Notes to Condensed
Financial Statements
(Unaudited)
Note
1. Basis of Presentation, Nature of
Operations and Going Concern
Name Change
On December 1, 2021, we received notice that our name change to Odyssey
Health, Inc. was approved by the state of Nevada, where we are incorporated.
Basis of Presentation
The accompanying financial information of Odyssey Health, Inc. f/k/a Odyssey Group International, Inc. is unaudited and has been prepared in accordance with accounting principles generally accepted in the United
States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").
However, such information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management,
necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial
information as of July 31, 2021 is derived from our 2021 Annual Report on Form 10-K. The financial statements included herein should be
read in conjunction with the financial statements and the notes thereto included in our 2021 Annual Report on Form 10-K filed with the
SEC on October 29, 2021. The results of operations for the interim periods presented are not necessarily indicative of the results to
be expected for the full year.
Significant Accounting Policies
Our significant accounting policies have not changed
during the six months ended January 31, 2022 from those disclosed in our Annual Report on Form 10-K for the year ended July 31, 2021.
Nature of Operations
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.
We are not currently selling or marketing any
products, as our products are in development and Food and Drug Administration ("FDA") clearance or approval to market our products
will be required in order to sell in the United States.
Going Concern
We did not recognize any revenues for the year
ended July 31, 2021 or the six months ended January 31, 2022 and we had an accumulated deficit of $49,072,810 as of January 31, 2022.
For the foreseeable future, we expect to experience continuing operating losses and negative cash flows from operations. Cash available
at January 31, 2022 of $131,337 may not provide enough working capital to meet our current operating expenses through March 15, 2023.
The operating deficit indicates substantial doubt
about our ability to continue as a going concern. 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 the additional financing on a timely basis, we may be required
to further scale down or perhaps even cease operations.
The issuance of additional equity securities could
result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans
would be available, would increase our liabilities and future cash commitments. Our financial statements do not include adjustments that
might result from the outcome of this uncertainty.
Additionally, 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 the timing of our clinical trial in Australia. 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.
If we are unable to raise additional capital by
March 15, 2023, 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 above). Given our recurring losses, negative cash flow, and accumulated deficit, there is substantial doubt about our ability
to continue as a going concern.
Note 2. New Accounting
Pronouncements
ASU 2019-12
In December 2019, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740),” which
simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also
improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance
is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the
amendments is permitted, including adoption in any interim period for which financial statements have not yet been issued. The adoption
of ASU 2019-12 effective August 1, 2021, on a prospective basis did not have a material effect on our financial position, results of operations,
or cash flows.
ASU 2020-06
In August 2020, the FASB issued ASU 2020-06, “Debt
– Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity
(Subtopic 815-40),” which simplifies the accounting for convertible instruments, reduces complexity for preparers and practitioners
and improves the decision usefulness and relevance of the information provided to financial statement users. ASU 2020-06 also amends the
guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting
conclusions. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal
years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. We have not yet determined the
impact of adopting this standard on our financial position, results of operations or cash flows.
Note 3. Intangible
Assets
Intangible assets at January 31, 2022 consisted
of costs related to a patent for our PRV-002 drug device combination.
Amortization expense was as follows:
Schedule of Amortization expense | |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended January 31, | | |
Six Months Ended January 31, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Amortization expense | |
$ | 452 | | |
| – | | |
$ | 452 | | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
Future amortization of intangible assets is as
follows:
Schedule of Future amortization of intangible assets | |
| | |
Remainder of fiscal 2022 | |
$ | 1,508 | |
Fiscal 2023 | |
| 3,015 | |
Fiscal 2024 | |
| 3,015 | |
Fiscal 2025 | |
| 3,015 | |
Fiscal 2026 | |
| 3,015 | |
Thereafter | |
| 31,200 | |
Total | |
$ | 44,768 | |
Note 4. Fair
Value
The fair value of financial assets and liabilities
are determined utilizing a three-level framework as follows:
Level 1 – Observable inputs, such
as unadjusted quoted prices in active markets, for substantially identical assets and liabilities.
Level 2 –
Observable inputs other than quoted prices within Level 1 for similar assets and liabilities. These include quoted prices for similar
assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other
inputs that are observable or can be corroborated by observable market data. If the asset or liability has a specified or contractual
term, the input must be observable for substantially the full term of the asset or liability.
