ITEM 1A. RISK FACTORS 

alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our personnel, sublicensees, vendors, and stockholders. The effects of these operational modifications will be reflected in current and future reporting periods.

For us, the COVID-19 pandemic substantially delayed the efforts to put the Efficacy Testing laboratory in full service as we worked to complete regulatory inspections and clearances, obtain necessary equipment and supplies, and assemble required international technical expertise, consultants, and personnel. These delays resulted in additional costs and delays in completing the planned testing and, in turn, submitting applications for required regulatory approvals. We are unable to launch our sublicensing program until the Efficacy Demonstration is substantially complete and required regulatory clearances are obtained.

The duration and magnitude of the COVID-19 pandemic impact on our business operations and overall financial performance are unknown at this time and will depend on numerous circumstances outside our control or the ability of anyone to predict accurately. The secondary and tertiary unpredictable economic effects on our business and on the worldwide economy could be quite adverse. The probability of reoccurrences of widespread or localized virus outbreaks is high and may continue for many months, likely resulting in further government-ordered lockdowns, stay-home or shelter-in-place orders and social distancing; restrictions on travel; and other extensive measures. Effective treatments for those infected by the virus and a possible preventive vaccine have not been developed and may not be widely accepted if they are developed in the future. We cannot predict the effect of these circumstances on us and our vendors, suppliers, and potential sublicensees; the global economy and political conditions; and the health of our personnel, consultants, and their families; all of which will affect how quickly and to what extent normal economic and operating activities can resume.

potential for revenue, which may require us to obtain additional capital to meet expenditures to sustain our operations. If an Efficacy Demonstration satisfactory to our board of directors 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.

Our license from Cell Science may be terminated by it if we fail to meet certain covenants, which could adversely affect our sublicensing program and third-party sublicensees.

Under our Amended Restated License, after we pay the cash and release the common stock to obtain a fully paid license, we will continue to be 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 in order to pay these costs. If we fail to meet these obligations, Cell Science could terminate our license. Under our Amended Restated License, Cell Science would then have the right to assume any outstanding sublicenses. If Cell Science assumed outstanding licenses, it would step into our position as licensee, precluding us from participating in further revenue from that sublicensee, notwithstanding our potential continuing liability for our sublicensee obligations to the sublicensee. The possibility that Cell Science, a foreign entity, may assume our obligations to our sublicensees may be a risk to potential sublicensees that has a material adverse effect on our sublicensing efforts. If Cell Science refused to assume our obligations to a sublicensee, the rights of the sublicensee would be subject to dispute, which would likely result in damages that the sublicensee would seek to recover from us. The existence of the right of Cell Science to terminate our license on which our sublicenses will be based may be considered a substantial risk to potential sublicensee and correspondingly impair the success of our sublicensing effort.

Acceptable completion of the Efficacy Demonstration will require us to pay to Cell Science a one-time payment of $3.5 million, subject to certain adjustments and credits, which we do not have.

If the Efficacy Demonstration is completed with results meeting prescribed criteria, we will be required to pay $3.5 million, subject to certain adjustments and credits, to Cell Science to obtain a fully paid, royalty-free license to the cell-extraction and replication technology. We do not currently have funds with which to pay this amount and do not have arrangements in place or commitments for such funding from any source. Our inability to make the payment would enable Cell Science to terminate the license on 60 days’ notice. In the event of termination, we would be unable to recover related costs incurred to date and would have to pursue other business opportunities or cease operations.

Our ability to attract and enter into sublicenses with producers, distributors, and sellers is uncertain.

Following an acceptable Efficacy Demonstration, we will need to identify and attract qualified, interested third parties to sublicense our cell-extraction and replication technology for cannabinoid production. We cannot assure that we will be able to successfully sublicense our new technology. We estimate that a new facility designed to produce about 5000 pounds of dry cannabinoid concentrate per month using our licensed technology for cannabinoid production will require a capital investment of from $3.9M to $4.6M by a sublicensee. 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 into sublicenses in order to generate revenue. We may be forced to delay anticipated business growth, seek other commercialization strategies, or obtain additional capital to continue.

We cannot assure that we will be able to transfer the required technical know-how respecting our licensed technology to enable sublicensees to commercially produce cannabinoids.

Our 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 assure that the licensed technology transfer and consulting strategies we plan to use will be effective in successful production facility operation by our sublicensees.

