This Annual Report
on Form 10-K contains forward-looking statements based on expectations, estimates, and projections as of the date of this filing.
Actual results may differ materially from those expressed in forward-looking statements. See Item 1A of Part I—“Risk
Factors.”
Odyssey Group International,
Inc. was formed as a Nevada corporation in March 2014. Our principal executive offices are located at 2372 Morse Ave., Irvine,
CA 92614. The registration statement effectuating our initial public offering became effective in July 2015.
Our shares of common
stock are listed on the OTCQB Marketplace (“OTC”) and there is currently very little public market for our common stock.
As used herein, when
we refer to “Odyssey”, “ODYY,” the “Company,” “our Company,” “we,”
“us” and “our,” we mean Odyssey Group International, Inc., a Nevada corporation, unless the context indicates
otherwise.
JOBS Act
Recently the United
States Congress passed the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), which provides for certain
exemptions from various reporting requirements applicable to public companies that are reporting companies and are “emerging
growth companies.” We are an “emerging growth company” as defined in Section 3(a) of the Exchange Act (as amended
by the JOBS Act, enacted on April 5, 2012), and we will continue to qualify as an “emerging growth company” until the
earliest to occur of: (a) the last day of the fiscal year during which we have total annual gross revenues of $1,000,000,000 (as
such amount is indexed for inflation every five years by the SEC) or more; (b) the last day of our fiscal year following the fifth
anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under
the Securities Act; (c) the date on which we have, during the previous three-year period, issued more than $1,000,000,000 in non-convertible
debt; or (d) the date on which we are deemed to be a “large accelerated filer,” as defined in Exchange Act Rule 12b–2.
Generally, a registrant
that registers any class of its securities under Section 12 of the Exchange Act is required to include in the second and all subsequent
annual reports filed by it under the Exchange Act a management report on internal control over financial reporting and, subject
to an exemption available to registrants that meet the definition of a “smaller reporting company” in Exchange Act
Rule 12b-2, an auditor attestation report on management’s assessment of internal control over financial reporting. However,
for so long as we continue to qualify as an emerging growth company, we will be exempt from the requirement to include an auditor
attestation report in our annual reports filed under the Exchange Act, even if we do not qualify as a “smaller reporting
company”. In addition, as an emerging growth company, we are able to avail ourselves to the reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements and not to present to our stockholders a nonbinding
advisory vote on executive compensation, obtain approval of any golden parachute payments not previously approved or present the
relationship between executive compensation actually paid and our financial performance. We have irrevocably elected to comply
with new or revised accounting standards even though we are an emerging growth company.
General
Odyssey was formed
as a publicly held holding company with an emphasis on the development and acquisition of medical products and health related technologies.
We are focused on building and acquiring technologies that have a technological advantage and a substantial market opportunity
within significant target markets across the globe. The corporate mission is to create or acquire distinct technologies and intellectual
property with an emphasis on acquisition targets that will generate positive cash flow. Our strategic mission is to deliver financial
results, which yield high rates of returns for our shareholders and partners. The Company’s leadership team has significant
experience and capabilities to further refine the technologies and submit to the appropriate regulatory agencies for marketing
approval.
Our business model
is to develop or acquire medical related products, engage third parties to manufacture such products and then distribute the products
through various distribution channels, including third parties. The Company has product development projects in three different
life saving technologies; the CardioMap® heart monitoring and screening device, the Save A Life choking rescue device and a
unique neurosteroid drug compound intended to treat rare brain disorders.
We intend to acquire
other technologies and assets and plan to be a multi-disciplinary product development company involved in the discovery, development
and commercialization of products and technologies that may be applied over various medical markets.
We intend to license,
improve and/or 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 intend to engage
third party research and development firms who specialize in the creation of medical products to assist us in the development.
We intend to apply for trademarks and patents as we develop proprietary products.
For a complete description
of our business, financial condition, results of operations and other important information, we refer you to our filings with the
SEC that are incorporated by reference in this Annual Report, including our Annual
Report on Form 10-K for the year ended July 31, 2019 and our Quarterly
Reports on Form 10-Q for the periods ended October 31, 2019, January 31, 2020 and April 30, 2020, as amended by the filings
of Form 10K/A for the period ended July 31, 2019 and Quarterly Reports on Form 10-Q/A for the periods ended October 31, 2019, January
31, 2020 and April 30, 2020 filed and with the Securities and Exchange Commission on November 13, 2020. For instructions on how
to find copies of these documents, see the section entitled “Where You Can Find More Information”.
Financial Information about Industry
Segments
We do not report our
revenues or expenses by segment. See financial statements.
Our Growth Strategy
Once the U.S. Food
and Drug Administration (the “FDA”) clears us to market the CardioMap® and Save a Life products, we intend to enter
into agreements with qualified distributors throughout the United States and internationally, including: Europe, South America,
Africa, India and China. We intend to require such distributors to pay us an initial license fee, as well as royalties based on
gross sales. Retaining exclusivity, we will bill based on a mutually agreeable semi-annual or quarterly sales minimum. We have
determined to focus on international growth because, generally, such international license agreements provide a stronger path to
revenue and earnings than purely domestic products.
Our objective is to
grow revenue through marketing and sales of each of our products, CardioMap® and Save a Life, once they gain regulatory approvals.
Although no assurances can be given, management anticipates company growth from the following areas:
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1)
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Distribution or License Agreements. In most cases, we will enter into distribution agreements with companies who have sales professionals with experience selling through a variety of sales methods. These distribution agreements will allow us to more quickly achieve sales and revenue in the health products industries.
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2)
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Generate revenues from sales of CardioMap® and Save a Life. We intend to market CardioMap® and Save a Life through third party distributors and through our own efforts.
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3)
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Identify and develop CardioMap® for additional proprietary uses of the product. We intend to identify new areas of the human body to map utilizing CardioMap® technology such as the brain, liver and kidney.
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4)
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The development and acquisition of new products. We intend to market any new products that may be developed or acquired. We intend, as capital resources permit, to develop such opportunities if and when they present themselves.
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About CardioMap®
The CardioMap®
System will be an internet service based on the new development of Dispersion Mapping Method in ECG analysis for the
early, non-invasive testing of a heart disease (“CHD”). The heart monitoring system is intended to provide high quality
3-D visualization and diagnosis of the heart using advanced signal analysis. The product is being designed for use in a professional
setting or in remote settings including home use.
Once FDA cleared, CardioMap®
could provide a better level of diagnosis with its improved sensitivity levels that can detect early warning signs that would normally
be invisible with standard ECG devices. The system is designed to dramatically cut the costs associated with the detection of ischemic
heart disease and will prove to be an invaluable testing device for cardiologists, physicians, clinics, hospitals, the fitness
industry, sports teams, emergency facilities and general public. CardioMap® was developed by VE Science Technology LLC, from
whom we have purchased the product rights. In order to sell, market and distribute the CardioMap® product, clearance from the
FDA is required. Such clearance has not been obtained at this time.
Product Development
Plan:
Concept
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Engineering Model
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Prototype
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Clinical Trial
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FDA Submission
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Complete
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Complete
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In Process; Testing
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TBD
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TBD
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The product development
plan is an estimate and is subject to change based on funding, technical risks and regulatory approvals.
