Bakhu Holdings, Corp. - Quarter Report: 2020 April (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Commission File Number: 000-55862

BAHKU HOLDINGS CORP.

 (Exact name of Registrant as specified in its charter)

One World Trade Center, Suite 130, Long Beach, California 90831

 (Address of principal executive offices, Zip Code)

(310) 891-1959

 (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒   No ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ☐ No ☒

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

As of June 12, 2020, the Registrant had 300,000,000 shares of Common Stock outstanding.

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

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

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

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

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

BAKHU HOLDINGS CORP.

Notes to Financial Statements

April 30, 2020

(Unaudited)

NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS

The Company was incorporated under the laws of the State of Nevada, on April 24, 2008 under the name Planet Resources, Corp. In May 2009, the Company also began to look for other types of business to pursue that would benefit the shareholders. In order to pursue businesses that may not be in the mining industry the name of the Company was changed with the approval of the Directors and Shareholders to Bakhu Holdings, Corp. on May 4, 2009 (“Bakhu, or the “Company”).

The Company has not generated any revenue to date and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise. For the period from inception, April 24, 2008 through April 30, 2020 the Company has accumulated losses of $15,339,235.

On August 9, 2019, the Company formed Cell Science CBD International, Inc., a California corporation as a wholly owned subsidiary. On November 26, 2019, the name of the subsidiary was changed to CBD Biotech, Inc., (“CBD”). On January 5, 2020, the Company entered into a Sublicense Agreement with CBD wherein the Company granted a sublicense of the Licensed Science as it relates to the production and manufacturing of cannabis and their byproducts which have measurable tetrahydrocannabinol (THC) concentration potency less than 3% on a dry weight basis. CBD had no active operations as of April 30, 2020.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.

Going Concern

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception resulting in an accumulated deficit of $15,339,235 as of April 30, 2020 and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation

The Company’s functional currency and its reporting currency is the United States dollar.

Financial Instruments

The carrying value of the Company’s financial instruments approximates their fair value because of the short maturity of these instruments.

BAKHU HOLDINGS CORP.

Notes to Financial Statements

April 30, 2020

(Unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-based Compensation

Stock-based compensation is accounted for at fair value in accordance with ASC 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.

Income Taxes

Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

Basic and Diluted Net Loss per Share

The Company computes net loss per share in accordance with ASC 105, “Earnings per Share.” ASC 105 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement.

Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period. Diluted EPS excludes all potentially dilutive shares if their effect is anti-dilutive.

Professional fees

Substantially all professional fees presented in the financial statements represent accounting fees, audit fees and legal fees associated with the filing of reports with the Securities and Exchange Commission. Also included in professional fees are fees paid to the stock transfer agent. The fees are expensed as incurred.

Fiscal Periods

The Company’s fiscal year end is July 31.

Recently Issued Accounting Pronouncements

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.

NOTE 3 - PREFERRED AND COMMON STOCK

On August 8, 2018, the Board of Directors of the Company approved the amendment and restatement of the Company’s Articles of Incorporation. The purpose of the amendment and restatement of the Articles of Incorporation was to:

The preferred and common stock has a par value of $0.001 per share.

On August 8, 2018, the Company issued 4 shares of Series A Preferred Stock to the Company’s controlling shareholder, The OZ Corporation, a California corporation.

BAKHU HOLDINGS CORP.

Notes to Financial Statements

April 30, 2020

(Unaudited)

On December 20, 2018, the Company entered into a License Agreement with Cell Science Holding, Ltd. (CSH”). Pursuant to the License Agreement, the Company is being granted an exclusive license by CSH with respect to certain patents and intellectual property for the production of phytocannabinoids for use in medical treatments and in exchange for 210,000,000 shares of common stock of the Company. On February 14, 2019, the stock was issued and recorded as consulting fees valued at $10,500,000.

On April 7, 2019, the Company issued 7,000,000 shares of common stock for the conversion of convertible notes payable and accrued interest in the amount of $10,199.

On March 9, 2020, the Company issued 11,061,816 restricted shares of Common Stock to the OZ Corporation, in consideration of ongoing consulting and advisory services provided to the Company, on terms as previously agreed to the Company and the OZ Corporation. The securities were issued pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933. The OZ Corporation is intimately acquainted with the Company’s business plan and proposed activities at the time of issuance and possessed information on the Company necessary to make an informed investment decision. The estimated fair value of the stock was $553,091 and has been expensed and included in “Consulting fees” in the three and six months ended April 30, 2020.