Our long-term success will depend on the profitability of our sublicensees, which we cannot control or predict.

Our long-term success will depend on the success of our sublicensees 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 sublicensees will affect our success in attracting sublicensees and the economic terms of our sublicenses. We cannot assure that our sublicensees will be successful, and so we may be required to adjust the terms of our existing or new sublicenses to include terms less favorable to us.

Others may challenge the validity and enforceability of the licensed patents, know-how, and related intellectual property.

Our future success is dependent on the validity and enforceability of the 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 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, as may be enforcing these rights against unauthorized use by others. Identifying unauthorized use of these rights is difficult as we may be unable to effectively monitor and evaluate the products being distributed by our competitors, including parties such as unlicensed dispensaries, and the processes used to produce such products. In addition, in any infringement proceeding, some or all of our trademarks, patents, other intellectual property rights, licensed rights, or other proprietary know-how, or arrangements or agreements seeking to protect the same for our benefit, may be found invalid, unenforceable, anticompetitive, or not infringed. An adverse result in any litigation or defense proceedings 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.

The auditor’s reports for the years ended July 31, 2020 and 2019, contain an explanatory paragraph about our ability to continue as a going concern.

We have not generated revenue and have limited capital. We have incurred losses since inception resulting in an accumulated deficit of $15,724,678 as of July 31, 2020. Our auditors stated in their report on our audited financial statements that they have 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 obtain acceptable financing in the interim period.

We anticipate that any additional funding that we obtain will be in the form of equity financing from the sale of our common stock. However, we cannot assure that we will be able to raise sufficient funding from the sale of our common stock. The risky nature of our business enterprise places debt financing beyond the creditworthiness required by most banks or typical investors of corporate debt until such time as our products are available on the market. We do not have any arrangements in place for any future equity financing. If we are unable to secure additional funding, we will cease or suspend operations. We have no plans, arrangements, or contingencies in place in the event that we cease operations.

We have a limited operating history.

We 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, its commercial efficacy has not been demonstrated, so we have not commenced sublicensing 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 assure 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.

We have not generated any revenue since our inception, and we may never achieve profitability.

We are a development-stage company that has not generated any revenue. If the Efficacy Demonstration meets prescribed standards so we can launch our sublicensing effort, our expenses are expected to increase significantly before we can begin granting sublicenses and generating revenue. Even as we begin to market and sublicense our licensed technology, we expect our losses to continue as a result of ongoing sales and marketing expenses for the sublicenses, technology transfer costs, research and development expenses, and other operating expenses. 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.

Unsolicited takeover proposals may detract management and adversely affect our business.

The 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 sublicensing program and otherwise advance our business and pursue our strategic objectives. An unsolicited takeover proposal may also create uncertainty for our sublicensees, suppliers, and other business partners, which may cause them to terminate, or not to renew or enter into, arrangements with us. The uncertainty arising from unsolicited takeover proposals and any related costly litigation may disrupt our business, which could result in an adverse effect on our business, financial condition, and results of operations.

insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms or at all. The 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 sublicensees’ production of potential products and, therefore, the commercialization of the licensed technology.

Subsequent clinical or laboratory research on the characteristics of cannabinoids or their effect on the human body could adversely affect the commercialization of our licensed technology.

A variety of institutions worldwide are continuing clinical and laboratory research of the use and effects of cannabinoids. Future research, studies, and clinical trials may lead to conclusions that dispute or conflict with the current 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 sublicensees. 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.

We cannot assure that the insurance coverage we obtain will be adequate.

We have or intend to obtain insurance to protect our assets, operations, directors, and personnel. While we believe our insurance coverage addresses and will address all material risks to which we are exposed and is adequate and customary for our operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which we are exposed. In addition, we cannot assure that such insurance will be adequate to cover our liabilities or will be generally be available in the future or, if available, that premiums will be commercially justifiable. If we were to incur substantial liability and the damages were not covered by insurance or were in excess of policy limits, or if we were to incur liability at a time when we were not able to obtain liability insurance, there could be a material adverse effect on our business, financial condition, and results of operations.

We are also currently pursuing additional insurance coverage over our product liability claims and for business interruption. We cannot assure 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.

As a technology provider for the cannabinoid industry, we would be adversely affected by negative public attitudes and consumer perception.

