Bright Green (BGXX) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Bright Green Corporation's unaudited condensed financial statements and related notes for Q1 2023 and 2022 Item 1. Financial Statements (Unaudited) This section presents Bright Green Corporation's unaudited condensed financial statements and related notes for Q1 2023 and 2022 Condensed Balance Sheets The Condensed Balance Sheets show an increase in total assets, liabilities, and stockholders' equity from December 2022 to March 2023 Condensed Balance Sheet Highlights (in US Dollars) | Metric | March 31, 2023 (Unaudited) | December 31, 2022 | | :----------------------------- | :------------------------- | :------------------ | | Total Assets | $24,168,581 | $22,788,293 | | Total Liabilities | $12,409,110 | $11,209,457 | | Total Stockholders' Equity | $11,759,471 | $11,578,836 | | Current Liabilities | $8,949,018 | $7,523,350 | | Accounts Payable | $6,360,662 | $5,033,831 | | Accrued Liabilities | $938,356 | $447,325 | Condensed Statements of Operations and Comprehensive Loss The company reported no revenue and a significant increase in net loss for Q1 2023, driven by higher general and administrative expenses Condensed Statements of Operations Highlights (in US Dollars) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $ - | $ - | | General and administrative expenses | $2,455,082 | $534,540 | | Total operating expenses | $2,612,623 | $726,346 | | Net loss and comprehensive loss | $(2,613,265) | $(726,346) | | Net loss per common share - basic and diluted | $(0.02) | $(0.00) | Condensed Statements of Changes in Stockholders' Equity Total stockholders' equity increased from December 2022 to March 2023, driven by common stock issuances despite a net loss Changes in Stockholders' Equity Highlights | Metric | March 31, 2023 | December 31, 2022 | | :--------------------------------------- | :------------- | :---------------- | | Common Shares Outstanding | 174,423,810 | 173,304,800 | | Common Stock Amount (in US Dollars) | $17,441 | $17,329 | | Additional Paid-in Capital (in US Dollars) | $48,431,116 | $45,637,328 | | Accumulated Deficit (in US Dollars) | $(36,689,086) | $(34,075,821) | | Total Stockholders' Equity (in US Dollars) | $11,759,471 | $11,578,836 | Key Changes (Q1 2023) (in US Dollars) * Warrants exercised for cash: $210,000 (200,000 shares) * Common stock issued for cashless conversion (EB-5): $880,000 (22,005 shares) * Common stock issued for cash (EB-5): $880,000 (22,005 shares) * Common stock issued for services: $823,900 (875,000 shares) * Net loss: $(2,613,265) Condensed Statements of Cash Flows Net cash from operating activities improved in Q1 2023, while investing activities used substantial cash, and financing provided a large influx Condensed Statements of Cash Flows Highlights (in US Dollars) | Cash Flow Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $273,391 | $137,876 | | Net cash used in investing activities | $(1,537,668) | $(822,265) | | Net cash provided by financing activities | $1,272,205 | $50,000 | | Net increase (decrease) in cash | $7,928 | $(634,389) | | Cash, end of period | $422,502 | $648,176 | Notes to the Condensed Financial Statements (Unaudited) This section details the company's business, accounting policies, financial instruments, and related party transactions 1. Description of Business and Organization Bright Green Corporation, incorporated in 2019, focuses on medicinal plants, went public in 2022, and initiated an EB-5 offering * Incorporated on April 16, 2019, in Delaware, focusing on growth, production, and research of medicinal plants[26] * Common stock commenced trading on Nasdaq under 'BGXX' on May 17, 2022[28] * Initiated a private placement offering (EB-5 program) on February 1, 2023, to issue up to 12,609,152 shares at $39.99 per share[28] * Is a start-up company with no revenue as of March 31, 2023, and acknowledges uncertainty regarding COVID-19's impact[29][30] 2. Going Concern and Basis of Presentation Going concern is in substantial doubt due to recurring losses and negative working capital, with management seeking additional financing Going Concern Indicators (as of March 31, 2023) (in US Dollars) | Metric | March 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :---------------- | | Net Loss (Q1) | $(2,613,265) | $(726,346) | | Accumulated Deficit | $(36,689,086) | $(34,075,821) | | Negative Working Capital | $(8,456,436) | $(7,030,929) | * Does not have sufficient working capital to pay operating expenses for at least 12 months from the financial statement issuance date[35] * Raised $880,000 through common stock issuances (EB-5 Program) and $210,000 through warrant exercises in Q1 2023, and drew $200,000 from a $15,000,000 related party line of credit[36] * Financial statements do not include adjustments for potential inability to continue as a going concern[10] 3. Summary of Significant Accounting Policies This section outlines key accounting principles and methods, including asset depreciation, fair value, and stock-based compensation A. Basis of Measurement Financial statements are prepared on a historical cost basis, with exceptions as noted * Financial statements prepared on a historical cost basis, except