NOTE 4 - INCOME TAXES

As of April 30, 2020, the Company had net operating loss carry forwards that may be available to reduce future years’ taxable income through 2030. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.

NOTE 5 - RELATED PARTY TRANSACTIONS

At various times, the Company’s Receiver extended short term financing to the Company at an interest rate of 15%. Due to the nature of the Receiver’s business, sometimes the accrued interest due to the Receiver is not reimbursed. As of July 31, 2019, and July 31, 2018 the Company’s Receiver had extended $-0- and $8,829, respectively, in short term borrowings to the Company. These borrowings were incurred to help the Company pay for certain expenses associated with the Company’s Receivership status. During the three months ended April 30, 2019, the principal amount of $8,829 and accrued interest of $1,370 was replaced by convertible promissory notes and immediately converted into 7,000,000 shares of common stock.

NOTE 6 - NOTES PAYABLE

On August 1, 2019, the Company executed a promissory note in favor of Company’s controlling shareholder, The OZ Corporation, to evidence monies loan to the Company from December 26, 2018 through July 31, 2019 in the amount of $147,513, and to evidence any additional amounts that may be loaned to the Company thereafter. Pursuant to the terms of the promissory note, the principal and unpaid accrued simple interest at the rate of 6.0% per annum shall be due and payable on or before December 31, 2019. The promissory note also provides that the Company may extend the maturity date for an additional 12 months, until December 31, 2020, by paying an extension fee of 1.00% of the outstanding principal loan balance, which may at the lenders’ option be advanced and added to the then outstanding principal balance. The extension fee amounted to $2,081 which has been added to the outstanding principal balance and recorded as interest expense during the nine months ended April 30. 2020. The principal amount of the promissory note shall be increased by the amount of any additional advances of funds made by The OZ Corporation to the Company, from time to time, from the date of such advance. Under the terms of the promissory note, The OZ Corporation, at its option may, at any time, convert all or any portion of the then unpaid principal balance and any unpaid accrued interest into shares of the Company’s common stock. The number of shares of common stock to be issued upon such conversion shall be equal to the quotient obtained by dividing (i) the then unpaid principal balance and any unpaid accrued interest of the promissory note being converted by (ii) 80% of the average closing price of the common stock of the Company, for the ninety (90) trading days before the conversion date, rounded up to the nearest whole share. During the nine months ended April 30, 2020, the company received proceeds of $170,081 and made payments of $18,316 against the principal balance of the note. The principal balance and accrued interest due on the note were $299,278 and $9,563, respectively as of April 30, 2020.

The Company did not assign any value to the conversion feature of the Note because the 80% of the common stock of the Company had a negative book value of as of April 30, 2020 and continues to have a negative book value. Furthermore, the company has not generated any revenue to date.

The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance 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.

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this periodic report.  Some of the statements under “Management’s Discussion and Analysis,” “Business Overview” and elsewhere herein may include forward-looking statements which reflect our current views with respect to future events and financial performance. These statements include forward-looking statements both with respect to us specifically and the industry in general. Statements which include the words “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “will,” and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise.

All forward-looking statements address such matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statements you read herein reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our written and oral forward-looking statements attributable to us or individuals acting on our behalf and such statements are expressly qualified in their entirety by this paragraph.

Business Overview

We were organized in the State of Nevada on April 24, 2008 under the name Planet Resources, Corp. The Company’s initial business model was the re-processing of mine tailings from previous mining operations. To date we have not generated any revenues because we were not successful in implementing our business plan. Various alternatives were considered to ensure the viability and solvency of the Company; however, the Company went dormant from April 30, 2011 to June, 2018, and in Case Number A-14-720990-C, Nevada's 8th Judicial District appointed Robert Stevens as Receiver for the Company on August 20, 2015. Subsequent to Mr. Stevens being released as the court-appointed receiver in July 2018, the Company embarked on a new business plan. The Company plans to exploit licenses that it acquires in the bio-pharmacy (Bio-Pharm) field, specifically in the cell-extraction sector. Such products are usually currently focused on medical products for pain relief and insomnia. A growing emphasis is being placed on more serious medical issues, such epilepsy, eye disease, as well as various nerve and vital organ disorders. Also, there is a national imperative to replace the widespread use (and misuse) of opioids to treat many common ailments. The plans to test the licensed processes in a scientific laboratory setting, prove-up the efficiencies of the extraction process, determine the market value of the process and then license the process for cash consideration and royalty payments.