We 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 sublicensees 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 assure that future scientific research, reports, findings, regulatory proceedings, litigation, media attention, or other publicity will be favorable to the cannabis market or any particular product 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 sublicensees, which would also adversely affect our ability to increase sublicenses that generate royalty revenues from sublicensees and our business, results of operations, financial condition, and cash flows.

Unfavorable publicity reports 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 reports or other media attention could arise even if the adverse effects associated with such products resulted from a sublicensee’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

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individuals and groups to communicate and share opinions and views about us, our activities, or our licensed technology, whether true or not. Although we believe that we operate in a manner that is respectful to all stakeholders and that we take care in protecting our image and reputation, we do not ultimately have direct control over how we are perceived by others. Reputational loss may result in decreased investor confidence, increased challenges in developing and maintaining community relations, and an 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.

Third parties may refuse to do business with us if they perceive that we are too closely connected to the cannabis industry, with which they do not want to be associated.

Some firms with which we may want to transact business may perceive that we are too closely connected to the objectionable cannabis industry and refuse to deal with us. These third parties may perceive that doing business with us exposes them to reputational risk as a result of our business activities relating to cannabis, even though we are not engaged in the cultivation, production, manufacturing, or sale of cannabis-derived products. Failure to establish or maintain business relationships could have a material adverse effect on us.

Our business will be subject to failures or interruptions of information technology systems and cyber-attacks.

Our 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 a number of 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 software, 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.

We are also subject to cyber-attacks or other information security breaches, and we cannot assure 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 cyber security 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.

Ongoing domestic and international financial conditions will adversely affect our business and operations, the business and operations of our prospective sublicensees, the cannabinoid industry, and the world generally.

In recent years, global commercial and financial markets have experienced significant reoccurring disruptions, including severely diminished liquidity and credit availability, levels of sovereign and individual indebtedness, increased trade tariffs and barriers, declines in consumer confidence, declines in economic growth, increased unemployment, and uncertainty about economic stability. We cannot assure that significant deterioration in credit and financial markets, international trade, and confidence in economic conditions will not occur in the future. Any such 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.

Further, global credit and financial markets have displayed arguably increased volatility in response to global economic 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, and the price of the common stock could be adversely affected.

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We cannot assure that we will be able to compete successfully.

We expect significant competition from other companies. We believe that competition in the commercial cannabinoid industry is based primarily on price per unit and predictable and replicable product flavor, aroma, and CBD or THC concentration. Price per unit of production will be based on the cost of amortizing capital expenditures and covering production and operating costs, and we cannot assure that production using our licensed technology will enable sublicensees to compete on these terms. Our principal known competitors include MedMen and Curaleaf, both of which have first-mover advantage and are well capitalized with experienced management and technical resources. A large number of 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 may be able to 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. Our future success depends upon our ability to sublicense the licensed technology and generate an initial and continuing royalty stream. To the extent that we are not able to market and enter into enough sublicenses, our business, financial condition, and results of operations could be materially and adversely affected.

Risks of Related to Significant Regulation

The activities of our potential sublicensees are highly regulated by extensive and complex federal and state regulatory schemes that make maintaining compliance difficult and challenging.

The 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 technology sublicensees will be subject to a variety of laws, regulations, and guidelines relating to the production, manufacturing, management, transportation, disposal, storage, distribution, sales, use, health, 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.

Laws, 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 schemes may adversely affect our sublicensees directly and us indirectly. Regulatory changes could reduce demand for cannabis-derived products and byproducts, decreasing the market for our sublicenses or potential royalty revenue, which would adversely affect our financial condition, results of operations, and prospects. Amendments to current laws, regulations, and permitting requirements, or more stringent application of existing laws or regulations, may have a material adverse effect on our sublicensees 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.

Our ability to sublicense our technology will depend on the ability of our sublicensees to maintain compliance with these laws and regulations. Delays of our sublicensees in obtaining, or failing to obtain, and maintaining the requisite regulatory approvals may significantly delay or negatively impair our sublicensing program.

We may incur ongoing costs and obligations related to regulatory compliance or assisting our sublicensees 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 will 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 sublicensees directly and us indirectly.

Strict enforcement of federal laws regarding cannabis would likely severely restrict our ability to execute our business plan.

Cannabis remains illegal under U.S. federal law. Even in those jurisdictions in which the manufacture and use of medical cannabis has been legalized at the state level, the interstate production, transportation, possession, sale,

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and use remain violations of federal law that are punishable by imprisonment, substantial fines, and forfeiture. Our sublicensees 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 these federal controlled substance laws. Therefore, strict enforcement of federal laws regarding cannabis would likely result in our inability and the inability of our sublicensees to execute our respective business plans.