About Save-a-Life®
The Save a Life®
(“SAL”) choking rescue device is in development and being designed to be a safe, and easy to use device for removing
a lodged mass or bolus from the throat of a choking victim. The device includes a pump for creating a vacuum chamber, which is
connected seamlessly with a replaceable/disposable mouthpiece. In an emergency the SAL may be easily inserted into the victim’s
mouth, which depresses the tongue providing a clear application. By pressing a button on the device, the device will deliver the
appropriate amount of instantaneous vacuum to dislodge the mass or bolus in the throat without harm or damage to the victim. The
application will be instantly effective as the device is operational and effective in a matter of seconds. In order to sell, market
and distribute the Save-a-Life product, clearance from the FDA is required. Such clearance has not been obtained at this time.
The Development Plan for commercializing the Save-a-Life product is below.
Product Development
Plan
Concept
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Engineering Model
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Prototype
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Clinical Trial
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FDA Submission
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Complete
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Complete – in testing phase
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TBD
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TBD
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TBD
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Product development
plan are estimates only and are subject to change based on funding, technical risks and regulatory approvals.
The Save a Life
has a number of advantages and features. The highlights are:
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Easy to Use – The product is designed to be used by adults and children. The tongue depressor vacuum tube is inserted versus trying to place and keep a mask on a traumatized patient. Management also believes the product can be self-administered.
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Smart Patented Design - The product is designed specifically to immobilize the palate from reflex spasm and open the air passage using a replaceable tongue depressor vacuum tube. A controlled vacuum action (manual or CO2 powered), with specific negative pressure, has been carefully calculated enabling the lifting of a lodged mass from the throat, so it may be ejected by reflexive coughing. This device utilizes a negative pressure to gently uplift the object from the larynx, at which point it will be coughed upward and outward reflexively.
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Used on Anyone – The SAL is designed to be used on infants (20 months plus) to elderly adults. Also, it can be use on pregnant women and others who the Heimlich maneuver cannot help.
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About the neurosteroid PRV-001
The Prevacus neurosteroid,
PRV-001 will seek to improve function and lifespan in pediatric disorders where de-myelination and cell death is widespread in
the cortex and cerebellum regions of the brain. The new chemical entity is designed to work through gene amplification to simultaneously
remove intra-neuronal debris while promoting antioxidant capacity and myelin repair/cell proliferation. Disorders like Nieman Pick
Type C disease are multi-faceted in their pathology and require a treatment that can work at many levels to stop progression. The
chemical compound for the neurosteroid being developed has completed initial safety tests in mice. Toxicology studies have been
performed and show a 380-fold safety margin. Preclinical efficacy studies show improvements in cognitive function and neuromotor
performance. In order to sell the PRV-001 neurosteroid, further development and clinical studies are required. PRV-001 will also
require approval by the FDA in order to be sold in the United States.
Product Development
Plan
Pre-clinical Animal Studies
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Phase 1a
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Phase 1b
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Phase 2
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Phase 3
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FDA Submission
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Safety study complete
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TBD
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TBD
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TBD
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TBD
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TBD
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The product development
plan is an estimate only and is subject to change based on funding, technical risks and regulatory approvals.
Competition
We believe that the
primary competition for our products and services is from existing companies offering EKG equipment and anti-choking devices, as
well as other pharmaceutical companies engaged in the development of Orphan drugs.
Governmental Regulation
Product Regulation
Domestic. The
processing, formulation, safety, manufacturing, packaging, labeling, advertising and distribution of our products may be subject
to certain regulation by one or more federal agencies, including the FDA, Housing and Human Services (the “HHS”), the
Federal Trade Commission (the “FTC”), the Consumer Product Safety Commission (the “CPSC”), the United States
Department of Agriculture (the “USDA”) and the Environmental Protection Agency (the “EPA”), and by various
agencies of the states and localities in which our products are sold.
In order to sell, market
and distribute the CardioMap®, the Save a Life or the drug compound products, clearance or approval from the FDA is required.
Such clearance or approval has not been obtained at this time and our products are not currently available for commercial sale.
Foreign. Any
products we eventually sell in foreign countries are also subject to regulation under various national, local and international
laws that include provisions governing, among other things, the formulation, manufacturing, packaging, labeling, advertising and
distribution of drugs and medical products. Government regulations in foreign countries may prevent or delay the introduction,
or require the reformulation, of some of our products.
Employees
At the date hereof,
we have three employees (one full-time and two part-time) and intend to hire additional employees in the foreseeable future.
Where you can find more information
The Company’s
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant
to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are filed with the
U.S. Securities and Exchange Commission (the “SEC”). Such reports and other information filed by the Company with
the SEC are available free of charge on the Company’s website at http://www.odysseygi.com when such reports are
available on the SEC website. The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public
Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and
information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The contents
of these websites are not incorporated into this filing. Further, the Company’s references to the URLs for these websites
are intended to be inactive textual references only.
An investment in
our common stock is highly speculative, involves a high degree of risk and should be made only by investors who can afford a complete
loss. You should carefully consider the following risk factors, together with the other information in this report, including our
financial statements and the related notes, before you decide to buy our common stock. If any of the following risks actually occurs,
then our business, financial condition or results of operations could be materially adversely affected, the trading of our common
stock could decline, and you may lose all or part of your investment therein.
Risks Relating to our Business
The Company is
a development stage company with little operating history, a history of losses and the company cannot assure profitability.
The Company has been
incurring operating losses and cash flow deficits since the inception of such operations. The Company’s lack of operating
history, and the lack of historical pro forma combined financial information for the Company, makes it difficult for investors
to evaluate the Company’s prospects for success. Prospective investors should consider the risks and difficulties the Company
might encounter, especially given the Company’s lack of an operating history or historical pro forma combined financial information.
There is no assurance that the Company will be successful, and the likelihood of success must be considered in light of its relatively
early stage of operations. As the Company has not begun to generate revenue, it is extremely difficult to make accurate predictions
and forecasts of its finances. There is no guarantee that the Company’s products or services will be attractive to potential
consumers.
Substantial doubt
about the Company’s ability to continue as a going concern.
The Company is in the
development stage and is currently seeking additional capital, mergers, acquisitions, joint ventures, partnerships and other business
arrangements to expand its product offerings and grow its revenue. The Company’s ability to continue as a going concern is
dependent upon its ability in the future to grow its revenue and achieve profitable operations and, in the meantime, to obtain
the necessary financing to meet its obligations and repay its liabilities when they become due. External financing, predominantly
by the issuance of equity and debt, will be sought to finance the operations of the Company; however, there can be no certainty
that such funds will be available at terms acceptable to the Company. These conditions indicate the existence of material uncertainties
that may cast significant doubt about the Company’s ability to continue as a going concern.
We have not generated
any revenue or profit from operations since our inception. We expect that our operating expenses will increase over the next twelve
months in order to continue our development activities. Based on our average monthly expenses and current burn rate, we estimate
that our cash on hand will not be able to support our operations through the balance of this calendar year. This amount could increase
if we encounter difficulties that we cannot anticipate at this time or if we acquire other businesses. Should this amount not be
sufficient to support our continuing operations, we do not expect to be able to raise any additional capital through debt financing
from traditional lending sources since we are not currently generating a profit from operations. Therefore, we only expect to raise
money through equity financing via the sale of our common stock or equity-linked securities such as convertible debt. We are currently
in discussions with a number of institutional investors who could provide the capital required for our ongoing operations. If we
cannot raise the money that we need in order to continue to operate our business beyond the period indicated above, we will be
forced to delay, scale back or eliminate some or all of our proposed operations. If any of these were to occur, there is a substantial
risk that our business would fail. If we are unsuccessful in raising additional financing, we may need to curtail, discontinue,
or cease operations.
