UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended ~~June 30, 2021~~March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 000-54239

Digipath, Inc.

(Exact name of registrant issuer as specified in its charter)

Nevada

27-3601979

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


6450 Cameron St Suite 113 Las Vegas, NV		89118
(Address of principal executive offices)		(zip code)

(702) 527-2060

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
		N/A		N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

~~Yes~~ ~~☒ No ☐~~

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

~~Yes~~ ~~☒ No ☐~~

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

~~Yes ☐~~ No ☒

Yes

☐

☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

The number of shares of registrant’s common stock outstanding as of ~~August 13, 2021~~May 16, 2022 was ~~71,230,153~~75,146,820.

TABLE OF CONTENTS

		Page
		No.
PART I - FINANCIAL INFORMATION		3
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)	3
	Condensed Consolidated Balance Sheets as of ~~June 30, 2021~~March 31, 2022 (Unaudited) and September 30, ~~2020~~2021	3
	Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ (Unaudited)	4
	Condensed Consolidated Statements of Stockholders’ ~~Equity (Deficit)~~Deficit for the Three and ~~Nine~~Six Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ (Unaudited)	6
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	7
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2118
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2623
ITEM 4.	CONTROLS AND PROCEDURES	2723
PART II -– OTHER INFORMATION		2824
ITEM 1.	Legal Proceedings	2824
ITEM 1A.	RISK FACTORS	2824
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	2824
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	2824
ITEM 4.	MINE SAFETY DISCLOSURES	2824
ITEM 5.	OTHER INFORMATION	2824
ITEM 6.	EXHIBITS	2825
	SIGNATURES	3026

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

DIGIPATH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			September 30,			March 31,			September 30,
	2021			2020			2022			2021
	(Unaudited)						(Unaudited)
Assets

Current assets:
Cash	$	72,809		$	82,749		$	82,769		$	295,932
Accounts receivable, net		193,810			242,145			259,268			214,900
Note receivable								1,029,227			230,959
Other current assets		68,950			53,673			27,241			24,751
Deposits		73,675			18,675			71,093			60,353
Total current assets		409,244			397,242			1,469,598			826,865

Right-of-use asset		437,298			505,706			366,089			413,884
Fixed assets, net		650,721			885,405			534,435			647,252
Total non-current assets								900,524			1,061,136

Total Assets	$	1,497,263		$	1,788,353		$	2,370,122		$	1,888,001

Liabilities and Stockholders’ Equity (Deficit)
Liabilities and Stockholders’ Deficit

Current liabilities:
Accounts payable	$	340,492		$	387,946		$	419,500		$	370,977
Accrued expenses		194,944			163,152			359,274			220,002
Short term advances		115,112			50,112
Current portion of operating lease liabilities		91,311			84,731			98,281			93,601
Current portion of finance lease liabilities		28,468			32,532			3,822			20,379
Current maturities of convertible notes payable								1,700,650			1,050,000
Current maturities of notes payable		56,705			54,317			486,458			259,425
Total current liabilities		827,032			772,790			3,067,985			2,014,384

Non-current liabilities:
Operating lease liabilities		354,701			423,752			279,981			330,151
Finance lease liabilities		-			20,379
Notes payable		335,960			418,907			474,166			339,516
Convertible notes payable, net of discounts of $-0- and $8,322 at June 30, 2021 and September 30, 2020, respectively		1,160,000			1,241,678
Convertible notes payable, net of discounts of $-0- and $8,322 at March 31, 2022 and September 30, 2021, respectively								-			257,282
Total non-current liabilities		1,850,661			2,104,716			754,147			926,949

Total Liabilities		2,677,693			2,877,506			3,822,132			2,941,333

Series B convertible preferred stock, $0.001 par value, 1,500,000 shares authorized; 333,600 and zero shares issued and outstanding as of March 31, 2022 and September 30, 2021 respectively								333,600			-

Stockholders’ Equity (Deficit):
Series A convertible preferred stock, $0.001 par value, 10,000,000 shares authorized; 1,325,942 shares issued and outstanding		1,326			1,326
Common stock, $0.001 par value, 250,000,000 shares authorized; 69,730,153 and 58,270,567 shares issued and outstanding at June 30, 2021 and September 30, 2020, respectively		69,730			58,271
Series A convertible preferred stock, $0.001 par value, 6,000,000 shares authorized; 1,047,942 and 1,325,942 shares issued and outstanding as of March 31, 2022 and September 30, 2021, respectively								1,048			1,326
Common stock, $0.001 par value, 250,000,000 shares authorized; 75,146,820 and 71,230,153 shares issued and outstanding at March 31, 2022 and September 30 2021, respectively								75,147			71,230
Additional paid-in capital		16,563,314			16,116,400			16,753,769			16,825,765
Accumulated (deficit)		(17,814,800	)		(17,265,150	)
Accumulated deficit								(18,615,574	)		(17,951,653	)

Total Stockholders’ Equity (Deficit)		(1,180,430	)		(1,089,153	)
Total Stockholders’ Deficit								(1,785,610	)		(1,053,332	)

Total Liabilities and Stockholders’ Equity (Deficit)	$	1,497,263		$	1,788,353
Total Liabilities and Stockholders’ Deficit							$	2,370,122		$	1,888,001

See accompanying notes to financial statements.

DIGIPATH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	2021			2020			2021			2020			2022			2021			2022			2021
	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,						March 31,						March 31,
	2021			2020			2021			2020			2022			2021			2022			2021

Revenues	$	764,015		$	407,229		$	1,897,560		$	1,971,141		$	604,735		$	633,160		$	1,304,320		$	1,133,545
Cost of sales		551,976			347,724			1,389,776			1,250,234			396,032			416,915			818,633			837,800
Gross profit		212,039			59,505			507,784			720,907			208,703			216,245			485,687			295,745

Operating expenses:
General and administrative		278,082			328,128			715,093			1,123,479			235,470			211,961			476,434			437,011
Professional fees		91,001			177,835			313,364			688,902			286,390			107,819			554,861			222,363
Change in allowance for doubtful accounts		(10,960	)		25,420			(28,945	)		186,540			16			(106,155	)		(2,123	)		(17,985	)
Total operating expenses		358,123			531,383			999,512			1,998,921			521,876			213,625			1,029,172			641,389

Operating loss		(146,084	)		(471,878	)		(491,728	)		(1,278,014	)		(313,173	)		2,620			(543,485	)		(345,644	)

Other income (expense):
Other income		-			21,000			47,918			63,000
Loss on disposal of fixed assets		-			(28,238	)		-			(28,238	)
Interest income														15,295			47,918			24,675			47,918
Interest expense		(31,130	)		(41,571	)		(105,840	)		(107,005	)		(75,718	)		(32,337	)		(145,111	)		(74,710	)
Total other income (expense)		(31,130	)		(48,809	)		(57,922	)		(72,243	)		(60,423	)		15,581			(120,436	)		(26,792	)

Net loss	$	(177,214	)	$	(520,687	)	$	(549,650	)	$	(1,350,257	)
Net income (loss)													$	(373,596	)	$	18,201		$	(663,921	)	$	(372,436	)

Weighted average number of common shares outstanding - basic and fully diluted		68,479,201			57,225,309			64,081,692			52,048,121
Weighted average number of common shares outstanding – basic														74,019,042			65,418,890			73,194,439			61,882,937
Weighted average number of common shares outstanding – fully diluted														74,019,042			114,702,490			73,194,439			61,882,937

Net loss per share - basic and fully diluted	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.03	)
Net loss per share – basic													$	(0.00	)	$	0.00		$	(0.01	)	$	(0.01	)
Net loss per share – diluted													$	(0.00	)	$	0.00		$	(0.01	)	$	(0.01	)

See accompanying notes to financial statements.

