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, 2023 (“2023 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 have received regulatory clearance or approval for commercial sale. Currently no research and development activities are being incurred on the CardioMap® or the Save a Life devices. On October 4, 2023, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Oragenics, Inc. (“Oragenics” the “Purchaser”). Pursuant to the Purchase Agreement, we have agreed to sell and assign certain assets and certain liabilities related to a segment of our business focused on developing medical products that treat brain related illnesses and diseases (the “Purchased Assets”) to Oragenics. See below and Note 4 of Notes to Consolidated Financial Statements for additional information. 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 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 that 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. 17 Recent Funding LPC Purchase Agreement Draws During the three months ended October 31, 2023, LPC purchased a total of 500,000 shares of our common stock for total proceeds of $45,820 pursuant to the August 14, 2020, LPC Purchase Agreement. LPC had purchased a total of 7,882,518 shares of our common stock for total proceeds of $2,646,306, the remaining purchase availability was $7,603,694 and the remaining shares available were 11,388,846. Asset Purchase Agreement with Oragenics, Inc. On October 4, 2023, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Oragenics, Inc. (“Oragenics” the “Purchaser”). Pursuant to the Purchase Agreement, we have agreed to sell and assign certain assets and certain liabilities related to a segment of our business focused on developing medical products that treat brain related illnesses and diseases (the “Purchased Assets”) to Oragenics in exchange for (i) $1,000,000 in cash and 8,000,000 shares of convertible Series F Preferred Stock. The Purchased Assets include drug candidates for treating mild traumatic brain injury (mTBI), also known as concussion, and for treating Niemann Pick Disease Type C (NPC), as well as our proprietary powder formulation and its nasal delivery device. We received $500,000 upon the execution of the Purchase Agreement on October 4, 2023 and will receive the additional $500,000 upon the earlier of (a) the closing of the Purchase Agreement (the “Closing”), (b) within three business days after the date that we have obtained our stockholders’ approval for the transaction or (c) immediately upon the Purchasers’ wrongful termination of the Purchase Agreement in breach of the Purchase Agreement. The closing is expected to be at the end of the fourth calendar quarter of 2023. At the closing, Oragenics will issue 8,000,000 shares of convertible Series F Preferred Stock to us. A number equal to 19.9% of Oragenics shares of common stock outstanding will be automatically converted into common stock at that time. As of December 14, 2023, Oragenics common stock traded at $5.43 per share. The remaining shares of convertible Series F Preferred Stock will convert upon certain listing and change in control criteria being achieved. See Note 4 of Notes to Consolidated Financial Statements for additional information. Accredited Investor Note Payable On July 7, 2023, we received a $150,000 advance from an accredited investor related to a $500,000 Note Purchase Agreement (the “NPA”) entered into with two accredited investors on August 15, 2023, at which time the additional $350,000 was received. See Note 6 of Notes to Consolidated Financial Statements for additional information. Going Concern See Note 1 of Notes to Consolidated Financial Statements. Significant Accounting Policies and Use of Estimates During the three months ended October 31, 2023, 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, 2023, which was filed with the SEC on October 30, 2023. 18 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, 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 October 31, $ % 2023 2022 Change Change Research and development $ 23,001 $ 354,215 $ (331,214 ) -94% Stock-based compensation 322,798 779,890 (457,092 ) -59% General and administrative 501,440 943,699 (442,259 ) -47% Loss from operations (847,239 ) (2,077,804 ) 1,230,565 -59% Gain on sale of asset 500,000 – 500,000 100% Interest expense (190,861 ) (71,302 ) (119,559 ) 168% Other expense, net 65 (474 ) 539 NM Net loss $ (538,035 ) $ (2,149,580 ) $ 1,611,545 -75% Basic and diluted net loss per share $ (0.01 ) $ (0.03 ) $ (0.02 ) 67% Research and Development Our Research and development includes expenses related to our current projects which include, clinical research, design and manufacturing, formulation, regulatory and consultants. The change in Research and development was due to the following: Three months ended October 31, 2023 compared to three months ended October 31, 2022 Increase (decrease) in: Consultants $ 1,292 Phase I clinical trial (637,593 ) Australian research and development rebate 310,137 Regulatory (5,050 ) $ (331,214 ) The decreases in the Phase I clinical trial is the result of the completion of the dosing of subject in the first quarter of 2022, offset by the Australian research and development rebate. Stock-Based Compensation The decrease in stock-based compensation was due to the decrease in stock option expense for directors, officers, employees and consultants from $625,576 in the three months ended October 31, 2022 compared to $37,229 expensed in the three months ended October 31, 2023 due to a $83,066 stock option recapture of options forfeited, offset by an increase of $131,255 of RSUs expense in the first quarter of 2023 related to directors, officers and employees. 19 General and Administrative Expense Our general and administrative expense includes salaries and related benefits for employees, business development and investor relations activities, legal and professional fees, and administrative costs related to maintaining compliance as a public company. The change in General and administrative expense was due to the following: Three months ended October 31, 2023 compared to three months ended October 31, 2022 Increase (decrease) in: Business development and investor relations $ (435,329 ) Consulting fees (14,025 ) Legal and professional fees 7,551 Wages 8,619 Other (9,075 ) $ (442,259 ) The decrease in the three months ended October 31, 2023, was primarily a result of the decrease in business development activities due to limited resources. Gain on Sale of Asset The increase in the gain on sale of asset is the result of the non-refundable fee of $500,000 received upon the execution of the Oragenics Asset Purchase Agreement. Interest Expense Interest expense includes interest on debt outstanding, as well as the amortization of beneficial conversion feature, debt discount and debt issuance costs. Certain information regarding debt outstanding was as follows: Three Months Ended October 31, 2023 2022 Weighted average debt outstanding $ 2,563,270 $ 1,633,043 Weighted average interest rate 9.33% 6.75% The increase in the weighted average debt outstanding was due to convertible debt agreements entered into with Mast Hill in the second quarter of fiscal 2023 and two accredited investors in the first quarter of fiscal 2024. Net Loss Net loss decreased in the three-month period ended October 31, 2023 compared to the same period of 2022 primarily due to the $331,214 decrease in research and development due to the completion of dosing of patients in the Phase I clinical trial in the first quarter of fiscal 2023, and the $809,355 decrease in stock expense and business development and investor relations activities in the first quarter of fiscal 2024 compared to the same quarter of fiscal 2023. 20 Liquidity and Capital Resources See Recent Funding above for a discussion of our recent financings. The following table sets forth the primary sources and uses of cash: Three Months Ended October 31, 2023 2022 Net cash used in operating activities $ (59,907 ) $ (284,707 ) Net cash used in investing activities – (8,038 ) Net cash provided by financing activities 220,924 270,710 Historically, we have financed our operations primarily through debt financing, limited sales of our common stock and recently through the sale of our neurological asset for upfront non-refundable fees. 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, 2023 July 31, 2023 Convertible note issued to LGH due December 31, 2023, with a set interest amount of $84,000 through July 7, 2023, then an interest rate of 8.0% per annum of the then outstanding principal of $1,055,000 and convertible at $0.12 per share $ 1,025,000 $ 1,055,000 Promissory notes issued to officers and directors due January 31, 2024, with an interest rate of 8.0% per annum 100,000 125,000 Note purchase agreement issued to two accredited investors due August 15, 2024, with an interest rate of 12% per annum 500,000 150,000 ClearThink convertible promissory note due December 31, 2023, with a set interest amount of $20,000 and convertible at $0.20 per share 175,000 175,000 Mast Hill convertible promissory note due June 13, 2024, with an interest rate of 10% per annum and convertible at $0.12 per share 727,451 920,000 2,527,451 2,425,000 Unamortized beneficial conversion feature, debt discount and closing costs (177,126 ) (280,340 ) $ 2,350,325 $ 2,144,660 Australian Research and Development Rebate In the first quarter of fiscal 2024, we incurred $25,843 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 $12,534, which was recorded as an offset to research and development expense during the quarter ended October 31, 2023. Inflation Inflation did not have a material impact on our business and results of operations during the periods being reported on. 21 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.