The Company had
negative cash flow for the fiscal year ended July 31, 2020
The Company had negative
operating cash flow for the fiscal year ended July 31, 2020. To the extent that the Company has negative operating cash flow in
future periods, it may need to allocate a portion of its cash reserves to fund such negative cash flow. The Company may also be
required to raise additional funds through the issuance of equity or debt securities. There can be no assurance that the Company
will be able to generate a positive cash flow from its operations, that additional capital or other types of financing will be
available when needed or that these financings will be on terms favorable to the Company. The Company’s actual financial
position and results of operations may differ materially from the expectations of the Company’s management.
The Company’s
actual financial position and results of operations may differ materially from management’s expectations.
The Company has experienced
some changes in its operating plans and certain delays in its plans. As a result, the Company’s revenue, net income and cash
flow may differ materially from the Company’s projected revenue, net income and cash flow. The process for estimating the
Company’s revenue, net income and cash flow requires the use of estimates and assumptions. These estimates and assumptions
may be revised as additional information becomes available and as additional analyses are performed. In addition, the assumptions
used in planning may not prove to be accurate, and other factors may affect the Company’s financial condition or results
of operations.
The Company expects
to incur significant ongoing costs and obligations related to its investment in infrastructure and growth and for regulatory compliance,
which could have a material adverse impact on the Company’s results of operations, financial condition and cash flows. In
addition, future changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive
changes to the Company’s operations, increased compliance costs or give rise to material liabilities, which could have a
material adverse effect on the business, results of operations and financial condition of the Company. Our efforts to grow our
business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our higher operating expenses.
We may incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications
and delays, and other unknown events. If we are unable to achieve and sustain profitability, the market price of our Common Shares
may significantly decrease.
Our success depends
on the viability of our business model, which is unproven and may be unfeasible.
Our revenue and income
potential are unproven, and the business model of Odyssey is new. Our new business model is based on a variety of assumptions based
on a growing trend in the health care systems in the United States and many other countries, where we are seeing a movement towards
preventative medicine that is directly decreasing general health care costs. The CardioMap®, through its screening and predictive
values, is a tool that might be implemented in this preventative approach. Considering heart disease-caused deaths are still the
number one cause of death and one of the most important health care costs factors, the CardioMap® device has potential value
in any medical practice. Once cleared, it could be an ideal device, allowing insurance companies to cut costs through early diagnostic
and preventative care. These assumptions may not reflect the business and market conditions we actually face. As a result, our
operating results could differ materially from those projected under our business model, and our business model may prove to be
unprofitable.
The Save a Life choking
rescue device is in the early development stage and is un-proven for commercial use. Further development is required, and the final
product will require FDA clearance.
The drug compound being
developed by Prevacus under the joint venture with the Company is in its early stage. The drug will require extensive testing and
clinical trials before it is commercialized. There is no guarantee that the drug will be approved for commercial use.
Our limited operating
history creates substantial uncertainty about future results.
We have limited operating
history and operations on which to base expectations regarding our future results and performance. To succeed, we must do most,
if not all, of the following:
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raise corporate equity to support our operating costs and to have sufficient funds to develop, market and sell our products;
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locate strategic licensing and commercialization partners;
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obtain proper regulatory clearances domestically and abroad;
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attract, integrate, retain and motivate qualified management and sales personnel;
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successfully execute our business strategies;
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respond appropriately and timely to competitive developments; and
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develop, enhance, promote and carefully manage our corporate identity.
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Our business will suffer
if we are unable to accomplish these and other important business objectives. We are uncertain as to when, or whether, we will
fully implement our contemplated business plan and strategy or become profitable. See Note 10 of the Notes to the Financial Statements.
We may have difficulty
raising additional capital, which could deprive us of the resources necessary to implement our business plan, which would adversely
affect our business, results of operation and financial condition.
We expect to continue
devoting significant capital resources to fund research and development and marketing. In order to support the initiatives envisioned
in our business plan, we will need to raise additional funds through the sale of assets, public or private debt or equity financing,
collaborative relationships or other arrangements. If our operations expand faster or at a higher rate than currently anticipated,
we may require additional capital sooner than we expect. We are unable to provide any assurance or guarantee that additional capital
will be available when needed by our company or that such capital will be available under terms acceptable to our company or on
a timely basis.
Our ability to raise
additional financing depends on many factors beyond our control, including the state of capital markets, the market price of our
common stock and the development or prospects for development of competitive products by others. Because our common stock is not
listed on a major stock market, many investors may not be willing or allowed to purchase it or may demand steep discounts. If additional
funds are raised through the issuance of equity, convertible debt or similar securities of our company, the percentage of ownership
of our company by our company’s stockholders will be reduced, our company’s stockholders may experience additional
dilution upon conversion, and such securities may have rights or preferences senior to those of our common stock. The preferential
rights granted to the providers of such additional financing may include preferential rights to payments of dividends, super voting
rights, a liquidation preference, protective provisions preventing certain corporate actions without the consent of the fund providers,
or a combination thereof. We are unable to provide any assurance that additional financing will be available on terms favorable
to us or at all.
If adequate funds are
not available or are not available on acceptable terms, our ability to fund our expansion, take advantage of potential opportunities,
would be limited significantly. We will also scale back or delay implementation of research and development of new products. Thus,
the unavailability of capital could substantially harm our business, results of operations and financial condition.
The capital requirements
necessary to implement our business plan initiatives could pose additional risks to our business and stockholders.
We require additional
debt or equity financing to implement our business plan and marketing strategy. Since the terms and availability of such financing
depend, to a large degree, on general economic conditions and third parties over which we have no control, we can give no assurance
that we will obtain the needed financing or that we will obtain such financing on attractive terms. In addition, our ability to
obtain financing depends on a number of other factors, many of which also are beyond our control, such as interest rates and national
and local economic conditions. If the cost of obtaining needed financing is too high or the terms of such financing are otherwise
unacceptable in relation to the strategic opportunity we are presented with, then we may decide to forego that opportunity. Additional
indebtedness could increase our leverage and make us more vulnerable to economic downturns and may limit our ability to withstand
competitive pressures. Additional equity financing could result in dilution to our stockholders.
Failure to implement
our business strategy could adversely affect our operations.
Our financial position,
liquidity and results of operations depend on our management’s ability to execute our business strategy. Key factors involved
in the execution of the business strategy include:
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successful sales through indirect sales distribution;
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continued investment in technology to support operating efficiency; and
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continued access to significant funding and liquidity sources.
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achieving the desired cost of goods on inventory
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obtaining the required regulatory clearances from the FDA;
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Our failure or inability
to execute any element of our business strategy could materially adversely affect our financial position, liquidity and results
of operations.
Our inability
to attract, train and retain additional qualified personnel may harm our business and impede the implementation of our business
strategy.
We need to attract,
integrate, motivate and retain a significant number of additional personnel in 2020 and beyond. Competition for these individuals
in our industry and geographic region is intense, and we may be unable to attract, assimilate or retain such highly qualified personnel
in the future. Our business cannot continue to grow if we are unable to attract such qualified personnel. Our failure to attract
and retain highly trained personnel that are essential to our business may limit our growth rate, which would harm our business
and impede the implementation of our business strategy.
