{"url_path":"/sec/cik-0001440153/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A ****RISK FACTORS**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-07-20","source_url":"https://www.sec.gov/Archives/edgar/data/1440153/0001096906-26-001097-index.html","accession_number":"0001096906-26-001097","cik":"0001440153","ticker":null,"issuer_name":"Bakhu Holdings, Corp.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1440153/0001096906-26-001097-index.html","primary_entity_key":"0001440153","primary_entity_name":"Bakhu Holdings, Corp."},"word_count":12948,"has_tables":true,"body_markdown":"**ITEM 1A.****RISK FACTORS** \n\n \n\n*Investment in our common stock involves significant risk. You should carefully consider the information described in the following risk factors, together with the other information appearing elsewhere in this report, before making an investment decision regarding our common stock. If any of the events or circumstances described in these risks factors occur, our business, financial conditions, results of operations, and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or a part of your investment in our common stock.*\n\n \n\n**Risks Related to Ukrainian Crises and 2026 Iran War**\n\n \n\n**Russia’s recent military intervention in Ukraine and Iran and the international community’s responses have created substantial political and economic disruption, uncertainty, and risk.**\n\n \n\nRussia’s military intervention in Ukraine in late February 2022, Ukraine’s widespread resistance, and the NATO led and United States coordinated economic, financial, communications, and other sanctions imposed by other countries have created significant political and economic world uncertainty and contributed to worldwide inflation. There is significant risk of expanded military confrontation between Russia and other countries, possibly including the United States. Current and likely additional international sanctions against Russia may contribute to higher costs, particularly for petroleum-based products.\n\n \n\nAdditionally, the 2026 Iran War has caused, and may continue to cause, regional military confrontations between Iran and neighboring countries (and their respective allies around the world), which have caused and may continue to cause political and economic disruptions that may adversely affect our operations.\n\n \n\nThe Ukraine and Iran military activities and related actions, responses, and consequences that cannot now be predicted or controlled may contribute to worldwide economic reversals and inflation. In these circumstances, our efforts to commercialize our technology may be delayed or otherwise negatively impacted.  \n\n \n\n**Risks Related to our Business**\n\n \n\n**Our entire business relies on the commercial-scale validation of our licensed cell-extraction and replication technology.**\n\n \n\nOur ability to exploit our licensed cell-extraction and replication technology for the commercial production of cannabinoids through joint ventures, strategic partners, and sublicenses is conditional on satisfactory completion of ongoing process and product refinement and customization, which has not been funded. We cannot predict when or whether we will obtain necessary funding or complete our planned work. We cannot ensure that the substantive results of our planned efforts will be accepted by prospective commercial partners. Our commercialization efforts will be dependent on our ability to convince prospective commercial partners that our licensed cell-extraction and replication technology warrants the required commitment of capital, expertise, and other resources in the face of related risks, regulatory hurdles, and competitive factors. Even after a successful completion of planned process and product refinement and customization, there will initially be no established commercially operating facility using this\n\nPage **23**\n\ntechnology successfully to support our commercialization efforts. We cannot ensure that any initial costs we incur will be recovered. Our lack of substantial commercialization progress in the year ended July 31, 2024, due to limited available financial and technical resources may have impaired the credibility and efficacy of our licensed technology and, therefore, our future commercialization efforts.\n\n \n\n**We cannot accurately predict when planned further work on our licensed technology will be completed satisfactorily.**\n\n \n\nWe cannot accurately predict when the planned further work related to our licensed technology, which we believe will accelerate our commercialization efforts, can be funded or completed. Any delay in obtaining required funding or completing the planned work could postpone the commencement of our commercialization efforts and our potential for revenue. Our planned laboratory work will require substantial financial, technical, and management resources that have not been arranged, so we cannot predict whether or when the required work will be completed. We expect that the foregoing will require us to obtain additional capital, which we cannot ensure that we will be able to obtain on acceptable terms or at all. If required financing and planned work cannot be completed timely, we may have to abandon efforts involving the cell-extraction and replication technology for cannabinoid production and seek other business opportunities or suspend operations. Consequently, we would be unable to recover previous costs related to these abandoned activities. We have no other technology or know-how to exploit commercially.\n\n \n\n**Our licensed proprietary cannabinoid production technology has only been tested on a limited basis by related parties without qualified third-party replication.**\n\n \n\nTo date the propriety technology that we have licensed has only been tested on a limited basis by our affiliates, Cell Science, which is also the licensor, and OZ Company, both of which benefit from favorable test results. Further, the testing was conducted by or under the supervision of Dr. Peter Whitton, the inventor of the licensed technology and our director, who will benefit substantially from the successful test that triggered the release of a large block of our common stock and a one-time payment required under the license agreement under which we acquired our rights. No qualified third party has independently replicated the entire process, results, processes, or procedures. Accordingly, we expect that prospective third-party investors, commercialization partners, investment bankers, and others will want to conduct their own independent tests to confirm the test results to date before transacting business with us. This requirement that potential commercial partners or others commit their own financial, technical, and management efforts to confirm the efficacy, reliability, and predictability of the proprietary technology may be a substantial barrier to commercialization. Our failure during the preceding fiscal year to further confirm the technical and commercialization validity of our technology may have impaired its credibility.\n\n \n\n**Our license from Cell Science may be terminated if we fail to meet certain covenants, which could adversely affect our commercialization program.**\n\n \n\nUnder the Integrated License Agreement through which we were granted our License, we remain obligated to pay certain patent prosecution and other intellectual property protection costs that could be substantial. We do not plan to establish or maintain any deposits or reserves to pay these costs. If we fail to meet these obligations, Cell Science could terminate our license. Under our Integrated License Agreement, Cell Science would then have the right to assume our position in any outstanding commercialization arrangements. If Cell Science assumes outstanding obligations, it would step into our position as commercial partner or sublicensee, precluding us from participating in further revenue from that relationship, notwithstanding our potential continuing liability for our obligations to commercial partners, or from further commercialization efforts. The possibility that Cell Science, a foreign entity, may assume our obligations to our commercial partners may be a risk to them that may have a material adverse effect on our commercialization efforts. If Cell Science refuses to assume our obligations under our commercialization arrangements, the rights of our commercial partners may be subject to dispute, which would likely result in claims for damages that our commercial partners would seek to recover from us. The existence of the right of Cell Science to terminate our license on which our commercialization arrangements will be based may be considered a substantial risk to potential commercial partners and correspondingly impair the success of our commercialization efforts.\n\nPage **24**\n\n**We have defaulted under a Promissory Note Payable to OZ Company**\n\n \n\nWe are in default under a promissory note payable to OZ company in the principal amount of $150,000 which was due on December 15, 2024. We currently do not have funds with which to pay this amount and have not arranged or obtained commitments for such funding from any source. We cannot ensure that we can negotiate any desired extension. Potential new providers of financing to the company may preclude or limit such payment from fresh funds\n\n \n\n**We are obligated to pay Cell Science a one-time payment of $3.5 million.**\n\n \n\nWe are required to pay Cell Science a one-time payment under a one-year note for $3.5 million, currently due on December 31, 2027. While not currently due, we do not have the funds with which to pay this amount and have not arranged or obtained commitments for such funding from any source. We cannot ensure that we can negotiate any desired extension. Potential new providers of financing to the company may preclude or limit such payment from fresh funds.\n\n \n\n**We are obligated to pay OZ Company under a Working Capital Promissory Note.**\n\n \n\nWe are required to pay OZ Company approximately $3,780,872 under a working capital promissory note, currently due on December 31, 2027. While not currently due, we do not have the funds with which to pay this amount and have not arranged or obtained commitments for such funding from any source. We cannot ensure that we can negotiate any desired extension. Potential new providers of financing to the company may preclude or limit such payment from fresh funds.\n\n \n\n**Our ability to attract and enter joint ventures, strategic alliances, or sublicenses with producers, distributors, and sellers is uncertain.