On December 20, 2018, the Company entered into a License Agreement (the “License Agreement”) with Cell Science Holding, Ltd. (“CSH”). Pursuant to the License Agreement, the Company was granted and holds an exclusive license to certain patents and intellectual property and associated technical information (the “Licensed Science”) with respect to the production of phytocannabinoids for use in medical treatments, within the Territory. The Territory includes any and all countries in the continent of North American, defined as the United States of America, Canada, Mexico, all countries in the Caribbean Sea and all countries north of the Panama/Columbia boarder (including the entire nation of Panama). In consideration of the grant of the License Agreement, the Company issued 210,000,000 shares of the Company’s common stock to CSH. These shares were issued in February 2019.

On December 31, 2019, the Company, as Licensee and CHS, as Licensor, entered into an Amended and Restated Patent and Technology License Agreement (the “Restated License”) restating the original License Agreement entered into on December 20, 2018, as it relates to (i) the production, manufacturing and sale of cannabis and byproducts thereof where permitted, (ii) Cannabis-related research, teaching and education for both medical and other purposes, and (iii) all medical uses and applications of Cannabis, within the Territory.

General and administrative expenses have been comprised of administrative wages and benefits; occupancy and office expenses; outside legal, accounting and other professional fees; travel and other miscellaneous office and administrative expenses. Selling and marketing expenses include selling/marketing wages and benefits, advertising and promotional expenses, as well as travel and other miscellaneous related expenses.

Because we have incurred losses, income tax expenses are immaterial. No tax benefits have been booked related to operating loss carryforwards, given our uncertainty of being able to utilize such loss carryforwards in future years. We anticipate incurring additional losses during the coming year.

Results of Operations

Following is management’s discussion of the relevant items affecting results of operations for the three and nine months ended April 30, 2020 and 2019.

Revenues. The Company generated no net revenues during the three and nine months ended April 30, 2020 and 2019. We expect revenues to increase as we continue to pursue funding through investment and the application for lines of credit with financial institutions.

Consulting Fees. Consulting fees were $554,277 and $10,509,175 for the three months ended April 30, 2020 and 2019, respectively. Consulting fees were $560,362 and $10,592,330 for the nine months ended April 30, 2020 and 2019, respectively. During the three months ended April 30, 2020, the Company issued 11,061,816 restricted shares of Common Stock to the OZ Corporation, in consideration of ongoing consulting and advisory services provided to the Company. The estimated fair value of the stock was $553,091 and has been expensed and included in consulting fees in the three and nine months ended April 30, 2020. On December 20, 2018, the Company entered into a License Agreement with Cell Science, Ltd. (CSH”). Pursuant to the License Agreement, the Company is being granted an exclusive license by CSH with respect to certain patents and intellectual property for the production of phytocannabinoids for use in medical treatments and in exchange for 210,000,000 shares of common stock of the Company. On February 14, 2019, the stock was issued and recorded as consulting fees valued at $10,500,000.

Professional Fees. Professional fees were $49,770 and $-0- for the three months ended April 30, 2020 and 2019, respectively. Professional fees were $131,805 and $38,530 for the nine months ended April 30, 2020 and 2019, respectively. The Company expects professional fees to increase in the future due to the fees associated with the Company filings with the Securities and Exchange Commission.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $2,788 and $845 for the three months ended April 30, 2020 and 2019, respectively. Selling, general and administrative expenses were $17,413 and $1,188 for the nine months ended April 30, 2020 and 2019, respectively. The Company expects SG&A expenses will increase commensurate with an increase in our operations and as a result of the License Agreement with Cell Science Holding.

Other Income (Expenses). The Company had net other expenses of $6,175 and $-0- for the three months ended April 30, 2020 and 2019, respectively. The Company had net other expenses of $11,643 and $668 for the nine months ended April 30, 2020 and 2019, respectively. Other expenses incurred were comprised of interest expenses related to notes payable of the Company.