The Company may
be unable to adequately protect its proprietary and intellectual property rights.
The Company’s
ability to compete may depend on the superiority, uniqueness and value of any intellectual property and technology that it may
develop in the future. The Company intends to protect its proprietary rights by relying on a combination of patent, trademark,
copyright and trade secret laws, confidentiality agreements with its employees and third parties, and protective contractual provisions.
Despite these efforts, any of the following occurrences may reduce the value of any of the Company’s intellectual property:
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the market for the Company’s products
and services may depend to a significant extent upon the goodwill associated with its trademarks and trade names, and its ability
to register its intellectual property under U.S. federal and state law.
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patents in the medical device industry
involve complex legal and scientific questions and patent protection may not be available for some or any products.
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the Company’s applications for trademarks
and copyrights relating to its business may not be granted and, if granted, may be challenged or invalidated.
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issued patents, trademarks and registered
copyrights may not provide the Company with competitive advantages.
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the Company’s efforts to protect
its intellectual property rights may not be effective in preventing misappropriation of any its products or intellectual property.
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the Company’s efforts may not prevent
the development and design by others of products similar to, competitive with, or superior to those the Company develops.
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another party may obtain a blocking patent
and the Company would need to either obtain a license or design around the patent in order to continue to offer the contested feature
or service in its products.
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the expiration of patent or other intellectual
property protections for any assets owned by the Company could result in significant competition, potentially at any time and without
notice, resulting in a significant reduction in sales. The effect of the loss of these protections on the Company and its financial
results will depend, among other things, upon the nature of the market and the position of the Company’s products in the
market from time to time, the growth of the market, the complexities and economics of manufacturing a competitive product and regulatory
approval requirements but the impact could be material and adverse. The Company may be forced to litigate to defend its intellectual
property rights, or to defend against claims by third parties against the Company relating to intellectual property rights.
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We may not be
able to protect intellectual property that we hope to acquire, which could adversely affect our business.
The companies that
we hope to acquire may rely on patent, trademark, trade secret, and copyright protection to protect their technology. We believe
that technological leadership can be achieved through additional factors such as the technological and creative skills of our personnel,
new product developments, frequent product enhancements, name recognition, and reliable product maintenance. Nevertheless, our
ability to compete effectively depends in part on our ability to develop and maintain proprietary aspects of our technology, such
as patents. We may not secure future patents; and patents that we may secure may become invalid or may not provide meaningful protection
for our product innovations. In addition, the laws of some foreign countries do not protect intellectual property rights to the
same extent as the United States. Furthermore, there can be no assurance that competitors will not independently develop similar
products, "reverse engineer" our products, or, if patents are issued to us, design around such patents. We also expect
to rely upon a combination of copyright, trademark, trade secret, and other intellectual property laws to protect our proprietary
rights by entering into confidentiality agreements with our employees, consultants, and vendors, and by controlling access to and
distribution of our technology, documentation and other proprietary information. There can be no assurance, however, that the steps
to be taken by us will not be challenged, invalidated, or circumvented, or that the rights granted thereunder will provide a competitive
advantage to us. Any such circumstance could have a material adverse effect on our business, financial condition and results of
operations. While we are not currently engaged in any intellectual property litigation or proceedings, there can be no assurance
that we will not become so involved in the future or that our products do not infringe any intellectual property or other proprietary
right of any third party. Such litigation could result in substantial costs, the diversion of resources and personnel, and significant
liabilities to third parties, any of which could have a material adverse effect on our business.
We may not be
able to protect our trade names and domain names.
We may not be able
to protect our trade names and domain names against all infringers, which could decrease the value of our brand name and proprietary
rights. We currently hold the Internet domain name Odyssey Group International, Inc. Domain names are generally regulated by Internet
regulatory bodies, are subject to change, and, in some cases, may be superseded, in some cases by-laws, rules and regulations governing
the registration of trade names and trademarks with the United States Patent and Trademark Office as well as ascertain other common
law rights. If the domain registrars are changed, if new ones are created, or if we are deemed to be infringing upon another's
trade name or trademark, we may be unable to prevent third parties from acquiring or using, as the case may be, our domain name,
trade names or trademarks, which could adversely affect our brand name and other proprietary rights.
The Company may
be forced to litigate to enforce or defend its intellectual property rights, to protect its trade secrets or to determine the validity
and scope of other parties’ proprietary rights.
Any such litigation
could be very costly and could distract management from focusing on operating the Company’s business. The existence and/or
outcome of any such litigation could harm the Company’s business. The Company may become subject to litigation, including
for possible product liability claims, which may have a material adverse effect on the Company’s reputation, business, results
from operations, and financial condition. The Company may be named as a defendant in a lawsuit or regulatory action. The Company
may also incur uninsured losses for liabilities which arise in the ordinary course of business, or which are unforeseen, including,
but not limited to, employment liability and business loss claims. Any such losses could have a material adverse effect on the
Company’s business, results of operations, sales, cash flow or financial condition. Further, the administration of medical
substances to humans can result in product liability claims by consumers. Product liability claims can be expensive, difficult
to defend and may result in large judgments or settlements against the Company. The Company may not be able to obtain or maintain
adequate insurance or other protection against potential liabilities arising from product sales. Product liability claims could
also result in negative perception of the Company’s products or other reputational damage which could have a material adverse
effect on the Company’s business, results of operations, sales, cash flow or financial condition.
We may fail to
defend the Company from infringement litigation.
The Company could be
subject to potential infringement actions. The Company's business is "Patent intensive," requiring the Company to constantly
search for patented technologies that are not already used by competitors. Any claims for infringement, with or without merit and
whether based on allegations that its technology or its intellectual property claims infringe upon the rights of others, could
subject the Company to costly litigation and the diversion of financial and human resources, regardless of the ultimate resolution
of the claim. If these claims are successful, the Company may be required to modify its products or services and pay financial
damages or to attempt to negotiate with third parties for licensing.
The Company may
be unable to maintain sufficient product liability insurance.
The Company may incur
product liability for products sold through its distribution chain. Consumers may sue if products sold through its distribution
chain or purchased through the Company-operated websites are defective or injure the user. This type of claim could require the
Company to spend significant time and money in litigation or to pay significant damages. At this time, the Company carries no product
liability insurance. As a result, any legal claims, whether or not successful, could seriously damage our reputation and business.
Our products
are subject to substantial federal and state regulations.
The Company's research
and development activities and the manufacturing and marketing of the Company's products are subject to the laws, regulations,
and guidelines and, in some cases, regulatory approvals of governmental authorities in the United States and other countries in
which the products are or will be marketed. Specifically, in the United States, the FDA regulates, among other areas, new medical
device approvals, prescription drugs and clinical trials of new products and establishes the proper labeling, safety and efficacy
of these products and the accuracy of certain marketing claims.
We anticipate
significant growth in our business, and any inability to manage such growth could harm our business.
Our success will depend,
in part, on our ability to effectively manage our growth and expansion. We plan to expand our business significantly. Any growth
in, or expansion of, our business is likely to continue to place a significant strain on our management and administrative resources,
infrastructure and systems. In order to succeed, we will need to continue to implement management information systems and improve
our operating, administrative, financial and accounting systems and controls. We will also need to train new employees and maintain
close coordination among our executive, accounting, finance and operations organizations. These processes are time consuming and
expensive, will increase management responsibilities and will divert management attention. Our inability or failure to manage our
growth and expansion effectively could substantially harm our business and adversely affect our operating results and financial
condition.