DIGIPATH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ ~~EQUITY (DEFICIT)~~DEFICIT

(Unaudited)

Shares Amount Shares Amount Capital Payable (Deficit) (Deficit)
For the Three Months Ended June 30, 2020
Series A Convertible Additional Total Stockholders’
Preferred Stock Common Stock Paid-in Subscriptions Accumulated Equity
Shares Amount Shares Amount Capital Payable (Deficit) (Deficit)

Balance, March 31, 2020 1,325,942 $ 1,326 56,737,672 $ 56,738 $ 15,879,225 $ 37,500 $ (15,785,230 ) $ 189,559

Common stock sold for cash
Common stock sold for cash, shares
Common stock issued for acquisition of VSSL Enterprises, Ltd.
Common stock issued for acquisition of VSSL Enterprises, Ltd., shares

Common stock issued for debt conversions
Common stock issued for debt conversions, shares
Common stock issued for services - - 875,000 875 97,318 (37,500 ) - 60,693
Common stock issued for services, related parties

Common stock issued for services, related parties, shares

Common stock options issued for services - - - - 28,032 - - 28,032
Common stock warrants issued for services

Net loss for the three months ended June 30, 2020 - - - - - - (520,687 ) (520,687 )

Balance, June 30, 2020 1,325,942 $ 1,326 57,612,672 $ 57,613 $ 16,004,575 $ - $ (16,305,917 ) $ (242,403 )
Shares Amount Shares Amount Shares Amount Capital (Deficit) Deficit
Series B Series A
Convertible Convertible Additional Total
Preferred Stock Preferred Stock Common Stock Paid-in Accumulated Stockholders’
Shares Amount Shares Amount Shares Amount Capital (Deficit) Deficit

Balance, September 30, 2021 - $ - 1,325,942 $ 1,326 71,230,153 $ 71,230 $ 16,825,765 $ (17,951,653 ) $ (1,053,332 )

Purchase of Series B Preferred shares 55,600 55,600 - - - - - - -

Conversion of Series A Preferred into Series B Preferred 278,000 278,000 (278,000 ) (278 ) - - (277,722 ) - (278,000 )

Stock-based compensation - - - - 1,500,000 1,500 97,179 - 98,679

Net loss - - - - - - - (290,325 ) (290,325 )

Balance, December 31, 2021 333,600 333,600 1,047,942 1,048 72,730,153 72,730 16,645,222 (18,241,978 ) (1,522,978 )

Common Shares issued for settlement of AP - - - - 250,000 250 7,250 - 7,500

Stock-based compensation - - - - 2,166,667 2,167 101,297 - 103,464

Net loss - - - - - - - (373,596 ) (373,596 )

Balance, March 31, 2022 333,600 $ 333,600 1,047,942 $ 1,048 75,146,820 $ 75,147 $ 16,753,769 $ (18,615,574 ) $ (1,785,610 )

For the Three Months Ended June 30, 2021
Series A Convertible Additional Total Stockholders’
Preferred Stock Common Stock Paid-in Subscriptions Accumulated Equity
Shares Amount Shares Amount Capital Payable (Deficit) (Deficit)

Balance, March 31, 2021 1,325,942 $ 1,326 68,181,820 $ 68,182 $ 16,457,720 $ - $ (17,637,586 ) $ (1,110,358 )

Common stock issued for services - - 83,333 83 4,917 - - 5,000

Common stock issued for services, related parties - - 1,465,000 1,465 78,035 - - 79,500

Common stock options issued for services - - - - 22,642 - - 22,642

Net income for the three months ended June 30, 2021 - - - - - - (177,214 ) (177,214 )

Balance, June 30, 2021 1,325,942 $ 1,326 69,730,153 $ 69,730 $ 16,563,314 $ - $ (17,814,800 ) $ (1,180,430 )
For the Nine Months Ended June 30, 2020
Series A Convertible Additional Total Stockholders’
Preferred Stock Common Stock Paid-in Subscriptions Accumulated Equity
Shares Amount Shares Amount Capital Payable (Deficit) (Deficit)

Balance, September 30, 2019 1,325,942 $ 1,326 48,361,433 $ 48,361 $ 15,331,839 $ - $ (14,955,660 ) $ 425,866

Common stock sold for cash - - 706,250 706 55,794 - - 56,500

Common stock issued for acquisition of VSSL Enterprises, Ltd. - - 6,500,000 6,500 367,250 - - 373,750

Common stock issued for services - - 2,044,989 2,046 113,360 - - 115,406

Common stock options issued for services - - - - 66,320 - - 66,320

Common stock warrants issued for services - - - - 70,012 - - 70,012

Net loss for the nine months ended June 30, 2020 - - - - - - (1,350,257 ) (1,350,257 )

Balance, June 30, 2020 1,325,942 $ 1,326 57,612,672 $ 57,613 $ 16,004,575 $ - $ (16,305,917 ) $ (242,403 )
For the Nine Months Ended June 30, 2021
Series A Convertible Additional Total Stockholders’
Preferred Stock Common Stock Paid-in Subscriptions Accumulated Equity
Shares Amount Shares Amount Capital Payable (Deficit) (Deficit)

Balance, September 30, 2020 1,325,942 $ 1,326 58,270,567 $ 58,271 $ 16,116,400 $ - $ (17,265,150 ) $ (1,089,153 )

Common stock sold for cash - - 900,000 900 19,350 - - 20,250

Common stock issued for debt conversions - - 6,666,668 6,666 193,334 - - 200,000

Common stock issued for services - - 833,333 833 30,242 - - 31,075

Common stock issued for services, related parties - - 3,059,585 3,060 140,220 - - 143,280

Common stock options issued for services - - - - 63,768 - - 63,768

Net loss for the nine months ended June 30, 2021 - - - - - - (549,650 ) (549,650 )
Net income (loss) - - - - - - (549,650 ) (549,650 )

Balance, June 30, 2021 1,325,942 $ 1,326 69,730,153 $ 69,730 $ 16,563,314 $ - $ (17,814,800 ) $ (1,180,430 )
Series B Convertible Series A Convertible Additional Total
Preferred Stock Preferred Stock Common Stock Paid-in Accumulated Stockholders’
Shares Amount Shares Amount Shares Amount Capital (Deficit) Deficit

Balance, September 30, 2020 - $ - 1,325,942 $ 1,326 58,270,567 $ 58,271 $ 16,116,400 $ (17,265,150 ) $ (1,089,153 )

Common stock sold for cash - - - - 900,000 900 19,350 - 20,250

Common stock issued for debt conversion - - - - 3,666,668 3,666 106,334 - 110,000

Stock-based compensation - - - - 1,228,155 1,228 42,832 - 44,060

Net loss - - - - - - - (390,637 ) (390,637 )

Balance, December 31, 2020 - - 1,325,942 1,326 64,065,390 64,065 16,284,916 (17,655,787 ) (1,305,480 )

