{"url_path":"/sec/cik-0001440153/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 ****MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION**","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":2716,"has_tables":true,"body_markdown":"**ITEM 7.****MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION** \n\n \n\n*The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act relating to future events or our future performance. The following discussion should be read in conjunction with our consolidated financial statements and notes to our financial statements included elsewhere in this report. This discussion contains forward-looking statements that relate to future*events*or our future performance. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, we cannot assure that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.*\n\nPage **45**\n\n**Business Overview**\n\n \n\nSince December 2018, we have focused on testing and commercializing cannabis plant cell-extraction and replication technologies under a technology license granted by Cell Science. This licensed technology uses plant cell-extraction and replication technology and related proprietary equipment, processes, and medium formulations in a commercially-sized bioreactor laboratory to produce, manufacture, and sell plant-based cannabis products—sometimes referred in the industry as cannabinoids—exclusively in North and Central America and the Caribbean for medical, food additive, and recreational uses.\n\n \n\nDuring our fiscal year ended July 31, 2024, our business operations were sharply curtailed by shortages of working capital and cash.  During the year, we devoted our principal attention to seeking funding from external sources, principally through the sale of equity or debt securities. We explored several potential funding opportunities that did not result in cash proceeds to us during the fiscal year. We believe that our finding efforts during the year were unsuccessful and that ongoing financing efforts may continue to be adversely affected principally due to several factors discussed in detail in this report.\n\n \n\nSubject to completing sufficient financing, we will seek to recruit and retain executive officers and directors to organize the launch of our commercialization efforts, identify possible sources of required financing, and initiate conversations with potential commercialization partners, particularly selected multi-state operators with established production, distribution, and marketing infrastructure, expertise, and financing. Conversations with some of these sources and potential commercialization partners stalled during the year ended July 31, 2024. With our recent funding, we anticipate reviving these efforts, but we may not reach any definitive commitments, understandings, or agreements. We are continuing our efforts.\n\n \n\nIn view of our shortages of liquidity during the preceding fiscal year, we deferred our earlier plans to undertake required additional work to determine the limits of the technology, maximize production efficiency, reduce production costs, and customize the process and products for potential commercialization partners, which we believe will enhance our commercialization efforts. Our failure to advance this work during the recently completed fiscal year may have undermined confidence in the credibility and efficacy of our technology. When we resume our planned work, we intend to coordinate these efforts with the requirements of potential funding and commercialization opportunities. Subject to successfully completing our ongoing work, we intend to seek to commercialize the licensed technology through joint ventures, strategic partners, sublicenses, and other arrangements that may enable us to take advantage of the technical, regulatory relationships and experience, and financial resources of experienced cannabinoid production firms. We intend to authorize these third parties to incorporate the technology into production facilities they fund, build, and operate to produce medical, food additive, and recreational cannabis-related products in compliance with applicable state and federal law. We will need substantial additional financing from external sources to begin these efforts.\n\n \n\nOn July 20, 2023, we authorized the OZ Company, a principal stockholder, as the lead investor to seek up to $20.0 million in external funding through the sale of secured promissory notes bearing interest at 13%, payable in cash or in kind. The notes are payable at maturity in 2027 (the “13% Convertible Secured Notes”). The obligations under the notes are secured by our assets. The 13% Convertible Secured Notes are convertible to our common stock at $0.50 per share. The funding term sheet provided for additional terms and covenants to be triggered upon achieving certain funding benchmarks, as discussed below. In furtherance of the financing efforts, on September 18, 2023, Cell Science agreed to cancel the four outstanding shares of Series A Preferred Stock owned by it. As a result of this preferred stock cancellation, Cell Science no longer has the voting power to control all stockholder votes, and we are amending our certificates of designation so that the the Series A Preferred Stock and Series B Preferred Stock are no longer authorized for future issuance.  We now have outstanding only common stock, which is entitled to one vote per share on all matters.