**\n\n \n\nWe will need to identify and attract qualified, interested third parties to commercialize our cell-extraction and replication technology for cannabinoid production. We cannot ensure that we will be able to successfully enter into any commercialization arrangement. We have no plans to build a manufacturing plant and will seek to sub contract manufacture to third party plants for the following reasons: We estimate that a new facility designed to produce about 5,000 pounds of dry plant-derived material per month using our licensed technology would require a capital investment of approximately $3.9 million to $4.6 million for equipment, plus any necessary leasehold improvements to support the production facility. Additionally, the facility will require capital for employees and contractors to initiate and thereafter support the production process, utilities, taxes, debt and or lease service, and necessary insurance coverage.  The facility from initiation of growing the first seed cultures will require up to twelve months before the first harvest. We expect to encounter third-party reluctance to commit substantial capital to use our technology, which will at least initially be commercially untried by others. Accordingly, we cannot predict when or the pace at which we may be able to enter commercial arrangements to generate revenue. For all of these reasons subcontract manufacturing or other commercialization strategies, will be explored.\n\n \n\n \n\n**We cannot ensure that we will be able to transfer the required technical know-how respecting our licensed technology to enable commercial partners to commercially produce cannabinoids. **\n\n \n\nOur licensed cell-extraction and replication technology for cannabinoid production is relatively sophisticated and complex and requires scientific expertise in sterile production facility plant construction and operation, particularly as compared to traditional open-grown, greenhouse, or hydroponic production. We cannot ensure that the licensed technology transfer and consulting strategies we plan to develop and use will enable our potential commercial partners to produce cannabinoids reliably, economically, and competitively. \n\n \n\n**Our long-term success will depend on the profitability of our commercialization arrangements, which we cannot control or predict.**\n\n \n\nOur long-term success will depend on the success of our future commercial partners and their ability to construct and operate commercial cannabinoid production facilities, market their products competitively, and achieve an overall, sustainable profit. The degree of commercial success and profitability of our commercial partners will affect our success in attracting additional commercial partners and the economic terms of our third-party arrangements. We cannot ensure that our commercial partners will be successful, which may incentivize us to adjust the terms of our existing or new arrangements to include terms less favorable to us.\n\nPage **25**\n\n**Others may challenge the validity and enforceability of the licensed patents, trade secrets, and related intellectual property. **\n\n \n\nOur future success is dependent on the validity and enforceability of our licensed patents, trade secrets, intellectual property, and related rights. Unauthorized parties may attempt to replicate or otherwise obtain and use the licensed intellectual property granted to us. Policing the unauthorized use of our current or future rights to patents, trade secrets, intellectual property, or licensed rights and enforcing these rights against unauthorized use by others could be difficult, expensive, time-consuming, and unpredictable. Identifying unauthorized use of these rights is difficult because we may be unable to effectively monitor and evaluate whether products being distributed by our competitors were made using our technology, including parties such as unlicensed producers. In addition, in any infringement proceeding, some or all our trademarks, patents, other intellectual property rights, licensed rights, trade secrets or other proprietary know-how, or arrangements or agreements that we are seeking to protect may be found invalid, unenforceable, anticompetitive, or not infringed. An adverse result in any litigation or defense proceeding could put one or more of our trademarks, patents, other intellectual property, or licensed rights at risk of being invalidated or interpreted narrowly and could put existing intellectual property applications for patent protection at risk of not being issued. Any or all of these events could materially and adversely affect our business, financial condition, and results of operations.\n\n \n\nIn addition, other parties may claim that our products infringe on their proprietary and perhaps patent-protected rights. Such claims, whether meritorious or not, may subject us to significant financial and managerial costs and expenses, legal fees, injunctions, temporary restraining orders, or an award of damages. We may need to obtain licenses from third parties that allege that we have infringed on their lawful rights, which may not be available on terms acceptable to us or at all. In addition, we may not be able to use or obtain licenses or other rights for intellectual property that we do not own on terms that are favorable to us or at all.\n\n \n\nUnder our Integrated License Agreement we are obligated to defend the licensed technology against third-party infringement. Therefore, we may be obligated to incur substantial legal, expert witness, and related litigation costs in any litigation that may be involved, whether initiated by us or a third party. We cannot ensure that we would be able to recover any costs incurred by us.\n\n \n\n**The markets for cannabinoid products may not grow at the rate projected by industry market data or at all.**\n\n \n\nWe partially base our long-term business model on the anticipated long-term growing demand for cannabis and cannabis-related products in North America, particularly in the United States, because of regulatory liberalization and growing social acceptance and use. We cannot ensure that our projections, based on numerous assumptions and projected effects of future events, will materialize. Limitations or slowness in the increase of demand for cannabis and cannabis-related products in the United States would also limit our possible growth. We cannot predict the extent to which some reported local market saturation may affect us. There are recent indications that growth for cannabis products in certain markets may not be growing as we initially anticipated or may be tempering or declining. We cannot predict future market demand in any industry segment.\n\n \n\nThe states that have approved cannabis consumption for either medical or recreational purposes have varied compliance and tax structures that may adversely impact the ability of cannabis licensees to operate profitably. Many of the states have aggressive growth plans in terms of the number of licenses for cultivation, manufacturing, and distribution that have been, or are being granted.  While the number of licenses a state may grant is incentivized by projected tax revenue from cannabis, particularly in states (approximately 24) that have granted full recreational consumption, the strategy may depress earnings because of competition and or oversupply.  If this occurs, it may make it more difficult for prospective sublicensees of our company to attract the necessary capital to build and operate production facilities.\n\n \n\n**Consumers may consider our licensed technology will result in a genetically modified organism.**\n\n \n\nSome consumers may consider our laboratory plant-derived cell production method constitutes genetic modification and resist acceptance of cannabinoids produced by commercial partners.\n\nPage **26**\n\n**Subsequent clinical or laboratory research on the characteristics of cannabinoids or their effects could adversely affect public attitudes and consumer perception towards cannabinoids and, ultimately, the commercialization of our licensed technology.**\n\n \n\nA variety of institutions worldwide are continuing clinical and laboratory research of the use and effects of cannabinoids. Research in the United States and internationally regarding the medical benefits, viability, safety, efficacy, and dosing of cannabis or isolated cannabinoids such as CBD and THC remains in relatively early stages. Future research, studies, and clinical trials may lead to conclusions that dispute or conflict with the current general understanding and belief regarding the medical or recreational benefits, viability, safety, efficacy, dosing, and social acceptance of cannabinoids and the demand for the products produced by our commercial partners.\n\n \n\nWe believe the cannabinoid industry is highly dependent upon consumer perception regarding the safety, efficacy, and quality of cannabis and related products distributed to consumers. Consumer perception of the products produced by commercial partners using our licensed technology can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention, informal social media exchanges, and other publicity regarding the consumption or use of cannabinoid products. We cannot ensure that future scientific research, reports, findings, regulatory proceedings, litigation, media attention, or other publicity will be favorable to the cannabis market or products or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention, informal social media exchanges, or other publicity that is perceived as less favorable than, or that questions, earlier research reports, findings, or publicity could have a material adverse effect on the demand for use of the licensed technology and consequently, our business, results of operations, financial condition, and cash flows. Negative publicity or public opinion may adversely affect consumer demand for cannabinoids produced and sold by our commercial partners, which would also adversely affect our ability to establish new commercial relationships that generate royalty revenues from commercial partners or sublicensees. In turn, these adverse effects would have an adverse impact on our business, results of operations, financial condition, and cash flows.\n\n \n\nUnfavorable publicity or other media attention regarding the safety, efficacy, and quality of cannabis and related products produced using the licensed technology or associating the consumption of cannabis or related products with illness or other negative effects or events could also have such a material adverse effect. Negative publicity or other media attention could arise even if the adverse effects associated with such products resulted from a commercial partner’s failure to use the licensed technology correctly or a consumer’s failure to consume or use the products appropriately or as directed. The increased usage of social media and other web-based tools to generate, publish, and discuss user-generated content and to connect with other users has made it significantly easier for individuals and groups to communicate and share opinions and views about us, our activities, or our licensed technology, whether true or not. Although we intend to operate in a manner that will be respectful to all stakeholders and protect our image and reputation, we will not be able to control how we are perceived by others. Reputational loss may result in decreased investor confidence, increased challenges in developing and maintaining community relations, and impediment to our overall ability to advance our projects, thereby having a material adverse effect on our financial performance, financial condition, cash flows, and growth prospects.