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, 2022 (“2022 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 plan to develop 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, and undertake and engage in direct marketing efforts effort as we move closer to regulatory approvals. We will determine the most effective distribution method for each unique product we include in our portfolio. We will engage third-party research and development firms who specialize in creating products to assist us in developing our own products, and we will apply for trademarks and patents once we have developed proprietary products. 15 Recent Funding Mast Hill Fund L.P. On December 13, 2022, we entered into a Securities Purchase Agreement (the “SPA”) with Mast Hill Fund, L.P. (“Mast Hill”). Pursuant to the SPA, we sold Mast Hill (i) an $870,000 face value, one-year, 10% per annum Promissory Note convertible into shares of our common stock at $0.12 per share, (ii) a five-year share purchase warrant entitling Mast Hill to acquire 2,000,000 shares of our common stock at $0.20 per share (the “Warrant”), and (iii) a five-year warrant for 4,000,000 shares of our common stock at $0.20 per share issuable in the event of default. Net proceeds after original discount, fees and expenses, was $723,868. LPC Purchase Agreement Draws During the nine months ended April 30, 2023, LPC purchased a total of 3,533,591 shares of our common stock for total proceeds of $572,720 pursuant to the August 14, 2020, LPC Purchase Agreement. As of April 30, 2023, LPC had purchased a total of 7,282,518 shares of our common stock for total proceeds of $2,592,986 and the remaining purchase availability was $7,657,014 and the remaining shares available were 11,988,846. Promissory Note On September 21, 2022, we entered into a promissory note for $30,000 with a consultant for investor relations services with an interest rate of 8% per annum and a due date of December 31, 2022. The promissory note was amended on December 30, 2022, to extend the maturity date to January 31, 2023. On January 31, 2023, the note was extended to June 30, 2023. Going Concern See Note 1 of Notes to Financial Statements. Significant Accounting Policies and Use of Estimates During the nine months ended April 30, 2023, there were no significant changes to our significant accounting policies and estimates are 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, 2022, filed with the Securities and Exchange Commission on October 31, 2022. Results of Operations We do not currently sell or market any products and did not have any revenue in the three or nine month periods ended April 30, 2023 or 2022. 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 April 30, $ % 2023 2022 Change Change In-process research and development expense $ – $ – $ – – Research and development expense 35,040 63,139 (28,099 ) (44.5% ) General and administrative expense 1,059,570 2,803,397 (1,743,827 ) (62.2% ) Loss from operations (1,094,610 ) (2,866,536 ) (1,771,926 ) (61.8% ) Interest expense (189,415 ) (232,686 ) 43,271 (18.6% ) Other expense, net (79 ) (49 ) (30 ) 61.2% Net loss $ (1,284,104 ) $ (3,099,271 ) $ (1,815,167 ) (58.6% ) Basic and diluted net loss per share $ (0.02 ) $ (0.04 ) $ (0.02 ) (50.0% ) 16 Nine Months Ended April 30, $ % 2023 2022 Change Change In-process research and development expense $ 170,000 $ – $ 170,000 100.00% Research and development expense 393,144 846,366 (453,222 ) (53.6% ) General and administrative expense 4,095,763 5,425,523 (1,329,760 ) (24.5% ) Loss from operations (4,658,907 ) (6,271,889 ) (1,612,982 ) (25.7% ) Interest expense (454,907 ) (658,395 ) (203,488 ) (30.9% ) Other income, net 8,402 492,026 (483,624 ) (98.3% ) Net loss $ (5,105,412 ) $ (6,438,258 ) $ (1,332,846 ) (20.7% ) Basic and diluted net loss per share $ (0.06 ) $ (0.07 ) $ (0.01 ) (14.3% ) In-Process Research and Development In-process research and development in the nine-month period ended April 30, 2023 relates to the value of the 1,000,000 shares of our Common Stock with a value of $0.17 per share issued to Prevacus in connection with the November 2022 Option Agreement. See Note 9. Research and Development Expense Our Research and development expense includes expenses related to our current projects, including, clinical research, design and manufacturing, formulation, regulatory and consultants. The decreases in Research and development expense were due to the following: Three months ended April 30, 2023 compared to three months ended April 30, 2022 Nine months ended April 30, 2023 compared to nine months ended April 30, 2022 Increase (decrease) in: Consultants $ (2,640 ) $ (115,198 ) Drug development – (480,752 ) Phase I clinical trial (177,530 ) 250,486 Australian research and development rebate 175,001 126,850 Prototype phase (20,155 ) (222,609 ) Regulatory (2,775 ) (11,999 ) $ (28,099 ) $ (453,222 ) The decreases in drug development, consultants and prototype phase were the result of the completion of the development of the concussion drug in the fourth quarter of fiscal 2022. The decrease in Phase I clinical trial costs in the three months ended April 30, 2023, as compared to the decrease in the nine months ended April 30, 2023, was the result of the completion of dosing patients in the Phase I clinical trial of our concussion drug device trial in first quarter of fiscal 2023. 