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 develop and manufacture such products and then distribute the products through various distribution channels, including third parties. We have two different technologies in research and development stage ; the CardioMap® heart monitoring and screening device, and the Save a Life choking rescue device. To date, none of our product candidates have received regulatory clearance or approval for commercial sale. On October 4, 2023, we entered into an Asset Agreement (the “Agreement”) with Oragenics, Inc. (“Oragenics”). Pursuant to the Agreement, we sold 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 “Assets”) to Oragenics. The closing was completed on December 28, 2023. See below and Note 4 of Notes to Condensed 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. 19 Recent Funding LPC Purchase Agreement Draws During the nine months ended April 30, 2024, LPC purchased a total of 600,000 shares of our common stock for total proceeds of $55,620 pursuant to the August 14, 2020, LPC Purchase Agreement. At December 31, 2023, the LPC Purchase Agreement expired. Asset Agreement with Oragenics, Inc. On October 4, 2023, we entered into an Asset Agreement with Oragenics, which closed on December 7, 2023. Pursuant to the Agreement, we sold the segment of our business and related assets focused on developing medical products that treat brain related illnesses and diseases (the “Assets”) to Oragenics in exchange for (i) $1,000,000 in cash; (ii) 8,000,000 shares of convertible Series F preferred stock; and (iii) the assumption of $325,672 of our accounts payable. The total value of consideration received was $16,400,687. The in-process research and development 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 Agreement on October 4, 2023, and received the additional $500,000 on December 11, 2023, upon our stockholder approval for the sale of the Asset. Following the closing of the Agreement on December 28, 2023, we received 8,000,000 shares of Series F preferred stock. Upon receipt, 511,308 shares of the Series F preferred stock, which represented 19.9% of the then outstanding shares of Oragenics common stock, converted into 511,308 shares of Oragenics common stock. At the closing, we were required to obtain the consent of Mast Hill to consummate the closing of the Asset Agreement. As part of the consent, we entered into a pledge agreement with Mast Hill granting a security interest in 154,545 of the total preferred shares, and collectively with all of the common shares or other securities into which the preferred shares are converted or exchanged into common shares, until the Mast Hill debt is paid. The remaining shares of convertible Series F preferred stock will convert upon Oragenics shareholder approval and upon certain listing and change in control criteria being achieved. In addition, at our option, we are allowed to convert additional shares of the Series F preferred stock as long as we do not own a total of more than 19.9% of the then outstanding Oragenics common stock. See Note 4 of Notes to Condensed Consolidated Financial Statements for additional information. Promissory Note On February 13, 2024, we entered into a six-month promissory note for $50,000, with Jonathan Lutz, an accredited investor, with an interest rate of 10% per annum and due August 11, 2024. 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 Condensed Consolidated Financial Statements for additional information. 20 Going Concern See Note 1 of Notes to Financial Statements. Significant Accounting Policies and Use of Estimates During the nine months ended April 30, 2024, 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, 2023, filed with the Securities and Exchange Commission on October 30, 2023. 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, 2024 or 2023. 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, $ % 2024 2023 Change Change Research and development expense $ – $ 35,040 $ (35,040 ) -100% Stock-based compensation 51,483 553,964 (502,481 ) -91% General and administrative expense 320,888 505,606 (184,718 ) -37% Loss from operations (372,371 ) (1,094,610 ) 722,239 -66% Loss on investment (367,929 ) – (367,929 ) -100% Interest expense (102,227 ) (189,415 ) 87,188 -46% Other income (expense), net 186 (77 ) 263 342% Net loss (842,341 ) (1,284,102 ) 441,761 -34% Deemed dividend – – – – Net loss attributable to common stockholders $ (842,341 ) $ (1,284,102 ) $ 441,761 -34% Basic net loss per share attributable to common stockholders $ (0.01 ) $ (0.02 ) $ (0.01 ) -59% Diluted net loss per share attributable to common stockholders $ (0.01 ) $ (0.02 ) $ (0.01 ) -59% 21 Nine Months Ended April 30, $ % 2024 2023 Change Change In-process research and development expense $ – $ 170,000 $ (170,000 ) -100% Research and development expense 65,766 393,144 (327,378 ) -83% Stock-based compensation 1,051,671 1,993,631 (941,960 ) -47% General and administrative expense 1,259,606 2,102,132 (842,526 ) -40% Loss from operations (2,377,043 ) (4,658,907 ) 2,281,864 -49% Gain on sale of assets 16,400,687 – 16,400,687 100% Loss on investment (1,700,909 ) – (1,700,909 ) 100% Interest expense (434,689 ) (454,907 ) 20,218 -4% Other income, net 9,144 8,402 742 9% Net income (loss) 11,897,190 (5,105,412 ) 7,172,604 140% Deemed dividend (63,455 ) – (63,455 ) -100% Net income (loss) attributable to common shareholders $ 11,833,735 $ (5,105,412 ) $ 16,939,147 332% Basic net income (loss) per share attributable to common stockholders $ 0.13 $ (0.06 ) $ 0.19 301% Diluted net income (loss) per share attributable to common stockholders $ 0.11 $ (0.06 ) $ 0.18 289% 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 a November 2022 Option Agreement. 