Net Loss. The Company had a net loss of $613,010 for the three months ended April 30, 2020 compared to $10,510,020 for the three months ended April 30, 2019. The Company had a net loss of $721,223 for the nine months ended April 30, 2020 compared to $10,632,716 for the nine months ended April 30, 2019. The decrease in net loss was mainly due to the higher expenses incurred during the nine months ended April 30, 2019 associated with the License Agreement.

Liquidity and Capital Resources

As of April 30, 2020, our primary source of liquidity consisted of $510 in cash and cash equivalents. Since inception, we have financed our operations through a combination of short and long-term loans, and through the private placement of our common stock.

We do not believe that the Company’s current capital resources will be sufficient to fund its operating activity and other capital resource demands during the next year. 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 long-term loans at negotiated rates of interest. We cannot assure you that we will be able to successfully complete any of these activities.

We are presently seeking additional debt and equity financing to provide sufficient funds for payment of obligations incurred and to fund our ongoing business plan. We expect to generate revenue pursuant to our new business plan. We cannot assure you, however, that any such financings will be available or will otherwise be made on terms acceptable to us, or that our present shareholders might suffer substantial dilution as a result.

For the nine months ended April 30, 2020, cash decreased $1,123 from $1,633 at July 31, 2019 to $510 at April 30, 2020.

Net cash used in operating activities was $152,888 during the nine months ended April 30, 2020, with a net loss of $721,223, which was offset by stock-based compensation of $553,091, an increase in accounts payable of $5,681 and an increase in accrued liabilities of $9,563.

During the nine months ended April 30, 2020, the Company had no net cash flows from investing activities.

During the nine months ended April 30, 2020, the Company had $151,765 in net cash provided by financing activities which consisted of proceeds from notes payable – related parties in the amount of $170,081, and payments on notes payable – related parties in the amount of $18,316.

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, 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 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, 2019 Form 10-K. While all 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. 

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).

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were effective as of April 30, 2020.

Changes in Internal Controls

  There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended January 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

We are not a party to any pending legal proceeding. No federal, state or local governmental agency is presently contemplating any proceeding against the Company. No director, executive officer or affiliate of the Company or owner of record or beneficially of more than five percent of the Company's common stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

Notwithstanding that we are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this Item 1A, in light of the current COVID-19 pandemic, the Company is including the following Risk Factor in its Quarterly Report.

A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely affect our business and operations, and our ability to complete financial reports to enable us to comply with our reporting obligation under the Exchange Act.

The occurrence of a pandemic, epidemic, or outbreak of an infectious disease including the recent outbreak of respiratory illness caused by a novel coronavirus (COVID-19), and efforts to contain the spread of the such a pandemic, epidemic, or outbreak, which includes social distancing, travel bans and quarantine, could limited access to our facilities, management, support staff and professional advisors. These, in turn, could impact our operations, financial condition, development work and demand for our products and services, and our overall ability to react timely to mitigate the impact of such an event. These factors could substantially hamper our efforts to provide our investors with timely information and comply with our filing obligations with the Securities and Exchange Commission.

None

None

On April 17, 2020, CBD Biotech, Inc. (“CBD Biotech”), a wholly-owned subsidiary of Bakhu Holdings Corp. (“Bakhu” or the “Company”) entered into a Strategic Alliance Agreement with Integrity Cannabis Solutions, Inc., a Florida corporation (“ICS”). Under the Strategic Alliance Agreement CBD Biotech and ICS agreed to collaborate (i) to facilitate the building and operating of a commercial-scale production facility in the State of Florida, and (ii) to enter into as Sublicense Agreement between CBD Biotech and ICS (the “CBD Biotech ICS Sublicense Agreement”) as further described below.

On April 22, 2020, pursuant to the terms of the Strategic Alliances Agreement, CBD Biotech and ICS entered into the CBD Biotech-ICS Sublicense Agreement, which entitles ICS to use the Bakhu Licensed Science (as defined in therein) to produce, manufacture, market and sell CBD, CBD byproducts and CBD derivatives, having low measurable tetrahydrocannabinol concentration potency less than 3.0% on a dry weight basis.

