Cannabis Bioscience International Holdings, Inc. 10-K

Item 1. Business. History The Company was formed in Colorado on February 28, 2003, as a limited liability company under the name Fidelity Aircraft Partners LLC. On December 16, 2009, it converted to a corporation under the name Fidelity Aviation Corporation, and on August 24, 2004, it changed its name to China Infrastructure Construction Corp. On February 28, 2018, the Company changed its name to Hippocrates Direct Healthcare, Inc., and on December 6, 2022, it changed its corporate name to Cannabis Bioscience International Holdings, Inc. On December 20, 2019, the present management acquired control of the Company as a result of the acquisition of Pharmacology University, Inc. (see below). The Company began to file reports with OTC in 2018 under its Alternate Reporting Standard and has been a “Pink Sheet” company since then. The Company’s vision is to provide superior services while adhering to its core values of integrity, respect, compassion, inclusiveness, social responsibility, excellence and innovation. Acquisition of Pharmacology University Inc. Pharmaceutical University Inc.(“PUI”) was incorporated in the State of Delaware on January 5, 2017. On December 20, 2019, PUI was merged with and into the Company. The Company conducts the business acquired by this merger (the “Pharmacology University Business”) under the trade name Pharmacology University. The Pharmacology University Business is generally cannabis-related research and education. For a more detailed description of the Pharmacology University Business, see “Business – Pharmacology University Business.” Acquisition of Precision Research Institute On March 31, 2019, the Company entered into the Alpha Research Business by acquiring all of the outstanding units in Precision Research Institute, LLC, a Texas limited liability company (“PRI”), which was formed on May 18, 2016, from the Company’s then president. On August 20, 2020, PRI was merged with and into the Company. The Company conducts the Alpha Research Business under the trade name Alpha Research Institute. As indicated under that caption, the Company intends to conduct clinical trials of cannabinoids as a Sponsor. For a detailed description of the Alpha Research Business, see “Business – Alpha Research Business.” Pharmacology University Business The Cannabis Industry The cannabis industry is fast-growing, increasingly complex, and rapidly changing. The Company believes that the growing cannabis industry in numerous U.S. states and other countries represents a significant market opportunity for the Pharmacology University Business, as persons involved in the industry need the educational and other services that it furnishes, as more fully described below. The U.S. cannabis industry is undergoing rapid growth and change, particularly with the recent opening of opportunities for federally sanctioned research on cannabis in partnership with the Drug Enforcement Administration (the “DEA”), as well as the federal legalization of hemp and corresponding state and federal hemp research programs. 1 The cannabis market generally is large and growing. In 2023, according to Brightfield’s 2023 U.S. Cannabis Market Forecast, the USA cannabis market had approximately $27 million in sales in 2022 and is forecast to reach $50.7 by 2028. According to a report by New Frontier Data, the U.S. legal cannabis market is predicted to reach $41.5 billion in sales by 2025. In the medical market, the demand for cannabis for research is likely to increase significantly over the next few years and decades, due to the increasing number of states legalizing cannabis and the strong public support for cannabis legalization. By 2025, 5.4 million Americans, or 2.4% of U.S. adults, are predicted to be registered patients in medical cannabis states, according to a report by New Frontier Data (“New Frontier”). New Frontier also projects that the medical cannabis market will nearly double to over $16 billion in that time, taking into account more geographies within the U.S. legalizing cannabis, which will lead to market expansion, the normalization of cannabis, which will increase the number of consumers, and medical cannabis patients turning to cannabis as an alternative to prescription drugs. The global medical cannabis market is projected to reach $87.4 billion by 2027, according to Global Market Insights (“GMI”). The DEA’s aggregate production quotas for cannabis were 3,200 kg in 2022 for dried flower (an estimated $35 million market) and 1,000 kg for cannabis extract (an estimated $100 million market). These aggregate production quotas are expected to continue increasing to meet the increasing demand for cannabis research in the U.S. In addition to government funding, some institutions are already receiving private investment in cannabis research. For example, Harvard and MIT recently received a $9 million donation to fund research into cannabis’ influence on brain health and behavior. Additionally, Skylight Health Group (formerly named “CB2 Insights”) has noted that average prescriptions for qualifying conditions such as chronic pain, PTSD, sleep disorders, epilepsy and anxiety saw a decline of 11% in favor of medical cannabis replacement, leading the Company to estimate that more than $4 billion in sales that currently go to pharmaceutical products could be redirected towards medical cannabis. Further research on cannabis legalization and its impact on public health is needed and is likely to take place over the coming years, as the DEA has recognized the increased need for cannabis-related research. In 