as otherwise indicated[13] B. Property, Plant, and Equipment Property, plant, and equipment are recorded at cost less depreciation, with construction in progress not depreciated until placed in service * Stated at cost less accumulated depreciation; expenditures for maintenance and repairs are expensed, while additions and betterments are capitalized[14] * Depreciation methods: declining balance for building and improvement (10-year life) and straight-line for furniture and fixtures (3-year life)[14] * Construction in progress is not depreciated until the asset is placed in service[14] C. Long-lived Assets Long-lived assets are reviewed annually for impairment, with losses recognized if undiscounted cash flows are less than carrying amounts * Long-lived assets are reviewed annually for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable[16] * Impairment losses are recorded when indicators are present and undiscounted cash flows are less than carrying amounts, with the loss based on the excess of carrying amount over fair value[16] D. Intangible Assets Intangible assets, mainly licenses, are amortized over useful lives and reviewed for impairment when indicators are present * Intangible assets consist of certain licenses, amortized over the term of each license[17] * Intangible assets with finite useful lives are reviewed for impairment when indicators are present and undiscounted cash flows are less than carrying amounts[17] E. Fair Value of Financial Instruments Fair value measurements use a three-level hierarchy, with short-term instruments approximating fair value and embedded derivatives bifurcated * Uses a three-level hierarchy (ASC 820) for fair value measurements: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[6][18] * Carrying amounts of short-term financial instruments (cash, other assets, accounts payable, accrued liabilities, due to others, due to related party) approximated their fair values due to their short-term nature[7] * Embedded derivatives are separately measured at fair value if bifurcation requirements are met, with changes recognized in the condensed statement of operations[1] F. Investments Under the Equity Method Investments with significant influence (20-50% ownership) are accounted for using the equity method, adjusted for earnings/losses * Investments are accounted for under the equity method when the Company has significant influence (generally 20% to 50% ownership)[8] * Initially recorded at cost and adjusted for additional investments, distributions, and proportionate share of earnings or losses of the investee[21] * Evaluates equity method investments for impairment when events or changes indicate an other-than-temporary decline in value[21] G. Advertising Costs Advertising costs are expensed as incurred, showing a notable increase in Q1 2023 compared to Q1 2022 * Advertising costs are charged to operations when incurred[3] Advertising Costs (in US Dollars) | Period | Amount | | :------------------- | :------- | | Q1 2023 | $11,483 | | Q1 2022 | $6,191 | H. Income Taxes Income taxes are accounted for using the asset and liability method, with deferred tax assets reduced by a valuation allowance * Accounts for income taxes in accordance with ASC Topic 740, using the asset and liability method[64] * Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all will not be realized[64] * Tax positions are recognized only if "more likely than not" to be sustained in a tax examination; the company has no material uncertain tax positions[66] I. Basic and Diluted Earnings (Loss) per share Basic EPS uses weighted average common shares, while diluted EPS considers options and warrants, excluding anti-dilutive effects * Basic earnings (loss) per share is calculated using the weighted average number of common shares outstanding[80] * Diluted earnings per share presumes the exercise of outstanding options, warrants, and similar instruments, with proceeds used to repurchase common shares[80] * The calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive[80] J. Segment Reporting Segment reporting follows ASC 280-10, focusing on medicinal plant operations as a U.S.-based start-up with no revenue * Applies ASC 280-10 for segment reporting, evaluating operating segments based on separate financial information available to the chief operating decision-maker[68] * Significantly all assets are located in the United States, and the company is a start-up with no revenue as of March 31, 2023 and 2022[68] * Reportable segments will include its growth, production, and research of medicinal plants operations[68] K. Use of Estimates Financial statements require management estimates for deferred tax assets, warrants, and going concern, with actual results potentially differing * Preparation of financial statements requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses[69] * Key areas of estimation include valuation allowance for deferred tax assets, valuation of warrants and stock-based compensation, going concern assessment, and assignment of useful lives of property, plant, and equipment[69] * Actual results experienced by the Company may differ materially and adversely from the Company's estimates[69] L. Stock-based Compensation