\n\n \n\n**We may encounter difficulties and increased costs in arranging a new suitable laboratory for our equipment and further technology testing.**\n\n \n\nAs a result of our default under the settlement agreement with VO Leasing, and our abandoning the laboratory facility, VO leasing has since disposed of all equipment, machinery and supplies which secured the obligations under the settlement agreement.  In addition to finding a suitable licensed facility, we will have to install substantial and costly tenant improvements and purchase new equipment and related supplies to outfit the new location, which will involve substantial expenses that we may not recover.\n\n \n\n**Third parties may refuse to do business with us if they perceive that we are too closely connected to the cannabis industry.**\n\n \n\nAlthough we do not cultivate, produce, manufacture, or sell cannabis-derived products, some firms with which we may want to transact business may find the cannabis industry generally objectionable or determine that they are exposed to reputational risk because they perceive that we are too closely connected to the cannabis industry. As a result, these firms may refuse to deal with us. Failure to establish or maintain business relationships in general could have a material adverse effect on us.\n\nPage **27**\n\nSuppliers of off-the-shelf or custom laboratory equipment, as well as suppliers of our media culture ingredients, may determine that supporting our licensed science production facilities may comprise economic, reputational or regulatory risk.\n\n \n\nOur connection to the retail cannabis industry may impair our access to the large and lucrative pharmaceutical/biotechnology / food and or beverage sectors in due course.\n\n \n\nSecurities broker-dealers, clearing firms, and others in the financial services industry may refuse to handle securities transactions in our stock because of our connections with the cannabis industry.\n\n \n\n**Risks Related to Significant Regulation**\n\n \n\n**The activities of our potential commercial partners are highly regulated by extensive and complex federal and state regulatory regimes that make maintaining compliance difficult and challenging.**\n\n \n\nThe commercial cannabis industry is a relatively new industry, and we anticipate that regulations will constantly be changing as the federal government and each state monitors the applicable regulatory regime and commercial activity. Our commercial partners will be subject to a variety of laws, regulations, and guidelines relating to the production, manufacturing, management, transportation, disposal, storage, distribution, sales, use, health, testing and safety of cannabis and derived products and byproducts as well as laws and regulations relating to drugs, controlled substances, health, and safety. In addition, publicly held cannabinoid producers may be subject to other federal and state securities laws and the rules and regulations of self-regulatory organizations such as the exchanges on which their securities are traded.\n\n \n\nLaws, regulations, and guidelines generally applicable to the cannabis industry domestically and internationally may change in unforeseen ways. New laws and changes to existing laws or regulatory regimes may adversely affect our commercial partners directly and us indirectly. Regulatory changes could reduce demand for cannabis-derived products and byproducts, which would decrease the potential success of our commercialization efforts, the profitability of potential strategic partners or sublicensees, and the potential for revenue to us, which would adversely affect our financial condition, results of operations, and prospects.\n\n \n\nAmendments to current laws, regulations, and permitting requirements, or more stringent application of existing laws or regulations, may have a material adverse effect on our commercial partners or us and our business, resulting in increased capital expenditures or production costs, reduced levels of production, or abandonment or delays in the development of facilities.\n\n \n\nOur ability to commercialize our technology will depend on the compatibility of our plant cell-extraction and replication technology with current regulatory regimes designed to regulate live-grow plant production and the predictability of the nature and extent of further regulation. Further, our business will depend on the ability of our commercial partners to maintain compliance with these laws, regulations, and interpretative and enforcement policies. Delays by our commercial partners in obtaining or failing to obtain and maintain the requisite regulatory approvals may significantly delay or negatively impair our commercialization program.\n\n \n\nWe may incur ongoing costs and obligations related to regulatory compliance or assisting our commercial partners in their regulatory compliance. Failure to comply with applicable laws and regulations could result in regulatory or agency proceedings, investigations, and enforcement actions, including orders causing operations to cease or be curtailed and levying damage awards, fines, penalties, or corrective measures, all of which would require unanticipated capital expenditures or remedial actions. Parties may be liable for civil or criminal fines or penalties imposed for violations of applicable laws or regulations. The outcome of any regulatory or agency proceedings, investigations, audits, and enforcement actions could harm our commercial partners directly and us indirectly.\n\nPage **28**\n\n**We are subject to various state regulations governing the production, transportation, and sale of cannabinoids generally that can severely restrict our ability to execute our business plan.**\n\n \n\nStates that permit the production, transportation, and sale of cannabinoids for either medicinal or recreational purposes have adopted a comprehensive regulatory and taxation regime. The state regulations generally impose stringent record keeping, labeling, and processing compliance, reporting, and taxation requirements. State enforcement of applicable laws, regulations, and administrative policies can result in sanctions, fines, license termination and other sanctions against companies producing, transporting, or selling cannabinoids, State compliance requirements will directly apply to our strategic partners and will indirectly require us to adopt compatible policies and practices.\n\n \n\n**We cannot ensure that state and local regulatory regimes will accommodate our plant cell-extraction and replication cannabinoid production technology.**\n\n \n\nWe cannot ensure that state and local cannabinoid regulatory regimes that are based on plant live-grow production are compatible with our plant cell-extraction and replication technology. We anticipate that we will need to address the regulatory regimes in each state and local jurisdiction to ensure that it is compatible with and will accommodate our plant cell-extraction and replication production technology. Further, we cannot ensure that any necessary changes in laws, regulations, or administrative policies or interpretations will be adopted or implemented. Accordingly, we may be limited in or prohibited from establishing commercial partners in certain states.\n\n \n\n**Strict enforcement of federal laws regarding cannabis would likely severely restrict our ability to execute our business plan.**\n\n \n\nIn the United States, cannabis is largely regulated at the state level. Currently, in the United States, approximately 40 states, the District of Columbia, Puerto Rico, Guam, and the U.S. Virgin Islands have legalized medical cannabis, and approximately 24 states, in addition to the District of Columbia, the Commonwealth of the Northern Mariana Islands, and Guam, have legalized cannabis for recreational purposes or \"adult-use.\" Notwithstanding the permissive regulatory environment of cannabis at the state level, cannabis continues to be categorized as a controlled substance under the Controlled Substances Act of 1970 (the \"CSA\"), and as such, cultivation, distribution, sale, and possession of cannabis violates federal law in the United States. As of June 2026, unlicensed cannabis remains classified as a Schedule I controlled substance under the CSA, though licensed medical cannabis has been reclassified to Schedule III. On December 18, 2025, the President issued an executive order directing federal agencies to expedite the process of rescheduling marijuana, and a related administrative hearing process remains ongoing. Rescheduling to Schedule III, by itself, would not bring state-legal cannabis businesses into compliance with federal law, since Schedule III substances generally may only be dispensed pursuant to a valid prescription, and cannabis is not currently an FDA-approved prescription drug.\n\n \n\nThe inconsistency between federal and state laws and regulations is a major risk factor. Even in those jurisdictions in which the manufacture and use of medical or recreational cannabis has been legalized at the state level, the interstate production, transportation, possession, sale, and use of cannabis remain violations of federal law that are punishable by imprisonment, substantial fines, and forfeiture. Our commercial partners will be directly subject to these laws and regulations. Companies that are not engaged directly in the cultivation, production, manufacturing, or sale of cannabis or cannabis-derived products nevertheless may violate federal law if they intentionally aid and abet another in violating federal controlled substance laws. Therefore, strict enforcement of federal laws regarding cannabis, or a failure of current rescheduling efforts to materially change cannabis's federal legal status, would likely result in our inability and the inability of our commercial partners to execute our respective business plans.\n\n \n\n**Anticipated relaxation of regulatory restraints may not materialize.