\n\n \n\nDuring the preceding two fiscal years, as in prior periods, we have not generated revenue and have devoted our limited management, technical, and financial resources to pay general and administrative expenses in order to seek the substantial amounts of external capital required to position us to be able to commercially exploit the licensed technology after completion of the efficacy testing required to demonstrate its commercial viability, organize our corporate structure, and seek substantial amounts of additional capital required to implement our business plan. We need additional external capital to continue operations.\n\nPage **46**\n\n**Results of Operations  **\n\n \n\n**Years Ended July 31, 2024 and 2023**\n\n \n\n*Revenues*. We had no revenues during the years ended July 31, 2024 and 2023.\n\n \n\n*Consulting Fees*. Consulting fees were $1,830,827 and $8,441,838 for the years ended July 31, 2024 and 2023, respectively, a decrease of $6,611,011 or 78%, as our limited capital required us to curtail 2024 fiscal year activities and efforts to license our technology. During the year ended July 31, 2024, we issued 1,440,000 additional stock options and 2,250,000 new warrants. As of July 31, 2024, there was $2,603,902 of total unrecognized stock-based compensation that is expected to be recognized over the vesting period of each option or warrant.\n\n \n\n*Professional Fees*. Professional fees were $318,070 and $487,704 for the years ended July 31, 2024 and 2023, respectively, a decrease of $169,634, or 35%. Decreases in professional fees during the later period resulted from our substantially decreased business activities and our corresponding periodic reporting obligations under federal securities laws. We expect these costs will increase again as we obtain required capital and increase our technology commercialization efforts.  \n\n \n\n*Selling, General, and Administrative Expenses*. Selling, general, and administrative expenses were $794,047 and $982,598 for the years ended July 31, 2024 and 2023, respectively, a decrease of $188,551, or 19%. The substantial decrease in the 2024 fiscal year is attributable to decreased activities, including costs under our office sharing agreement with an affiliate, insurance, equipment, staff and other related laboratory related costs, which we expect will increase as we obtain required capital and increase our technology commercialization efforts.\n\n \n\n*Other Income (Expenses)*. We had net other expenses of $296,680 and $259,642 for the years ended July 31, 2024 and 2023, respectively. Included in other income and expenses for the year ended July 31, 2024, was the gain on the settlement debt in the amount of $323,078 and the loss on disposal of fixed assets of $334,179. Also included in other expenses were interest expenses of $343,953 related to our notes payable for the year ended July 31, 2024. The increase in interest expenses is a result of the increase in loans and notes payable, which increased by a principal amount of $1,855,875 from July 31, 2023 to July 31, 2024. We used these borrowed funds for operating expenses.  \n\n** **\n\n*Net Loss*. We had a net loss of $3,431,669 for the year ended July 31, 2024, compared to $10,305,454 for the year ended July 31, 2023, a decrease of $6,932,158 or 67%. Since we had no revenues in either year, the decrease in net loss was due to the decreased expenses as discussed above.\n\n \n\n**Liquidity and Capital Resources**\n\n \n\n**As of July 31, 2024**\n\n \n\nAs of July 31, 2024, we had cash of $25,461 compared to $$3,101 as of July 31, 2023. We continue to consume working capital in the pursuit of our business plan using proceeds from loans or sales of our equity.\n\n \n\nFor the year ended July 31, 2024, cash increased by $22,360 from $3,101 on July 31, 2023 to $25,461 on July 31, 2024.\n\n \n\nNet cash used in operating activities was $1,458,840 during the year ended July 31, 2024, because of a net loss of $3,431,669, which was offset by stock-based compensation of $1,745,934, gain on settlement of debt of $323,078, loss on disposal of fixed assets of $334,179, depreciation of $133,671, a decrease in accounts payable and accrued liabilities of $520,169, an increase in accrued interest of $266,560 and the settlement liability of $260,000.\n\n \n\nDuring the year ended July 31, 2024, we had no net cash flows from investing activities.\n\n \n\nDuring the year ended July 31, 2024, financing activities provided $1,481,200 in net cash, which consisted of $856,200 in proceeds from notes payable issued to related parties, and $625,000 in proceeds from notes payable issued to third parties.  \n\nPage **47**\n\n**Future Capital Requirements**\n\n \n\nAs of July 31, 2024, our current capital resources plus the limited proceeds from our private sale of 13% Convertible Secured Notes after July 31, 2024, have not been and will not be sufficient to fund our planned laboratory activities, continue our planned efforts to seek to commercialize our licensed technology, and meet other financial requirements during the next 12 months. Our ability to continue as a going concern is contingent upon our ability to obtain capital through the sale of equity or issuance of debt and, ultimately, to attain profitable operations. We expect that we will continue to rely on debt and equity financing from external sources, including related parties during the next 12 months. We cannot assure that we will be able to successfully complete any of these activities.