Stock-based payments are recognized at fair value in operations over the vesting period, including awards to non-employees * Accounts for stock-based payments in accordance with ASC 718, recognizing them at fair value, net of estimated forfeitures, in the condensed statement of operations[70] * Compensation expense related to stock-based awards is recognized over the requisite service period, generally the vesting period[70] * Stock-based compensation awards issued to non-employees for services are accounted for at the fair value of services rendered or instruments issued, whichever is more readily determinable[84] M. Warrants Warrants are classified as equity or liability based on specific terms, with equity-classified recorded in additional paid-in capital * Warrants are classified as either equity-classified or liability-classified instruments based on specific terms and applicable authoritative guidance in FASB, ASC 480 and ASC 815[106] * Equity-classified warrants are recorded as a component of additional paid-in capital at issuance, while liability-classified warrants are recorded at initial fair value with changes recognized in operations[106] N. Standards, Amendments, and Interpretations Adopted The company adopted ASU 2021-04, ASU 2016-02 (Leases), and ASU 2018-13 (Fair Value Measurement) in recent periods * Adopted ASU 2021-04 (modifications to equity-classified written call options) as of January 1, 2022[107][108] * Adopted ASU No. 2016-02 (Leases) as of May 17, 2022, which did not have a material effect on the condensed financial statements[73][87][109] * Adopted ASU 2018-13 (Fair Value Measurement disclosure requirements) effective October 4, 2022[110] 4. Concentration of Credit Risk Credit risk is concentrated in cash deposits exceeding the FDIC insured limit as of March 2023 and December 2022 * Financial instruments potentially subject the Company to a concentration of credit risk consist principally of cash deposits[89] Cash in Excess of FDIC Insured Limit ($250,000) (in US Dollars) | Date | Amount | | :------------------- | :------- | | March 31, 2023 | $184,718 | | December 31, 2022 | $187,821 | 5. Deposits Deposits as of December 2022 included equipment and construction contracts, with the construction completed by March 2023 * As of December 31, 2022, deposits were comprised of a down payment for an equipment contract and a construction contract[75] * As of March 31, 2023, the construction contract was completed, but the Company had not yet taken title of the equipment[75] * In 2022, the Company made a deposit totaling $1,109,643 for equipment costing $2,219,285, with the remaining balance due upon delivery[123] 6. Equity Method Investment in Alterola Bright Green acquired 25% of Alterola Biotech, accounted for by the equity method, and plans to acquire the remaining 75% * Obtained approximately 25% ownership or voting power of Alterola Biotech Inc. through a Secondary Stock Purchase Agreement[112] * The investment is accounted for as an equity method investment due to significant influence[93][114] * Intends to acquire the remaining 75% of Alterola, with a valuation of $50 million, to be paid as 20% cash and 80% Bright Green stock[92][94] * Recognizes its share of net loss from Alterola on a three-month lag due to inability to timely obtain financial information[93] 7. Property, Plant, and Equipment Property, plant, and equipment, primarily construction in progress, had a net value of $18.6 million as of March 2023 Property, Plant, and Equipment (Net) (in US Dollars) | Date | Amount | | :------------------- | :------------- | | March 31, 2023 | $18,574,396 | | December 31, 2022 | $17,146,325 | Construction in Progress (in US Dollars) | Date | Amount | | :------------------- | :------------- | | March 31, 2023 | $12,321,881 | | December 31, 2022 | $10,736,269 | * Capitalized interest costs included in construction in progress totaled $185,703 as of March 31, 2023 (vs $106,117 as of December 31, 2022)[96] * The Company is in the process of negotiating final terms to exercise two Real Estate Option Agreements for 175 and 330 acres, with acquisitions not yet completed as of March 31, 2023[120] 8. Intangible Assets Intangible assets consist solely of licenses, valued at $1,000 with no accumulated amortization * Intangible assets consist of certain licenses[17][121] Net Intangible Assets (Licenses) (in US Dollars) | Date | Amount | | :------------------- | :------- | | March 31, 2023 | $1,000 | | December 31, 2022 | $1,000 | Accumulated amortization: $0 for both periods 9. Commitments The company has a $15 million unsecured line of credit with a related party, used for construction in progress * Entered into an unsecured line of credit with LDS Capital LLC (later assigned to Lynn Stockwell, a Board member and majority shareholder)[147] * The line of credit was amended on November 14, 2022, to increase capacity by $10 million, for a total of $15 million[147] * Funds from the line of credit have been used for construction in progress, and interest expense ($185,703 as of March 31, 2023) has been capitalized[124] 10. Related Party Line of Credit Note The related party line of credit saw payments, draws, and a cashless conversion in