2019, large pharmaceutical companies in the U.S. spent $83 billion on drug research and development. The private research market, like the federal DEA research program, has an interest in investigating the uses and risks of cannabis and hemp derivatives, not only in states that have legalized medical cannabis, but also in anticipation of potential full legalization. The high prevalence of cancer is expected to be one of the factors driving the demand for legal cannabis. For instance, according to the World Health Organization (WHO), cancer is the second leading cause of death worldwide and was responsible for about 8.8 million deaths in 2015. In addition, the growing disease burden of chronic pain and significant side effects associated with opioid usage is expected to drive the demand for medical cannabis, which has proved to be a potent product for chronic pain management. The Company believes that these and other applications will lead to increased demand. Expanding Legalization of Cannabis The 2018 Farm Bill in the U.S. created an opportunity for hemp-derived cannabidiol (CBD) products in retail and pharmaceutical channels. Also, many countries, including Canada, China, Italy, Australia, and South Korea, have legalized hemp for growth and export. In the United States, CBD is widely available from retailers, including online, drug and convenience stores, natural products, beauty, grocery, and pet stores. According to the Grand View Research Industrial Hemp Market Analysis, the global CBD market was valued at $4.6 billion in 2018 and is expected to grow at a CAGR of 22.2% from 2019 to 2025. Additionally, the global industrial hemp market size was estimated at $4.71 billion in 2019 and is expected to show a revenue-based compound annual growth rate of 15.8%. A recent CBS News poll found that 88% of Americans support the legal use of medical cannabis when recommended by a doctor. Cannabis Business Daily projects sales in the cannabis industry to be $15.5 billion and $20.3 billion in 2020 and 2021, respectively and sales could be as high as $37 billion in 2024. The size of the industry was only $3.4 billion industry in 2015. Sharp sales increases in recently launched medical cannabis programs – as well as continued gains in adult-use markets – are expected to fuel much of the industry’s growth over the coming years. 2 Thirty-nine U.S. states, the District of Columbia, Puerto Rico and Guam have legalized some form of whole-plant cannabis cultivation, sales and use for certain medical purposes. Eighteen of those states and the District of Columbia and Northern Mariana have also legalized cannabis for adults for non-medical purposes (sometimes referred to as adult use). Under federal law, however, those activities are illegal. Cannabis, other than hemp (defined by the U.S. government as Cannabis sativa L. with a THC concentration of not more than 0.3% on a dry weight basis), is a Schedule I controlled substance under the CSA. Even in states or territories that have legalized cannabis to some extent, the cultivation, possession, and sale of cannabis, whether in-state or interstate, violate the CSA and are punishable by imprisonment, substantial fines and forfeiture. Moreover, individuals and entities may violate federal law if they aid and abet another in violating the CSA or conspire with another to violate the law. Violation of the CSA is a predicate for violation of other criminal laws, including money laundering laws and RICO. The U.S. Supreme Court has ruled that the federal government has the authority to regulate and criminalize the sale, possession and use of cannabis, even for individual medical purposes, regardless of whether it is legal under state law. While the U.S. government has not enforced these laws against companies complying with state cannabis laws, it retains the authority to do so, and therefore, the likelihood of any future adverse enforcement against companies complying with state cannabis laws remains uncertain. U.S. Attorneys can prosecute violations of the CSA, including cannabis activities that comply with state law; however, U.S. Attorneys have not targeted state-law-compliant entities in recent years. The policy of not prosecuting such entities has continued under current U.S. Attorney General Merrick Garland. Since 2014, versions of the U.S. omnibus spending bill have included provisions prohibiting the DOJ, which includes the DEA, from using appropriated funds to prevent states from implementing their medical-use cannabis laws. In 2016, the U.S. Court of Appeals for the Ninth Circuit held that this provision prohibits the DOJ from spending funds to prosecute individuals who engage in conduct permitted by state medical-use cannabis laws and who strictly comply with such laws and other courts that have considered the issue have ruled similarly. However, the court noted that if these provisions were not continued, prosecutors could prosecute conduct that occurred even while the provision was previously in force. This decision does not apply to adult-use businesses. Despite the ongoing federal illegality of cannabis, the DEA has authorized certain institutions to conduct research using cannabis. Between January 2017 and January 2019, the DEA’s projections for federally approved cannabis research projects increased dramatically: the number of federally registered cannabis researchers increased from 384 to 542. In 2019, the DEA announced that it would further facilitate and expand scientific and medical research for cannabis in the United States, including registering additional entities to produce cannabis for researchers and