Odyssey Health, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This quarterly report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management are forward-looking statements. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that the expectations underlying our forward-looking statements are reasonable, these expectations may prove to be incorrect, and all of these statements are subject to risks and uncertainties. Therefore, you should not place undue reliance on our forward-looking statements. Many possible events or factors could affect our future financial results and performance and could cause actual results or performance to differ materially from those expressed, including those risks and uncertainties described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended July 31, 2021 (“2021 Annual Report”) and those described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”). We believe these risks and uncertainties could cause actual results or events to differ materially from the forward-looking statements that we make. Should one or more of these risks and uncertainties materialize, or should underlying assumptions, projections or expectations prove incorrect, actual results, performance or financial condition may vary materially and adversely from those anticipated, estimated or expected. Our forward-looking statements do not reflect the potential impact of future acquisitions, mergers, dispositions, joint ventures or investments that we may make. We do not assume any obligation to update any of the forward-looking statements contained herein, whether as a result of new information, future events or otherwise, except as required by law. In the light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not occur, and actual results could differ materially from those anticipated or implied in the forward-looking statements. Overview 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. Recent Funding LPC 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. 13 LPC Purchase Agreement Draws During the first quarter of Fiscal 2022, we sold 974,482 shares of our common stock to LPC for total proceeds of $367,035. As of December 10, 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 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 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. 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. Going Concern Substantial doubt exists as to our ability to continue as a going concern based on the facts that we may not have adequate working capital to finance our day-to-day operations and we do not have any sources of revenue. We had an accumulated deficit of $47,380,097 as of October 31, 2021 and cash of $471,140. Management’s plans include engaging in further research and development and raising additional capital in the short term to fund such activities through sales of its common stock. 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 additional financing on a timely basis, we may be required to further scale down or cease the operation of our business. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. Our financial statements do not include adjustments that might result from the outcome of this uncertainty. For the foreseeable future, we expect to experience continuing operating losses and negative cash flows from operations as our management executes our current business plan. The cash of $471,140 available at October 31, 2021, may not provide enough working capital to meet our current operating expenses through December 10, 2022. 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 of Notes to Financial Statements). 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. Impact of COVID-19 The COVID-19 global pandemic has had an unfavorable impact on our business operations. The pandemic has impacted our ability to get financing, engage third-party vendors and timing of clinical trials. In addition, the COVID-19 outbreak has adversely affected the U.S. and global economies and financial markets, which may result in a long-term economic downturn that could negatively affect future performance and our ability to secure additional debt or equity funding. Significant Accounting Policies and Use of Estimates During the three months ended October 31, 2021, there were no significant changes to our significant accounting policies and estimates as described in Note 2. Summary of Significant Accounting Policies included in Part II, Item 8. of our Annual Report on Form 10-K for the year ended July 31, 2021, which was filed with the Securities and Exchange Commission on October 29, 2021. 14 Results of Operations We do not currently sell or market any products and we did not have any revenue in the three-month periods ended October 31, 2021 or 2020. We will commence actively marketing products after the products and drugs in development have been FDA cleared or approved, but there can be no assurance, however, that we will be successful in obtaining FDA clearance or approval for our products. Three Months Ended October 31, $ % 2021 2020 Change Change Research and development expense $ 322,504 $ – $ 322,504 100% General and administrative expense 1,106,884 525,269 581,615 111% Loss from operations (1,429,388 ) (525,269 ) 904,119 172% Interest expense 216,886 186,245 30,641 16% Net loss $ (1,646,274 ) $ (711,514 ) $ 934,760 131% Basic and diluted net loss per share $ (0.02 ) $ (0.01 ) $ 0.01 137% Research and Development Expense Our Research and development expense includes expenses related to our current projects and include, clinical research, design and manufacturing, formulation, regulatory and consultants. Research and development expense is expensed as incurred and totaled $322,504 and zero for the three months ended October 31, 2021 and 2020, respectively. General and Administrative Expense Our General and administrative expense includes salaries and related benefits for employees in finance, accounting, sales, and administrative activities, as well as stock-based compensation, costs related to maintaining compliance as a public company and legal and professional fees. The increase in General and administrative expense in the three months ended October 31, 2021 as compared to the same period of 2021 was due to the following: Three months ended October 31, 2021 compared to three months ended October 31, 2020 Increase (decrease) in: Board and stock expense $ 400,325 Business development and investor relations 87,398 Consulting fees 26,077 Financing fees 10,113 Insurance expense 24,939 Legal and professional fees (108,063 ) Wages 165,324 Other (24,498 ) $ 581,615 The increase in Board and stock expense of $400,325 for the quarter ended October 31, 2021 compared to the quarter ended October 31, 2020, was due to board grants in the current year quarter, option and restricted stock unit expense for the employees, consultants and the scientific and sports advisory boards. The increase in wages of $165,324 was a result of increased headcount for the quarter ended October 31, 2021, as compared to the quarter ended October 31, 2020. The increases were partially offset by a decrease in legal and professional fees of $108,063 in the quarter ended October 31, 2021, as compared to the quarter ended October 31, 2020. 15 Interest Expense Interest expense includes interest on debt outstanding, as well as the amortization of unamortized debt issuance costs and debt closing costs. Certain information regarding debt outstanding was as follows: Three Months Ended October 31, 2021 2020 Weighted average debt outstanding $ 1,221,196 $ 656,957 Weighted average interest rate 8.0% 9.5% The increase in interest expense for the three-month period ended October 31, 2021 compared to the same period of 2020 was due to LGH and Tysadco investments in April 2021 and October 2021, respectively. Net Loss Net loss increased in the three-month period ended October 31, 2021 compared to the same period of 2020 due to increased board and stock expense, research and development and wages, as well increased interest expense, partially offset by the lower weighted average interest rate. Liquidity and Capital Resources See Recent Funding above for a discussion of our recent debt and equity financings. The following table sets forth the primary sources and uses of cash: Three Months Ended October 31, 2021 2020 Net cash used in operating activities $ (1,165,210 ) $ (303,496 ) Net cash provided by financing activities 1,079,766 533,300 To date, we have financed our operations primarily through debt financing and limited sales of our common stock. Our ability to continue to access capital could be affected adversely by various factors, including general market and other economic conditions, interest rates, the perception of our potential future earnings and cash distributions, any unwillingness on the part of lenders to make loans to us and any deterioration in the financial position of lenders that might make them unable to meet their obligations to us. If these conditions continue and we cannot raise funds through a public or private debt financing, or an equity offering, our ability to grow our business may be negatively affected. In such case, we may need to suspend the creation of new products until market conditions improve. Debt The following notes payable were outstanding: October 31, 2021 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 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 Unamortized debt discount and closing costs (184,089 ) $ 1,115,911 16 Australian 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. Inflation Inflation did not have a material impact on our business and results of operations during the periods being reported on. Off Balance Sheet Arrangements We do not have any material off balance sheet arrangements. Item 3. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company and are not required to provide information under this item.