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 Nine months ended April 30, 2024 compared to three months ended April 30, 2024 compared to three months ended April 30, 2023 April 30, 2023 Increase (decrease) in: Consultants $ (12,960 ) $ 35,237 Phase I clinical trial (42,987 ) (658,857 ) Australian research and development rebate 20,907 290,592 Phase II clinical trial – 10,000 Regulatory – (4,350 ) $ (35,040 ) $ (327,378 ) The decreases in the Phase I clinical trial and the Australian research and development rebate in the nine months ended April 30, 2024, compared to the nine months ended April 30, 2023, were the result of the completion of the dosing of subject in the first quarter of fiscal 2023. No additional expenses are expected related to ONP-002 as a result of the sale of the asset to Oragenics. 22 Stock-Based Compensation The decreases in Stock-based compensation for the three and nine months ended April 30, 2024, compared to the same periods of 2023 were due to fewer grants and unvested awards outstanding. 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 changes in General and administrative expense were due to the following: Three months ended April 30, 2024 compared to three months ended Nine months ended April 30, 2024 compared to three months ended April 30, 2023 April 30, 2023 Increase (decrease) in: Business development and investor relations $ (16,525 ) $ (650,443 ) Consulting fees (24,000 ) (71,000 ) Insurance expense (3,750 ) (8,125 ) Legal and professional fees (45,902 ) 9,958 Public Company Expense (4,413 ) 25,620 Travel (8,006 ) (21,630 ) Wages (59,249 ) (114,335 ) Other (22,873 ) (12,571 ) $ (184,718 ) $ (842,526 ) The decreases in the current fiscal year periods compared to the prior fiscal year were primarily a result of the decreases in business development activities due to limited resources and fewer employees. Gain on Sale of Asset The gain on sale of asset in the nine months ended April 30, 2024 relates to our sale of our 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 to Oragenics in December 2023. Loss on Investment Loss on investment in the three and nine months ended April 30, 2024 relates to the revaluation of the common stock of Oragenics held as an investment. 23 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, 2024 2023 2024 2023 Weighted average debt outstanding $ 1,660,778 $ 2,263,933 $ 1,778,993 $ 1,937,564 Weighted average interest rate 8.29% 5.7% 7.74% 7.8% The decrease in the weighted average debt outstanding for the three and nine months ended April 30, 2024, was due to the conversion of convertible debt agreements with Mast Hill, ClearThink and the two accredited investors. 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, 2024 2023 Net cash used in operating activities $ (1,151,509 ) $ (1,354,850 ) Net cash provided by (used in) investing activities 1,000,000 (8,038 ) Net cash provided by financing activities 180,724 1,291,588 Historically, we have financed our operations primarily through debt financing, limited sales of our common stock and recently through the sale of our neurological assets to Oragenics as discussed in Note 4 of Notes to Condensed Consolidated Financial Statements. 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. 24 Debt The following notes payable were outstanding: April 30, 2024 July 31, 2023 Convertible note issued to LGH due June 30, 2024, with a set interest amount of $84,000 through July 7, 2023, then an interest rate of 8.0% per annum of outstanding principal and convertible at $0.12 per share $ 1,035,000 $ 1,055,000 Promissory notes issued to officers and directors due July 31, 2024, with an interest rate of 8.0% per annum and convertible at $0.12 per share 100,000 125,000 Accredited investor promissory note due August 11, 2024, with an interest rate of 10% per annum and convertible into Oragenics common stock held by us at $2.50 per share 50,000 – Note purchase agreement issued to two accredited investors due August 15, 2024, with an interest rate of 12% per annum – 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 Mast Hill convertible promissory note due December 13, 2024, with an interest rate of 10% per annum and convertible at $0.072 per share 499,667 920,000 1,684,667 2,425,000 Unamortized debt discount and closing costs (84,123 ) (246,866 ) Unamortized beneficial conversion feature – (33,474 ) $ 1,600,544 $ 2,144,660 Australian Research and Development Rebate In the first nine months of fiscal 2024, we incurred $43,092 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 $20,900, which was recorded as an offset to Research and development expense. 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. 25