods and generate international wholesale and retail CPG sales in North and South America, Europe, Africa, Asia, and Australia.

In addition to the foregoing, since our acquisition of BLF during April 2019, pursuant to which we acquired a license with 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. 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.

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

Recent Developments

Eliot’s Adult Nut Butter

On February 1, 2021, the Company entered into a Mutual Rescission and Release Agreement (the “Rescission Agreement”) with Eliot’s Adult Nut Butter, LLC (“Eliot’s”) and the member owners of Eliot’s (the “Members”) as a result of the parties’ inability to agree upon advancement of Eliot’s business operations. Pursuant to the terms of the Rescission Agreement, among other things, all agreements between the parties including (i) Asset Purchase Agreement dated September 1, 2020, (ii) the Assignment and Assumption Agreement dated September 1, 2020, (iii) the Bill of Sale dated September 1, 2020, (iv) the Employment Agreement by and between Eliot’s and Michael Kanter dated September 1, 2020, and (v) all related ancillary agreements (collectively, “Original Contracts”) were terminated and the parties released each other from all obligations arising from the Original Contracts.

Accordingly, the Company concluded that no business combination occurred on September 1, 2020, and therefore no financial information related to this transaction has been included in the Company’s consolidated financial statements as of and for the three and six months ended April 30, 2021.

Critical Accounting Policies and Estimates

The discussion and analysis of the Company’s financial condition and results of operations are based upon its unaudited condensed ~~consolidated~~ consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, management evaluates past judgments and estimates, including those related to bad debts, potential impairment of intangible assets, accrued liabilities and contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies and related risks described in Note 2 above and the Company’s Annual Report on Form 10-K as filed with the SEC on March 19, 2021 are those that depend most heavily on these judgments and estimates. As of ~~January~~April 3130, 2021, there had been no material changes to any of the critical accounting policies contained therein.

Results of Operations

Three months ended ~~January~~April 3130, 2021 compared to three months ended ~~January~~April 3130, 2020

Continuing Operations

Revenue

Our revenue decreased to $3,~~453~~310,~~353~~680 for the three months ended ~~January~~April 3130, 2021, compared to $64,~~173~~622,~~662~~900 for the three months ended ~~January~~ ~~31,~~April 30, 2020, a decrease of $21,~~720~~312,~~309~~220 or 4428%. The decrease is the result of decreased international revenue with existing and new customers, partially offset by Pachyderm Labs revenue of approximately $348,000. We remain focused on reducing the order backlog with customers by continuing to increase sales to customers and through increased working capital funding that allows us to procure additional products for sale.

Cost of Revenue

Cost of revenue totaled $2,~~861~~563,~~348~~644 for the three months ended ~~January~~April 3130, 2021, compared to $43,~~906~~695,~~793~~365 for the three months ended ~~January 31,~~April 30, 2020, a decrease of $21,~~045~~131,~~445~~721 or 4231%. 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 $~~703~~874,~~702~~528 for the three months ended ~~January~~April 3130, 2021, compared to $27,~~629~~638,~~995~~512 for the three months ended ~~January~~April 3130, 2020, a decrease of $16,~~926~~763,~~293~~984, or 7389%. The decrease is primarily due to a decrease of of $16,~~727~~549,~~431~~216 in stock-based compensation expense related to performance warrants earned by our former Chief Executive Officer ~~during~~ during the prior year period, coupled with lower ~~expenses~~selling ~~across~~and ~~all~~promotions ~~other~~expense ~~categories,~~and ~~except~~legal ~~selling~~ and ~~promotions~~professional ~~expense~~fees, aspartially offset by a ~~result of~~slight ~~the~~increase ~~experienced~~in ~~revenue~~general ~~decline~~and administrative expenses, while salaries and benefits was flat.

Other (Expense) Income

Our other (expense) income, net ~~decreased~~increased by $~~586~~264,~~845~~857 for the three months ended ~~January~~April 3130, 2021. The ~~decrease~~increase is primarily the result of increases ~~decreases~~ in ~~loss~~initial onderivative ~~extinguishment/settlement~~liability, ofloss ~~debt~~on ~~due to conversions of~~ convertible ~~notes~~note payable ~~and~~extinguishment ~~amortization~~/ ~~of original~~settlement, ~~issue discounts~~ and ~~deferred~~loss ~~financing costs, coupled with a gain~~ on ~~the~~ change in fair value of derivative liability. ~~The~~ ~~decrease~~This increase was partially offset by andecreases ~~increase~~ in ~~initial~~amortization ~~derivative~~of ~~liability~~original ~~expense~~issue discounts and deferred financing costs and interest expense, coupled with an increase in gain on settlement of liabilities.