Level 3 –
Unobservable inputs that are supported by little or no market activity, generally requiring a significant amount of judgment by management.
The methods described
above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Further,
although we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies
or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the
reporting date.
We did not have any transfers
of assets or liabilities measured at fair value on a recurring basis to or from Level 1, Level 2 or Level 3 during the six months ended
January 31, 2022 or the year ended July 31, 2021.
The carrying values of
cash, prepaid expenses, accounts payable and accrued wages approximate their fair value due to their short maturities.
No changes were made
to our valuation techniques during the quarter ended January 31, 2022.
Contingent Liabilities
At January 31, 2022 and
July 31, 2021, we had contingent consideration related to the acquisition of intellectual property, know-how and patents for an anti-choking,
life-saving medical device in fiscal 2019. According to the agreement, we will make a one-time cash payment totaling $250,000 upon FDA
clearance of the device. The fair value of the contingent consideration is reviewed quarterly and determined based on the current status
of the project (Level 3). We determined the value was zero at both periods since it is not yet probable that we will file for FDA clearance.
We also had contingent
consideration at January 31, 2022 and July 31, 2021 related to milestones in our Asset Purchase Agreement with Prevacus, Inc. The
fair value of the contingent consideration is reviewed quarterly and determined based on the current
status of the project (Level 3). Based on these reviews, the fair value of the contingent consideration was determined to be zero at both
periods as it is not yet probable that any of the milestones will be met.
Fixed-Rate Debt
We have fixed-rate debt
that is reported on our Balance Sheets at carrying value less unamortized debt discount and closing costs. The fair value of our fixed
rate debt was calculated using a discounted cash flow methodology with estimated current interest rates based on similar risk profile
and duration (Level 2). The carrying value, excluding unamortized debt discount and debt issuance costs, and the fair value of our fixed-rate
long-term debt was as follows:
Schedule of Fixed-Rate Debt | |
| | | |
| | |
| |
January 31, 2022 | | |
July 31, 2021 | |
Carrying value | |
$ | 1,413,314 | | |
$ | 1,087,270 | |
Fair value | |
$ | 1,425,000 | | |
$ | 1,094,212 | |
Non-Financial Assets
Non-financial assets, such as Property and equipment
and Intangible assets are measured at fair value on a non-recurring basis when events or circumstances indicate that an impairment may
have occurred. If we determine these assets to be impaired, they are reported at fair value as calculated during the period. No non-financial
assets were recorded at fair value during the six months ended January 31, 2022 or the fiscal year ended July 31, 2021.
Note 5. Debt
Promissory Notes
On December 21, 2021
and December 22, 2021, we entered into a total of five Promissory Notes (the “Notes”) with three of our directors and two
officers.
Mr. Joseph Michael Redmond,
President and Chief Executive Officer, Ms. Christine M. Farrell, Chief Financial Officer, Mr. Jerome H. Casey, Director, Mr. John P. Gandolfo,
Director, and Mr. Ricky W. Richardson, Director, each loaned us $25,000 for total proceeds of $125,000. The Notes bear interest at 8%
per annum and are due March 31, 2022.
Tysadco Partners
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 relative 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. As of March 15, 2022, the loan has
not been repaid or converted.