Common stock issued for debt conversion - - - - 3,000,000 3,000 87,000 - 90,000

Stock-based compensation - related parties - - - - 866,430 867 56,157 - 57,024

Stock-based compensation - - - - 250,000 250 29,647 - 29,897

Net income - - - - - - - 18,201 18,201

Net income (loss) - - - - - - - 18,201 18,201
Balance, March 31, 2021 - $ - 1,325,942 $ 1,326 68,181,820 $ 68,182 $ 16,457,720 $ (17,637,586 ) $ (1,110,358 )

~~See accompanying notes to financial statements.~~
5

DIGIPATH, INC. AND SUBSIDIARIES
~~CONDENSED~~ CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

2021 2020 2022 2021
For the Nine Months Ended For the Six Months Ended
June 30, March 31,
2021 2020 2022 2021
Cash flows from operating activities
Net loss $ (549,650 ) $ (1,350,257 ) $ (663,921 ) $ (372,436 )
Adjustments to reconcile net loss to net cash used in operating activities:
Change in allowance for doubtful accounts (28,945 ) 186,540 (2,123 ) (17,985 )
Depreciation and amortization expense 233,663 242,207 117,063 159,209
Loss on disposal of fixed assets 2,227 28,238 - 2,227
Gain on early extinguishment of debt (40,338 ) - - (40,338 )
Stock issued for services 174,355 115,406
Options and warrants granted for services 63,768 136,332
Stock-based compensation 202,143 130,981
Amortization of debt discounts 8,322 24,783 39,103 8,322
Decrease (increase) in assets:
Accounts receivable 77,280 (176,825 ) (42,245 ) 49,400
Other current assets (15,277 ) (42,815 ) (35,416 ) 12,677
Inventory - (37,900 )
Deposits (55,000 ) 26,057 (2,490 ) -
Right-of-use assets 68,408 144,149 47,795 45,308
Increase (decrease) in liabilities:
Accounts payable (47,454 ) 230,483 56,023 (58,639 )
Accrued expenses 32,016 169 139,272 27,814
Lease liabilities (62,471 ) (141,504 ) (45,490 ) (41,143 )
Net cash used in operating activities (139,096 ) (614,937 )
Net cash (used) in operating activities (190,286 ) (94,603 )

Cash flows from investing activities
Cash acquired from affiliate in acquisition of VSSL - 143
Cash paid for purchase of VSSL Enterprises, Ltd. - (200,000 )
Purchase of fixed assets (1,206 ) (141,151 ) (4,246 ) (1,206 )
Net cash used in investing activities (1,206 ) (341,008 )
Advance of note receivable (773,622 ) -
Net cash (used) in investing activities (777,868 ) (1,206 )

Cash flows from financing activities
Proceeds from short term advances 65,000 25,000
Repayments of short term advances - (25,000 )
Principal payments on finance lease (24,443 ) (41,824 ) (16,557 ) (16,715 )
Principal payments on note payable, equipment financing (40,445 ) (25,642 ) (28,317 ) (26,769 )
Proceeds from short term advances - 40,000
Proceeds from notes payable - 220,034 390,000 -
Proceeds from convertible notes 110,000 550,000 394,265 110,000
Payments on convertible notes (40,000 )
Proceeds from sale of common stock 20,250 56,500 - 20,250
Proceeds from sale of preferred stock 55,600 -
Net cash provided by financing activities 130,362 759,068 754,991 126,766

Net decrease in cash (9,940 ) (196,877 )
Net increase (decrease) in cash (213,163 ) 30,957
Cash - beginning 82,749 323,739 295,932 82,749
Cash - ending $ 72,809 $ 126,862 $ 82,769 $ 113,706

Supplemental disclosures:
Interest paid $ 49,508 $ 35,869 $ 42,809 $ 32,294
Income taxes paid $ - $ - - -

Non-cash investing and financing activities:
Fair value of net assets acquired from affiliate in business combination $ - $ 18,871
Fair value of common stock paid to affiliate in business combination $ - $ 373,750
Fixed assets acquired with capitalized finance lease $ - $ 99,193
Common stock issued for debt conversion $ - $ 110,000
Fixed assets acquired with note payable, equipment financing $ - $ 291,931 $ - $ 200,000
Fair value of common shares issued for conversion of debt

200,000
-
Common stock issued for settlement of accounts payables $ 7,500 $ -
Conversion of Series A preferred into Series B preferred $ 278,000 $ -

~~See accompanying notes to financial statements.~~
6
DIGIPATH, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Organization, Basis of Presentation and Significant Accounting Policies

Organization

Digipath, Inc. was incorporated in Nevada on October 5, ~~2010~~.2010. Digipath, Inc. and its subsidiaries (“Digipath,” the “Company,” “we,” “our” or “us”) is a service-oriented independent testing laboratory, data analytics and media firm focused on the developing cannabis and hemp markets, and supports the cannabis industry’s best practices for reliable testing, cannabis education and training. Our mission is to provide pharmaceutical-grade analysis and testing to the cannabis industry, under ISO-17025:2017 guidelines, to ensure consumers and patients know exactly what is in the cannabis they ingest and to help maximize the quality of our clients’ products through research, development, and standardization. Digipath has been operating a cannabis-testing lab in Nevada since 2015 and hopes to open labs in other states that have legalized the sale of cannabis, beginning with California or Arizona.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Intercompany accounts and transactions have been eliminated.

The unaudited condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Condensed Consolidated Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Condensed Consolidated Financial Statements, and the accompanying notes, are prepared in accordance with GAAP and do not contain certain information included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021. The interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the following entities, all of which were under common control and ownership at ~~June 30, 2021:~~March 31, 2022:
Schedule of Entities Under Common Control and Ownership
Jurisdiction of
Name of Entity⁽¹⁾ Incorporation Relationship
Digipath, ~~Inc.~~Inc.⁽²⁾ Nevada Parent
Digipath Labs, ~~Inc.~~Inc. Nevada Subsidiary
Digipath Labs CA, ~~Inc.~~Inc.⁽³⁾ California Subsidiary
Digipath Labs ~~S.A.S.~~S.A.S.⁽⁴⁾ Colombia Subsidiary
VSSL Enterprises, ~~Ltd.~~Ltd.⁽⁵⁾ Canada Subsidiary
TNM News ~~Corp.~~Corp.⁽⁶⁾ Nevada Subsidiary

⁽¹⁾ All entities are in the form of a corporation.
⁽²⁾ Holding company, which owns each of the wholly-owned subsidiaries. All subsidiaries shown above are wholly-owned by Digipath, Inc., the parent company.
⁽³⁾ Formed during the second fiscal quarter of 2021, but has not yet commenced significant operations.
⁽⁴⁾ Formed during the first fiscal quarter of 2019, but has not yet commenced significant operations.
⁽⁵⁾ Acquired on March 11, 2020.
⁽⁶⁾ Minimal activity, dissolved on July 28, 2021.

The consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements. The parent company and subsidiaries will be collectively referred to herein as the “Company”, “Digipath” or “DIGP”. The Company’s headquarters are located in Las Vegas, Nevada and substantially all of its customers are within the United States.

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein.

7

~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~
~~Segment Reporting~~
ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company ~~operates as a~~ ~~single~~ ~~segment and will evaluate additional segment disclosure requirements as it expands its operations~~.
Fair Value of Financial Instruments

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair value primarily due to the short-term nature of the ~~instruments~~.instruments.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the ~~sale~~commercial sales of ~~lab testing services through our subsidiary Digipath Labs, Inc.~~products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.