The Strategic Alliance Agreement and CBD Biotech-ICS Sublicense Agreement shall become effective upon completion of the Bakhu Efficacy Test (as defined in the Strategic Alliance Agreement) and the delivery of the Lab Operating Manual and the delivery of Lab Equipment Requirements as provided in the Strategic Alliance Agreement.

Under the terms of the Strategic Alliance Agreement, as compensation of the services of ICS in facilitating the construction of the production facility, Bakhu shall issue to ICS, 1,500,000 shares of common stock of Bakhu (the “Share Compensation”) upon the completion and commencement of operations of the production facility with the initial successful monthly production of CBD end product concentrate in the same production ratios as the Bakhu Efficacy Test results, or in the event of the sale of all rights covered by the patents or licenses relating to the Bakhu Licensed Science, or the termination of the CBD Biotech Sublicense Agreement with ICS.

Under the terms of the CBD Biotech-ICS Sublicense Agreement, in consideration of the grant of the CBD Biotech-ICS Sublicense Agreement, ICS shall pay to CBD Biotech a license fee (the “License Fee”) License Fee of $250,000 in two installments, (a) the first installment of the License Fee, in the amount of USD$125,000 USD, shall be paid within twelve (12) months of the sale date for the first monthly product of CBD, and (b) the second installment of the License Fee, in the amount of USD$125,000 shall be paid on the six-month anniversary date of the payment of installment one above.

Additionally, under the CBD Biotech-ICS Sublicense Agreement ICS shall pay to CBD Biotech a continuing gross royalty (the “Royalty”) equal to 8% of the wholesale product price sales revenue from the production of CBD raw product concentrate, produced in the production facility using the Bakhu Licensed Science. The royalty payments shall be paid quarterly in arrears, beginning post the first quarter of commercial production,

Further, in consideration of housing and operating a training facility for sublicensees of the Bakhu Licensed Science, CBD Biotech shall pay to ICS a training fee of $10,000 per sublicensee being trained.

As provided in the Strategic Alliance Agreement and Sublicense Agreement, CBD Biotech and ICS agreed that in the event of the sale to a non-affiliated third party, of the Bakhu Licensed Science and any license rights associated therewith, then CBD Biotech shall have the option, on 45-days prior written notice to ICS, to terminate the CBD Biotech-ICS Sublicense Agreement, subject to payment of a termination fee (the “Termination Fee”) by CBD Biotech to ICS equal to the actual license fees paid by ICS to CBD Biotech under the CBD Biotech-ICS Sublicense Agreement, and the release and delivery by CBD Biotech to ICS of the Share compensation. Additionally, CBD Biotech and ICS agree that in addition to the payment of the Termination Fee CBD Biotech shall have the obligation to reimburse ICS and purchase from ICS all lab operational equipment acquired, installed and necessary to operate the production facility by making a single payment to ICS (the “Equipment Purchase Payment”), equal to one hundred percent (100%) of ICS’ actual cost incurred. The payment of the Termination Fee and Equipment Purchase Payment shall be a condition precedent to CBD Biotech’s rights to terminate the CBD Biotech-ICS Sublicense Agreement.

The foregoing summary descriptions of the terms of the Strategic Alliance Agreement and the CBD Biotech-ICS Sublicense Agreement are summaries only and do not purport to be complete, may not contain all information that is of interest to the reader and is qualified in its entirety by reference to the full text thereof of such agreements. Copies of the Strategic Alliance Agreement and CBD Biotech-ICS Sublicense Agreement are attached hereto as Exhibits 10.1 and 10.2, respectively, and incorporated herein by reference.

(a)       Documents filed as part of this Report.

1.  Financial Statements.  The unaudited Balance Sheet of Bakhu Holdings Corp., as of April 30, 2020 and the audited balance sheet as of July 31, 2019, the unaudited Statements of Operations for the three and nine month periods ended April 30, 2020 and 2019, the unaudited Statements of Cash Flows for the nine month periods ended April 30, 2020 and 2019 and the unaudited Statement of Stockholders’ Equity for the nine month periods ended April 30, 2020 and 2019, together with the notes thereto, are included in this Quarterly Report on Form 10-Q.

3.  Exhibits. The following exhibits are either filed as a part hereof or are incorporated by reference. Exhibit numbers correspond to the numbering system in Item 601 of Regulation S-K.

⁽³⁾ Filed herewith

SIGNATURES

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