Notes Payable
The following notes payable were outstanding:
Schedule of Notes Payable | |
| | | |
| | |
| |
January 31, 2022 | | |
July 31, 2021 | |
Note issued to Labrys due August 14, 2021 with an interest rate of 12% | |
$ | – | | |
$ | 37,270 | |
Convertible note issued to LGH due February 5, 2022 with an interest rate of 8.0% and convertible at $1.00 per share(1) | |
| 1,050,000 | | |
| 1,050,000 | |
Promissory notes issued to officers and directors due March 31, 2022 with an interest rate of 8.0% | |
| 125,000 | | |
| – | |
Tysadco convertible promissory note payable due March 1, 2022 with an interest rate of 8.0% and convertible at $0.30 per share(2) | |
| 250,000 | | |
| – | |
| |
| 1,425,000 | | |
| 1,087,270 | |
Unamortized debt discount and closing costs | |
| (11,686 | ) | |
| (351,030 | ) |
| |
$ | 1,413,314 | | |
$ | 736,240 | |
| (1) | Effective February 1, 2022, the maturity date of this note was extended to May 31, 2022 and $200,000 was
added to the principal amount. See Note 13 for additional information. |
| (2) | As of March 15, 2022, the loan has not been repaid or converted.. |
Note 6. Stock-Based
Compensation
2021 Omnibus Stock Incentive Plan
At our annual stockholder meeting held September
14, 2021, the stockholders approved the Amended and Restated 2021 Omnibus Stock Incentive Plan (the “2021 Plan”). The purpose
of the Amended and Restated 2021 Omnibus Stock Incentive Plan is to enable us to recruit and retain highly qualified employees, directors
and consultants and to provide incentives for productivity and the opportunity to share in the our growth and value. Subject to certain
adjustments, the maximum number of shares of common stock, incentive stock options, stock appreciation rights, restricted stock, restricted
stock units, cash or other stock-based awards that may be issued under the Amended and Restated 2021 Omnibus Stock Incentive Plan is 20,000,000.
At January 31, 2022, 18,300,000 shares remained available for future awards and 20,000,000 shares of our common stock were reserved for
issuance pursuant to the 2021 Plan.
Stock Options
Stock option activity during the six months ended January 31, 2022
was as follows:
Schedule of stock option activity | |
| | | |
| | |
| |
Number of Options | | |
Weighted Average Exercise Price | |
Options outstanding at July 31, 2021 | |
| 1,050,000 | | |
$ | 1.22 | |
Options issued | |
| 200,000 | | |
| 0.26 | |
Options canceled | |
| – | | |
| – | |
Options outstanding at January 31, 2022 | |
| 1,250,000 | | |
| 1.07 | |
Restricted Stock Units (“RSUs”)
RSU activity during the six months ended January
31, 2022 was as follows:
Schedule of RSU activity | |
| | |
RSUs outstanding at July 31, 2021 | |
| 4,396,819 | |
RSUs issued | |
| 1,500,000 | |
RSUs vested | |
| (1,591,263 | ) |
RSUs outstanding at January 31, 2022 | |
| 4,305,556 | |
On September 14, 2021, following the annual stockholders
meeting, three re-elected board members were granted 500,000 RSUs each vesting equally over 12 months at a total fair value of $675,000
based on the fair value of our stock on September 14, 2021 of $0.45 per share.
Warrants
There was no warrant activity during the six months
ended January 31, 2022.
Unrecognized Compensation Costs
At January 31, 2022, we had unrecognized stock-based
compensation of $714,627, which will be recognized over the weighted average remaining vesting period of 1.06 years.
Note 7. 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.
Note 8. Net Loss Per Share
Basic and diluted net loss per share is computed
by dividing net loss by the weighted-average number of common shares outstanding for the period. Potentially dilutive common stock and
common stock equivalents, including stock options, RSUs and warrants are excluded as they would be antidilutive.
The following anti-dilutive securities were excluded
from the calculations of diluted net loss per share:
Schedule of anti-dilutive shares | |
Six Months Ended January 31, | |
| |
2022 | | |
2021 | |
Options to purchase common stock | |
| 1,250,000 | | |
| 400,000 | |
Shares issuable upon conversion of convertible notes and related accrued interest | |
| 2,034,000 | | |
| 1,581,072 | |
Warrants to purchase common stock | |
| 5,745,666 | | |
| 1,054,500 | |
Unvested restricted stock units | |
| 4,305,556 | | |
| 1,461,783 | |
Total potentially dilutive securities | |
| 13,335,222 | | |
| 4,497,355 | |
Note 9. Common
Stock
Returned Shares
On August 5, 2021, our loan with Labrys Fund,
LP was repaid in full and per the agreement, on August 6, 2021, 350,000 restricted stock shares were returned to treasury.
On December 21, 2021,
Vivakor, Inc., a shareholder, returned 3,309,578 shares of our common stock and the shares were returned to treasury.
On December 29, 2021,
Regal Growth, LLC, a shareholder, returned 5,000,000 shares of our common stock and the shares were returned to treasury.