Our inability
to retain and properly insure against the loss of the services of our executive officer and other key personnel may harm our business
and impede the implementation of our business strategy.
Our future success
depends significantly on the skills and efforts of Joseph Michael Redmond, President, CEO and Director and possibly other key personnel.
The loss of the services of any of these individuals could harm our business and operations. In addition, we have not obtained
key person life insurance on any of our key employees. If any of our executive officers or key employees left or was seriously
injured and unable to work and we were unable to find a qualified replacement and/or to obtain adequate compensation for such loss,
we may be unable to manage our business, which could harm our operating results and financial condition.
Our inability
to attract, train and retain additional qualified personnel may harm our business and impede the implementation of our business
strategy.
Once our business begins
to grow, we will need to attract, integrate, motivate and retain a significant number of additional administrative and sales personnel.
Competition for these individuals in our industry and geographic region is intense, and we may be unable to attract, assimilate
or retain such highly qualified personnel in the future. Our business cannot continue to grow if we are unable to attract such
qualified personnel. Our failure to attract and retain highly trained personnel that are essential to our business may limit our
growth rate, which would harm our business and impede the implementation of our business strategy.
We may indemnify
our directors and officers against liability to us and our stockholders, and such indemnification could increase our operating
costs.
Our bylaws allow us
to indemnify our directors and officers against claims associated with carrying out the duties of their offices. Our bylaws also
allow us to reimburse them for the costs of certain legal defenses. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors, officers or control persons, we have been advised by the SEC that such
indemnification is against public policy and is therefore unenforceable. Since our directors and officers are aware that they may
be indemnified for carrying out the duties of their offices, they may be less motivated to meet the standards required by law to
properly carry out such duties, which could increase our operating costs. Further, if our directors and officers file a claim against
us for indemnification, the associated expenses also could increase our operating costs.
There are substantial
inherent risks in attempting to commercialize newly developed products, and, as a result, we may not be able to successfully develop
new products.
The Company plans to
conduct research and development of products in the health and wellness field. However, commercial feasibility and acceptance of
such product candidates are unknown. Scientific research and development require significant amounts of capital and takes an extremely
long time to reach commercial viability, if at all. During the research and development process, we may experience technological
barriers that we may be unable to overcome. Because of these uncertainties, it is possible that some of our future product candidates
will never be successfully developed. If we are unable to successfully develop new products, we may be unable to generate new revenue
sources or build a sustainable or profitable business.
We will need
to achieve commercial acceptance of our products to generate revenues and achieve profitability.
Superior competitive
products may be introduced, or customer needs may change, which would diminish or extinguish the uses for our products. We cannot
predict when significant commercial market acceptance for our products will develop, if at all, and we cannot reliably estimate
the projected size of any such potential market. If markets fail to accept our products, then we may not be able to generate revenues
from them. Our revenue growth and achievement of profitability will depend substantially on our ability to introduce new products
that are accepted by customers. If we are unable to cost-effectively achieve acceptance of our products by customers, or if our
products do not achieve wide market acceptance, then our business will be materially and adversely affected.
We expect to
rely on third parties for the worldwide marketing and distribution of our product candidates, who may not be successful in selling
our products.
We currently do not
have adequate resources to market and distribute any of our products worldwide and expect to engage third-party marketing and distribution
companies to perform these tasks. While we believe that distribution partners will be available, we cannot assure you that the
distribution partners, if any, will succeed in marketing our products on a global basis. We may not be able to maintain satisfactory
arrangements with our marketing and distribution partners, who may not devote adequate resources to selling our products. If this
happens, we may not be able to successfully market our products, which would decrease or eliminate our ability to generate revenues.
Our products
may be displaced by superior products developed by third parties.
The health and wellness
industry is constantly undergoing rapid and significant change. Third parties may succeed in developing or marketing products that
are more effective than those developed or marketed by us or that would make our products obsolete or non-competitive. Additionally,
researchers could develop new procedures and medications that replace or reduce the use of our products. Accordingly, our success
will depend, in part, on our ability to respond quickly to medical and technological changes through the development and introduction
of new products. We may not have the resources to do this. If our products become obsolete and our efforts to develop new products
do not result in commercially successful products, then our sales and revenues will decline.
We
may incur material product liability claims, which could increase our costs and harm our financial condition and operating results.
Our products consist
of devices that diagnose heart ailments and dislodge blockage in the airway passage. Our products could malfunction. As a marketer
of a medical devices used on the human body, we may be subjected to various product liability claims, including that the products
contain defective parts, the products include inadequate instructions as to their uses or the products include inadequate warnings
concerning side effects and interactions with other substances. It is possible that widespread product liability claims could increase
our costs and adversely affect our revenues and operating income. Moreover, liability claims arising from a serious adverse event
may increase our costs through higher insurance premiums and deductibles and may make it more difficult to secure adequate insurance
coverage in the future.
Our management
has broad discretion regarding the use of proceeds.
We intend to use the
proceeds from any offering for general corporate purposes, including working capital, capital expenditures, product enhancements,
product development and regulatory filings to the FDA and to begin initial marketing efforts. In any case, we will have broad discretion
over how we use these proceeds.
Investors may
experience dilution in the value of the shares of common stock.
We anticipate offering
common stock or preferred stock in offerings, which could cause further dilution.
If our business
is unsuccessful, our stockholders may lose their entire investment.
Although our stockholders
will not be bound by or be personally liable for our expenses, liabilities or obligations beyond their total original investments
in our common stock, if we suffer a deficiency in funds with which to satisfy our obligations, our stockholders as a whole may
lose their entire investment in our company.
Your ownership
will be diluted by future issuances of capital stock.
Our business strategy
requires us to raise additional equity capital through the sale of common stock or preferred stock. Your percentage of ownership
will become diluted as we issue new shares of stock. Stockholders have no rights to buy additional shares of stock in the event
we issue new shares of stock, known as preemptive rights. We may issue common stock, convertible debt or common stock pursuant
to a public offering or a private placement, upon exercise of warrants or options, or to sellers of properties we directly or indirectly
acquire instead of, or in addition to, cash consideration. Investors purchasing common stock in the Offering who do not participate
in any future stock issues will experience dilution in the percentage of the issued and outstanding stock they own.
Risks Related to Our Financial Condition
Dependence on
financing and losses for the foreseeable future.
Our independent registered
public accounting firm has issued its audit opinion on our consolidated financial statements appearing in this Annual Report on
Form 10-K, including an explanatory paragraph as to substantial doubt with respect to our ability to continue as a going concern.
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America, assuming we will continue as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. For the fiscal year ended July 31, 2020, our net loss was $4,348,855.