We and our sublicensees may have difficulty accessing the service of banks, which may make it difficult to sell our products and services.

Federal and federally insured state banks currently do not do business with those that grow and sell cannabis products on the stated ground that growing and selling cannabis is illegal under federal law. Financial transactions involving proceeds generated by cannabis-related activities can form the basis for prosecution under the federal statutes and the U.S. Bank Secrecy Act. Guidance issued by the Financial Crimes Enforcement Network, a division of the U.S. Department of the Treasury, clarifies how financial institutions can provide services to cannabis-related businesses consistent with their obligations under the Bank Secrecy Act. Furthermore, supplemental guidance from the U.S. Department of Justice (“DOJ”) directs federal prosecutors to consider the enforcement priorities enumerated in the so-called “Cole Memo,” issued on August 29, 2013, under the Obama Administration, when determining whether to charge institutions or individuals with any of the financial crimes based upon cannabis-related activity. However, in January 2018, under the Trump Administration, the DOJ issued a policy memorandum on federal marijuana enforcement announcing a return to the rule of law and rescinding previous guidance documents, including the Cole Memorandum. In this memorandum, Attorney General Jeff Sessions directed U.S. Attorneys to determine whether to pursue prosecution of cannabis activity based upon the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community. Understandably, banks remain hesitant to offer banking services to cannabis-related businesses, and those businesses involved in the cannabis industry continue to encounter difficulty establishing banking relationships. We cannot assure 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.

We are subject to certain federal regulations relating to cash reporting.

The Bank Secrecy Act requires us to report currency transactions in excess of $10,000, including identification of the customer by name and social security number, to the IRS. This regulation also requires us to report certain suspicious activity, including any transaction that exceeds $5,000 that we know, suspect, or have reason to believe involves funds from illegal activity or is designed to evade federal regulations or reporting requirements, and to verify sources of funds. We may be pressured by sublicensees to accept cash payments in view of the federal regulation of banks that restricts sublicensees’ access to banks. If we fail to comply with these laws and regulations, the imposition of substantial penalties could have a material adverse effect on our business, financial condition, and results of operations. Increasingly, foreign jurisdictions in which we may do business have similar regulatory schemes.

We or our sublicensees may be subject to compliance with laws and regulations governing cannabis in foreign jurisdictions.

Our ability to achieve our business objectives in foreign jurisdictions may be contingent, in part, upon our prospective sublicensees 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 sublicensees in producing and manufacturing cannabis and derived products and byproducts; 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 markets for our sublicenses and could have a material adverse effect on our business, financial condition, results of operations, and prospects.

We anticipate that we and our sublicensees will incur ongoing costs and obligations related to regulatory compliance. Failure by us or our sublicensees to comply with regulations may result in additional costs for corrective

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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.

Prohibitions or restrictions from investing in or transacting business with companies in the cannabis industry may have an adverse effect on our operations.

Certain 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. For example, if an investor in the United Kingdom profits from an investment in a cannabis producer or supplier, or the use of technology is used in the production, the investment may technically violate the United Kingdom Proceeds of Crime Act 2002. 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 U.S. Customs and Border Protection preventing citizens of foreign countries from entering the United States for reasons related to the cannabis industry.

We will rely on foreign advisors and consultants respecting local legal, regulatory, or governmental requirements or business practices.

The legal and regulatory requirements in the foreign countries in which we operate, or may operate, respecting the cultivation, production, manufacturing, and sale of cannabis and cannabis-related products by our intended sublicensees, 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 in order 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.

We would suffer severe penalties and other consequences if our agents or personnel are found to be corrupt or to violate anti-bribery laws.

Our 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, engage in prohibited conduct for which we may be held responsible. We cannot assure 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.

Anticipated relaxation of regulatory restraints may not materialize.

Currently the market for THC cannabinoids in the United States is severely restricted by the federal regulatory position listing cannabis as a Schedule I controlled substance, which prohibits cannabis in interstate commerce, with attendant secondary and tertiary adverse effects. Accordingly, intrastate production, transportation, and sale of cannabis and cannabis-related products are regulated on a state-by-state basis. Although in recent years several states have changed their laws to legalize and tax cannabis and cannabis-related products for medical or recreational use, we cannot predict whether this trend will continue or whether the federal government will take similar action. We expect the disparity between federal and state cannabis legalization and regulation will continue. The continuation of the current regulatory regime may limit the commercialization of our licensed technology.