**\n\n \n\nUntil April 2026, the market for THC cannabinoids in the United States was severely restricted by the federal regulatory position listing cannabis as a Schedule I controlled substance. In April 2026, the U.S. Department of Justice and the Drug Enforcement Administration issued a final order, effective April 28, 2026, rescheduling from Schedule I to Schedule III under the Controlled Substances Act both FDA-approved drug products that contain marijuana and marijuana in any form covered by a state medical marijuana license. This action followed a December 18, 2025 executive order from President Trump instructing the Attorney General to expedite completion of the rescheduling process. However, this rescheduling remains narrow and conditional. Any form of marijuana other than an FDA-approved drug product or marijuana covered by a state medical marijuana license—such as state-licensed cannabis for adult recreational use—remains a Schedule I controlled substance, and entities handling such material remain\n\nPage **29**\n\nsubject to the full range of regulatory controls and criminal sanctions applicable to Schedule I substances. The final order also does not apply to synthetically derived THC, such as delta-10-THC, which is expressly excluded and remains in Schedule I. DEA has also initiated an expedited administrative hearing process to consider the broader rescheduling of marijuana from Schedule I to Schedule III. The outcome of this hearing could determine whether recreational and other currently unaddressed forms of cannabis are also moved out of Schedule I.\n\n \n\nBecause the current rescheduling action leaves state-legal recreational marijuana subject to Schedule I restrictions under federal law, intrastate production, transportation, and sale of recreational cannabis and cannabis-related products continue to be regulated primarily on a state-by-state basis, with state-by-state variation persisting even as federal medical marijuana policy shifts. While the rescheduling action represents a substantial loosening of federal restrictions on certain cannabis products, we cannot predict the outcome of the pending DEA hearing, whether further federal rescheduling or legalization will occur, or how quickly remaining disparities between federal and state cannabis regulation will be resolved. We expect that meaningful disparity between federal and state cannabis legalization and regulation will continue, at least with respect to recreational and other non-medically-licensed cannabis activity, and that this continuing regulatory uncertainty may limit the commercialization of our licensed technology\n\n \n\n**The Rohrabacher-Farr Amendment may not be renewed.**\n\n \n\nThe Rohrabacher–Farr amendment (also known as the Rohrabacher–Blumenauer amendment, and previously the Joyce amendment) prohibits the U.S. Department of Justice (\"DOJ\") from spending funds appropriated by Congress to enforce the tenets of the CSA against the medical cannabis industry in states that have legalized such activity. The amendment was most recently continued and applies to states that have legalized medical cannabis, with a notable exception for Nebraska. As of December 2025, the Rohrabacher-Farr amendment had been temporarily extended, and the CJS spending bill was signed into law in January 2026. Notably, the amendment's protections have become less reliable than in past years. Amendments added to a recent Commerce-Justice-Science appropriations bill have attempted to undercut Rohrabacher-Blumenauer protections, including a carve-out explicitly allowing the DOJ to enforce federal cannabis laws within 1,000 feet of schools, playgrounds, housing authority properties, and other sensitive locations. The enforcement ban as most recently passed did not include this school/housing buffer-zone language that had been proposed, but the issue remains contested in ongoing appropriations cycles.\n\n \n\nWe cannot ensure that the federal government will not seek to prosecute cases involving medical cannabis businesses that are otherwise compliant with state law, particularly given the amendment's history of lapses, narrowing carve-outs, and its dependence on annual (or more frequent) renewal through the appropriations process. Potential proceedings could involve significant restrictions being imposed upon us or our commercial partners, which could have a material adverse effect on us.\n\n \n\n**We and our commercial partners may have difficulty accessing the services of banks, which may make it difficult to sell our products and services.**\n\n \n\nFederal and federally insured state banks have historically been reluctant to do business with companies that grow and sell cannabis products on the stated ground that cannabis remains illegal under federal law. Financial transactions involving proceeds generated by cannabis-related activities can still form the basis for prosecution under certain federal statutes, including the Bank Secrecy Act (BSA) and federal money laundering laws.\n\n \n\nIn April 2026, Acting U.S. Attorney General Todd Blanche issued an order moving cannabis from Schedule I to Schedule III of the Controlled Substances Act, but only with respect to state-licensed medical marijuana. Adult-use, or recreational, cannabis remains in Schedule I. Importantly, neither adult-use nor medical cannabis is considered federally legal under their respective classifications, and rescheduling does not amend federal money laundering or anti-money-laundering statutes. As a result, legal experts and industry observers broadly agree that Bank Secrecy Act obligations and federal anti-money laundering laws still apply to cannabis under a Schedule III listing, and that rescheduling alone does not resolve the banking access problem. Guidance issued by the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of the Treasury, in 2014 still nominally governs how financial institutions may provide services to cannabis-related businesses consistent with their BSA obligations, but this guidance framework technically remains in effect even though it was always considered inadequate by most compliance officers, and FinCEN has not issued updated guidance addressing rescheduling or Schedule III operators. According to recent industry analysis, there is persistent internal reluctance within FinCEN to reopen or materially revise the guidance, and the agency appears to favor deferring to broader interagency guidance, signaling an absence of appetite to reclaim ownership over cannabis banking policy.\n\nPage **30**\n\nThe DOJ's 2013 \"Cole Memo,\" which had outlined federal enforcement priorities for cannabis-related conduct, was rescinded in January 2018 under Attorney General Jeff Sessions and has not been formally reinstated since, notwithstanding statements by then-Attorney General nominee Merrick Garland in 2021 that he would consider reinstituting a version of it. No comparable DOJ enforcement-priorities memorandum is currently in effect.\n\n \n\nLegislatively, the SAFE Banking Act—and its more recent iteration, the SAFER Banking Act—would create an explicit safe harbor shielding depository institutions from federal prosecution, regulatory penalties, or loss of deposit insurance for serving state-licensed cannabis businesses. The SAFER Banking Act cleared the Senate Banking Committee with a bipartisan 14–9 vote in 2023 and has passed the House in various forms multiple times, but has not received a full Senate floor vote. On June 25, 2026, a bipartisan group of lawmakers reintroduced the Secure and Fair Enforcement (SAFE) Banking Act in both chambers of Congress, but as of this filing no such legislation has been enacted, and the SAFE Banking Act is not a change in current law.\n\n \n\nBecause of this continued legal and regulatory uncertainty, major national banks still do not serve cannabis businesses, although a small number of banks and credit unions have developed cannabis-specific compliance programs and will accept dispensary accounts, typically with higher fees and more documentation requirements than standard business accounts. Cannabis-related businesses continue to face significant difficulty accessing banking services, including business checking accounts, lines of credit, commercial mortgages, and conventional credit and debit card processing. https://www.chaptersdata.com/blog/cannabis-banking-2026-safer-banking-act-dispensary-options/\n\n \n\nWe cannot ensure that we will be able to avoid being considered by financial institutions to be engaged in the cannabis industry, which would adversely affect our banking relationships. Our inability to maintain bank accounts would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical, and security challenges that could result in our inability to implement our business plan.\n\n \n\n**We are subject to certain federal regulations relating to currency transactions.**\n\n \n\nThe Bank Secrecy Act (BSA) requires financial institutions to file Currency Transaction Reports (CTRs) for cash transactions exceeding $10,000, including identification of the customer by name and taxpayer identification number (such as a Social Security number), with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. The BSA also requires the filing of Suspicious Activity Reports (SARs) for transactions that we know, suspect, or have reason to suspect involve funds derived from illegal activity, are structured to evade BSA reporting or recordkeeping requirements, or otherwise lack a business or apparent lawful purpose — generally without regard to a specific dollar threshold, though a $5,000 threshold applies in certain contexts (e.g., when a suspect can be identified). We are also required to maintain customer due diligence and source-of-funds verification procedures under our anti-money laundering (AML) program.\n\n \n\nWe may face pressure from commercial partners to accept cash payments due to restricted or limited access to banking services, a challenge common among businesses operating in cash-intensive industries. Failure to comply with the BSA, AML requirements, or related regulations could result in significant civil or criminal penalties, loss of banking relationships, or other regulatory action, any of which could have a material adverse effect on our business, financial condition, and results of operations.\n\n \n\nA growing number of foreign jurisdictions in which we operate or may operate have adopted similar anti-money laundering and counter-terrorist financing regimes, which could subject us to additional compliance obligations and risks.\n\n \n\n**We are subject to risk of civil asset forfeiture.**\n\n** **\n\nBecause the cannabis industry remains illegal under U.S. federal law, any property owned by participants in the cannabis industry that is either used in conducting such business, or was obtained with the proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture. Even if the owner of the property is never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which, with minimal due process, it could be subject to forfeiture.\n\nPage **31**\n\n**Our commercial partners may be subject to compliance with laws and regulations governing cannabis in foreign jurisdictions.