As of July 31, 2020, we had an accumulated deficit of $28,850,728. As of July 31, 2020, we had current liabilities of $707,062
and current assets of $99,619 and a working capital deficit of $607,443. These factors raise substantial doubt about our ability
to continue as a going concern which is dependent on our ability to raise the required additional capital or debt financing to
meet short- and long-term operating requirements. We may also encounter business endeavors that require significant cash commitments
or unanticipated problems or expenses that could result in a need for additional cash. Our ability to continue as a going concern
is dependent upon raising capital from financing transactions. To stay in business, we will need to raise additional capital through
public or private sales of our securities or debt financing. In the past, we have financed our operations by issuing secured and
unsecured convertible debt and equity securities in private placements, in some cases with equity incentives for the investor in
the form of warrants to purchase our common stock, and we have borrowed from related parties. We have sought, and will continue
to seek, various sources of financing. If we raise additional funds through the issuance of equity or convertible debt securities,
the percentage ownership of our current shareholders could be reduced, and such securities might have rights, preferences, or privileges
senior to our common stock. Additional financing may not be available upon acceptable terms, or available at all. If adequate funds
are not available on acceptable terms, we may not be able to take advantage of prospective business endeavors or opportunities,
which could significantly and materially restrict our operations. If we are unable to obtain necessary capital, we may have to
cease operations. There are no additional commitments from anyone to provide us with financing. We can provide no assurance as
to whether our capital raising efforts will be successful or as to when, or if, we will be profitable in the future. Even if the
Company achieves profitability, it may not be able to sustain such profitability. If we are unable to obtain financing or achieve
and sustain profitability, we may have to suspend operations or sell assets, making us unable to execute our business plan. Failure
to become and remain profitable may adversely affect the market price of our common stock and our ability to raise capital and
continue operations. For additional information, see Management’s Discussion and Analysis of Financial Condition and Results
of Operations – “Going Concern.”
Our ability to
generate positive cash flows is uncertain.
To develop and expand
our business, we will need to make significant up-front investments in our manufacturing capacity and incur research and development,
sales and marketing, and general and administrative expenses. In addition, our growth will require a significant investment in
working capital. Our business will require significant amounts of working capital to meet our project requirements and support
our growth. We cannot provide any assurance that we will be able to raise the capital necessary to meet these requirements. If
adequate funds are not available or are not available on satisfactory terms, we may be required to significantly curtail our operations
and may not be able to fund our current production requirements, let alone fund expansion, take advantage of unanticipated acquisition
opportunities, develop or enhance our products, and respond to competitive pressures. Any failure to obtain such additional financing
could have a material adverse effect on our business, results of operations, and financial condition.
Because we may
never have net income from our operations, our business may fail.
We have no history
of profitability from operations. There can be no assurance that we will ever operate profitably. Our success is significantly
dependent on uncertain events, including successful developing our products, establishing satisfactory manufacturing arrangements
and processes, and distributing and selling our products. If we are unable to generate significant revenues from sales of our products,
we will not be able to earn profits or continue operations. We can provide no assurance that we will generate any revenues or ever
achieve profitability. If we are unsuccessful in addressing these risks, our business will fail, and investors may lose all of
their investment in our Company.
We need to raise
additional funds, and such funds may not be available on acceptable terms.
We may consider issuing
additional debt or equity securities in the future to fund our business plan, for general corporate purposes or for potential acquisitions
or investments. If we issue equity or convertible debt securities to raise additional funds, our existing stockholders may experience
dilution, and the new equity or debt securities may have rights, preferences, and privileges senior to those of our existing stockholders.
If we incur additional debt, it may increase our leverage relative to our earnings or to our equity capitalization, requiring us
to pay additional interest expenses. We may not be able to obtain financing on favorable terms, in which case, we may not be able
to develop or enhance our products, execute our business plan, take advantage of future opportunities, or respond to competitive
pressures.
We participate in transactions and
make tax calculations for which the ultimate tax determination may be uncertain.
We participate in many
transactions and make tax calculations during the course of our business for which the ultimate tax determination is uncertain.
While we believe we maintain provisions for uncertain tax positions that appropriately reflect our risk, these provisions are made
using estimates of the amounts expected to be paid based on a qualitative assessment of several factors. It is possible that liabilities
associated with one or more transactions may exceed our provisions due to audits by, or litigation with, relevant taxing authorities
which may materially adversely affect our financial condition and results of operations.
Risks Related to Our Common Stock
and Its Market Value
We have limited
capitalization and may require financing, which may not be available.
We have limited capitalization,
which increases our vulnerability to general adverse economic and industry conditions, limits our flexibility in planning for and
reacting to changes in our business and industry, and may place us at a competitive disadvantage to competitors with sufficient
capitalization. If we are unable to obtain sufficient financing on satisfactory terms and conditions, we will be forced to curtail
or abandon our plans or operations. Our ability to obtain financing will depend upon a number of factors, many of which are beyond
our control.
A limited public
trading market exists for our common stock, which makes it difficult for our stockholders to sell their common stock on the public
markets. Any trading in our shares may have a significant effect on our stock prices.
Although our common
stock is listed for quotation on the OTC Markets, under the symbol “ODYY,” the trading activity of our common stock
is volatile and may not develop or be sustained. As a result, any trading price of our common stock may not be an accurate indicator
of the valuation of our common stock. Any trading in our shares could have a significant effect on our stock price. If a more liquid
public market for our common stock does not develop, then investors may not be able to resell the shares of our common stock that
they have purchased and may lose all of their investment. No assurance can be given that an active market will develop or that
a stockholder will ever be able to liquidate its shares of common stock without considerable delay, if at all. Many brokerage firms
may not be willing to effect transactions in the securities. Even if an investor finds a broker willing to affect a transaction
in our securities, the combination of brokerage commissions, state transfer taxes, if any, and any other selling costs may exceed
the selling price. Furthermore, our stock price may be impacted by factors that are unrelated or disproportionate to our operating
performance. These market fluctuations, as well as general economic, political, and market conditions, such as recessions, interest
rates, and international currency fluctuations, may adversely affect the market price and liquidity of our common stock.
Our common stock
may never be listed on a national exchange and is subject to being removed from the OTC Marketplace.
Our common stock is
quoted for trading on the OTCQB Marketplace. We still will be unable to list our stock on the OTC Markets Fully Reporting since
the price of our stock is below $0.01, and we do not meet the eligibility standards for listing under the OTC Markets Fully Reporting
per OTC Markets guidelines. Should we continue to fail to satisfy the eligibility standards of OTC Markets for the OTC Markets
Fully Reporting, the trading price of our common stock could continue to suffer and the trading market for our common stock may
be less liquid and our common stock price may be subject to increased volatility.
Our common stock
is deemed to be a “penny stock,” which may make it more difficult for investors to sell their shares due to suitability
requirements.
Our stock is categorized
as a “penny stock,” as that term is defined in SEC Rule 3a51-1, which generally provides that a “penny stock”
is any equity security that has a market price (as defined) less than U.S. $5.00 per share, subject to certain exceptions. Our
securities are covered by the penny stock rules, including Rule 15g-9, which imposes additional sales practice requirements on
broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document
in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock
market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation
of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny
stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information,
must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing
before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure
requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject
to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities
and reduce the number of potential investors. We believe that the penny stock rules discourage investor interest in, and limit
the marketability of, our common stock.
The sale of shares
of our common stock could cause the price of our common stock to decline.
Depending on market
liquidity at the time, a sale of shares covered by a registration statement could cause the trading price of our common stock to
decline. The sale of a substantial number of shares of our common stock under a registration statement, or the anticipation of
such a sale, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price
that we otherwise might desire to affect such sales.
A low market
price would severely limit the potential market for our common stock.
Our common stock may
trade at a price below $5.00 per share, subjecting trading in the stock to certain SEC rules requiring additional disclosures by
broker-dealers. These rules generally apply to any non-NASDAQ equity security that has a market price share of less than $5.00
per share, subject to certain exceptions (a “penny stock”). Such rules require the delivery, before any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith and impose various sales
practice requirements on broker-dealers who sell penny stocks to persons other than established customers and institutional or
wealthy investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser’s written consent to the transaction before the sale. The broker-dealer also must disclose
the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock, and, if the broker-dealer is
the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market.