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Our business may be adversely affected by the environmental regulations and compliance related to the businesses of our sublicensees.

We do not anticipate that our future business activities will subject us to any direct environmental compliance regulations.

However, the operations of our sublicensees may be subject to environmental regulation in the various jurisdictions in which they operate. These regulations 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 assure that future changes in environmental regulation, if any, will not adversely affect the operations of a sublicensee, which in turn will affect our operations.

Government approvals and permits are currently and may in the future be required in connection with the operations of our sublicensees. To the extent such approvals are required and not obtained, our sublicensees may be curtailed or prohibited from production of adult-use or medical cannabis-related products, delaying the development of our operations as currently proposed.

Failure to comply with applicable environmental laws and regulations could subject our sublicensees 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 sublicensees 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.

We will be subject to Federal Trade Commission and state regulation of business opportunities in connection with our sublicensing activities.

We must comply with regulations adopted by the U.S. Federal Trade Commission, or 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 sublicensees with a business opportunity disclosure document containing information prescribed by the FTC rules and applicable state laws and regulations, including, for example:

·whether legal action has ever been taken against us; 

·whether there is a cancellation or refund policy for the business transaction; 

·any claims that the buyer (sublicensee) will earn a specific amount of money through the business opportunity; and 

·references for our company. 

We cannot assure that any disclosure document that we prepare and 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 and business interruptions while we bring disclosure into regulatory compliance and civil liability to sublicensees.

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Risks Related to our Common Stock

The market for our common stock is volatile.

The market price of our common stock may be 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.

Market price fluctuations in our common stock may be due to 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 has 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 have not changed. We cannot assure 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.

We will continue to be controlled by our principal stockholders.

Inter-M Traders FZ, LLE is currently the beneficial owner of 120,000,000 shares of common stock, representing 39.98% of our outstanding common stock, Mentone Ltd., is currently the beneficial owner of 90,000,000 shares of common stock, representing 29.99% of our outstanding common stock and OZ Corporation is currently the beneficial owner of 11,378,397 shares of common stock, representing 3.79% of our outstanding common stock. Cell Science, which is owned 40% by Inter-M Traders FZ, LLE, 30% by OZ Corporation and 30% by Mentone Ltd., owns four shares of Series A Preferred Stock, representing 100% of our outstanding Series A Preferred Stock. The super voting rights of the Series A Preferred Stock entitle it to voting power equivalent to four times the aggregate voting power of all other outstanding common and preferred stock outstanding, or 12,200,455,000 votes. Based on the number of shares currently outstanding, the holders of the Preferred Stock have 80% of all votes on all matters submitted to the stockholders for consideration, voting together as a single class, which enables Cell Science directly, and its controlling stockholders indirectly, to control the election of our directors and the approval or disapproval of all other matters, including mergers, the sale of all or substantially all of our assets, liquidation, and the adoption or amendment of provisions in our articles of incorporation and bylaws. See Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

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.

We 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 of directors’ discretion to issue, sell, and determine the price and terms of, additional 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. Any transaction involving the issuance of common stock, or securities convertible into common stock, would result in dilution, possibly substantial, to our security holders, including the investors in this offering.

Sales 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.

Limited trading volumes for our common stock may limit the ability of our stockholders to obtain liquidity.

Due 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

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common stock. We cannot assure 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.

We do not anticipate paying dividends.

We 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.

The regulated nature of our business may impede or discourage a takeover.

Our business is subject to 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.

Our status as a prior shell company adversely affects our stockholders under Rule 144.

On June 12, 2020, we filed a Current Report on Form 8-K reporting that we were no longer a “shell company,” as that term is defined in Rule 405 of the Securities Act of 1933, as amended (“Securities Act”) and Rule 12b-2 of the Securities Exchange Act of 1934, as amended (“Exchange Act”). On filing that Form 8-K, we completed our “Form 10 Information” showing that we had material assets and operations. This has a number of consequences, including making Rule 144 available to our stockholders for the resale of stock owned by them commencing June 12, 2021 (i.e. one year after Form 10 information was filed). Thus, until that date, Rule 144 will not be available for the resale of the securities issued before June 12, 2021.