Revenue is primarily generated through our subsidiary, Digipath Labs, Inc., which recognizes revenue from the analytical testing of cannabis products for licensed producers and cultivators within the state of Nevada on a determinable fixed fee per test, or panel of tests ~~basis~~.basis. Revenue from the performance of those services is recognized upon completion of the tests, at which time test results are delivered to the customer, provided collectability of the fee is reasonably assured. WeWe typically require payment within thirty days of the delivery of results. Management estimates an allowance for doubtful accounts based on the aging of its receivables.

Stock-Based Compensation

The Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718) and Equity-Based Payments to Non-employees pursuant to ASC 2018-07 (ASC 2018-07). All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance.

~~Adoption of New Accounting Standards and~~ Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

In August 2020, the FASB issued ~~Accounting Standard Update (“ASU”) No.~~ASU 2020-06, ~~Debt–~~Debt -Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and ~~Hedging–~~Hedging - Contracts in ~~Entity’s~~Entity's Own Equity (Subtopic 815-40):: Accounting for Convertible Instruments and Contracts in an ~~Entity’s~~Entity's Own ~~Equity~~Equity). ~~(ASU 2020-06), which simplifies the accounting for convertible instruments by reducing~~ASU 2020-06 reduces the number of accounting models ~~available~~ for convertible debt ~~instruments. This guidance also eliminates~~instruments and convertible preferred stock, which results in fewer embedded conversion features being separately recognized from the ~~treasury stock method to calculate~~host contract as compared with current GAAP. Additionally, ASU 2020-06 affects the diluted earnings per share calculation for instruments that may be settled in cash or shares and for convertible instruments and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity's own equity. ASU 2020-06 allows entities to use ~~of the if converted method.~~ ~~The new guidance~~a modified or full retrospective transition method and is effective for ~~all entities~~smaller reporting companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2021, with early adoption permitted. The adoption of ASU 2020-06 is not expected to have a material impact on the Company’s financial statements or related disclosures.
~~In November 2019, the FASB issued ASU 2019~~-~~12 –~~ ~~Income Taxes~~ ~~(“Topic 740”~~~~): Simplifying the Accounting for Income Taxes~~~~. The amendments in ASU 2019~~-12 are part of an initiative to reduce complexity in accounting standards and simplify the accounting for income taxes by removing certain exceptions from Topic 740 and making minor improvements to the codification. ASU 2019-~~12 and its related amendments are effective for public entities for fiscal years, and interim periods within those~~ 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,. including interim periods within those fiscal years. The ~~provisions of~~Company is evaluating the impact that this ~~update did not~~ASU may have ~~a material impact~~ on ~~the Company’s~~its consolidated financial ~~position or results of operations.~~statements.

~~No other new accounting pronouncements, issued or effective during the period ended June 30, 2021, have had or are expected to have a significant impact on the Company’s financial statements.~~
8
~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~
Note 2 – Going Concern

As shown in the accompanying condensed consolidated financial statements, as of ~~June 30, 2021,~~March 31, 2022, the Company had negative working capital of $~~417,788~~1,598,387, accumulated recurring losses of $~~17,814,800~~18,615,574, and only $~~72,809~~82,769 of cash on hand, which is not sufficient to sustain operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new customers to increase revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. Management believes these factors will contribute toward achieving profitability.

The consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. These financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
~~Note 3 –~~ ~~Related Party Transactions~~
~~Board of Directors Compensation~~
~~On March 25, 2021, the Board of Directors approved changes to the compensation arrangements for each of Edmond A. DeFrank and Dennis Hartmann for serving as directors of the Company, as follows:~~
● ~~Effective April 1, 2021, annual compensation is increased from $18,000~~ ~~to $30,000, payable in quarterly installments of $7,500~~ ~~each; and~~
● ~~Such compensation may now be paid in shares of common stock of the Company instead of cash, at the discretion of the Company.~~
In connection with the foregoing, the Board of Directors of the Company also approved changes to the compensation arrangements for Bruce Raben for serving as the Company’s Chairman of the Board, as follows:
● ~~Effective April 1, 2021, annual compensation has been increased from $30,000~~ ~~to $60,000, payable in quarterly installments of $15,000~~ ~~each; and~~
● ~~Such compensation may now be paid in shares of common stock of the Company instead of cash, at the discretion of the Company.~~
~~Common Stock Sold for Cash~~
~~On December 30, 2020, the Company sold~~ ~~900,000~~ ~~shares of its common stock to its Chairman of the Board in exchange for proceeds of $20,250~~.
~~Common Stock Issued for Services~~
~~On June 25, 2021, the Company issued~~ ~~250,000~~ ~~shares of common stock to its former CFO for services rendered pursuant to his employment agreement. The fair value of the common stock was $15,000~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~On June 25, 2021, the Board approved the issuance of~~ ~~250,000~~ ~~shares of common stock to Bruce Raben for services rendered. The fair value of the common stock was $15,000~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~On June 25, 2021, the Board approved the issuance of~~ ~~125,000~~ ~~shares of common stock to Dennis Hartmann for services rendered. The fair value of the common stock was $7,500~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~On June 25, 2021, the Board approved the issuance of~~ ~~83,333~~ ~~shares of common stock to Edmond A. DeFrank for services rendered. The fair value of the common stock was $5,000~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~On June 2, 2021, the Board approved the issuance of~~ ~~840,000~~ ~~shares of common stock to Bruce Raben for services rendered. The fair value of the common stock was $42,000~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
9
~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~
~~On March 25, 2021, the Company issued~~ ~~266,430~~ ~~shares of common stock to its former CFO for services rendered pursuant to his employment agreement. The aggregate fair value of the common stock was $15,000~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~On March 25, 2021, the Board also approved the issuance of~~ ~~200,000~~ ~~shares of common stock as a bonus to each of Edmond A. DeFrank, Dennis Hartmann and Bruce Raben, or~~ ~~600,000~~ ~~shares in the aggregate. The aggregate fair value of the common stock was $33,780~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~On December 25, 2020, the Company issued~~ ~~728,155~~ ~~shares of common stock to its former CFO for services rendered pursuant to his employment agreement. The aggregate fair value of the common stock was $15,000~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~

Note 43 – Fair Value of Financial Instruments

The Company discloses the fair value of certain assets and liabilities in accordance with ASC 820 – Fair Value Measurement (“ASC 820”). Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.
8

The Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

10
~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~
The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, respectively:
Summary of Financial Instruments at Fair Value on Recurring Basis
Level 1 Level 2 Level 3
Fair Value Measurements at June 30, 2021 Fair Value Measurements at March 31, 2022
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets
Cash $ 72,809 $ - $ - $ 82,769 $ - $ -
Total assets 72,809 - -

Liabilities
Short term advances - 115,112 -
Lease liabilities - - 474,480 - - 382,084
Notes payable - 392,665 - - 960,624 -
Convertible notes payable - - 1,160,000 - - 1,700,650
Total liabilities - 507,777 1,634,480
Total $ 72,809 $ (507,777 ) $ (1,634,480 )

Level 1 Level 2 Level 3
Fair Value Measurements at September 30, 2020
Level 1 Level 2 Level 3
Assets
Cash $ 82,749 $ - $ -
Total assets 82,749 - -
Liabilities
Short term advances - 50,112 -
Lease liabilities - - 561,394
Notes payable - 473,224 -
Convertible notes payable, net of discounts of $8,322 - - 1,241,678
Convertible notes payable - - 1,241,678
Total liabilities - 523,336 1,803,072
Total $ 82,749 $ (523,336 ) $ (1,803,072 )
Fair Value Measurements at September 30, 2021
Level 1 Level 2 Level 3
Assets
Cash $ 295,932 $ - $ -

Liabilities
Lease liabilities - - 444,131
Notes payable - 598,941 -
Convertible notes payable, net of discounts of $98,188 - - 1,307,282

The fair value of our intellectual properties are deemed to approximate book value, and are considered Level 3 inputs as defined by ASC Topic 820-10-35.