Reverse Split
At our 2021 annual stockholder meeting, which
was held on September 14, 2021, the stockholders approved the proposal that granted the Board discretionary authority to amend our Certificate
of Incorporation to effect a reverse stock split of the issued and outstanding shares of our common stock. As determined by our Board,
such stock split could be effected at a time and choosing of the Board. The amendment did not change the number of authorized shares of
common stock or preferred stock or the relative voting power of our stockholders. The number of authorized shares will not be reduced.
The number of authorized but unissued shares of our common stock will materially increase and will be available for re-issuance. We reserve
the right not to effect any reverse stock split if the Board does not deem it to be in the best interests of our stockholders and the
Board's decision as to whether and when to effect the reverse stock split will be based on a number of factors, including prevailing market
conditions, existing and expected trading prices for our common stock, actual or forecasted results of operations, and the likely effect
of such results on the market price of our common stock.
Lincoln Park
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
LPC Purchase Agreement Draws
During the six months ended January 31, 2022,
LPC purchased a total of 974,482 shares of our common stock for total proceeds of $367,035 pursuant to the August 14, 2020 LPC Purchase
Agreement. As of January 31, 2022, LPC had purchased a total of 3,127,808 shares of our common stock pursuant to the agreement and remaining
purchase availability was $8,411,489 and remaining shares available were 16,143,556.
Tysadco Partners
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.
Note 10. Related Party
Transactions
Due to Officers
The following amounts were due to our officers
for reimbursement of expenses and were included in Accounts payable on our Balance Sheets:
Schedule of related party
payables | |
| | | |
| | |
| |
January 31, 2022 | | |
July 31, 2021 | |
Joseph M. Redmond, CEO | |
$ | 17,899 | | |
$ | 2,568 | |
Christine Farrell, CFO | |
| 3,437 | | |
| – | |
| |
$ | 21,336 | | |
$ | 2,568 | |
The amount of unpaid salary and bonus due to
our officers was included in Accrued wages on our Balance Sheets and was as follows:
Schedule of accrued wages | |
| | | |
| | |
| |
January 31, 2022 | | |
July 31, 2021 | |
Joseph M. Redmond, CEO | |
$ | 586,769 | | |
$ | 183,846 | |
Christine Farrell, CFO | |
| 63,847 | | |
| – | |
| |
$ | 650,616 | | |
$ | 183,846 | |
On January 31, 2022, the Compensation Committee
and our full Board approved the 2021 bonus plan. Pursuant to the plan, Mr. Redmond received a $360,000 bonus and Ms. Farrell received
a $40,000 bonus based upon meeting fund raising goals. The bonuses will be paid when funds are available and were included as a component
of Accrued wages on our Balance Sheets at January 31, 2022.
Note 11. Donation
Received
On January
5, 2022, we received a donation in the amount of $500,000 in partnership with the Erase PTSD Now organization and the Glenn Greenberg
and Linda Vester Foundation. These funds were recorded as Other income in our Statements of Operations and will be used to progress the
Phase 1 human clinical trials for drug candidate PRV-002 for the treatment of concussion.
Note 12. Subsequent Events
LPC Share Purchases
From February 1, 2022 through March 15, 2022,
LPC purchased an additional 100,000 shares of our common stock for a total price of $51,500 and, as of March 15, 2022, there was $8,359,989
remaining purchase availability.
LGH Amendment
On February 15, 2022, we entered into Amendment
No. 1 to the Convertible Promissory Note (the “Amendment”) to the Securities Purchase Agreement dated April 5, 2021, with
LGH Investments, LLC (“LGH”) with an effective date of February 1, 2022. Pursuant to the Amendment, the maturity date of the
Note was extended from February 5, 2022 to May 31, 2022. As consideration, $200,000 was added to the principal amount outstanding, we
issued 100,000 shares of our common stock to LGH with a value of $58,000 and we will pay down principal and interest on the Note in the
amount of the lesser of 10% or $250,000 of any future capital raises, investments, donations or financings unless the Note has been converted.
Return of Shares
On February 2, 2022,
7,500,000 shares of our common stock from LBL Professional Consulting, Inc. were returned to treasury.
Agreement Amendment
We entered into an amended
agreement with a consultant on January 16, 2022, and as part of the agreement, on February 9, 2022, we issued the consultant three million
(3,000,000) restricted shares of the Company’s common stock valued at $0.53 per share. The agreement includes a lock-up - leak out
provision.