increasing the amount and variety of cannabis available for research in order to “facilitate research, advance scientific understanding about the effects of marijuana, and potentially aid in the development of safe and effective drug products that may be approved for marketing by the Food and Drug Administration.” Further, this announcement acknowledged the possibility that medical cannabis or related products may, in the future, require FDA approval and come under the FDA’s FDCA jurisdiction. On December 18, 2020, the DEA finalized regulations pertaining to applications by entities seeking to become registered with the DEA to grow cannabis as bulk manufacturers for authorized purposes. Under these and other applicable regulations, applicants are responsible for demonstrating that they have met various requirements, including requirements to possess appropriate state authority, document that their customers are licensed to perform research, and employ adequate safeguards to prevent diversion. On May 14, 2021, the DEA announced that memorandums of agreement were provided to an unspecified and unnamed number of companies to collaborate with the DEA “to facilitate the production, storage, packaging, and distribution of marijuana under the new regulations as well as other applicable legal standards and relevant laws.” To the extent these memorandums of agreement are finalized, DEA anticipates issuing DEA registrations to these manufacturers. Each applicant will then be authorized to cultivate cannabis – up to an allotted quota – in support of the more than 575 DEA-licensed researchers nationwide. As of 2022, six companies have been granted DEA registrations to bulk-manufacture cannabis. 3 If the DEA continues the above policies and activities (as to which no assurance can be given), the Company believes that demand for medical cannabis, and in turn, the Company’s products and services, will increase. According to the Biden campaign website: “A Biden Administration will support the legalization of cannabis for medical purposes and reschedule cannabis as a CSA Schedule II drug so researchers can study its positive and negative impacts. This will include allowing the V.A. to research the use of medical cannabis to treat veteran-specific health needs.” Neither the Republican nor the Democrat party platform for the 2024 election takes a position on the legalization or decriminalization of cannabis. As discussed under the caption “Alpha Research Business,” recent legislation has made research in product candidates containing hemp-derived cannabinoids possible without FDA approvals. The Company believes that the anticipated growth of the cannabis industry, propelled in significant part by the increasing legalization of cannabis, offers the Company opportunities to expand. The industry requires skilled and educated cannabis professionals to operate. Overview of the Pharmacology University Business Through the Pharmacology University Business, the Company provides knowledge and promotes professionalism in the rapidly growing worldwide cannabis industry through education in and research about the medical properties and healing virtues of this substance. The Company does not cultivate, sell or distribute cannabis or cannabis-infused products and has no plans to do so. Pharmacology University is not an institution of higher education, is not chartered, regulated or accredited by any governmental or private agency and does not offer training that qualifies recipients to become pharmacists or pharmacologists. The Pharmacology University Business and its prospects depend on the growth of the cannabis industry and the need for experienced, educated professional persons to lead and grow that industry ethically and responsibly in the United States and other countries where the Company’s activities are legal. While the Company embraces the legal cannabis industry generally, its primary focus is on educating cannabis industry workers and leaders and scientific research and development of hemp and cannabis for medicinal and commercial applications. One of the Company’s most important assets is the close relationship of its personnel to and cooperation with law enforcement agencies in the locations where it does business. Police agencies in several countries have appeared as guest speakers at the Company’s cannabis seminars. In the United States, the Company has conducted instructional seminars and cannabis classes in the states of Texas, Arkansas, Florida, Illinois, Missouri, Oklahoma and Georgia, as well as Puerto Rico, and is planning to do likewise in the remaining states. Currently, the Company is holding seminars and classes only in the State of Texas. The Company has conducted instructional seminars and cannabis classes in Mexico, Peru, Ecuador, Colombia and the Dominican Republic. With the COVID-19 pandemic having abated, it plans to resume these activities in Mexico, Peru, Ecuador and the Dominican Republic and to expand into Argentina, Chile, Brazil, Panama and other Latin American countries where its activities are lawful. As stated below, however, the Company believes that the demand for its educational products is towards online education and away from classrooms and seminars. Before the pandemic, the Company offered, and with the abatement of the pandemic, is offering, opportunities for learning, discovery and engagement to students, doctors, scientists, entrepreneurs and others in a real-world setting. The Company offers a full range of educational programs at all levels and pursues a broad agenda of research, innovative and creative activities and builds partnerships with other educational institutions, community organizations, government agencies and the private sector in many jurisdictions, including Jorge Tadeo Lozano University in Bogota, Cartagena, and Santa Marta, Colombia; Clayton State University, Atlanta, Georgia; Autonomous University of Santo Domingo, Dominican Republic; EUFLORIA Medical Cannabis Dispensary, Tulsa, Oklahoma; the Polytechnic University of Puerto Rico in San Juan, Dispensarios 420, Puerto Rico; Cannapolis Scientific Farm in Colombia; Hemp Ecuador in Ecuador. 