~~Level 3 liabilities consist of lease liabilities and a total of $1,160,000~~ ~~of convertible debentures and $1,250,000~~ ~~of convertible debentures, net of discounts of $-0- and $8,322, as of June 30, 2021 and September 30, 2020, respectively.~~
There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 or the year ended September 30, ~~2020.~~2021.

Note 54 – ~~Accounts~~Note Receivable

~~Accounts receivable was~~On various dates between December 28, 2018 and June 13, 2019, we loaned Northwest Analytical Labs, Inc. a total of $~~193,810~~95,000. The loans bear interest at an annual rate of 10%, are evidenced by secured demand notes, and $are secured by a lien on the borrower’s assets. An allowance for doubtful accounts for the full value of the notes has been recorded due to the uncertainty of collectability.
~~242,145~~ ~~at June 30,~~
On various dates between August 23, 2021 and ~~September 30, 2020, respectively, net of allowance for uncollectible accounts~~March 31, 2022, we loaned C3 Labs, Inc. (“C3 Labs”) a total of $~~96,282~~1,003,622. The loans bear interest at an annual rate of 8%. These loans are evidenced by secured demand notes, and are secured by a lien on the borrower’s assets and have a maturity date of August 23, 2022. The Company has recorded interest income of $15,120 ~~and~~during the six months ended March 31, 2022 with total accrued interest of $~~128,944~~25,605 ~~at June 30, 2021 and September 30, 2020, respectively.~~as of March 31, 2022.
The loans were made in connection with a potential acquisition of a controlling interest in C3 Labs. On March 11, 2022, the Company notified C3 Labs of its termination of the letter of intent. The Company is currently in possession of equipment of C3 Labs, which it is in the process of liquidating. The Company anticipates that the proceeds of such liquidation will be sufficient to repay the Company in full all amounts owed to it by C3 Labs under the secured loans.
9

Note ~~6 –~~ ~~Other Current Assets~~
~~Other current assets consist of the following:~~
~~Schedule of Other Current Assets~~
June 30, September 30,
2021 2020
Prepaid expenses $ 63,470 $ 48,151
Other receivable 5,480 5,522
Total other current assets $ 68,950 $ 53,673
11
~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~
~~Note 7~~5 – Fixed Assets

Fixed assets consist of the following at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020:~~2021:
Schedule of Fixed Assets
June 30, September 30,
2021 2020
Software $ 125,903 $ 124,697
Office equipment 71,601 74,777
Furniture and fixtures 29,879 29,879
Lab equipment 1,398,716 1,398,716
Leasehold improvements 494,117 494,117
Lab equipment held under capital leases 99,193 99,193
Fixed assets, gross 2,219,409 2,221,379
Less: accumulated depreciation (1,568,688 ) (1,335,974 )
Total $ 650,721 $ 885,405
~~On March 31, 2021, we distributed fixed assets with an aggregate net book value of $2,227~~ ~~to our former CEO in satisfaction of accrued payroll that was owed. The fixed assets consisted of office equipment with a historical cost basis of $3,176~~ ~~and accumulated depreciation of $949, resulting in a loss of $2,227~~ ~~that was settled against the amount of unpaid compensation that was owed.~~
March 31, September 30,
2022 2021
Software $ 125,903 $ 125,903
Office equipment 71,601 71,601
Furniture and fixtures 29,879 29,879
Lab equipment 1,455,479 1,453,716
Leasehold improvements 496,600 494,117
Lab equipment held under capital leases 99,193 99,193
Fixed assets,gross 2,278,655 2,274,409
Less: accumulated depreciation (1,744,220 ) (1,627,157 )
Total $ 534,435 $ 647,252

Depreciation and amortization expense ~~totaled~~totalled $~~233,663~~117,063 and $~~242,207~~159,209 for the ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

Note 86 – Leases

The Company leases its operating and office facility under a ~~non-cancelable~~non-cancellable real property lease agreement that expires on August 31, 2025. The Company also has a financing lease for lab equipment subject to the recently adopted ASU 2016-02. In the locations in which it is economically feasible to continue to operate, management expects to enter into a new lease upon expiration. The real property lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. As the Company’s leases do not provide implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

The components of lease expense were as follows:
Schedule of Components of Lease Expense
For the Nine
Months Ended
June 30,
2021
Finance lease cost $ 6,477
Operating lease cost:
Amortization of assets 68,408
Interest on lease liabilities 20,747
Total lease cost $ 95,632
For the Six For the Six
Months Ended Months Ended
March 31, March 31,
2022 2021
Operating lease cost $ 59,436 $ 21,644
Finance lease cost:
Amortization of assets 17,329 45,308
Interest on lease liabilities 1,223 14,129
Total net lease cost $ 18,552 $ 59,437

12
~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~
Supplemental balance sheet information related to leases was as follows:
Schedule of Supplemental Balance Sheet Information
June 30, March 31, September 30,
2021 2022 2021
Operating leases:
Operating lease assets $ 437,298 $ 366,089 $ 413,884

Current portion of operating lease liabilities $ 91,311 98,281 $ 93,601
Noncurrent operating lease liabilities 354,701 279,981 330,151
Total operating lease liabilities $ 446,012 $ 378,262 $ 423,752
Finance lease:
Equipment, at cost $ 99,193 $ 99,193 $ 99,193
Accumulated amortization (34,718 ) (49,596 ) (36,677 )
Equipment, net $ 64,475 $ 49,597 $ 74,395

Current portion of finance lease liability $ 28,468
Noncurrent finance lease liability -
Total finance lease liability $ 28,468
Current portion of finance lease liabilities $ 3,822 $ 20,379
Noncurrent finance lease liabilities - -
Total finance lease liabilities $ 3,822 $ 20,379

Weighted average remaining lease term:
Operating leases 4.17 years 3.42 years 3.92 years
Finance leases 0.8 years 0.05 years 1.55 years

Weighted average discount rate:
Operating leases 5.75 % 5.75 % 5.75 %
Finance lease 18.41 % 18.41 % 18.41 %
10

Supplemental cash flow and other information related to leases was as follows:
Schedule of Supplemental Cash Flow and Other Information
For the Nine For the Six For the Six
Months Ended Months Ended Months Ended
June 30, March 31, March 31,
2021 2022 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases $ 62,471 $ 45,490 $ 41,143
Financing cash flows used for finance leases $ 24,443 $ 16,557 $ 16,715

Leased assets obtained in exchange for lease liabilities:
Total operating lease liabilities $ - $ 528,616
Total finance lease liabilities $ - $ 99,193