17 General and Administrative Expense Our General and administrative expense includes salaries and related benefits for employees in finance, accounting, sales, administrative, and research and development activities, as well as stock-based compensation, costs related to maintaining compliance as a public company and legal and professional fees. The changes in General and administrative expense were due to the following: Three months ended April 30, 2023 compared to three months ended April 30, 2022 Nine months ended April 30, 2023 compared to nine months ended April 30, 2022 Increase (decrease) in: Board and stock expense $ 123,238 $ 518,491 Business development and investor relations (1,759,938 ) (1,305,474 ) Consulting fees 13,125 60,300 Financing fees (163,494 ) (193,607 ) Legal and professional fees 21,187 (44,475 ) Wages 19,028 (376,156 ) Other 3,027 11,161 $ (1,743,827 ) $ (1,329,760 ) The board and stock expense increases were due to the vesting of restricted stock units. The decreases in business development and investor relations were a result of decreased activities related to business development. The decrease in wages in the nine-month period was due to the $400,000 bonus granted to our executive officers in January 2022. 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 April 30, Nine Months Ended April 30, 2023 2022 2023 2022 Weighted average debt outstanding $ 2,263,933 $ 1,630,618 $ 1,937,564 $ 1,401,545 Weighted average interest rate 5.7% 12.3% 7.8% 11.2% The increases in the weighted average debt outstanding were due to the addition of principal to both the LGH and Tysadco notes in exchange for extending the maturity date of the notes. In addition, we issued a $30,000 promissory note during the first quarter of fiscal 2023 and an $870,000 promissory note during the second quarter of fiscal 2023. The weighted average interest rate decreased due to the extension of maturity dates on the LGH and Tysadco notes that have flat interest rates. 18 Other Income, net Other income, net in the nine months ended April 30, 2022, included a donation in the amount of $500,000 in partnership with the Erase PTSD Now organization and the Glenn Greenberg and Linda Vester Foundation. Other income, net in all periods includes foreign exchange gains and losses related to invoices denominated and paid in foreign currencies. Net Loss Net loss decreased in the three and nine months ended April 30, 2023 compared to the same periods of the prior year due to decreased research and development expense, general and administrative expense and interest expense as discussed above. 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: Nine Months Ended April 30, 2023 2022 Net cash used in operating activities $ (1,354,850 ) $ (2,554,811 ) Net cash used in investing activities (8,038 ) (45,220 ) Net cash provided by financing activities 1,291,588 2,309,747 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 research and development activities until market conditions improve. Debt The following notes payable were outstanding: April 30, 2023 July 31, 2022 Convertible note issued to LGH due June 30, 2023, with a flat interest rate of 8.0% of the original principal of $1,050,000 and convertible at $0.20 per share $ 1,030,000 $ 1,180,000 Promissory notes issued to officers and directors due June 30, 2023, with a fixed interest rate of 8.0% per annum (see Note 10) 125,000 125,000 Promissory note with an interest rate of 8% per annum due June 30, 2023 30,000 – Tysadco convertible promissory note payable due December 31, 2023, with a flat interest rate of 8.0% of the original principal of $250,000 and convertible at $0.20 per share 175,000 275,000 Mast Hill convertible promissory note due December 13, 2023, with a fixed interest rate of 10% per annum and convertible at $0.12 per share 870,000 – 2,230,000 1,580,000 Unamortized debt discount and closing costs (327,294 ) (48,063 ) $ 1,902,706 $ 1,531,937 19 Australian Research and Development Rebate In the first nine months of fiscal 2023, we incurred $698,041 of expenses related to our Phase I clinical trial of our concussion drug device combination that are eligible for the Australian research and development rebate for a rebate due of $294,654, which was recorded as an offset to Research and development expense. On November 18, 2022, we received a research and development rebate from the government of Australia in the amount of $313,709 for clinical work performed in Australia related to our Phase I human clinical trial during the fiscal year ended July 31, 2022. On December 8, 2022, we received a goods and service tax refund, which was accrued as part of our research and development rebate due from the Australian government, in the amount of $82,705 related to our Phase I human clinical trial during July, August and September 2022. On February 10, 2023, we received a goods and service tax refund, which was accrued as part of our research and development rebate due from the Australian government, in the amount of $9,231 related to our Phase I human clinical trial during October, November and December 2022. 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.