4 Educational Services The Company offers multilevel educational services to entrepreneurs, medical and legal professionals, cultivators, dispensary technicians, manufacturers, patients and others who desire to participate in the cannabis industry or who are otherwise interested in cannabis. These services include: · Continuing medical education courses for physicians · Continuing legal education courses for attorneys · Certification courses for physicians · Certification for industry workers · General education seminars · On-site training These courses cover all aspects of the medical cannabis industry. For the general public, they focus on the history of cannabis, its medicinal value, dispensary concepts, legal issues and ethics, production, growing and extracts, security, operations and economics. For doctors, our courses and seminars cover subjects such as medicinal uses of cannabis, the biochemistry of cannabis, functions of the endocannabinoid system, pharmacology, cannabis use and abuse, and administration and dosage of cannabis medications. The cultivation course focuses on germination, cultivation practices, cloning, growth stages and harvesting, drying and curing, and the manufacturing course covers the chemical composition of cannabis plants, extraction of oils, laboratory practices, the manufacture of cannabis products and marketing. Overall, we have certified and graduated several thousand students in our courses in the United States, Puerto Rico and Colombia. Courses are taught and seminars are led by degreed professionals, university professors, and industry experts with at least two years of commercial experience in the particular subject. For example, the cultivation course might be taught by a professor of horticulture, an individual with an M.S. degree in agriculture, or a master grower with three years’ experience growing crops of at least 500 plants. Before the COVID-19 pandemic, classes were usually held at local colleges and universities in classrooms with projectors, screens and microphones. Among these colleges and universities were the University of Texas, Houston; Texas Women’s University; University of Oklahoma; Oklahoma State University; Clayton State University, Atlanta; Polytechnic University, San Juan; Texas A&M University; and Jorge Tadeo Lozano University in Bogota, Cartagena, and Santa Marta, Colombia. The Company believes that due to the COVID-19 pandemic, which resulted in the closing of classroom and seminar education, as well as convenience, demand for its courses is trending towards online education and away from classrooms and seminars. Students learn about Pharmacology University through its website, social media, ticket venues, and local cannabis groups. Upon completing a course of study, students receive certificates of completion, which are not certifications of their ability to work in a particular field, but recognition of their completion of a non-accredited class. A 130-hour course lasting a semester was available at the University of Tadeo in Colombia, and the students who completed it received a certificate entitled “Diplomado en Cannabis.” In addition, CME and CLE credits were available for doctors and lawyers taking the classes. The Company received CLE approvals for courses that it offered in Arkansas (Office of Professional Programs), Oklahoma (Oklahoma MCLE Commission) and Texas (State Bar of Texas) and received CME approvals for courses that it has offered in Arkansas (University of Arkansas for Medical Sciences Office of Continuing Education), Texas and Florida (Ponce Medical School Foundation). We were the first company approved by the Department of Health of the Commonwealth of Puerto Rico as a provider of all training certificates, including medical education, agriculture and manufacturing education, dispensary education, and others in the medicinal cannabis industry. 5 After the advent of the COVID-19 pandemic, all of our classrooms and seminars venues were forced to close. We also canceled all travel plans to further our expansion. To meet this pandemic, we created online courses. We currently have more than 100 videos available online in English, Spanish, Portuguese, Italian and Arabic and we plan to add other languages. Additionally, we have used Zoom to hold virtual classes to teach students and be able to respond to their questions in real time during the courses. However, revenue received from online courses has not replaced the revenue that we believe we would have generated if our classrooms and public venues had remained open. With the abatement of the COVID-19 pandemic, the Company is attempting to resume teaching in classrooms and public forums. A result of the closing of classrooms due to the pandemic was increasing reliance on online classes. The Company believes that this trend will increase due to the ease of attendance and the ability of students to learn at times that are convenient to them. The Company believes that teaching in classrooms and public forums is unlikely to resume to its former extent. The Company believes that teaching