~~Future minimum~~The following is a maturity analysis of the annual undiscounted cash flows of the operating lease ~~commitments~~ liabilities on a fiscal year basis, including common area maintenance fees, under ~~non-cancelable~~non-cancellable operating leases ~~are as follows~~ as of ~~June 30, 2021:~~March 31, 2022:
Schedule of Future Minimum Annual Lease Commitments Under Operating Leases
Fiscal Year Ending Minimum Lease Minimum Lease
September 30, Commitments Commitments
2021 (for the three months remaining) $ 28,566
2022 115,550
2022 (for the six months remaining) $ 58,419
2023 119,468 119,468
2024 123,543 123,543
2025 116,891 116,892
Total minimum lease payments 504,018
2026 -
Total future undiscounted lease payments 418,322
Less interest
58,006
40,060
Present value of lease liabilities
446,012

Present value of lease payments 378,262
Less current portion
91,311
98,281
Long-term lease liabilities $
354,701

Long-term operating lease liabilities $ 279,981

13
~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~
Future minimum annual lease payments required under the finance lease and the present value of the net minimum lease payments are as follows at ~~June 30, 2021:~~March 31, 2022:
Schedule of Future Minimum Annual Lease Payments Under Finance Lease
Finance Finance
Leases Leases

2021 (for the three months remaining) $ 9,276
2022 21,644 $ 3,865
2023 -
Total minimum lease payments 30,920 3,865
Less interest 2,452 43
Present value of lease liabilities 28,468 3,822
Less current portion 28,468 3,822
Long-term lease liabilities $ -
Long-term finance lease liabilities $ -
11

Note ~~9 –~~ ~~Short Term Advances~~
~~Short term advances consist of the following at June 30, 2021 and September 30, 2020, respectively:~~
~~Schedule of Short Term Advances~~
June 30, September 30,
2021 2020

On April 29, 2021, we received $25,000 as a short-term loan from one of our convertible noteholders. The loan bears interest at the rate of 8% per annum. $ 25,000 $ -

On March 23, 2021, we received $40,000 as a short-term loan from one of our convertible noteholders. The loan bears interest at the rate of 8% per annum. 40,000 -

On July 20, 2020, we received $30,112 as a short-term loan from one of our convertible noteholders. The loan bears interest at the rate of 8% per annum. 30,112 30,112

On January 21, 2020, we received $20,000 as a short-term loan from one of our convertible noteholders. NaN interest expense was recognized. 20,000 20,000

Total short term advances $ 115,112 $ 50,112
~~The Company recorded interest expense pursuant to the stated interest rates on the short term loans in the amount of $3,123~~ ~~for the nine months ended June 30, 2021.~~
14
~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~
~~Note 10~~7 –Notes Payable

Notes payable consists of the following at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, respectively:
Schedule of Notes Payable
June 30, September 30, March 31, September 30,
2021 2020 2022 2021

On June 22, 2020, the Company, borrowed $40,114 from Cross River Bank, pursuant to a Promissory Note issued by the Company to Cross River Bank (the “Company PPP Note”). The loan was made pursuant to the Payroll Protection Program established as part of the Coronavirus Aid, Relief, and Economic Security Act (the “Payroll Protection Program”). The Company PPP Note carried interest at 1.00% per annum, payable monthly beginning December 22, 2020, and was due on June 22, 2025. On January 12, 2021, the PPP Note and interest was forgiven, resulting in a gain on early extinguishment of debt in the amount of $40,338. $ - $ 40,114
On September 10, 2021, the Company, entered into a Secured Promissory note for $675,000 from US Canna Lab I, LLC, (the “Company Canna Lab Note”). The Company Canna Lab Note carries interest at 12% per annum, and is due on September 10, 2024 with monthly principal and interest payments of $22,419.66 beginning on October 1, 2021. As of March 31, 2022, a total $675,000 of the funds have been advanced to the Company. In addition, the Company was advanced an additional $115,000 of funds under the same terms as the original note. $ 790,000 $ 400,000

On May 13, 2020, the Company, through its wholly-owned subsidiary Digipath Labs, Inc. (“Labs”), borrowed $179,920 from WebBank Corp, pursuant to a Promissory Note issued by Labs to WebBank Corp (the “Labs PPP Note”). The loan was made pursuant to the Payroll Protection Program. The Labs PPP Note bears interest at 1.00% per annum, payable monthly beginning December 13, 2020, and is due on May 13, 2022. The Labs PPP Note may be repaid at any time without penalty.

Under the Payroll Protection Program, Labs will be eligible for loan forgiveness up to the full amount of the Labs PPP Note and any accrued interest. The forgiveness amount will be equal to the amount that Labs spends during the 8-week period beginning May 13, 2020 on payroll costs, payment of rent on any leases in force prior to February 15, 2020 and payment on any utility for which service began before February 15, 2020. The maximum amount of loan forgiveness for non-payroll expenses is 25% of the amount of the Labs PPP Note. On July 20, 2021, the PPP Note and interest was forgiven, resulting in a gain on early extinguishment of debt in the amount of $182,054. 179,920 179,920

On December 26, 2019, the Company financed the purchase of $377,124 of lab equipment, in part, with the proceeds of a bank loan in the amount of $291,931. The loan bears interest at the rate of 5.75% per annum and requires monthly payments of $5,622 over the five-year term of the loan ending on December 26, 2024. The Company’s obligations under this loan are secured by a lien on the purchased equipment. 212,745 253,190
On December 26, 2019, the Company financed the purchase of $377,124 of lab equipment, in part, with the proceeds of a bank loan in the amount of $291,931. The loan bears interest at the rate of 5.75% per annum and requires monthly payments of $5,622 over the five-year term of the loan ending on December 26, 2024. The Company’s obligations under this loan are secured by a lien on the purchased equipment. 170,624 198,941

Total notes payable 392,665 473,224 960,624 598,941
Less: current maturities (56,705 ) (54,317 ) (486,458 ) (259,425 )
Notes payable $ 335,960 $ 418,907 $ 474,166 $ 339,516

The Company recorded interest expense pursuant to the stated interest rate and closing costs on the notes payable in the amount of $~~11,609~~41,277 and $~~12,153~~7,970 during the ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

15 12
~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~

Note 118 – Convertible Notes Payable

Convertible notes payable consists of the following at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, respectively:
Schedule of Convertible Notes Payable
June 30, September 30,
2021 2020

On February 11, 2020, the Company completed the sale to an accredited investor of a 9% Secured Convertible Promissory Note in the principal amount of $50,000. The Note matures on August 11, 2022, bears interest at a rate of 9% per annum, and was convertible into shares of the Company’s common stock at a conversion price of $0.15 per share. On December 28, 2020, the conversion price was amended to $0.03 per share in exchange for an additional $10,000 of proceeds and the promissory note was increased to $60,000. The Company’s obligations under the Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc., pursuant to a Security Agreement between the Company, Digipath Labs, Inc. and the investor. On December 29, 2020, the note holder converted $10,000 of principal into 333,334 shares of common stock at a conversion price of $0.03 per share. $ 50,000 $ 50,000

