ODYSSEY HEALTH, INC. 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 endedJuly 31, 2022 ("2022 Annual Report") and those described from time to time in our future reports filed with theSecurities 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 withPrevacus, 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 effort as we move closer to regulatory approvals. 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. 15 Recent FundingMast Hill Fund L.P.
OnDecember 13, 2022 , we entered into a Securities Purchase Agreement (the "SPA") withMast 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 six months endedJanuary 31, 2023 , LPC purchased a total of 2,233,591 shares of our common stock for total proceeds of$441,030 pursuant to theAugust 14, 2020 , LPC Purchase Agreement. Subsequent toJanuary 31, 2023 and throughMarch 17, 2023 , we sold an additional 1,100,000 shares of our common stock to LPC for total proceeds of$115,270 . As ofMarch 17, 2023 , LPC had purchased a total of 7,082,518 shares of our common stock for total proceeds of$2,576,566 and the remaining purchase availability was$7,673,433 and the remaining shares available were 12,188,846. Promissory Note
OnSeptember 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 ofDecember 31, 2022 . OnDecember 30, 2022 , this promissory note was amended to extend the maturity date toJanuary 31, 2023 . OnJanuary 31, 2023 , the note was extended toJune 30, 2023 . Going Concern
See Note 1 of Notes to Financial Statements.
Significant Accounting Policies and Use of Estimates
During the six months endedJanuary 31, 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 endedJuly 31, 2022 , which was filed with theSecurities and Exchange Commission onOctober 31, 2022 . 16 Results of Operations We do not currently sell or market any products and we did not have any revenue in the three or six month periods endedJanuary 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 January 31, $ % 2023 2022 Change Change In-process research and development expense$ 170,000 $ -$ 170,000 100.0%
Research and development expense 3,889 460,723
(456,834 ) (99.2% ) General and administrative expense 1,312,603 1,515,241 (202,638 ) (13.4% ) Loss from operations (1,486,492 ) (1,975,964 ) (489,472 ) (24,8% ) Interest expense (194,191 ) (208,767 ) 14,576 (7.0% ) Other income, net 8,955 492,018 (483,062 ) (98.2% ) Net loss$ (1,671,728 ) $ (1,692,713 ) $ (20,985 ) (1.2% ) Basic and diluted net loss per share $ (0.02 )$ (0.02 ) $ - - Six Months Ended January 31, $ % 2023 2022 Change Change In-process research and development expense$ 170,000 $ -$ 170,000 100.00%
Research and development expense 358,104 783,227
(425,123 ) (54.3% ) General and administrative expense 3,036,192 2,622,126 414,066 15.8% Loss from operations (3,564,296 ) (3,405,353 ) (158,943 ) 4.7% Interest expense (265,493 ) (425,709 ) 160,217 (37.6% ) Other income, net 8,481 492,075 (483,594 ) (98.3% ) Net loss$ (3,821,308 ) $ (3,338,987 ) $ 475,223 14.5% Basic and diluted net loss per share $ (0.05 )$ (0.04 ) $ 0.01 25.0%
In-process research and development in the three and six-month periods endedJanuary 31, 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 theNovember 2022 Option Agreement. See Note 9. 17
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.
The decreases in Research and development expense were due to the following:
Six months
ended
Three months January 31,
ended 2023 compared
January 31, 2023 to six
compared to three months ended
months ended January 31,
January 31, 2022 2022
Increase (decrease) in:
Consultants $ (38,858 ) $ (112,558 )
Drug development (228,120 ) (480,752 )
Phase I clinical trial (96,518 ) 421,050Australian research and development rebate 5,627
(41,185 )
Prototype phase (87,841 ) (202,454 )
Regulatory (11,124 ) (9,224 )
$ (456,834 ) $ (425,123 ) 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 the three month endedJanuary 31, 2023 , as compared to the increase in the six months endedJanuary 31, 2023 , is the result of the completion of dosing patients the Phase I clinical trial of our concussion drug device trial in first quarter of fiscal 2023.
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:
Six months
ended
Three months January 31,
ended 2023 compared
January 31, 2023 to six
compared to three months ended
months ended January 31,
January 31, 2022 2022
Increase (decrease) in:
Board and stock expense $ 148,468 $ 395,253 Business development and investor relations 109,347
454,464
Consulting fees 23,675 47,175
Financing fees - (30,113 )
Legal and professional fees (88,240 ) (65,662 )
Wages (401,344 ) (395,184 )
Other 5,456 8,133
$ (202,638 ) $ 414,066
The increases in board and stock expense were due to the vesting of restricted
stock units. The increases in business development and investor relations were a
result of increased activities related to business development. The decreases in
wages were due to the $400,000 bonus granted to our executive officers January
2022 .
18
Interest Expense
Interest expense includes interest on debt outstanding, as well as the amortization of unamortized debt issuance costs and debt closing costs. Certain information regarding debt outstanding was as follows:
Three Months Ended January 31, Six Months Ended January 31,
2023 2022 2023 2022Weighted average debt outstanding$ 1,828,370 $ 1,354,619 $ 1,779,701 $ 1,315,217 Weighted average interest rate 6.2% 7.9%
6.8% 8.1%
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 decreases in the weighted average interest rates were due to the extension of maturity dates on the LGH and Tysadco notes that have flat interest rates.
Other Income, net Other income, net in the three and six months endedJanuary 31, 2022 , included a donation in the amount of$500,000 in partnership with the Erase PTSD Now organization and theGlenn 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 months endedJanuary 31, 2023 , compared to the same period of the prior year due to decreased research and development expense, general and administrative expense and interest expense as discussed above. Net loss increased in the six months endedJanuary 31, 2023 , compared to the same period of the prior year due to increased general and administrative expense, partially offset by decreased research and development 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:
Six Months Ended January 31,
2023 2022
Net cash used in operating activities
(8,038 ) (45,220 ) Net cash provided by financing activities 1,159,898 1,204,766
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. 19 Debt
The following notes payable were outstanding:
January 31, 2023 July 31, 2022
Convertible note issued to LGH due March 31, 2023
with a flat interest rate of 8.0% of the original
principal of $1,050,000 and convertible at $0.20 per
share $ 1,010,000 $ 1,180,000
Promissory notes issued to officers and directors
due March 31, 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 31, 2023 30,000 - Tysadco convertible promissory note payable dueDecember 31, 2023 with a flat interest rate of 8.0% of the original principal of$250,000 and convertible at$0.30 per share (see Note 11) 275,000
275,000
Mast Hill convertible promissory note due
870,000 -
2,310,000 1,580,000
Unamortized debt discount and closing costs (471,651 )
(48,063 )
$ 1,838,349 $ 1,531,937 In the first six months of fiscal 2023, we incurred$658,962 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$323,263 , which was recorded as an offset to Research and development expense. OnNovember 18, 2022 , we received a research and development rebate from the government ofAustralia in the amount of$313,709 for clinical work performed inAustralia related to our Phase I human clinical trial during the fiscal year endedJuly 31, 2022 .
OnDecember 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 andSeptember 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.
© Edgar Online, source