Q1 2023, with $11.5 million available * Related party line of credit note was paid down $17,795 on January 9, 2023, and an additional $200,000 was drawn on March 14, 2023[102][103] * On February 6, 2023, a cashless conversion paid down $880,000 from the line of credit in exchange for 22,005 shares of common stock for the EB-5 Program[125] * The related party loan balance of $392,194 was paid in full through a cashless conversion on February 1, 2023[148] * As of March 31, 2023, $11.5 million remains available to draw from the credit facility[36] 11. Stockholders' Equity As of March 2023, 174.4 million common shares were outstanding, with Q1 issuances for warrants, EB-5, and services * Authorized 500,000,000 common shares and 10,000,000 preferred shares; 174,423,810 common shares issued and outstanding as of March 31, 2023, with no preferred shares issued[150] Common Stock Issuances (Q1 2023) | Issuance Type | Shares Issued | Proceeds/Fair Value (in US Dollars) | | :--------------------------------------- | :------------ | :------------------ | | Warrants exercised for cash | 200,000 | $210,000 | | EB-5 Program (cash) | 22,005 | $880,000 | | EB-5 Program (cashless conversion) | 22,005 | $880,000 | | Services rendered (Executive Chairman) | 875,000 | $823,900 | * The September 2022 Private Placement generated approximately $10 million in gross proceeds, with the grant date fair value of accompanying warrants estimated at $4,489,662[151][153] 12. Related Party Transactions Significant related party transactions include common stock issuances for services and amounts due to executives and a board member * 875,000 shares of common stock were issued to the Executive Chairman for services during Q1 2023[127] Amounts Due to Related Parties (as of March 31, 2023) (in US Dollars) | Related Party | Amount | Included In | | :--------------------------------------- | :------- | :------------------ | | Former interim CEO/Executive Chairman | $775,000 | Accrued liabilities | | Company's Chief Executive Officer | $82,500 | Accrued liabilities | | Company wholly owned by CFO | $107,232 | Accounts payable | | Company majority owned by CEO | $41,079 | Accounts payable | | Lender (Board member) for LOC note | $3,460,092 | Related party line of credit note | 13. Contingencies The company is involved in legal proceedings regarding common stock and equity ownership, with potential losses unassessable * The Company is routinely a defendant in, or party to, a number of pending and threatened legal actions[158] * Cannot reliably assess potential losses for current legal matters as they are at an early stage, and no amounts have been accrued in the financial statements[158] * Specific cases include Bright Green Corporation v. John Fikany (regarding 5,000,000 common shares) and Bright Green Corporation v. Jerry Capussi (regarding up to 108,000 shares or fair market value of equity ownership)[132][159] 14. Subsequent Events Subsequent events include the CEO earning 500,000 shares and a $3.5 million securities purchase agreement in May 2023 * On May 3, 2023, the Company's Chief Executive Officer earned 500,000 shares of common stock by achieving a milestone[133] * On May 22, 2023, the Company entered into a securities purchase agreement to sell 3,684,210 shares of common stock and warrants to an institutional investor for approximately $3.5 million in gross proceeds[160] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, DEA registration, COVID-19 impact, and accounting policies Overview Bright Green Corporation is a federally authorized U.S. cannabis company with DEA registration for bulk manufacturing and international export * Bright Green Corporation is a first-mover in the U.S. federally-authorized cannabis space[136] * Received a federal controlled substances registration (DEA Registration No. RB0649383) on April 28, 2023, for bulk manufacturing of cannabis, cannabis extracts, and tetrahydrocannabinol[136] * Authorized to sell federally legal cannabis to licensed researchers and pharmaceutical companies, and to export cannabis internationally[138][163] * Plans to sell CBN (cannabinol) and CBG (cannabigerol) as hemp isolates or extracts to consumers where legal, as these meet the definition of 'hemp' and are outside DEA's jurisdiction[137] Recent Developments Recent developments include receiving DEA Registration and entering a new MOA in April 2023 for federally legal cannabis activities * Received DEA Registration in April 2023 for the bulk manufacture of a Schedule I controlled substance – cannabis, cannabis extract, and tetrahydrocannabinol[167] * Entered into a new Memorandum of Agreement (MOA) with the DEA in April 2023, outlining terms for commercial cannabis business, effective for a one-year term and renewable[167] * The DEA Registration permits cannabis activities under federal law, allowing cultivation, manufacturing, supply to researchers, and production for pharmaceutical use[139][167] * Must comply with MOA terms, including submitting procurement/manufacturing quotas, collecting samples, providing harvest/distribution notifications, and following DEA packaging/labeling/storage/transportation requirements[165] Coronavirus ("COVID-19") Impact COVID-19 adversely