Odyssey Health, Inc. 10-Q

Item 1 - Financial Statements Odyssey Group International, Inc. Balance Sheets (Unaudited) October 31, July 31, 2021 2021 Assets Current assets: Cash $ 471,140 $ 556,584 Prepaid expenses and other current assets 460,397 53,535 Total current assets 931,537 610,119 Property and equipment, net of accumulated depreciation of $ 3,034 and $ 2,896 276 414 Total assets $ 931,813 $ 610,533 Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $ 1,368,592 $ 1,224,783 Accrued wages 255,768 259,487 Accrued interest 64,221 32,351 Asset purchase liability 1,123,090 1,125,026 Notes payable, net of unamortized debt discount and closing costs of $ 184,089 and $ 351,030 1,115,911 736,240 Total current liabilities 3,927,582 3,377,887 Total liabilities 3,927,582 3,377,887 Commitments and contingencies (Note 3) – – Stockholders' deficit: Preferred stock, $ 0.001 par value, 100,000,000 shares authorized, no shares issued or outstanding – – Common stock, $ 0.001 par value, 500,000,000 shares authorized, 91,015,650 and 88,559,978 shares issued and outstanding 91,016 87,191 Additional paid-in-capital 44,293,312 42,879,278 Accumulated deficit ( 47,380,097 ) ( 45,733,823 ) Total stockholders' deficit ( 2,995,769 ) ( 2,767,354 ) Total liabilities and stockholders' deficit $ 931,813 $ 610,533 The accompanying notes are an integral part of these financial statements. 3 Odyssey Group International, Inc. Statements of Operations and Comprehensive Loss (Unaudited) For the Three Months Ended October 31, 2021 2020 Research and development expense $ 322,504 $ – General and administrative expense 1,106,884 525,269 Loss from operations ( 1,429,388 ) ( 525,269 ) Interest expense 216,886 186,245 Net loss and comprehensive loss $ ( 1,646,274 ) $ ( 711,514 ) Basic and diluted net loss per share $ ( 0.02 ) $ ( 0.01 ) Shares used for basic and diluted net loss per share 88,064,376 90,281,255 The accompanying notes are an integral part of these financial statements. 4 Odyssey Group International, Inc. Statements of Stockholders' Equity (Deficit) (Unaudited) Shares Dollars Additional Paid-In Capital Accumulated Deficit Total Equity (Deficit) Balances, July 31, 2021 87,191,168 $ 87,191 $ 42,879,278 $ ( 45,733,823 ) $ ( 2,767,354 ) Stock-based compensation – – 533,105 – 533,105 Common stock issued in debt financing 200,000 200 17,518 – 17,718 Common stock issued in equity financings 3,974,482 3,974 863,061 – 867,035 Return of reserved shares ( 350,000 ) ( 350 ) 350 – – Net loss – – – ( 1,646,274 ) ( 1,646,274 ) Balances, October 31, 2021 91,015,650 $ 91,016 $ 44,293,312 $ ( 47,380,097 ) $ ( 2,995,769 ) Shares Dollars Additional Paid-In Capital Accumulated Deficit Total Equity (Deficit) Balance, July 31, 2020 88,559,978 $ 88,560 $ 28,110,689 $ ( 28,850,728 ) $ ( 651,479 ) Note payable converted to common stock 214,000 214 106,786 – 107,000 Stock-based compensation – – 130,301 – 130,301 Common stock issued in debt financing 420,000 420 196,980 – 197,400 Common stock issued in equity financing 1,396,224 1,396 248,604 – 250,000 Stock forfeited ( 20,000 ) ( 20 ) – – ( 20 ) Warrants issued in connection with financings – – 128,333 – 128,333 Net loss – – – ( 711,514 ) ( 711,514 ) Balance, October 31, 2020 90,570,202 $ 90,570 $ 28,921,693 $ ( 29,562,242 ) $ ( 549,979 ) The accompanying notes are an integral part of these financial statements. 5 Odyssey Group International, Inc. Statements of Cash Flows (Unaudited) For the Three Months Ended October 31, 2021 2020 Cash flows from operating activities: Net loss $ ( 1,646,274 ) $ ( 711,514 ) Adjustments to reconcile net loss to net cash flows used in operating activities: Depreciation and amortization 138 2,638 Stock-based compensation 533,105 130,281 Common stock issued for debt financing commitment shares 17,718 – Amortization of beneficial conversion feature, debt discount and closing costs 166,940 171,179 Other non-cash interest expense – 7,000 Asset purchase liability ( 1,936 ) – Changes in operating assets and liabilities: Increase in prepaid expenses and other current assets ( 142,653 ) ( 65,833 ) Increase in other current assets ( 264,209 ) – Increase in accounts payable 143,810 154,652 Decrease in accrued wages ( 3,719 ) 34 Increase in accrued interest 31,870 8,067 Net cash used in operating activities ( 1,165,210 ) ( 303,496 ) Cash flows from investing activities – – Cash flows from financing activities: Proceeds from notes payable 250,000 315,000 Principal payments made on notes payable ( 37,269 ) – Financing closing costs paid – ( 31,700 ) Proceeds from equity financing 867,035 250,000 Net cash provided by financing activities 1,079,766 533,300 Increase (decrease) in cash and cash equivalents ( 85,444 ) 229,804 Cash and cash equivalents: Beginning of period 556,584 62,952 End of period $ 471,140 $ 292,756 Supplemental disclosure of non-cash information: Common stock issued for conversion of notes payable – 107,000 Common stock issued for debt financing commitment shares 17,718 197,400 Warrants issued in connection with financings – 128,333 Original issue discount on debt – 35,000 The accompanying notes are an integral part of these financial statements. 