**\n\n \n\nOur ability to commercialize our licensed technology in foreign jurisdiction within our licensed territory may be contingent, in part, upon our prospective commercial partners obtaining approval and complying with applicable regulatory requirements enacted by those governmental authorities. We cannot predict the effect to our business of foreign compliance regulations on our commercial partners in producing and manufacturing cannabinoids, the length of time to secure appropriate regulatory approvals to use our licensing technology and process, or the extent of testing and documentation that may be required in those jurisdictions. Delays in obtaining, or failing to obtain, regulatory approvals may negatively affect the development of commercialization arrangements with these partners and could have a material adverse effect on our business, financial condition, results of operations, and prospects.\n\n \n\nWe anticipate that both we and our commercial partners will incur ongoing costs and obligations related to regulatory compliance. Failure by us or our commercial partners to comply with regulations may result in additional costs for corrective measures, penalties, or restrictions on our operations. In addition, changes in regulations, more vigorous enforcement thereof, or other unanticipated events could require extensive changes to our operations, increase compliance costs, or give rise to material liabilities, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.\n\n \n\n**Prohibitions or restrictions from investing in, or transacting business with, companies in the cannabis industry may have an adverse effect on our operations.**\n\n \n\nCertain jurisdictions may prohibit or restrict their citizens or residents from investing in, or transacting business with, companies involved in the cannabis industry, even if such companies only conduct business in jurisdictions where cannabis is legal, or the companies are not directly engaged in the cultivation, production, manufacturing, or sale of cannabis-derived products. Similar prohibitions or restrictions may apply in other jurisdictions where cannabis has not been legalized. In the United States, there have been certain instances of the\n\nU.S. Customs and Border Protection preventing citizens of foreign countries from entering the United States for reasons related to the cannabis industry.\n\n \n\n**We may rely on foreign advisors and consultants respecting local legal, regulatory, or governmental requirements or business practices.**\n\n \n\nThe legal and regulatory requirements in the foreign countries in which we may operate respecting the cultivation, production, manufacturing, and sale of cannabis and cannabis-related products by our intended commercial partners, as well as banking systems and controls and local business culture and practices, are different from those in the United States. Although members of our management may have previous experience working and conducting business in these countries, we may retain and rely on local consultants, advisors, legal counsel, and other expert professionals to keep apprised of legal, regulatory, and governmental developments as they pertain to our business, banking, financing, labor, litigation, and tax matters in these jurisdictions. Any changes in the local legal, regulatory, or governmental requirements or business practices are beyond our control and may adversely affect our business, financial condition, and results of operations.\n\n \n\n**There remains doubt and uncertainty that we will be able to legally enforce contracts.**\n\n \n\nIt is a fundamental principle of law that a contract will not be enforced if it involves a violation of law or public policy. Recreational cannabis remains illegal at the federal level — and adult-use marijuana that isn't covered by a state medical marijuana license remains a Schedule I controlled substance, with individuals and entities handling such material remaining subject to the full range of regulatory controls and criminal sanctions applicable to Schedule I substances. While the DOJ and DEA placed FDA-approved marijuana products and marijuana products regulated by a qualifying state medical marijuana license into Schedule III in April 2026, and a broader DEA hearing on rescheduling marijuana as a whole began in June 2026, any form of marijuana that is neither in an FDA-approved drug product nor subject to a state medical marijuana license remains a Schedule I controlled substance, leaving the cultivation and sale of recreational cannabis that dominates the state-licensed industry in legal limbo for the time being.\n\nPage **32**\n\nBecause much of the cannabis industry — particularly adult-use/recreational operations — continues to operate in violation of federal law, judges in multiple U.S. states have on several occasions refused to enforce contracts relating to the cannabis industry, including for the repayment of money when the loan was used in connection with activities that violate federal law, even where there is no violation of state law. There remains doubt and uncertainty that we will be able to legally enforce contracts we enter, if necessary. Although the partial rescheduling and pending DEA hearing could eventually narrow this risk for state-licensed medical marijuana activities, the outcome of that rulemaking process is not yet final, recreational cannabis remains unaffected, and the rescheduling action itself is already facing legal challenges. We cannot ensure that we will have a remedy for breach of contract, which could have a material adverse effect on our business, revenues, operating results, financial condition, and prospects.\n\n \n\n**We would suffer severe penalties and other consequences if we or our agents are found to be in violation of the Foreign Corrupt Practices Act or anti-bribery laws.**\n\n \n\nOur business is subject to U.S. laws that generally prohibit companies and personnel from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are subject to the anti-bribery laws of any other countries in which we may conduct business. Even though our policies and procedures mandate compliance with these anti-corruption and anti-bribery laws, our personnel or other agents may, without our knowledge and despite our efforts otherwise, engage in prohibited conduct for which we may be held responsible. We cannot ensure that our internal control policies and procedures will always protect us from recklessness, fraudulent behavior, dishonesty, or other inappropriate acts committed by our affiliates, personnel, contractors, or agents. If our personnel or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition, and results of operations.\n\n \n\n**Our business may be adversely affected by the environmental regulations applicable to the businesses of our commercial partners.**\n\n \n\nWe do not anticipate that our future business activities will subject us to any direct environmental compliance regulations. However, the operations of our commercial partners may be subject to environmental regulation in the various jurisdictions in which they operate. These regulations may mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage, and disposal of solid and hazardous waste. The processes and media formulations that are parts of our licensed technology must be applied, used, and discarded in accordance with these requirements. Environmental legislation is evolving in a manner that may require stricter standards and enforcement, increased fines and penalties for noncompliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors, and employees. We cannot ensure that future changes in environmental regulation, if any, will not adversely affect the operations of a commercial partners or sublicensees, which in turn will affect our operations.\n\n \n\nGovernment approvals and permits are currently and may in the future be required in connection with the operations of our commercial partners. To the extent such approvals are required and not obtained, our commercial partners may be curtailed or prohibited from production of adult-use or medical cannabis-related products, delaying the development of our operations as currently proposed.\n\n \n\nFailure to comply with applicable environmental laws and regulations could subject our commercial partners to regulatory or agency proceedings or investigations and may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include damage awards, fines, penalties, or corrective measures requiring capital expenditures or remedial actions. Our commercial partners may be required to compensate those suffering loss or damage by reason of their operations using our technology and civil or criminal fines or penalties may be imposed for violations of applicable laws or regulations. These events would negatively impact our operations.\n\n \n\n**We will be subject to Federal Trade Commission and state regulation of business opportunities in connection with our commercialization activities.**\n\n \n\nWe must comply with regulations adopted by the U.S. Federal Trade Commission (the “FTC”) and several state laws that regulate the offer and sale of business opportunities. The FTC and certain state laws require that we furnish prospective commercial partners with a business opportunity disclosure document containing information prescribed by applicable FTC and state laws, rules, and regulations, including, for example:\n\nPage **33**\n\n·whether legal action has ever been taken against us; \n\n·whether there is a cancellation or refund policy for the business transaction; \n\n·any claims that a commercialization partner will earn a specific amount of money through the business opportunity; and \n\n·references for our company. \n\n \n\nWe cannot ensure that any disclosure document that we use will comply with the FTC rules and applicable state disclosure requirements. Our failure to meet applicable business opportunity requirements may expose us to regulatory sanctions, civil liability to commercial partners, and business interruptions while we bring disclosure into regulatory compliance.\n\n \n\n**Risks Related to our Company**\n\n \n\n**Unless we are able to bring our delinquent period reports current, our registration may be revoked.**\n\n \n\nOn March 24, 2026 the Company received a letter from the Securities and Exchange Commission (“SEC”) regarding the Company’s non-compliance and failure to file is mandatory period reports.  The Company responded to the SEC, confirming its filing obligations and advising the SEC and confirming that the Company intends to undertake and proceed with the preparation and filing of its delinquent period reports to bring the Company into compliance with its reporting obligations, and requested that the SEC refrain from and not commence administrative proceedings to revoke the Company’s registration pursuant to Section 12(j) of the Exchange Act, or suspend trading pursuant to Section 12(k), and allow the Company to bring its delinquent mandatory periodic filings current and in compliance with its filing obligations.  If we are not above to complete and file all delinquent mandatory periodic filings to the satisfaction of the SEC, our registration may be revoked, which would hinder and impact our efforts to raise necessary working capital.