impacted operations and financial condition, causing market disruptions and capital tightening, with uncertain future effects * The COVID-19 pandemic has had an adverse impact on the company's operations and financial condition[142] * Caused significant market and business disruptions, stock market volatility, and tightened capital access[142] * The ultimate magnitude of COVID-19's impact is of unknown duration and could have a material adverse effect on liquidity and profitability[196] Results of Operations The company generated no revenue in Q1 2023 or 2022, incurring significant operating expenses and net losses Revenue As a start-up, Bright Green Corporation generated no revenue from commercial operations in Q1 2023 or 2022 * The Company has not started commercial operations and has not generated any revenues for the three months ended March 31, 2023 and 2022[170][171] Operating Expenses Operating expenses significantly increased in Q1 2023, primarily due to higher general and administrative expenses and share-based compensation Operating Expenses (in US Dollars) | Expense Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Total operating expenses | $2,612,623 | $726,346 | | General and administrative expenses | $2,455,082 | $534,540 | | Stock-based compensation | $823,900 | $ - | | Professional fees | $926,093 | $462,206 | | Officer salaries | $480,757 | $ - | * The increase in general and administrative expenses ($1,920,542) was largely the result of increased spending on share-based compensation to executives and professional fees associated with the Direct Listing[145] * General and administrative expenses are expected to increase in future quarters due to reporting obligations and increased operational activity[199] Liquidity and Capital Resources Cash increased to $422,502 by March 2023, but the company faces going concern risk due to recurring losses and insufficient working capital Liquidity and Capital Resources Highlights (in US Dollars) | Metric | March 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :---------------- | | Cash | $422,502 | $414,574 | | Accumulated Deficit | $(36,689,086) | $(34,075,821) | | Negative Working Capital | $(8,456,436) | $(7,030,929) | | Total Stockholders' Equity | $11,759,471 | $11,578,836 | * The $7,928 increase in cash was mainly from $880,000 in common stock sales (EB-5 program), $210,000 from warrant exercises, and a $200,000 draw on a line of credit, partly offset by funds used for construction and equipment deposits[200] * The Company does not have sufficient working capital to pay its operating expenses for at least 12 months and its continued existence depends on obtaining additional debt or equity financing[146] Inflation Inflation did not materially affect the company's results of operations for Q1 2023 * The Company does not believe that inflation had a material effect on its results of operations during the three months ended March 31, 2023[201] Off-balance sheet arrangements The company has no material off-balance sheet arrangements affecting its financial condition or operations * The Company has not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources[175] Critical Accounting Policies and Estimates Financial statements adhere to U.S. GAAP, requiring management estimates, with no material changes to policies in Q1 2023 * The financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and judgments that affect the amounts of assets, liabilities, revenues, and expenses[176] * Estimates are evaluated on an ongoing basis based on historical experience and various other assumptions believed to be reasonable[176] * No material changes were made to the Company's significant accounting policies during the three months ended March 31, 2023[176] JOBS Act Accounting Election As an emerging growth company, Bright Green elected the extended transition period for new accounting standards, impacting comparability * The Company is an emerging growth company, as defined in the JOBS Act[177] * Elected to use the extended transition period for complying with new or revised accounting standards, which may make its financial statements not comparable to companies that comply with new pronouncements as of public company effective dates[177] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is not subject to material foreign currency risk and does not use derivative instruments for hedging or speculation * The Company believes it is not subject to material foreign currency exchange rate fluctuations, as substantially all of its sales and expenses are denominated in the U.S. dollar[178] * The Company does not hold derivative securities and has not entered into contracts embedded with derivative instruments for hedging or speculative purposes[178] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 2023, with no material changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures were effective as of March 2023, following correction of a prior material weakness in June 2022 * Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2023[181] * A material weakness related to the fair value recorded for shares issued for services was identified in June 2022, which was corrected, and review controls were