6 Odyssey Group International, Inc. Notes to Financial Statements (Unaudited) Note 1. Basis of Presentation and Nature of Operations Basis of Presentation The accompanying financial information of Odyssey Group International, Inc. is unaudited and has been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). However, such information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of July 31, 2021 is derived from our 2021 Annual Report on Form 10-K. The financial statements included herein should be read in conjunction with the financial statements and the notes thereto included in our 2021 Annual Report on Form 10-K filed with the SEC on October 29, 2021. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year. Significant Accounting Policies Our significant accounting policies have not changed during the three months ended October 31, 2021 from those disclosed in our Annual Report on Form 10-K for the year ended July 31, 2021. Nature of Operations Our business model is to develop or acquire unique medical-related products, engage third parties to manufacture such products and then distribute the products through various distribution channels, including third parties. We are developing potentially life-saving technologies: the CardioMap® heart monitoring and screening device; the Save A Life choking rescue device, a unique neurosteroid drug compound intended to treat concussions, and a unique drug compound to treat rare brain disorders in partnership with Prevacus, Inc. To date, none of our product candidates has received regulatory clearance or approval for commercial sale. We plan to license, improve, and develop our products and identify and select distribution channels. We intend to establish agreements with distributors to get products to market quickly, as well as to undertake and engage in our own direct marketing efforts. We will determine the most effective method of distribution for each unique product that we include in our portfolio. We will engage third-party research and development firms who specialize in the creation of our products to assist us in the development of our own products, and we will apply for trademarks and patents once we have developed proprietary products. We are not currently selling or marketing any products, as our products are in development and Food and Drug Administration ("FDA") clearance or approval to market our products will be required in order to sell in the United States. Research and Development Research and development expense is expensed as incurred and totaled $ 322,504 and 0 zero for the three months ended October 31, 2021 and 2020, respectively. Note 2. New Accounting Pronouncements ASU 2019-12 In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740),” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments is permitted, including adoption in any interim period for which financial statements have not yet been issued. The adoption of ASU 2019-12 effective August 1, 2021, on a prospective basis did not have a material effect on our financial position, results of operations, or cash flows. 7 ASU 2020-06 In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40),” which simplifies the accounting for convertible instruments, reduces complexity for preparers and practitioners and improves the decision usefulness and relevance of the information provided to financial statement users. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. We have not yet determined the impact of adopting this standard on our financial position, results of operations or cash flows. Note 3. Fair Value The fair value of financial assets and liabilities are determined utilizing a three-level framework as follows: Level 1 – Observable inputs, such as unadjusted quoted prices in active markets, for substantially identical assets and liabilities. Level 2 – Observable inputs other than quoted prices within Level 1 for similar assets and liabilities. These include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. If the asset or liability has a specified or contractual term, the input must be observable for substantially the full term of the asset or liability. Level 3 – Unobservable inputs that are supported by little or no market activity, generally requiring a significant amount of judgment by management. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Further, although we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. We did not have any transfers of assets or liabilities measured at fair value on a recurring basis to or from Level 1, Level 2, or Level 3 during the three months ended October 31, 2021, or the year ended July 31, 2021. The carrying values of cash, prepaid expenses, accounts payable and accrued wages approximate their fair value due to their short maturities. No changes were made to our valuation techniques during the quarter ended October 31, 2021. Contingent Liabilities At October 31, 2021 and July 31, 2021, we had contingent consideration related to the acquisition of intellectual property, know-how and patents for an anti-choking, life-saving medical device in fiscal 2019. According to the agreement, we will make a one-time cash payment totaling $250,000 upon FDA clearance of the device. The fair value of the contingent consideration is reviewed quarterly and determined based on the current status of the project (Level 3). We determined the value was zero at both periods since it is not yet probable that we will file for FDA clearance. We also had contingent consideration at October 31, 2021 and July 31, 2021 related to milestones in our Asset Purchase Agreement with Prevacus, Inc. The fair value of the contingent consideration is reviewed quarterly and determined based on the current status of the project (Level 3). Based on these reviews, the fair value of the contingent consideration was determined to be zero at both periods as it is not yet probable that any of the milestones will be met. Fixed-Rate Debt We have fixed-rate debt that is reported on our Balance Sheets at carrying value less unamortized debt discount and closing costs. The fair value of our fixed rate debt was calculated using a discounted cash flow methodology with estimated current interest rates based on similar risk profile and duration (Level 2). The carrying value, excluding unamortized debt discount and debt issuance costs, and the fair value of our fixed-rate long-term debt was as follows: Schedule of Fixed-Rate Debt October 31, 2021 July 31, 2021 Carrying value $ 1,300,000 $ 1,087,270 Fair value $ 1,300,000 $ 1,094,212 8 Non-Financial Assets Non-financial assets, such as Property and equipment, are measured at fair value on a non-recurring basis when events or circumstances indicate that an impairment may have occurred. If we determine these assets to be impaired, they are reported at fair value as calculated during the period. No non-financial assets were recorded at fair value during the three months ended October 31, 2021 or the fiscal year ended July 31, 2021. Note 4. Debt Tysadco Partners On August 29, 2021, we entered into a Securities Purchase Agreement (the “SPA”) with Tysadco Partners (“Tysadco”) pursuant to which we entered into a $ 250,000 face value convertible promissory note which bears interest at a one-time rate of 8.0 % applied to the face value and is due March 1, 2022 . We received $ 250,000 net cash from the issuance of the promissory note and issued 200,000 shares of common stock with a relative fair value of $ 17,718 which is being expensed over the life of the note as a component of interest expense. The conversion rate of the note is $ 0.30 for a total of 900,000 shares of our common stock if converted in full, including interest. Notes Payable The following notes payable were outstanding: Schedule of Notes Payable October 31, 2021 July 31, 2021 Note issued to Labrys due August 14, 2021 with an interest rate of 12% $ – $ 37,270 Convertible note issued to LGH due February 5, 2022 with an interest rate of 8.0% and convertible at $1.00 per share 1,050,000 1,050,000 Tysadco convertible promissory note payable due March 1, 2022 with an interest rate of 8.0% and convertible at $0.30 per share 250,000 – 1,300,000 1,087,270 Unamortized debt discount and closing costs ( 184,089 ) ( 351,030 ) $ 1,115,911 $ 736,240 Note 5. Stock-Based Compensation 2021 Omnibus Stock Incentive Plan At our annual stockholder meeting held September 14, 2021, the stockholders approved the Amended and Restated 2021 Omnibus Stock Incentive Plan (the “2021 Plan”). The purpose of the Amended and Restated 2021 Omnibus Stock Incentive Plan is to enable us to recruit and retain highly qualified