in classrooms and public forums is unlikely to resume to its former extent. We held two classes and no seminars during the year ending May 31, 2024, producing revenue of $23,006, compared with three classes and no seminars, producing revenues of $52,315 in the year ended May 31, 2023. As a result, we are concentrating on expanding our online business. Digital Products As a result of the COVID-19 pandemic, which made classroom and seminar education impossible, Pharmacology University focused on the production of educational materials for sale on online platforms (including those operated by Amazon, Zinio, Apple, Walmart/Kobo, Barnes & Noble and Google Books). However, the trend of students’ preference for online courses has adversely affected the demand for classroom teaching and seminars. The Company does not expect that demand for teaching in these venues will return to pre-pandemic levels. It also focuses on entering into subscription and commercial agreements with universities and e-commerce platforms. We have published 50 cannabis-related eBooks in five languages, have produced videos to offer online and have recorded over 13,000 minutes of audio in 5 languages. We have also engaged artificial intelligence services to generate translations of these materials in up to 100 additional languages. This activity has resulted in increased expenses, while producing minimal revenue and no profit; however, we believe that it will become profitable and be a significant component of our business. We have aimed to publish our educational content on different marketplaces that host products in languages commonly used worldwide. We work with platforms from Brazil, Spain, England, Mexico, Canada, the United States, Germany and other countries. We currently have four types of products published on different platforms. · E-Books : We publish fifty titles in Spanish, English, Portuguese, Italian, and Arabic on Amazon, Kobo and Google Books. In addition, Smashwords distributes our content on Barnes & Noble, Apple, Baker & Taylor’s Axis 360, OverDrive, Scribd, cloudLibrary, Gardners Extended Retail, Odilo and Gardners Library. · Audiobook s: Findawayvoices distributes our content on 3Leaf Group, Axiell, Baker & Taylor, Bibliotheca, Bidi, EBSCO, Follett, hoopla, LOL, Dilo, Overdrive, Perma-Bound, Ulverscroft and Wheelers, as well as on 24symbols, Anyplay, Apple, Audiobooks.com, AudiobooksNow, AudiobooksNZ, BajaL, BingeBooks, Bokus Play, Bookmate, Chirp, Cliq, Downpour, eStories, Google Play, Hummingbird, Instaread, Leamos, Libro.FM, Milkbox, Nextory, NOOK, Scribd, and Ubook. · Video courses : We publish 161 titles on Amazon (6 courses), Sympla (17 courses), Teachlr (62 courses), Edusity (13 courses), Simplivlearning (16 courses), Alugha (40 courses), Aprendum (4 courses), and Unihance (105 courses). We published Cannabis Worlds, a digital magazine, on Google Books, Zinio, Pocketmags and Magzter. In April 2024, we ceased publication. The Company believes that the amount and scope of its digital products exceed those offered by any of its competitors in cannabis-related education. A staff of 14 independent contractors in Venezuela, Argentina, Colombia, Brazil and Texas holds classes; researches and edits materials; translates materials; prepares audio-visual materials; and engages in web development. 6 Franchising Until the COVID-19 pandemic, we offered educational programs to franchisees worldwide. A franchisee purchased the right to provide our courses in its particular city. In addition to an initial franchise fee, a franchisee paid a 10% franchise fee and a 2% advertising fee on all gross sales. We assisted in creating and registering a franchisee’s business identity; developing and activating its websites; creating its social media platforms; providing it with marketing plans; assisting in finding venues for their classes; explaining how to find qualified instructors; providing PowerPoint presentations as well as books for students and instructors; and providing one week of one-on-one training relating to the operation of the franchise. In addition, we provided one month of marketing assistance. As a result of the pandemic, we received no revenue from these franchisees in the year ended May 31, 2023. After the COVID-19 pandemic abated, we attempted to resume franchise operations, but have been unable to find customers and received no revenue from franchising in the year ended May 32, 2024.. In April 2024, we decided not to pursue franchising. Consulting Prior to the pandemic, the Company offered consulting services, which included: These services included: · creating and presenting advertising material for campaigns in traditional and digital media, including publicity strategy, campaign creation, design of flyers, advertising social networks, newspapers and magazines and creation of audiovisual content. · consulting services to entrepreneurs who are considering entering the cannabis industry, manufacturers and growers, including preparation of business plans, guidance in business structure, guidance in seeking investment, preparation of license and other applications and development of operating procedures. The costs of these services were based on the nature of each assignment. The Company provided these services in many states and Puerto Rico and assisted in obtaining over 40 licenses for its clients for dispensaries, cultivation, manufacturing and a full analytical laboratory. In the year ended May 31, 2023, the Company began to offer these services again and recorded revenue of $8,333 for that year and $0 for the year ended May 31, 2024. We are determining