\n\n \n\nAs a result of successive amendments the current maturity date of the notes payable to Cell Science and OZ Company is December 31, 2027. We cannot assure, however, that any required financing to repay indebtedness will be obtained or will be available on terms acceptable to us. Any transaction involving the issuance of common stock, or securities convertible into common stock, would result in dilution, possibly substantial, to our existing security holders. Further, we cannot assure that these related parties will extend the payment dates for this indebtedness which in the aggregate exceeds $7.6 million.\n\n \n\nWe estimate that we will require approximately $8.5 million in external capital to fund our activities during the next 12 months. This consists of between $1.1 million and $1.4 million during the next twelve months for our planned laboratory work to improve and customize our licensed processes. The actual amount of work completed will depend on the amount of capital available for those expenditures. Reductions in available capital would correspondingly delay and disrupt laboratory plans and, in turn, the commencement of our commercialization program that we anticipate will lead to recurring revenue. In addition to the above, we expect that operating capital for planned regular, non-laboratory corporate operations will require approximately $250,000 during the next 12 months. Less available capital will require us to implement cost-cutting measures and may delay planned activities.\n\n \n\nWe have no current commitments or agreements to fund the above capital requirements.\n\n \n\nWe may also seek additional debt and equity financing to fund payment of additional trade and other obligations incurred and costs of implementing our business plan. Our ability to attract debt financing will be substantially impaired by our current lack of both revenues and a robust, viable trading market for our common stock. Accordingly, any debt financing will likely be convertible to common stock, at the lender’s option, at prices discounted to our stock trading price at the time of conversion, which could dilute the interests of existing stockholders. We cannot assure that any such financings will be available, or can be completed on terms acceptable to us. Any transaction involving the issuance of preferred or common stock, or securities convertible into common stock, would result in dilution, possibly substantial, to our current security holders.\n\n \n\n**Management’s Plan to Continue as a Going Concern**\n\n \n\nOur independent registered public accounting firm’s report on our financial statements for the year ended July 31, 2024, and our prior independent registered public accounting firm’s report on our financial, as for previous years, contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing. In order to continue as a going concern, we will need, among other things, additional capital resources. Management’s plans to obtain capital from the sale of our securities and short-term borrowings from stockholders or related parties when needed. However, management cannot provide any assurance that we will be successful in accomplishing any of our plans. Our ability to continue as a going concern is dependent upon our ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.\n\n \n\n**Off-Balance Sheet Arrangements**\n\n \n\nWe do not have any off-balance sheet arrangements.\n\n \n\n**Critical Accounting Pronouncements**\n\n \n\nOur financial statements and related public financial information are based on the application of generally accepted accounting principles in the United States (“GAAP”). GAAP requires the use of estimates, assumptions, judgments, and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues, and expense amounts reported. These estimates can also affect supplemental information contained in our\n\nPage **48**\n\nexternal disclosures, including information regarding contingencies, risk, and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor estimates made during the preparation of our financial statements.\n\n \n\nFinancial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements.\n\n \n\nWhile all these accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those that have the most substantial impact on our financial statements and require management to use a greater degree of judgment and estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our results of operations, financial position, or liquidity for the periods presented in our annual report.\n\n \n\n**Cash and Cash Equivalents**\n\n \n\nCash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.\n\n \n\n**Revenue Recognition**\n\n \n\nRevenue is recognized upon delivery of goods when the sales price is fixed or determinable and collectability is reasonably assured. Revenue is not recognized until persuasive evidence of an arrangement exists.\n\n \n\n**Stock-Based Compensation**\n\n \n\nWe account for stock-based compensation under Accounting Standards Codification Topic 718, “Compensation–Stock Compensation,” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. \n\n** **\n\n**Advertising**\n\n \n\nAdvertising costs that are not material for the periods presented are expensed as incurred.\n\n \n\n**Basic and Fully Diluted Net Loss per Share**\n\n \n\nBasic net loss per common share is based on the weighted average number of shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of common shares plus dilutive common share equivalents outstanding during the period. There are no common stock equivalents as of July 31, 2024 and 2023, and for the periods presented.\n\n** **\n\n**Recent Accounting Pronouncements**\n\n \n\nWe have evaluated recent accounting pronouncements and believe that none of them will have a material effect on our financial statements."}