\n\n \n\n**Our efforts to obtain adequate external financing have been and likely will continue to be affected by our negative working capital, substantial past due indebtedness, and other factors.**\n\n \n\nWe are seeking and will likely continue to require substantial funding from external sources, principally through the sale of equity or debt securities. We believe that our finding efforts will likely continue to be adversely affected by:\n\n \n\n·our failure to have file all mandatory periodic reports with the SEC; \n\n \n\n·our common stock designated for quotation on the Expert Market which securities are restricted from public viewing.  \n\n \n\n·our common stock is eligible for unsolicited quotes only and not eligible for proprietary broker-dealer quotations.  \n\n \n\n·there being essentially no active trading market for our common stock; \n\n \n\n·our substantial indebtedness to related parties that had been extended or restructured several times to avoid default,  \n\n·our planned expenditure of substantial portions of the anticipated net proceeds from the financing to pay past-due indebtedness, including payments to related parties, \n\n·the assertion of continuing control of our corporation by Demetri Michalakis on behalf of Inter-M Traders FZ, LLE, and J.R. Munoz on behalf of OZ Company, each a principal stockholder, resulting from their prior contractual right to designate directors, which rights to designate directors was terminated in May 2026,. \n\n·the continuing asserted control by our founding and principal stockholders who together will own approximately ​38.44% of our voting common stock, after giving effect to the sale of all offered convertible secured notes and their conversion to common stock \n\n·the fact that less than ​34% of our outstanding shares are publicly held; \n\nPage **34**\n\n·the small amount of net proceeds from the proposed financing allocated to advancing commercialization of our licensed technology; \n\n·our failure to commercialize our licensed technology notwithstanding our announced commercial feasibility of the technology in July 2021,  \n\n·our inability to recruit and retain experienced, qualified high-level business and technical executives with experience and relationships in the US cannabis industry,  \n\n·the leveling or declining public interest in the cannabis industry in the face of emerging compliance public acceptance of medical and recreational cannabis commercialization, and  \n\n·other factors of which we may not be aware and that are outside our control. \n\n \n\n**Our current and future efforts to obtain additional financing may be adversely affected by the amount of our past due indebtedness, including amounts due to related parties.**\n\n \n\nAs of July 31, 2024, our aggregate liabilities were $10,978,638, almost all of which was over 30 days past due. Our liabilities included $3,170,000 due under a note due Cell Science, a related party, $3,780,872 due OZ Company under a working capital promissory  note, $150,000 due OZ Company under a separate promissory note which is now in default, and $1,409,000 due OZ Company under an office sharing agreement. The remaining about $2.47 million is due several unrelated trade creditors. Much of this indebtedness has been past due for over 24 months. We intend to seek to negotiate extended or discounted payments for many of these creditors but may be unable to do so. Such creditors may have the power to initiate insolvency proceedings against us. Further, the requirement that we use net proceeds from new financings to pay delinquent obligations, particularly to related parties, will negatively impact our fundraising.\n\n \n\n**Rising prevailing interest rates, inflation, and their economic consequences have depressed the securities markets generally and the market for our common stock, which adversely affects our efforts to obtain external funding.**\n\n \n\nGrowing inflation and a series of increases in US government set interest rates and the resulting spread of higher interest rates in the United States and world-wide and their resulting economic consequences have broadly depressed prices in the market for US securities in general and our securities in particular. We anticipate that our funding will likely be obtained through the sale of equity securities, principally common stock, or securities convertible into equity securities. We cannot ensure that we can obtain adequate financing in the foregoing circumstances.\n\n \n\n**We cannot ensure that we will be able to successively reorganize our board of directors and management in order to commercialize our licensed technology.**\n\n \n\nWe plan to reorganize our management and board of directors to obtain additional technical, financial, and technology commercialization expertise, whether as required as part of our ongoing financing efforts or at the initiative of current officers and directors. We cannot ensure that we will be able to recruit and retain experienced, qualified high-level business and technical executives with experience and relationships in the US cannabis industry.\n\n \n\n**Certain of our officers and directors have been and are subject to substantial conflicts of interest in dealings with Cell Science and others.**\n\n \n\nSince 2018 until very recently, a majority or all of our directors were or are also affiliates of Cell Science, the licensor of the intellectual property on which our business activities are based, and its affiliates. Accordingly, the terms of the following were not the result of arm’s-length negotiations:\n\n \n\n·the Integrated License Agreement; \n\n·the July 2021 reduction in the technical requirements of the efficacy demonstration and the agreement to accept test results to date as warranting release from cancellation of 184,000,000 shares issued under the Integrated License Agreement and the amount of the credits to reduce the amount of the one-time payment note;  \n\n·the terms of our office sharing agreement;  \n\n·the ownership of improvements to the licensed technology;  \n\n·the amounts and repayment terms of certain intercorporate advances;  \n\nPage **35**\n\n·the terms and conditions of any amendment or modification of any of these arrangements and related agreement interpretations and administration, and  \n\n·other interpretation and administrative decisions.  \n\n \n\nThese conflicting interest transactions directly and indirectly benefited the affiliates of the directors with a conflict of interest. These conflicts are likely to continue. We do not have policies or procedures in place to resolve any conflicts of interest in our favor. We have no governance policy to preclude or limit decisions with related parties.\n\n \n\n**Our Code of Ethics may not apply or may be waived.**\n\n \n\nWe have adopted a Code of Ethics that requires our board of directors to refrain from approving any transaction that is not in our best interests and is not on terms at least as favorable to us as could be obtained as a result of arm’s-length negotiations between unrelated parties in a similar situation. We have not adopted any other policy respecting decisions involving conflicts of interest and cannot ensure that any such issues will be resolved in our favor. We cannot ensure that the Code of Ethics has or will apply to all potential conflicts or that its provisions will not be waived. Further, we cannot ensure that our efforts to recruit and retain new directors will increase the number of independent directors or result in a board comprised of a majority of independent directors.\n\n \n\n**The auditor’s reports for the years ended July 31, 2024 and 2023, and previous periods contain explanatory paragraphs about our ability to continue as a going concern. **\n\n \n\nWe have not generated revenue and have limited capital. We have incurred losses since inception resulting in an accumulated deficit of about $50.8 million as of July 31, 2024. Our auditor stated in its report on our July 31, 2024, audited financial statements that it has substantial doubt that we will be able to continue as a going concern without further financing. Our ability to continue as a going concern is dependent upon our ability to successfully accomplish our business plan and eventually attain profitable operations and to obtain acceptable financing in the interim period.\n\n \n\nWe anticipate that any additional funding that we obtain will be in the form of equity financing from the sale of our equity securities, principally common stock, or debt convertible to equity securities. However, we cannot ensure that we will be able to raise sufficient funding from the sale of our common stock or be able to obtain debt financing. The risky nature of our business enterprise and our lack of revenue may place debt financing beyond the creditworthiness required by most banks or typical investors in corporate debt until such time as we generate recurring revenue from technology commercialization. We do not have any arrangements for any future equity financing. If we are unable to secure additional funding, we will cease or suspend operations. Increases in prevailing interest rates and the rates of inflation in the preceding several months has increased the difficulty of obtained required financing.  We have no plans, arrangements, or contingencies in place if we cease operations.\n\n \n\n**We have identified material weaknesses in our internal control over financial reporting that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements.**\n\n \n\nOn January 24, 2025 due to the deadlock of the Board, Teddy Scott and Mitch Kahn resigned their respective position as officers and directors.  On January 27, 2025, Aristotle Popolizio and Peter Whitton resigned their respective position as officers and directors.  Also on January 27, 2025 Alvin Sun who had replaced Kimberly Tanami as a director resigned as a director. Finally, on January 28, 2025, Juan Carlos Garcia, resigned as an officer and director.\n\n \n\nEffective January 28, 2025, essentially all operations of the Company ceased and any further efforts to commercialize and exploit the licensed intellectual property rights under our license agreement were suspended.\n\n \n\nOn March 18, 2026 Konstantia (Nadia) Galazi was appointed as a director, the President, CEO, Secretary and CFO of the Company.   