whether we will continue this operation. Alpha Research Business Through the Alpha Research Business, based in Houston, Texas, the Company offers specialized services in all therapeutic areas of clinical trials and has conducted over 20 clinical trials for Sponsors and CROs. These trials have included drugs relating to diseases in the areas of asthma, allergies, renal disorders, neurology disorders, cardiac and vascular disorders, nutrition/metabolism, obstetrics/gynecology, dermatology, oncology, ophthalmology, orthopedics, gastroenterology, psychiatric disorders, infectious diseases, pulmonary and respiratory diseases, urology and COVID-19, as well as devices for orthopedic and cardiovascular problems. Our clients have included Sponsors such as Pfizer Inc., Merck & Co., Inc., Shionogi & Co., Ltd., Medtronic plc, Novartis, GlaxoSmithKline plc, Gilead Sciences, Inc. and Johnson & Johnson, and CROs, such as PPD, Inc., Icon plc, Parexel, PRA Health Sciences, Inc., Covance, IQVIA Holdings Inc. and Medpace Holdings, Inc. In the near future, Alpha Research intends to conduct cannabinoid clinical trials, in which it will be the Sponsor. One of our clients is Vita Biotech Research, LLC (“Vita”), which is engaged in data collection for clinical trials. For information regarding the interest of two of our officers and directors in Vita, see “Certain Relationships and Related Party Transactions – Vita Agreement.” 7 Clinical trials are a research method designed to evaluate and test new drugs or devices. They are typically conducted in four phases, each of which has a different purpose and helps scientists answer different questions. · Phase I. Researchers test an experimental drug or treatment in a small group of people for the first time. The researchers evaluate the treatment’s safety, determine a safe dosage range, and identify side effects. · Phase II. The experimental drug or treatment is given to a larger group of people to ascertain whether it is effective and to evaluate its safety further. · Phase III . The experimental study drug or treatment is administered to large groups of people. Researchers confirm its effectiveness, monitor side effects, compare it to commonly used treatments, and collect information that will allow the experimental drug or treatment to be used safely. · Phase IV. Post-marketing studies, which are conducted after a treatment is approved for use by the FDA, provide additional information, including information relating to treatment, risks, benefits and best use. The Company’s facilities are equipped with examination and blood drawing rooms, storage for investigational medication and study-related equipment. The Company employs only clinical research coordinators (“CRCs”) with at least five years of experience. CRCs are involved in supervising drug trials and medical research, which involves recruiting patients for medical and drug trials and screening them to ensure that they meet the guidelines of the trial, as well as following good clinical practice, overseeing the progress of the clinical trial and ensuring that it is properly conducted, recorded, and reported. The recruitment of subjects from minority, rural and economically disadvantaged groups is important to clinical trials because the benefits and risks of new drugs with respect to them may differ from other groups due to genetic, environmental and other factors. To enhance such recruitment, the Company has worked with community organizations, churches, social services and public agencies and has provided transportation services. The Alpha Research Business is staffed by seven personnel responsible for regulatory and Investigational Review Board (“IRB”) processes and a staff of two auditors. An IRB is an independent body required by federal regulation, comprising medical, scientific, and nonscientific members, the responsibility of which is to ensure the protection of the rights, safety, and well-being of human subjects involved in a clinical trial. An IRB reviews and approves clinical trials, protocols, amendments, methods and materials to be used in obtaining and documenting informed consents from trial subjects. We have more than six principal investigators, who are physicians who prepare and perform or oversee clinical trials, usually in conjunction with their medical practices. These investigators are independent contractors. In addition, we have seven professional personnel who analyze data and report the results of trials to Sponsors and CROs, all of whom are independent contractors; they are encouraged to keep up to date on good clinical practices and regulations relating to clinical research and a part-time accountant. Clinical Trials for Sponsors and CROs In connection with these clinical trials, the Company will contract with a Sponsor or CRO to provide services in connection with a clinical trial after it has provided information respecting its ability to provide them and after a visit by the Sponsor or CRO to our facilities to confirm our ability to conduct the trial and to establish communications procedures. After further measures, which include establishing a budget and providing additional information about the Company and a second visit to our facilities, we will enter into a contract with the Sponsor or CRO, which will issue a “Site Activation Letter.” When we receive this letter, we begin enrolling volunteer test subjects. 