employees, directors and consultants and to provide incentives for productivity and the opportunity to share in the our growth and value. Subject to certain adjustments, the maximum number of shares of common stock, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, cash or other stock-based awards that may be issued under the Amended and Restated 2021 Omnibus Stock Incentive Plan is 20,000,000. At October 31, 2021, 18,500,000 shares remained available for future awards and 20,000,000 shares of our common stock were reserved for issuance pursuant to the 2021 Plan. Stock Options There was no stock option activity during the quarter ended October 31, 2021 Restricted Stock Units (“RSUs”) RSU activity during the quarter ended October 31, 2021 was as follows: Schedule of RSU activity RSUs outstanding at July 31, 2021 4,396,819 RSUs issued 1,500,000 RSUs vested ( 877,083 ) RSUs canceled – RSUs outstanding at October 31, 2021 5,019,736 9 On September 14, 2021, following the annual stockholders meeting, three re-elected board members were granted 500,000 RSUs each vesting equally over 12 months at a total fair value of $ 675,000 based on the fair value of our stock on September 14, 2021, of $ 0.45 per share. Unrecognized Compensation Costs At October 31, 2021, we had unrecognized stock-based compensation of $ 1,275,665 , which will be recognized as a component of General and administrative expenses over the weighted average remaining vesting period of 1.36 years. Note 6. Net Loss Per Share Basic and diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Potentially dilutive common stock and common stock equivalents, including stock options, RSUs and warrants are excluded as they would be antidilutive. The following anti-dilutive securities were excluded from the calculations of diluted net loss per share: Schedule of anti-dilutive shares Three Months Ended October 31, 2021 2020 Options to purchase common stock 300,000 25,000 Shares issuable upon conversion of convertible notes and related accrued interest 2,034,000 448,711 Warrants to purchase common stock 5,745,666 934,500 Restricted stock units 902,083 1,350,000 Total potentially dilutive securities 8,981,749 2,758,211 Note 7. Common Stock Returned Shares On August 5, 2021, our loan with Labrys Fund, LP was repaid in full and per the agreement, on August 6, 2021, 350,000 restricted stock shares were returned to treasury. Reverse Split At the annual stockholder meeting held September 14, 2021, the stockholders approved the proposal to grant the Board discretionary authority to amend our Certificate of Incorporation to effect a reverse stock split of the issued and outstanding shares of our common stock, par value $0.001 per share, such split to combine a whole number of outstanding shares of our Common Stock in a range of not less than two shares and not more than 30 shares, into one share of common stock at any time prior to January 31, 2022. The amendment did not change the number of authorized shares of common stock or preferred stock or the relative voting power of our stockholders. The number of authorized shares will not be reduced. The number of authorized but unissued shares of our common stock will materially increase and will be available for re-issuance. We reserve the right not to effect any reverse stock split if the Board does not deem it to be in the best interests of our stockholders and the Board's decision as to whether and when to effect the reverse stock split will be based on a number of factors, including prevailing market conditions, existing and expected trading prices for our common stock, actual or forecasted results of operations, and the likely effect of such results on the market price of our common stock. Lincoln Park Securities Purchase Agreement On October 22, 2021, we entered into a Securities Purchase Agreement (the “SPA”) with Lincoln Park Capital Fund, LLC (“LPC”) pursuant to which we received $ 250,000 in cash from LPC and LPC received (i) 1,500,000 restricted shares of our common stock, and (ii) 833,333 warrants exercisable at $ 0.50 per common share expiring in five years 10 LPC Purchase Agreement Draws During the quarter ended October 31, 2021, LPC purchased a total of 974,482 shares of our common stock for total proceeds of $ 367,035 pursuant to the August 14, 2020 LPC Purchase Agreement. As of October 31, 2021, LPC purchased a total of 3,127,808 shares of our common stock pursuant to the agreement and remaining purchase availability is $ 8,411,489 and remaining shares available are 16,143,556 . Tysadco Partners On October 18, 2021, we entered into a Securities