Quarterly Report for Quarter Ending October 31, 2024 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

Business Overview

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.

In July 2021, we completed efficacy testing of our licensed technology required to demonstrate its commercial viability.

In January 2022, we acquired rights to use the Van Nuys laboratory facility through agreements with our affiliates, Cell Science and OZ Company. As part of our ongoing laboratory work, we intended to develop a standardized operating manual, technical descriptions, and related documentation with a view to supporting joint venturers, strategic alliance partners, sublicensees, and others in constructing and operating commercial production plants. However, to date, we have failed to achieve any of these intended objectives.

In December 2023 we reached a settlement agreement to restructure the indebtedness owed to VO Leasing Corp., our landlord, and holder of necessary cannabis cultivation and manufacturing licenses in CA. We have defaulted under the terms of the settlement agreement and abandoned the laboratory facility and VO leasing has since disposed of all equipment, machinery and supplies which secured the obligations under the settlement agreement.

During our fiscal quarter ended October 31, 2024, we undertook raise working capital in order to continue our efforts to determine the limits of the technology, maximize production efficiency, and reduce production costs, which we believe will enhance our commercialization efforts.

If, as, and when we obtain sufficient funding, executive and technical employees or consultants, we will need to secured appropriate laboratory facilities and the required equipment to complete our ongoing work, 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 experience, regulatory relationships, and financial resources of experienced cannabinoid production firms. We intend to authorize 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 additional financing from external sources to complete the work and to begin these commercialization efforts.

During the last three fiscal years and the recently completed quarter, we have not generated revenue and have devoted our limited management, technical, and financial resources to pay general and administrative expenses to position us to be able to commercially exploit the licensed technology.

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Results of Operations

Following is management's discussion of the relevant items affecting results of operations for the three months ended October 31, 2024 and 2023.

Revenues. We generated no net revenues during the three months ended October 31, 2024 and 2023. We do not expect to generate revenues until we launch our proposed commercialization program. We cannot predict whether or when that may occur.

Consulting Fees. Consulting fees were $488,983 and $692,606 for the three months ended October 31, 2024, and 2023, respectively. We recognized stock-based compensation of $488,983 and $626,975 for the three months ended October 31, 2024 and 2023, respectively, attributable to the issuance of options and warrants. See Stock-based Compensation under Note 2 in the Notes to Financial Statements for description of options and warrants granted.

Professional Fees. Professional fees were $24,433 and $192,326 for the three months ended October 31, 2024 and 2023, respectively. Professional fees consist of legal and accounting fees associated with our reporting obligations under federal securities laws and the filing of a registration statement on behalf of stockholders for the resale of outstanding securities.

Other Operating Expenses. Other operating expenses were $150,024 and $149,017 for the three months ended October 31, 2024, and 2023, respectively. SG&A expenses include laboratory expenses, including office facility charges, insurance, equipment, staff and other related laboratory costs. These costs should continue to decrease with the closure of our laboratory facility.

Other Income (Expenses). We had net other expenses of $107,947 and $64,111 for the three months ended October 31, 2024, and 2023, respectively. Other expenses consisted entirely of interest expenses related to our notes payable. The increase in interest expenses is a result of the increase in loans and notes payable due to related parties. These borrowed funds were used for operating expenses.

Net Loss. We had a net loss of $771,387 and $1,131,478 for the three months ended October 31, 2024, and 2023, respectively. The decrease is the mainly the result of the decrease in stock based compensation and we did not expect a major change in our net loss as our operations remain relatively the same as the prior year.

Liquidity and Capital Resources

As of October 31, 2024, our primary source of liquidity consisted of $14,035 in cash and cash equivalents. Since inception, we have financed our operations through a combination of short and long-term loans from related parties and through the private placement of our common stock.

For the three months ended October 31, 2024, cash decreased $11,426 from $25,461 at July 31, 2024, to $14,035 at October 31, 2024.

Net cash used in operating activities was $15,201 during the three months ended October 31, 2024, with a net loss of $771,387, stock-based compensation of $488,983, an increase in accounts payable of $159,339, and an increase in accrued interest of $67,243.

There were no investing activities during the three months ended October 31, 2024.

During the three months ended October 31, 2024, financing activities provided $3,775 in net cash which consisted entirely of proceeds from notes payable - related parties.

Future Capital Requirements

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 attaining profitable operations. We expect that any financing we receive will be similar to what we have heretofore received over the previous two years to enable us to operate, which financing consists of short-term loans from related parties at negotiated rates of interest. We cannot assure you that we will be able to successfully complete any of these activities.

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We 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

We have no current commitments or agreements to fund the above capital requirements.

We 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.

Management's Plan to Continue as a Going Concern

Our 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.

Critical Accounting Pronouncements

Our 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 external disclosures including information regarding contingencies, risks, 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 significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 2 of our financial statements included in our July 31, 2024, Form 10-K. While these significant 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 policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those 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 this report.

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Recent Accounting Pronouncements

See Note 2 in the Notes to the Financial Statements. We have reviewed accounting pronouncements issued during the past two years and have adopted any that are applicable to the Company. We have determined that none had a material impact on our financial position, results of operations, or cash flows for the periods presented in this report.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities" ("SPE"s).