8 Alpha Research finds Sponsors and CROs in three ways: · Recruitment websites . On these websites, we search for trials that are within our competence and contact the related Sponsors or CROs, providing relevant information about ourselves, who will respond if they are interested in our services. The Sponsor or CRO will consider entering into a contract for the study only after it has met with our personnel and has visited our facilities and if the Sponsor or CRO is satisfied that we can conduct the trial and comply with the terms of its contract, which, as indicated above, are complex. Even then, the Sponsor or CRO may award the contract to a firm that it considers better qualified. · Sponsor or CRO websites . The process is similar to that described above for recruitment websites. · Personal contact . We are currently conducting clinical trials for Sponsors and CROs in non-cirrhotic, non-alcoholic steatohepatitis, chronic obstructive pulmonary disease, a multivalent pneumococcal vaccine, iron deficiency anemia and the collection of biospecimen collections and samples across all ages and various therapeutic areas, and multiple medical conditions. We are actively seeking contracts, have bid on four and believe that we will be successful in obtaining some of them. We produced revenues of approximately $267,220 and $213,865 from our clinical trials business for the years ending May 31, 2024, and May 31, 2023, respectively. Clinical Trial in Which We Will be the Sponsor In the near future, Alpha Research intends to conduct clinical trials of hemp-derived cannabidiol (“CBD”) medical products, in which it will be the Sponsor. CBD derived from hemp containing less than 0.3% of tetrahydrocannabinol (“THC”) was legalized at the federal level by the Agriculture Improvement Act of 2018 and its sale and use of CBD products containing less than 0.3% of THC is legal in all states except for 18, which restrict sale and use for various reasons, including the age of the purchaser, non-medical use and the THC content; the Company will not sell its CBD product in any jurisdiction in which such sale is illegal, including these 18 states. The Company does not intend to conduct clinical trials of products that require approval of the FDA. CBD is a naturally produced cannabinoid from the cannabis plant that differs from other cannabinoids, such as THC, for its structure and mechanism of action. CBD does not have psychoactive effects and does not alter the conscience and perception of the user. In contrast, CBD has been proven clinically to have anti-inflammatory, analgesic, anti-seizure, immunomodulatory and anxiolytic activity. According to an article in Harvard Health Publishing, the consumer health education division of Harvard Medical School (“Cannabidiol (CBD): What we know and what we don’t,” published on September 24, 2021), there is strong evidence for the use of CBD in treating certain childhood epilepsy syndromes, and one CBD-based drug, Epidiolex, has been approved by the Federal Drug Administration for treating these conditions. This article states that animal studies, human research and self-reporting suggest that CBD may help with anxiety, insomnia, chronic pain and treatment of addiction. Other articles state, with varying degrees of certainty, that CBD may be used to treat other conditions, including mental disorders, such as depression, psychosis and PTSD; cancer-related symptoms, such as nausea, vomiting and pain; neurological conditions, such as Parkinson’s disease, Huntington’s disease, autism spectrum disorder and motor disorders; substance abuse; glioblastoma; high blood pressure; and sleep disorders. Initially, the Company intends to conduct research in the areas of endocannabinoid system physiology to study the normal endocannabinoid range in healthy individuals, the medical consequences of low endocannabinoid levels and the effects of cannabinoid administration in the organism. These studies will involve various methodologies, which will include blood tests, breathalyzer tests and electroencephalograms (EEGs) to determine the impact of cannabinoids on pathologies that have been linked to clinical endocannabinoid deficiencies such as irritable bowel syndrome, migraine and fibromyalgia. Research will also be conducted in oncology regarding the influence of cannabinoid-based treatments respecting cancer prevention, tumor size and viability, cancer-related symptoms and chemotherapy-induced symptoms. Finally, the Company intends to conduct research in anxiety disorders with a view to determining whether cannabinoids can reduce anxiety-related symptoms and improve quality of life. 9 The Company determined to conduct these clinical trials for the following reasons: · According to Forbes Business Institute, the global CBD oil and CBD consumer health market is expected to grow from $39.54 billion in 2022 to $55.79 billion in 2028 at a compound annual growth rate of 47.49%. · According to a Forbes Health Survey conducted by OnePoll, 60% of respondents reported that they have tried a cannabidiol (CBD) product and believe CBD has health and wellness benefits, including the potential to improve sleep, reduce anxiety and/or relieve pain. Based on these factors and the expertise of the Company in conducting clinical trials, it believes that it can develop and test CBD products. These trials will be conducted in the Company’s facilities, adding additional CRCs to handle the new studies. It will contract with an IRB to ensure all protocols are met and approved. If a clinical trial indicates that a product is safe and effective, the Company intends to exploit it by selling or licensing it. Where possible, it will seek protection of intellectual property related to and the use of a product through patents and trademarking. Sleep Center Business In July 2022, the Company