Such information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to
the customer. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information
on the limited market in penny stocks. The additional burdens imposed on broker-dealers by such requirements could discourage broker-dealers
from effecting transactions in our common stock.
If applicable,
FINRA sales practice requirements could limit a stockholder’s ability to buy and sell our stock.
In addition to the
penny stock rules promulgated by the SEC, above, FINRA rules (which would apply to our common stock in the event that our common
stock ultimately becomes traded over the counter via the OTC Electronic Bulletin Board) require that, in recommending an investment
to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Under
these FINRA rules, before recommending speculative low-priced securities to their non-institutional customers, broker-dealers must
make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced
securities will not be suitable for at least some customers. If these FINRA rules were to apply to our common stock, such application
would make it more difficult for broker-dealers to recommend that their customers buy our common stock, which could limit the ability
to buy and sell our common stock and have an adverse effect on the market value for our shares of common stock.
An investor’s
ability to trade our common stock may be limited by trading volume.
A consistently active
trading market for our common stock may not occur on a national stock exchange or an automated quotation system. A limited trading
volume may prevent our stockholders from selling shares at such times or in such amounts as they otherwise may desire.
A
limited number of stockholders collectively own a significant portion of our common shares and may act, or prevent corporate actions,
to the detriment of other stockholders.
A limited number of
stockholders, including our founders and members of the Board of Directors and our management, currently own a significant portion
of our outstanding common shares. Accordingly, these stockholders may, if they act together, exercise significant influence over
all matters requiring stockholder approval, including the election of a majority of our directors and the determination of significant
corporate actions. This concentration could also have the effect of delaying or preventing a change in control that could otherwise
be beneficial to our stockholders.
Our company has
a concentration of stock ownership and control, which may have the effect of delaying, preventing or deterring a change of control.
Our common stock ownership
is highly concentrated. Through ownership of shares of our common stock, nine stockholders collectively own beneficially more than
81% of our total outstanding shares of common stock. As a result of this concentrated ownership of our common stock, our nine
stockholders may be able to exert significant control over all matters requiring stockholder approval, including the election of
directors and approval of mergers and other significant corporate transactions. This concentration of ownership may have the effect
of delaying, preventing or deterring a change in control of our company. It also could deprive our stockholders of an opportunity
to receive a premium for their shares as part of a sale of our company, and it may affect the market price of our common stock.
We have not voluntarily
implemented various corporate governance measures, in the absence of which, stockholders may have more limited protections against
interested director transactions, conflicts of interest and similar matters.
Federal legislation,
including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote
the integrity of corporate management and the securities markets. Some of these measures have been adopted in response to legal
requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, on which
their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges
and NASDAQ are those that address board of directors’ independence, audit committee oversight and the adoption of a code
of ethics. While our board of directors has adopted a Code of Ethics and an Audit Committee Charter, we have not yet adopted any
of the other corporate governance measures, and, since our securities are not currently listed on a national securities exchange
or NASDAQ, we are not currently required to do so. In the event that our common stock becomes listed, we will be required to adopt
these other corporate governance measures, and we intend to do so. It is possible that if we were to adopt some or all of these
corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were
being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the
absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning
matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority
of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current
lack of corporate governance measures in formulating their investment decisions.
Our Articles
of Incorporation provide that certain proceedings may only be instituted in the District Courts of Nevada, which may prevent or
delay such proceedings and will increase the costs to enforce shareholder rights.
Our Articles of Incorporation
provide that the following actions and proceedings may only be brought in the courts located in the State of Nevada: (i) derivative
actions brought on behalf of the company, (ii) any action asserting breach of fiduciary duty by the directors or officers, (iii)
any action brought under the Business Associations, Securities and Commodities statutes of the State of Nevada, and (iv) actions
asserting a claim under the internal affairs doctrine. No court has determined that such provisions are enforceable in Nevada,
and we may be forced to defend proceedings brought in other states if such provision is ruled unenforceable. If enforceable, claims
covered by this provision may be maintained in the courts of the State of Nevada only if such courts have personal jurisdiction
over the defendants. If the State of Nevada does not have personal jurisdiction over any named defendant, this provision may have
the effect of preventing the prosecution of any claim. Additionally, because shareholders may initiate such actions only in the
State of Nevada, shareholders will be required to incur additional costs and expense such as engaging legal counsel authorized
to practice in Nevada. Moreover, the laws of the State of Nevada may be more favorable to us or our management than the laws of
the state in which any shareholder resides.
The sale
or issuance of our common stock to Lincoln Park may cause dilution and the sale of the shares of common stock acquired by Lincoln
Park, or the perception that such sales may occur, could cause the price of our common stock to fall.
On August 14, 2020,
we entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC, an Illinois limited liability company (“Lincoln
Park”) and, on that date, we sold 602,422 shares of our common stock to Lincoln Park in an initial purchase under the Purchase
Agreement for a total purchase price of $250,000. We also issued 793,802 shares of our common stock to Lincoln Park as consideration
for its irrevocable commitment to purchase our common stock under the Purchase Agreement. The remaining shares of our common stock
that may be issued under the Purchase Agreement may be sold by us to Lincoln Park at our discretion from time to time over a 36-month
period commencing after the satisfaction of certain conditions set forth in the Purchase Agreement, including that the SEC has
declared effective the related registration statement and that such registration statement remains effective. The purchase price
for the shares that we may sell to Lincoln Park under the Purchase Agreement will fluctuate based on the price of our common stock.
Depending on market liquidity at the time, sales of such shares may cause the trading price of our common stock to fall.
Subject to the terms
of the Purchase Agreement, we generally have the right to control the timing and amount of any future sales of our shares to Lincoln
Park. Additional sales of our common stock, if any, to Lincoln Park will depend upon market conditions and other factors to be
determined by us. We may ultimately decide to sell to Lincoln Park all, some, or none of the additional shares of our common stock
that may be available for us to sell pursuant to the Purchase Agreement. If and when we do sell shares to Lincoln Park, after Lincoln
Park has acquired the shares, Lincoln Park may resell all or some of those shares at any time or from time to time in its discretion.
Therefore, sales to Lincoln Park by us could result in substantial dilution to the interests of other holders of our common stock.
Additionally, the sale of a substantial number of shares of our common stock to Lincoln Park, or the anticipation of such sales,
could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we
might otherwise wish to effect sales.
We may require
additional financing to sustain our operations, without which we may not be able to continue operations, and the terms of subsequent
financings may adversely impact our stockholders.
We may direct Lincoln
Park to purchase up to $10,000,000 worth of shares of our common stock under our agreement over a 36-month period generally in
amounts up to 200,000 shares of our common stock (such purchases, “Regular Purchases”), which may be increased to up
to 100,000 shares of our common stock depending on the market price of our common stock at the time of sale. Lincoln Park’s
committed obligation under any Regular Purchase shall not exceed $50,000 unless the median aggregate dollar value of the volume
of shares of common stock during the 20 consecutive trading day period ending on the date of the applicable Regular Purchase equals
or exceeds $100,000, in which case Lincoln Park’s committed obligation under such single Regular Purchase shall not exceed
$500,000.