Our management, which is responsible to establish and maintain internal control over financial reporting, has concluded that our internal controls and procedures were not effective due to the following material weaknesses:\n\n \n\n•lack of appropriate segregation of duties;  \n\n•lack of control procedures that include multiple levels of supervision and review; and \n\n•lack of full-time executive personnel to oversee financial reporting and controls. \n\nPage **36**\n\nBecause of these factors, we have failed to: (i) maintain records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) and the receipts and expenditures of company assets are made and in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on our financial statements. As a result of these weaknesses, we were unable to file timely our Annual Report on Form 10-K for the year ended July 31, 2021, and have amended our quarterly reports on Form 10-Q for the fiscal quarters ended October 31, 2020, January 31, 2021, and April 30, 2021, and our Annual Report on Form 10-K for the year ended July 31, 2021, to correct the initial filings or add omitted information. We have further amended our Annual Report on Form 10-K for the year ended July 31, 2022, to correct the initial filing and inadvertent overstatement of compensation expense, and we were late in filing the Annual Report on Form 10-K for the year ended July 31, 2023.  We have not implemented curative measures to address these weaknesses.  We were late in filing this Annual Report on Form 10-K for the year ended July 31, 2024, and are delinquent in the filing of the then due periodic reports thereafter.\n\n \n\n**We have a limited operating history.**\n\n \n\nWe were incorporated in 2008 but had little or no activity until we obtained license rights to cell-extraction and replication technology for commercial cannabinoid production in late 2018. However, we have not completed the required planned engineering, so we have not commenced commercialization in this technology to generate revenue. Therefore, we are subject to the risks common to early-stage enterprises, including undercapitalization, few personnel, limited financial and other resources, and lack of revenues. We cannot ensure that we will be successful in achieving a return on our stockholders’ investments. Our likelihood of success must be considered in the light of our early stage of operations.\n\n \n\n**We have not generated any revenue since our inception, and we may never achieve profitability.**\n\n \n\nWe are a development-stage company that has not generated any revenue. If the planned product refinement and customization meets the requirements of prospective partners so we can launch our commercialization effort, our expenses are expected to increase significantly before we can begin generating revenue. Even if and when we begin to market and commercialize our licensed technology, we expect our losses to continue because of ongoing sales and marketing expenses, technology transfer costs, research and development, and other operational matters. These losses, among other things, have had and will continue to have an adverse effect on our working capital, total assets, and stockholders’ equity. Because of the numerous risks and uncertainties that we will encounter, we are unable to predict if or when we will become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we are unable to achieve and then maintain profitability, our business, financial condition, and results of operations will be negatively affected, and the market value of our common stock will likely decline.\n\n \n\n**Our ability to successfully implement a commercialization strategy does not ensure our profitability.**\n\n \n\nWe cannot ensure that our strategy of commercializing our technology through third-party cannabinoid producers, even if we enter several or multiple arrangements, will generate sufficient revenue to meet related costs and result in a profit. We will incur operating costs in marketing our technology, completing commercialization arrangements, providing technical and operational support to our commercial partners, and otherwise operating our business. We cannot ensure that our revenue will offset these costs. We may not be profitable.\n\n \n\n**We are a smaller reporting company, which reduces our reporting obligations.**\n\n \n\nWe are currently a “smaller reporting company,” meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company, and we have a public float of less than $250 million and had annual revenues of less than $100 million during the most recently completed fiscal year. Because we are a smaller reporting company, the disclosure required in our SEC filings is less than it would be if we were not considered to be a smaller reporting company. Specifically, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings, are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation on the effectiveness of internal control over financial reporting, are required to provide only two years of audited financial statements in annual reports, and have certain other decreased disclosure obligations in their\n\nPage **37**\n\nSEC filings. Decreased disclosures in our SEC filings due to our status as a smaller reporting company may make it harder for investors to analyze our results of operations and financial prospects.\n\n \n\n**Unsolicited takeover proposals may distract management and adversely affect our business.**\n\n \n\nThe review and consideration of any takeover proposal may be a significant distraction for our management and personnel and could require the expenditure of significant time and resources by us. Moreover, any unsolicited takeover proposal may create uncertainty for our personnel that may adversely affect our ability to retain key personnel and to hire new talent. Management and employee distractions related to any such takeover proposal also may adversely impact our ability to optimally conduct our commercialization program and otherwise advance our business and pursue our strategic objectives. An unsolicited takeover proposal may also create uncertainty for our commercial partners, suppliers, and other business partners, which may cause them to terminate, or not to renew or enter, arrangements with us. The uncertainty arising from unsolicited takeover proposals and any resulting costly litigation may disrupt our business, which could result in an adverse effect on our business, financial condition, and results of operations.\n\n \n\n**We rely on key personnel and consultants.**\n\n \n\nOur success is dependent upon the ability, expertise, judgment, discretion, and good faith of our executive management and consultants and our ability to attract, develop, motivate, and retain highly qualified and skilled personnel and consultants. We previously relied on scientific advice from Dr. Peter Whitton, the inventor of the cell-extraction and replication technology on which our business is based, who resigned as a director in January 2025. Qualified, experienced individuals and cannabis industry consultants, such as our principal technical consultant, are in high demand, and we may incur significant costs to engage them. The inability to attract other suitably qualified persons when needed, could have a material adverse effect on our ability to execute our business plan and strategy, and we may be unable to find adequate replacements on a timely basis or at all.\n\n \n\n**We may incur product liability claims related to the application of the intellectual property we commercialize for cannabinoid production.**\n\n \n\nOur potential commercial partners producing cannabinoids will face an inherent risk of exposure to third-party product liability claims, regulatory action, and litigation, which would expose us to potential liability if our processes, procedures, or medium formulations are alleged to have caused significant loss or injury. In addition, the sale of products produced by a commercial partner using intellectual property involves the risk of injury to consumers due to product contamination or tampering by unauthorized third parties. Previously unknown adverse reactions could occur resulting from human consumption of such products alone or in combination with other medications or substances. We may be subject to various third-party product liability claims, including claims that the products produced using the licensed technology caused injury or illness, that such products did not include adequate warnings concerning possible side effects or interactions with other substances, or that the use of the licensed technology did not include adequate instructions for use.\n\n \n\nProduct liability claims or regulatory actions against us could result in increased costs, adversely affect our reputation generally with existing or potentially new commercial partners and have a material adverse effect on our results of operations and financial condition. Although we are also currently pursuing additional insurance coverage for product liability claims, such insurance is expensive, and we cannot ensure that we will be able to obtain desired insurance coverage on acceptable terms or at all. Any insurance coverage we maintain will be subject to coverage limits and exclusions and may not be available for the risks and hazards to which we are exposed. Our inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of the licensed technology.\n\n \n\n**Our business could be adversely impacted by failures or interruptions of information technology systems and potential cyber-attacks.**\n\n \n\nOur business will depend on information technology hardware, software, telecommunications, and other services and systems we obtain from third parties. Therefore, our operations depend, in part, on how well we and our suppliers protect networks, equipment, information technology systems, and software against damage from numerous threats, including damage to physical facilities, capacity limitations, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism, and theft. Our operations also depend on the timely maintenance, upgrade, and replacement of networks, equipment, information technology systems, and\n\nPage **38**\n\nsoftware, as well as preemptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures and delays or increased capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any failure, adversely impact our reputation and results of operations.\n\n \n\nWe may also be subject to cyber-attacks or other information security breaches, and we cannot ensure that we will not incur such losses in the future. Our risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, we will prioritize cybersecurity and the continued development and enhancement of controls, processes, and practices designed to protect systems, computers, software, data, and networks from attack, damage, or unauthorized access. As cyber threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.\n\n \n\n**Ongoing domestic and international financial conditions will adversely affect our business and operations, our prospective commercial partners, the cannabinoid industry, and the world generally.