opened its Sleep Center, which served Houston-area patients who were interested in improving their sleep quality and enhancing their physical and mental well-being. The Sleep Center utilized state-of-the-art equipment. Its goal was to assess, diagnose, and treat sleep problems and provide patients with convenient and flexible care. During the year ended May 31, 2023, the Sleep Center treated only six patients and produced revenue of $900. The Company closed the Sleep Center in April 2023 because it was unable to obtain patients in the quantity needed to justify its operation and the Company believed that its manpower and financial resources would more effectively be used in its other activities. Employees The Company has two employees, namely its executive officers, who serve full-time. It meets its other manpower needs through approximately 14 independent contractors; the number of these personnel changes from time to time in accordance with the Company’s staffing needs. For a description of the services provided by these independent contractors, see the descriptions of the three segments of the Company’s business. Concentration of Revenues The Company has depended on a few customers of Alpha Research Business for substantial portions of its revenue. For the year ended May 31, 2024, the Company had revenues of $248,841, of which 62.8%, 24.1% and 4.0% were received from three customers. For the year ended May 31, 2023, the Company had revenues of $316,825, of which 63.9%, 27.2% and 5.1% were received from three customers. 10 Description of Property The Company leases approximately 1,367 square feet at 6201 Bonhomme Road, Suite 435N, Houston, Texas, under a lease dated April 12, 2024. The lease, which has a one-year term that commenced on May 1, 2024. provides for a base rent of $1,631 per month. These premises are shared by PUI and Alpha Research Institute. Two of the Company’s officers leased 1,400 square feet in Houston, Texas, at 1625 Main St., Houston, Texas, under a lease the term of which commenced on March 15, 2023, and expired on September 14, 2023, at a rent of $3,168 per month; these officers have made a portion of these premises available to the Company for use as office space, for which the Company pays them $2,817 per month. These officers entered into a new lease for these premises, which commenced on September 15, 2023, and will expire on September 14, 2024, at a rent of $3,164 per month, and they made a portion of these premises available to the Company for use as office space, for which the Company is paying them $2,817 per month. One of these officers died in January 2024. For further information, see “Certain Relationships and Related Party Transactions—Lease.” The surviving officer intends to renew this lease and make a portion of these premises available to the Company for use as office space on the same terms, Legal Proceedings The Company is not a party to any litigation and is not aware of any threatened litigation. Off-Balance Sheet Arrangements We have no off-balance-sheet arrangements. Government Re g ulation The Company’s businesses are affected by laws and regulations relating to cannabis and clinical trials. In the future, the Company may sell cannabinoid products that are subject to legal restriction and regulation in some states and, although not subject to federal regulation today, could be regulated or restricted in the future. The Company intends to comply with all such restrictions and regulations. The Company and its expenditures, earnings and competitive position have not been materially affected by compliance with the above or other governmental regulations, including those relating to climate change. See also Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Climate Change. The Company believes that it is in compliance with all material government regulations. Information About Our Executive Officers The names and ages of the Company’s executive officers and their positions with the Company are as follows: Name (Age) Present Position (Effective Date) Positions Held During Past Five Years (Effective Date) Dante Picazo (68) Chief Executive Officer, Chief Financial Officer and Director (2019) Chief Executive Officer, Chief Financial Officer and Director (2019) John Jones (59) Treasurer and Director (2024) Treasurer and Director (2024) There are no family relationships between any of the officers named above and, except for an Agreement, dated as of August 19, 2024, by and among the Company, John Jones and Barbara Kamienski (the “Jones Agreement”), there is no arrangement or understanding between any of the officers named above and any other person pursuant to which he was selected as an officer. For information regarding the Jones Agreement, see “Certain Relationships and Related Transactions, and Director Independence – Jones Agreement”). The board of directors (the “Board”) appointed each of the officers named above to hold office until his successor is elected and qualified or until his earlier resignation or removal. Further information about the Company’s officers and directors appears in Part III of this report. 11 Item 1A. Risk Factors. The Company is a smaller reporting company as defined by Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) and is not required to provide information under this item. Item 1B. Unresolved Staff Comments. None. Item 1C. Cybersecurity. The Company does not believe that it is subject to material cybersecurity risks and does not expect to incur material costs in connection with cybersecurity. The Company does not believe that it has been the object of any cyberattack.