The extent to which
we rely on Lincoln Park as a source of funding will depend on a number of factors including the prevailing market price of our
common stock and the extent to which we are able to secure working capital from other sources. If obtaining sufficient funding
from Lincoln Park were to prove unavailable or prohibitively dilutive, we will need to secure another source of funding in order
to satisfy our working capital needs. Even if we sell all $10,250,000 under the Purchase Agreement to Lincoln Park, we may still
need additional capital to finance our future production plans and working capital needs, and we may have to raise funds through
the issuance of equity or debt securities. Depending on the type and the terms of any financing we pursue, stockholders’
rights and the value of their investment in our common stock could be reduced. A financing could involve one or more types of securities
including common stock, convertible debt or warrants to acquire common stock. These securities could be issued at or below the
then prevailing market price for our common stock. In addition, if we issue secured debt securities, the holders of the debt would
have a claim to our assets that would be prior to the rights of stockholders until the debt is paid. Interest on these debt securities
would increase costs and negatively impact operating results. If the issuance of new securities results in diminished rights to
holders of our common stock, the market price of our common stock could be negatively impacted. Should the financing we require
to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences could be a
material adverse effect on our business, operating results, financial condition and prospects.
Our management
will have broad discretion over the use of the net proceeds from our sale of shares of common stock to Lincoln Park; you may not
agree with how we use the proceeds and the proceeds may not be invested successfully.
Our management will
have broad discretion as to the use of the net proceeds from our sale of shares of common stock to Lincoln Park, and we could use
them for purposes other than those contemplated at the time of the offering. Accordingly, you will be relying on the judgment of
our management with regard to the use of those net proceeds, and you will not have the opportunity, as part of your investment
decision, to assess whether the proceeds are being used appropriately. It is possible that, pending their use, we may invest those
net proceeds in a way that does not yield a favorable, or any, return for us. The failure of our management to use such funds effectively
could have a material adverse effect on our business, financial condition, operating results and cash flows.
An active trading
market for our common stock may not be sustained.
Although our common
stock is listed on the OTCQB Market, the market for our shares has demonstrated varying levels of trading activity. Furthermore,
the current level of trading may not be sustained in the future. The lack of an active market for our common stock may impair investors’
ability to sell their shares at the time they wish to sell them or at a price that they consider reasonable, may reduce the fair
market value of their shares and may impair our ability to raise capital to continue to fund operations by selling shares and may
impair our ability to acquire additional intellectual property assets by using our shares as consideration.
We do not anticipate
paying dividends on our common stock and, accordingly, stockholders must rely on stock appreciation for any return on their investment.
We do not anticipate
paying cash dividends on our common stock in the foreseeable future and we may not have sufficient funds legally available to pay
dividends. Even if the funds are legally available for distribution, we may nevertheless decide not to pay any dividends. We currently
intend to retain all earnings for our operations. The declaration of dividends is subject to the discretion of our board of directors
and limitations under applicable law, and will depend on various factors, including our operating results, financial condition,
future prospects and any other factors deemed relevant by our board of directors. You should not rely on an investment in our company
if you require dividend income from your investment in our company. The success of your investment will likely depend entirely
upon any future appreciation of the market price of our common stock, which is uncertain and unpredictable. There is no guarantee
that our common stock will appreciate in value.
If we fail to
develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or
prevent financial fraud. As a result, current and potential stockholders could lose confidence in our financial reporting.
We are subject to the
risk that sometime in the future our independent registered public accounting firm could communicate to the board of directors
that we have deficiencies in our internal control structure that they consider to be “significant deficiencies.” A
“significant deficiency” is defined as a deficiency, or a combination of deficiencies, in internal control over financial
reporting such that there is more than a remote likelihood that a material misstatement of the entity’s financial statements
will not be prevented or detected by the entity’s internal controls.
Effective internal
controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable
financial reports or prevent fraud, we could be subject to regulatory action or other litigation and our operating results could
be harmed. We are required to document and test our internal control procedures to satisfy the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act,” or “SOX”), which requires our management to annually
assess the effectiveness of our internal control over financial reporting.
We currently are not
an “accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. Section 404
of the Sarbanes-Oxley Act of 2002 (“Section 404”) requires us to include an internal control report with our Annual
Report on Form 10-K. That report must include management’s assessment of the effectiveness of our internal control over financial
reporting as of the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal control
over financial reporting that we have identified. As of July 31, 2020, the management of the Company assessed the effectiveness
of the Company’s internal control over financial reporting based on SEC guidance on conducting such assessments and on the
criteria for effective internal control over financial reporting established in Internal Control and Integrated Framework, issued
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management concluded, during the
year-ended July 31, 2020, that the Company’s internal controls and procedures were not effective to detect the inappropriate
application of U.S. GAAP rules. Management realized there were deficiencies in the design or operation of the Company’s internal
control that adversely affected the Company’s internal control, which management considers to be material weaknesses. A material
weakness in the effectiveness of our internal control over financial reporting may increase the chance of fraud and the loss of
customers, reduce our ability to obtain financing, and require additional expenditures to comply with these requirements. Any of
these consequences could have a material adverse effect on our business, results of operations and financial condition. For additional
information, see Item 9A – Controls and Procedures.
It may be time-consuming,
difficult, and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley
Act. We may need to hire additional financial reporting, internal controls, and other finance personnel in order to develop and
implement appropriate internal controls and reporting procedures. If we are unable to comply with the internal control requirements
of the Sarbanes-Oxley Act, then we may not be able to obtain the independent accountant certifications required by such act, which
may preclude us from keeping our filings with the SEC current.
If we are unable to
maintain the adequacy of our internal controls, as those standards are modified, supplemented, or amended from time to time, we
may not be able to ensure that we may conclude on an ongoing basis that we have effective internal control over financial reporting
in accordance with Section 404. Failure to achieve and maintain an effective internal control environment could cause us to face
regulatory action and cause investors to lose confidence in our reported financial information, either of which could adversely
affect the value of our common stock.
Our certificate
of incorporation allows our board to create new series of preferred stock without approval by our stockholders, which could adversely
affect the rights of the holders of our common stock.
Our board of directors
has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has
the authority to issue preferred stock without stockholder approval. As a result, our board of directors could authorize the issuance
of a series of preferred stock granting holders a preferred right to our assets upon liquidation, the right to receive dividend
payments before dividends are distributed to the holders of common stock, and the right to redemption of the shares, together with
a premium prior to the redemption of our common stock. In addition, our board of directors could authorize the issuance of a series
of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could
decrease the relative voting power of our common stock or result in dilution to our existing stockholders.
Our financial
and operating performance is adversely affected by the coronavirus pandemic.
The recent outbreak
of a strain of coronavirus (COVID-19) in the U.S. has had an unfavorable impact on our business operations. Mandatory closures
of businesses imposed by the federal, state and local governments to control the spread of the virus is disrupting the operations
of our management, business and finance teams. In addition, the COVID-19 outbreak has adversely affected the U.S. economy and financial
markets, which may result in a long-term economic downturn that could negatively affect future performance. The extent to
which COVID-19 will impact our business and our consolidated financial results will depend on future developments which are highly
uncertain and cannot be predicted at the time of the filing of this Form 10-K, but is expected to result in a material adverse
impact on our business, results of operations and financial condition.
Cautionary Note
We have sought to identify
what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such
risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully
consider all of such risk factors before making an investment decision with respect to our common stock.