Net Loss from Continuing Operations

We generated a net loss from continuing operations of $~~445~~707,~~789~~513 for the three months ended ~~January~~April 3130, 2021, compared to a net loss of $27,~~284~~026,~~063~~ 141 for the three months ended ~~January~~April 3130, 2020, a decrease of $16,~~838~~318,~~274~~628. The decrease in net loss is primarily driven by the decrease in operating expenses and other expenses, partially offset by the decrease in gross profit as disclosed above.

Discontinued Operations

AsFor ~~our~~the ~~discontinued~~three ~~operations~~months ~~were~~ended ~~sold,~~April ~~transferred~~30, ~~and assigned effective December 18~~2021, ~~2020~~there ~~(see~~are ~~Note~~no ~~13)~~revenue, wecost ~~generated $1,291~~ of revenue, ~~incurred $1,637 of~~ operating expenses, ~~and~~other ~~generated~~income a(expense), or net ~~loss of $346~~ income from discontinued operations ~~for the three months ended January 31, 2021~~. ~~During~~For the three months ended ~~January~~April 3130, 2020, we generated no$24,986 of revenue, incurred $~~133~~216,~~312~~593 of cost of of revenue, incurred $8595,~~913~~265 of operating expenses, and generated a net loss of $~~219~~286,~~225~~980 from discontinued operations.

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Six months ended April 30, 2021 compared to three months ended April 30, 2020

Continuing Operations

Revenue

Our revenue decreased to $6,764,033 for the six months ended April 30, 2021, compared to $10,796,562 for the six months ended April 30, 2020, a decrease of $4,032,529 or 37%. The decrease is the result of decreased international revenue with existing and new customers, partially offset by Pachyderm Labs revenue of approximately $348,000. We remain focused on reducing the order backlog with customers by continuing to increase sales to customers and through increased working capital funding that allows us to procure additional products for sale.

Cost of Revenue

Cost of revenue totaled $5,424,992 for the six months ended April 30, 2021, compared to $8,602,158 for the six months ended April 30, 2020, a decrease of $3,177,166 or 37%. 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 $1,578,230 for the six months ended April 30, 2021, compared to $10,268,507 for the six months ended April 30, 2020, a decrease of $8,690,277, or 85%. The decrease is primarily due to a decrease of $8,276,647 in stock-based compensation expense related to performance warrants earned by our former Chief Executive Officer during the prior year period, coupled with lower legal and professional fees and salaries and benefits, partially offset by slight increases in general and administrative expenses and selling and promotions expense.

Other (Expense) Income

Our other (expense) income, net decreased by $321,988 for the six months ended April 30, 2021. The decrease is primarily the result of decreases in loss on convertible note payable extinguishment / settlement, amortization of original issue discounts and deferred financing costs and interest expense, partially offset by an increase in initial derivative liability expense and gains on change in fair value of derivative liability and settlement of liabilities.

Net Loss from Continuing Operations

We generated a net loss from continuing operations of $1,153,302 for the six months ended April 30, 2021, compared to a net loss of $9,310,204 for the six months ended April 30, 2020, a decrease of $8,156,902. The decrease in net loss is primarily driven by the decrease in operating expenses and other expenses, partially offset by the decrease in gross profit as disclosed above.

Discontinued Operations

As our discontinued operations were sold, transferred, and assigned effective December 18, 2020 (see Note 13), we generated $1,291 of revenue, incurred $1,637 of operating expenses, and generated a net loss of $346 from discontinued operations for the six months ended April 30, 2021. During the six months ended April 30, 2020, we generated $24,986 of revenue, incurred $349,905 of cost of revenue, incurred $181,178 of operating expenses, and generated a net loss of $506,205 from discontinued operations.

Liquidity and Capital Resources

At ~~January~~April 3130, 2021, we had $3622,~~995~~890 of cash and a working capital surplus of $~~831~~393,~~433~~709 as compared to cash of $21,483 and a working ~~capital~~ capital surplus of $670,680 at October 31, 2020.