**\n\n \n\nIn recent years, global commercial and financial markets have experienced significant reoccurring disruptions, including severely diminished liquidity and credit availability, larger levels of sovereign and individual indebtedness, increased trade tariffs and barriers, supply chain delays or failures, declines in consumer confidence, declines in economic growth, increased unemployment, and uncertainty about economic stability. We cannot ensure that significant deterioration in credit and financial markets, prevailing interest rates, international trade, and confidence in economic conditions will not occur in the future. Any economic downturn, volatile business environment, or continued unpredictable and unstable market conditions could have a material adverse effect on our business, financial condition, and results of operations.\n\n \n\nFurther, global credit and financial markets have displayed arguably increased volatility in response to global economic, pandemic, or political events. Future crises may be precipitated by any number of causes, including natural disasters, geopolitical instability, changes to energy prices, or sovereign defaults. These factors may impact our ability to obtain equity or debt financing in the future, and if obtained, on terms favorable to us. Increased levels of volatility and market turmoil can adversely impact our operations and value, including the price of our common stock.\n\n \n\n**We cannot ensure that we will be able to compete successfully.**\n\n \n\nWe expect significant competition from other companies offering cannabinoid production technologies or producing, transporting, or marketing cannabinoids. We believe that competition in the commercial cannabinoid industry is based primarily on price per unit; predictable and replicable product flavor, aroma, CBD or THC concentration; and ease and predictability of regulatory compliance. Price per unit of production will be based on the cost of amortizing capital expenditures and covering production and operating costs, and we cannot ensure that production using our licensed technology will enable commercial partners to compete on these terms. Our potential commercial partners’ principal known competitors have established production, transportation, and marketing infrastructure and market recognition in the multiple states in which they operate and are well capitalized with experienced management and technical resources. Numerous companies appear to be applying for cultivation, processing, and sale licenses, some of which may have significantly greater financial, technical, marketing, and other resources than we have. These competitors have and can devote greater resources to the development, promotion, sale, and support of their products and services, and may have more extensive customer bases and broader customer relationships. Without substantial financing, we may be at a competitive disadvantage to live-grow plant producers because of the lack of established regulatory accommodation of plant cell-extraction and replication production methods. To the extent that we are not able to market and enter enough commercialization arrangements, our business, financial condition, and results of operations could be materially and adversely affected. Recent changes that we perceive in the cannabis industry may disrupt the competitive environment in ways we do not know or control.\n\n \n\n**There is an ongoing dispute between a minority stockholder Mentone, Ltd., and its other stockholders respecting the minority stockholder’s removal from Mentone’s board and Mentone’s purportedly unauthorized transactions related to the licensed cell replication technology.**\n\n \n\nIn 2023 a minority stockholder of Mentone has advised us of his claim that he was unlawfully removed from the board of directors of Mentone and that it was unauthorized to enter into certain agreements with Cell Science that led to its license of the subject cell replication technology to us.  The Mentone minority stockholder has threatened litigation seeking equitable remedies and money damages against Mentone and its other stockholders.\n\nPage **39**\n\nIn 2023 we received by commercial courier a copy of a purported complaint for a lawsuit filed in Cyprus by the minority stockholder of Mentone, purportedly on behalf of Mentone, which names the Company, one of our prior directors and vice president, and one of our former directors and executive officers, as defendants in said complaint.  We do not believe we have been served pursuant to the requirements of international law.\n\n \n\nIn 2023 we were advised verbally that the complaint had been or was dismissed as to our company and our former officers and directors named in the complaint but have not received any written confirmation of such dismissal.\n\n \n\nThis action by Mentone is further in contravention of and violates the terms of the Agreement, Assignment Waiver and Estoppel (the “Estoppel Agreement”) entered into by Mentone with Cell Science, the Licensor, our company, and others on September 22, 2020, that provides us with the potential remedy to seek cancellation of any of our shares received by Mentone and its owners. We believe the complaint is without merit, and if necessary, we intend to challenge its claimed jurisdiction over us, defend ourselves vigorously on the merits, assert all defenses and counterclaims, assert cross-claims against other parties to the Estoppel Agreement, and seek remedies provided under the Estoppel Agreement against all other parties to that agreement as warranted.\n\n \n\n**Risks Related to our Common Stock**\n\n \n\n**Our Common Stock is Quoted on the Expert Market of the OTC Markets Group**\n\n \n\nThe OTC Markets Group has designated our common stock for quotation on the Expert Market for lack of current information publicly available under SEC Rule 15c2-11, as a result of our failure to file our required periodic reports with the SEC. With our common stock being designated as an Expert Market security, there is no published quotation for our common stock as Expert Market securities are restricted from public viewing.\n\n \n\n**Our Common Stock is only Eligible for Unsolicited Quotes**\n\n \n\nOur common stock is eligible for unsolicited quotes only and not eligible for proprietary broker-dealer quotations, which exposes our stock to higher trading risks and reduces investor liquidity.\n\n \n\n**The market for our common stock is volatile.**\n\n \n\nThe market price of our common stock has been volatile and subject to wide fluctuations in price and trading volume in response to numerous factors, many of which are beyond our control. This volatility may affect the ability of holders of our common stock to sell their securities at an advantageous price or at all. There is extremely limited trading volume in our common stock, with no transactions for many consecutive trading days.\n\n \n\nMarket price fluctuations in our common stock may be due to the quotation or transaction volume our results of operations or public releases failing to meet market expectations, negative news about us or the cannabis industry, adverse changes in general market conditions or economic trends, social media activity outside our control, or other material public announcements by us or others. Financial markets for the stock of smaller capitalized companies historically have experienced significant price and volume fluctuations that have often been unrelated to the operating performance, underlying asset values, or prospects of such companies. Accordingly, the market price of our common stock may decline even if our results of operations, underlying asset values, or prospects improve or do not change. We cannot ensure that continuing fluctuations in price and volume of our common stock will not occur. If increased levels of volatility and market turmoil continue, our ability to obtain capital from external sources, the trading price of our common stock, and our operations could be adversely affected.\n\n \n\n**We may issue common stock in the future, which may dilute a stockholder’s holdings in our company, including the investors in this offering, or have a negative effect on the market price of our stock.**\n\n \n\nWe may sell equity securities (including convertible securities) in offerings, which may dilute a stockholder’s holdings in our company. Our articles of incorporation grant our board discretion to issue, sell, and determine the price and terms of additional preferred or common stock, including at prices less than the current market price per share. Our stockholders do not have preemptive rights. Moreover, additional common stock will be issued by us on the exercise of options under our stock option plan or warrants. Any transaction involving the issuance of preferred or common stock, or securities convertible into common stock, would result in dilution, possibly substantial, to our security holders, including the investors in this offering.\n\nPage **40**\n\n \n\nSales of substantial amounts of our securities by us or our existing stockholders, or the availability of such securities for sale, could adversely affect the prevailing market prices for our securities and dilute an investor’s per-share earnings, if any. A decline in the market prices of our securities could also impair our ability to raise additional capital through the sale of securities should we desire to do so.\n\n \n\n**Limited trading volumes for our common stock may limit the ability of our stockholders to obtain liquidity.**\n\n \n\nDue to the limited trading volume for our common stock, our stockholders may be unable to sell any or large quantities of our common stock into the public trading market without a significant reduction in the price of their common stock. We cannot ensure that there will be sufficient liquidity of the common stock on the trading market and that we will continue to meet the listing requirements of any public listing exchange or quotation medium.\n\n* *\n\n**We do not anticipate paying dividends.**\n\n \n\nWe do not have earnings from which to pay dividends and have no current intention to declare dividends, even if we were to become profitable. If we were to achieve earnings, any discretionary decision to pay dividends would depend on, among other things, our results of operations, current and anticipated cash requirements and surplus, financial condition, future contractual restrictions and financing agreement covenants, solvency tests imposed by corporate law, and other factors that our board of directors may deem relevant. Rather than pay dividends, we anticipate that we will retain earnings to fund expansion and growth.\n\n* *\n\n**The regulated nature of our business may impede or discourage a takeover. **\n\n \n\nOur business is subject to cannabinoid industry direct and indirect regulatory or licensing requirements that may not necessarily continue to apply to an acquirer of our business following a change of control. These licensing requirements could impede a merger, amalgamation, takeover, or other business combination involving us or discourage a potential acquirer from making a tender offer for common stock, which under certain circumstances could reduce the market price of the common stock."}