On February 11, 2020, the Company completed the sale to an accredited investor of a 9% Secured Subordinated Convertible Promissory Note in the principal amount of $150,000. The Note matures on August 11, 2022, bears interest at a rate of 9% per annum, and was convertible into shares of the Company’s common stock at a conversion price of $0.15 per share. On December 28, 2020, the conversion price was amended to $0.03 per share in exchange for an additional $50,000 of proceeds and the promissory note was increased to $200,000. The Company’s obligations under the Note are secured by subordinated lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc., pursuant to a Security Agreement between the Company, Digipath Labs, Inc. and the investor. On December 29, 2020, the note holder converted $50,000 of principal into 1,666,667 shares of common stock at a conversion price of $0.03 per share. 150,000 150,000

On February 10, 2020, the Company completed the sale to an accredited investor of a 9% Secured Convertible Promissory Note in the principal amount of $350,000. The Note matures on August 10, 2022, bears interest at a rate of 9% per annum, and was convertible into shares of the Company’s common stock at a conversion price of $0.15 per share. On December 28, 2020, the conversion price was amended to $0.03 per share in exchange for an additional $50,000 of proceeds that were received on January 4, 2021, and the promissory note was increased to $400,000. The Company’s obligations under the Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc., pursuant to a Security Agreement between the Company, Digipath Labs, Inc. and the investor. On December 29, 2020, the note holder converted $50,000 of principal into 1,666,667 shares of common stock at a conversion price of $0.03 per share. 350,000 350,000

On September 23, 2019, the Company received proceeds of $200,000 on a senior secured convertible note that carries an 8% interest rate, which matures on August 10, 2022, as amended. The principal and interest were convertible into shares of common stock at the discretion of the note holder at a fixed conversion price of $0.11 per share. On September 30, 2020, the maturity date was extended to August 10, 2022 and the conversion price was amended to $0.03 per share. The Company’s obligations under this Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc. On February 22, 2021, the noteholder converted $90,000 of principal into 3,000,000 shares of common stock at a conversion price of $0.03 per share. 110,000 200,000

On November 8, 2018, the Company received proceeds of $350,000 on a senior secured convertible note that carries an 8% interest rate, which matures on August 10, 2022, as amended. The principal and interest were convertible into shares of common stock at the discretion of the note holder at a fixed conversion price of $0.14 per share. On September 30, 2020, the maturity date was extended to August 10, 2022 and the conversion price was amended to $0.03 per share. The Company’s obligations under this Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc. A total of $4,066 of interest was repaid during the year ended September 30, 2019. 350,000 350,000

On November 5, 2018, the Company received proceeds of $150,000 on a senior secured convertible note that carries an 8% interest rate, which matures on August 10, 2022, as amended. The principal and interest were convertible into shares of common stock at the discretion of the note holder at a fixed conversion price of $0.14 per share. On September 30, 2020, the maturity date was extended to August 10, 2022 and the conversion price was amended to $0.03 per share. The Company’s obligations under this Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc. 150,000 150,000

Total convertible notes payable 1,160,000 1,250,000
Less: unamortized debt discounts - (8,322 )
1,160,000 1,241,678
Less: current maturities - -
Convertible notes payable $ 1,160,000 $ 1,241,678
16
March 31, September 30,
2022 2021
On February 11, 2020, the Company completed the sale to an accredited investor of a 9% Secured Convertible Promissory Note in the principal amount of $50,000. The Note matures on August 11, 2022, bears interest at a rate of 9% per annum, and was convertible into shares of the Company’s common stock at a conversion price of $0.15 per share. On December 28, 2020, the conversion price was amended to $0.03 per share in exchange for an additional $10,000 of proceeds and the promissory note was increased to $60,000. The Company’s obligations under the Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc., pursuant to a Security Agreement between the Company, Digipath Labs, Inc. and the investor. On December 29, 2020, the note holder converted $10,000 of principal into 333,334 shares of common stock at a conversion price of $0.03 per share. $ 50,000 $ 50,000

On February 11, 2020, the Company completed the sale to an accredited investor of a 9% Secured Subordinated Convertible Promissory Note in the principal amount of $150,000. The Note matures on August 11, 2022, bears interest at a rate of 9% per annum, and was convertible into shares of the Company’s common stock at a conversion price of $0.15 per share. On December 28, 2020, the conversion price was amended to $0.03 per share in exchange for an additional $50,000 of proceeds and the promissory note was increased to $200,000. The Company’s obligations under the Note are secured by subordinated lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc., pursuant to a Security Agreement between the Company, Digipath Labs, Inc. and the investor. On December 29, 2020, the note holder converted $50,000 of principal into 1,666,667 shares of common stock at a conversion price of $0.03 per share. 150,000 150,000

On February 10, 2020, the Company completed the sale to an accredited investor of a 9% Secured Convertible Promissory Note in the principal amount of $350,000. The Note matures on August 10, 2022, bears interest at a rate of 9% per annum, and was convertible into shares of the Company’s common stock at a conversion price of $0.15 per share. On December 28, 2020, the conversion price was amended to $0.03 per share in exchange for an additional $50,000 of proceeds and the promissory note was increased to $400,000. The Company’s obligations under the Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc., pursuant to a Security Agreement between the Company, Digipath Labs, Inc. and the investor. On December 29, 2020, the note holder converted $50,000 of principal into 1,666,667 shares of common stock at a conversion price of $0.03 per share. 350,000 350,000

On September 23, 2019, the Company received proceeds of $200,000 on a senior secured convertible note that carries an 8% interest rate, which matures on August 10, 2022, as amended. The principal and interest were convertible into shares of common stock at the discretion of the note holder at a fixed conversion price of $0.11 per share. On September 30, 2020, the maturity date was extended to August 10, 2022 and the conversion price was amended to $0.03 per share. The Company’s obligations under this Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc. On February 22, 2021, the noteholder converted $90,000 of principal into 3,000,000 shares of common stock at a conversion price of $0.03 per share. On September 30, 2021 the note was amended to add outstanding short term notes and accrued interest into the principal balance, making the outstanding balance 355,470, as amended. As a result of the modification, the Company recorded an additional debt discount of $98,188 as a result of the beneficial conversion feature of the additional principal. During the six months ended March 31, 2022, the Company repaid $40,000 of the balance of this note. In addition, during the six months ended March 31, 2022, the Company was advanced additional loans of $394,265 from the lender under the same terms. 709,735 355,470

On November 8, 2018, the Company received proceeds of $350,000 on a senior secured convertible note that carries an 8% interest rate, which matures on August 10, 2022, as amended. The principal and interest were convertible into shares of common stock at the discretion of the note holder at a fixed conversion price of $0.14 per share. On September 30, 2020, the maturity date was extended to August 10, 2022 and the conversion price was amended to $0.03 per share. The Company’s obligations under this Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc. 350,000 350,000

On November 5, 2018, the Company received proceeds of $150,000 on a senior secured convertible note that carries an 8% interest rate, which matures on August 10, 2022, as amended. The principal and interest were convertible into shares of common stock at the discretion of the note holder at a fixed conversion price of $0.14 per share. On September 30, 2020, the maturity date was extended to August 10, 2022 and the conversion price was amended to $0.03 per share. The Company’s obligations under this Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc. 150,000 150,000

Total convertible notes payable 1,759,735 1,407,470
Less: unamortized debt discounts (59,085 ) (98,188 )
Total convertible debt 1,700,650 1,307,282
Less: current maturities 1,700,650 1,050,000
Convertible notes payable $ - $ 257,282

~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~
13

In addition, the Company recognized and measured the embedded beneficial conversion feature present in the convertible notes by allocating a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the feature was calculated on the commitment date using the effective conversion price of the convertible notes. This intrinsic value is limited to the portion of the proceeds allocated to the convertible debt.