Net cash used in operating activities of continuing operations was $~~111~~694,~~932~~462 for the ~~three~~six months ended ~~January~~April 3130, 2021 as compared to net cash used in operating activities continuing operations of $~~643~~1,~~262~~338,830 for the ~~three~~six months ended ~~January~~April 3130, ~~20202~~2020. The decrease in net cash used in operating activities of continuing operations was primarily due to decreases in accounts receivable, inventories, ~~and~~ prepaid expenses, and ~~partially offset by an increase in~~ accounts payable and accrued expenses.

There was no net cash used in investing activities of continuing operations for the ~~three~~six months ended ~~January~~April 3130, 2021 or 2020.

We have financed our operations since inception primarily through proceeds from equity and debt financings and revenue derived from operations. During the ~~three~~six months ended ~~January~~April 3130, 2021, net cash provided by financing activities of continuing operations was $~~105~~673,~~300~~725 as compared to $~~476~~1,~~000~~295,479 during the ~~three~~six months ended ~~January~~April 3130, 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, 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. Although these temporary office closures created minor disruption to our business operations, such disruptions to date have not been significant.

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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. 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 April ~~January 31~~30, 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.

Based on this evaluation, management concluded that our disclosure controls and procedures were effective as of ~~January~~April 3130, 2021.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. 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. As of the date of this Quarterly Report on Form 10-Q, except as set forth herein, management believes that there are no claims against us, which it believes will result in a material adverse effect on our business or financial condition.

Item 1A. Risk Factors.

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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 5. Other Information

None.

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Item 6. Exhibits.

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)
10.1		Employment Agreement by and between Verus International, Inc. and Anshu Bhatnagar (Incorporated by reference to Form 8-K filed on April 29, 2020)
10.2		Form of Securities Purchase Agreement dated July 22, 2020 (Incorporated by reference to Form 10-Q filed on September 21, 2020)
10.3		Form of Note dated July 22, 2020 (Incorporated by reference to Form 10-Q filed on September 21, 2020)
10.4		Amendment No. 3 to Donald P. Monaco Insurance Trust Note (Incorporated by reference to Form 8-K filed on August 20, 2020)
10.5		Amendment No. 4 to Donald P. Monaco Insurance Trust Note (Incorporated by reference to Form 8-K filed on October 30, 2020)
10.6		Special Amendment to note dated March 31, 2020 (Incorporated by reference to Form 8-K filed on December 28, 2020)
10.7		Form of Agreement (Incorporated by reference to Form 8-K filed on December 28, 2020)
10.8		Form of Securities Purchase Agreement dated January 13, 2021 (Incorporated by reference to Form 8-K filed on January 25, 2021)
10.9		Form of Note dated January 13, 2021 (Incorporated by reference to Form 8-K filed on January 25, 2021)
10.10		Employment Agreement by and between Verus International, Inc. and Apurva Dhruv (Incorporated by reference to Form 8-K filed on February 23, 2021)
10.11		Form of Securities Purchase Agreement dated January 4, 2021 (Incorporated by reference to Form 10-K filed on March 9, 2021)
10.12		Form of Note dated January 4, 2021 (Incorporated by reference to Form 10-K filed on March 9, 2021)
10.13		Form of Securities Purchase Agreement dated February 1, 2021 (Incorporated by reference to Form 10-K filed on March 9, 2021)
10.14		Form of Note dated February 1, 2021 (Incorporated by reference to Form 10-K filed on March 9, 2021)
10.15*		Form of Securities Purchase Agreement dated April 7, 2021
10.16*		Form of Note dated April 7, 2021
10.17*		Form of Securities Purchase Agreement dated April 8, 2021
10.18*		Form of Note dated April 8, 2021
10.19*		Form of Securities Purchase Agreement dated April 15, 2021
10.20*		Form of Note dated April 15, 2021
31.1*		Certification of Chief Executive and Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Executive and Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Chief Executive and Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Chief Executive and 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*		XBRL Instance Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document
101.SCH*		XBRL Taxonomy Extension Schema Document

*Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Verus International, Inc. /s/ Apurva Dhruv Apurva Dhruv Chief Executive Officer (Principal Executive, Financial, and Accounting Officer), ~~since~~June ~~February 17~~21, 2021 ~~March 26, 2021 /s/ Anshu Bhatnagar Anshu Bhatnagar Chief Executive Officer (Principal Executive, Financial, and Accounting Officer), through February 17, 2021 March 26, 2021~~

3641

Filing Compare · VERUS INTERNATIONAL, INC.