Purchase Agreement (the “SPA”) with Tysadco pursuant to which we received $ 250,000 in cash from Tysadco and Tysadco received (i) 1,500,000 restricted shares of our common stock, and (ii) 833,333 warrants exercisable at $ 0.50 per common share expiring in five years. Note 8. Related Party Transactions Due to Officer The following amounts were due to officers for reimbursement of expenses and were included in Accounts payable on our Balance Sheets: Schedule of due to officer October 31, 2021 July 31, 2021 Joseph M. Redmond, CEO $ 7,173 $ 2,568 Christine M. Farrell 2,238 – The amount of unpaid salary due to Mr. Redmond for his services from November 2017 was included in Accrued wages on our Balance Sheets as follows: Schedule of accrued compensation Balance at July 31, 2021 $ 183,846 Salary accrued – Salary paid – Balance at October 31, 2021 $ 183,846 Note 9. Going Concern We did not recognize any revenues for the quarter ended October 31, 2021 or the year ended July 31, 2021 and we had an accumulated deficit of $ 47,380,097 as of October 31, 2021. For the foreseeable future, we expect to experience continuing operating losses and negative cash flows from operations. Cash available at October 31, 2021 of $ 471,140 may not provide enough working capital to meet our current operating expenses through December 10, 2022. The operating deficit indicates substantial doubt about our ability to continue as a going concern. Our continued existence depends on the success of our efforts to raise additional capital necessary to meet our obligations as they come due and to obtain sufficient capital to execute our business plan. We may obtain capital primarily through issuances of debt or equity or entering into collaborative arrangements with corporate partners. There can be no assurance that we will be successful in completing additional financing or collaboration transactions or, if financing is available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we may be required to further scale down or even cease operations. The issuance of additional equity securities could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, would increase our liabilities and future cash commitments. Our financial statements do not include adjustments that might result from the outcome of this uncertainty. Additionally, as the novel coronavirus (“COVID-19”) pandemic continues to severely impact the U.S. and global economy, our business may be impacted in a variety of ways. Political, legal or regulatory actions as a result of the COVID-19 pandemic in jurisdictions where we may plan to manufacture, source or distribute products have created supply disruptions which could affect our plans, and may cause additional supply disruptions or shortages in the future. We cannot currently predict the frequency, duration or scope of these governmental actions and supply disruptions. For example, several countries, including India, China, Australia and the UK, have increased or instituted new restrictions on the export of medical or pharmaceutical products that we distribute or use in our business, including key components or raw materials. Governmental authorities in many countries, including the U.S., are enacting legislative or regulatory changes to address the impact of the pandemic, which may restrict or require changes in our operations, increase our costs, or otherwise adversely affect our operations. 11 If we are unable to raise additional capital by December 10, 2022, we will adjust our current business plan. Due to the unknown and volatile nature of the stock price and trading volume of our common stock, is it is difficult to predict the timing and amount of availability pursuant to our equity line of credit with LPC (see Note 7 above). Given our recurring losses, negative cash flow, accumulated deficit, and the impact of COVID-19, there is substantial doubt about our ability to continue as a going concern. Note 10. Subsequent Event Research and Development Rebate On November 2, 2021, we received a research and development rebate from the government of Australia in the amount of $284,981 AUD ($214,120 USD) for clinical work performed in Australia related to our Phase 1 human trial for safety and efficacy for the treatment of concussed individuals. The $214,120 is accounted for as an offset to research and development expense, which is a component of General and administrative on our Statements of Operations. Name Change On December 1, 2021, we received notice that our name change to Odyssey Health, Inc. was approved by the state of Nevada, where we are incorporated. 12