strengthened[205] Changes in Internal Control Over Financial Reporting No material changes occurred in internal control over financial reporting during Q1 2023 * There has been no change in internal control over financial reporting during the quarter ended March 31, 2023, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting[182] Inherent Limitations on Effectiveness of Controls Control systems provide only reasonable assurance due to inherent limitations like faulty judgments, errors, and management override * Management recognizes that any controls and procedures can provide only reasonable assurance of achieving their objectives[181][183] * Inherent limitations include faulty judgments, simple errors, circumvention by individuals or collusion, and management override of controls[183] * Controls may become inadequate over time due to changes in conditions or deterioration in compliance[183] PART II. OTHER INFORMATION This section provides other material information, including legal proceedings, risk factors, unregistered sales of equity, and exhibits Item 1. Legal Proceedings The company is routinely involved in legal proceedings, which are costly and have uncertain outcomes, potentially impacting the business * The Company is routinely defendants in, or parties to a number of pending and threatened legal actions[158][207] * Defending such proceedings is costly and can impose a significant burden on management and employees[207] * The results of any current or future litigation cannot be predicted with certainty, and litigation can have an adverse impact regardless of the outcome[207] Item 1A. Risk Factors Investing in the company involves high risk, as its business heavily relies on obtaining and renewing federal authorizations for cannabis research * An investment in the Company's securities involves a high degree of risk[208] * The business plan depends heavily on receiving the necessary state and federal authorizations to research cannabis and to grow cannabis for federally sanctioned cannabis research[186][209] DEA Registration The DEA Registration, obtained in April 2023, allows federally legal cannabis production but requires renewal and MOA compliance * Received the DEA Registration on April 28, 2023, which allows the Company to produce federally legal cannabis, cannabis extracts, and tetrahydrocannabinol[136] * The DEA Registration is valid through July 31, 2024, and its renewal is not guaranteed[163][186] * The Company must comply with the terms agreed upon pursuant to the MOA, including submitting quotas, collecting samples, and providing notifications[165][187] A denial of, or significant delay in obtaining, or any interruption of required government authorizations or renewals to grow cannabis for federally sanctioned purposes would likely significantly, negatively impact us. Business is highly dependent on obtaining and maintaining state and federal authorizations for cannabis, with renewal risks impacting operations * The business plan depends heavily on receiving the necessary state and federal authorizations to research cannabis and to grow cannabis for federally sanctioned cannabis research[186] * The DEA Registration expires July 31, 2024, and there is no guarantee that needed state or federal authorizations will be subsequently renewed upon expiration[186][210] * A denial of, or significant delay in obtaining, or any interruption of required government authorizations or renewals could have a significantly negative impact on business plans, operations, and financial results[186][209] Item 2. Unregistered Sales of Equity Securities From January to May 2023, the company sold 44,010 common shares via an EB-5 private placement, generating $1.76 million * On February 1, 2023, the Company initiated a private placement offering of common stock to accredited or qualified institutional investors under the EB-5 immigrant investor program[188] Unregistered Sales of Equity Securities (Jan 1, 2023 - May 22, 2023) (in US Dollars) | Metric | Value | | :------------------- | :---------- | | Shares Sold | 44,010 | | Price Per Share | $39.99 | | Total Proceeds | $1.76 million | Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period * Not applicable[189][211] Item 4. Mine Safety Disclosures The company has no mine safety disclosures to report * None[216] Item 5. Other Information This section is not applicable, indicating no other material information to disclose * Not applicable[190] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including XBRL documents and CEO/CFO certifications * Includes Inline XBRL Taxonomy Extension Schema, Label Linkbase, Instance, Definition Linkbase, Calculation Linkbase, and Presentation Linkbase Documents[191][212][217] * Includes certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Exchange Act Rule 13a-14 and 18 U.S.C. Section 1350[213] * Certifications (Exhibit 32.1 and 32.2) are not deemed filed with the SEC and are not to be incorporated by reference into any other filings[218] Signatures The report is signed by the Chief Executive Officer and Chief Financial Officer * The report is signed by Seamus McAuley, Chief Executive Officer, and Saleem Elmasri, Chief Financial Officer, on May 22, 2023[220]