The aforementioned accounting treatment resulted in a total debt discount equal to $~~70,964~~98,188.. The discount is amortized on a straight-line basis from the dates of issuance until the earlier of the stated redemption date of the debts, as noted above or the actual settlement date. The Company recorded debt amortization expense on the aforementioned debt discount in the amount of $~~8,322~~39,103 ~~and $24,783~~ ~~during~~for the ~~nine~~six months ended ~~June 30, 2021 and 2020, respectively.~~March 31, 2022. Unamortized discount as of March 31, 2022 is $59,085.

All of the convertible notes limit the maximum number of shares that can be owned by each note holder as a result of the conversions to common stock to 4.99% of the Company’s issued and outstanding shares.

The Company recorded interest expense pursuant to the stated interest rates on the convertible notes in the amount of $~~76,309~~46,380 and $~~61,099~~51,802 for the ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

The Company recognized interest expense for the ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, as follows:
Schedule of Interest Expense
June 30, June 30, March 31, March 31,
2021 2020 2022 2021

Interest on short term loans $ 3,123 $ - $ - $ 1,687
Interest on capital leases 6,477 8,970 6,603 4,929
Interest on notes payable 11,609 12,153 41,277 7,970
Amortization of beneficial conversion features 8,322 24,783 39,103 8,322
Interest on convertible notes 76,309 61,099 58,128 51,802
Total interest expense $ 105,840 $ 107,005 $ 145,111 $ 74,710

Note 129 - Changes in Stockholders’ Equity
Convertible Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001 per share, of which 6,000,000 have been designated as Series A Convertible Preferred Stock (“Series A Preferred”) and 1,500,000 have been designated as Series B Convertible Preferred Stock (“Series B Preferred”), with the remaining ~~4,000,000~~2,500,000 shares available for designation from time to time by the Board as set forth below. As of ~~June 30, 2021,~~March 31, 2022, there were ~~1,325,942~~1,047,942 shares of Series A Preferred issued and outstanding and 333,600 shares of Series B Preferred issued and outstanding. The Board of Directors is authorized to determine any number of series into which the undesignated shares of preferred stock may be divided and to determine the rights, preferences, privileges and restrictions granted to any series of the preferred stock. Each share of Series A Preferred is currently convertible into five shares of common stock and each share of Series B Preferred is currently convertible into twenty-five shares of common stock.
Series A

The conversion price is adjustable in the event of stock splits and other adjustments in the Company’s capitalization, and in the event of certain negative actions undertaken by the Company. At the current conversion price, the ~~1,325,942~~1,047,942 shares of Series A Preferred outstanding at ~~June 30, 2021~~March 31, 2022 are convertible into ~~6,629,710~~ 5,239,710shares of the common stock of the Company. No holder is permitted to convert its shares of Series A Preferred if such conversion would cause the holder to beneficially own more than 4.99% of the issued and outstanding common stock of the Company immediately after such conversion, unless waived by such holder by providing at least sixty-five days’ notice.

14
Additional terms of the Series A Preferred and include the following:
● The shares of Series A Preferred are entitled to dividends when, as and if declared by the Board as to the shares of the common stock of the Company into which such Series A Preferred may then be converted, subject to the 4.99% beneficial ownership limitation described above.
● Upon the liquidation or dissolution of the Company, or any merger or sale of all or substantially all of the assets, the shares of Series A Preferred are entitled to receive, prior to any distribution to the holders of common stock, 100% of the purchase price per share of Series A Preferred plus all accrued but unpaid dividends.
● The Series A Preferred plus all declared but unpaid dividends thereon automatically will be converted into common stock, at the then applicable conversion rate, upon the affirmative vote of the holders of a majority of the outstanding shares of Series A Preferred.
● Each share of Series A Preferred will carry a number of votes equal to the number of shares of common stock into which such Series A Preferred may then be converted, subject to the 4.99% beneficial ownership limitation described above. The Series A Preferred generally will vote together with the common stock and not as a separate class, except as provided below.
● Consent of the holders of the outstanding Series A Preferred is required in order for the Company to: (i) amend or change the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the Series A Preferred; (ii) authorize, create or issue shares of any class of stock having rights, preferences, privileges or powers superior to the Series A Preferred; (iii) reclassify any outstanding shares into shares having rights, preferences, privileges or powers superior to the Series A Preferred; or (iv) amend the Company’s Articles of Incorporation or Bylaws in a manner that adversely affects the rights of the Series A Preferred.
● Pursuant to the Securities Purchase Agreements, holders of Series A Preferred are entitled to unlimited “piggyback” registration rights on registrations by the Company, subject to pro rata cutback at any underwriter’s discretion.
During the six months ended March 31, 2022, the Company offered the Series A Preferred shareholders the ability to convert their Preferred A shares into Preferred B shares for an additional investment of 20% of their initial Series A investment. One Series A shareholder agreed to invest additional cash proceeds of $55,600 for 55,600 Series B shares and converted 278,000 of their Series A into Series B.
Series B
The Series B Preferred were designated on December 29, 2021. Each share of Series B Preferred has a Stated Value of $1.00 and is currently convertible into common stock at a conversion price equal to $0.04. The conversion price of the Series B Preferred is subject to equitable adjustment in the event of a stock split, stock dividend or similar event with respect to the common stock, and in the event of the issuance of common stock by the Company below the conversion price, subject to customary exceptions. At the current conversion price, the 333,600 shares of Series B Preferred outstanding at March 31, 2022 are convertible into 8,340,000 shares of the common stock of the Company. No holder is permitted to convert its shares of Series B Preferred if such conversion would cause the holder to beneficially own more than 4.99% of the issued and outstanding common stock of the Company immediately after such conversion, unless waived by such holder by providing at least sixty-five days’ notice.
Additional terms of the Series B Preferred and include the following:
● The shares of Series B Preferred are not entitled to dividends, provided that if dividends are paid on the shares of common stock of the Company, the Series B Preferred will be entitled to dividends based on the number shares of common stock which the Series B Preferred may then be converted.
● Upon the liquidation or dissolution of the Company, or any merger or sale of all or substantially all of the assets, or upon a change in control whereby a stockholder gains control of 50% or more of the outstanding shares of common stock, the shares of Series B Preferred are entitled to receive, prior to any distribution to the holders of common stock, 100% of the purchase price per share of Series B Preferred plus all accrued but unpaid dividends.
● Each share of Series B Preferred carries a number of votes equal to the number of shares of common stock into which such Series B Preferred may then be converted.
Due to the change in control provision of the Series B Preferred, the Series B Preferred is classified as temporary equity on the balance sheet.
On December 30, 2021, the Company entered into an Exchange Agreement with one of the Company’s institutional investors (the “Investor”), pursuant to which the Investor exchanged 278,000 shares of the Series A Preferred for 278,000 shares of the Series B Preferred. In addition, on December 30, 2021, the Investor purchased 55,600 shares of Series B Preferred Stock at a price of $1.00 per share, resulting in gross proceeds to the Company of $55,600.
15
Common Stock

Common stock consists of $0.001 par value, 250,000,000 shares authorized, of which ~~69,730,153~~75,146,820 shares were issued and outstanding as of ~~June 30, 2021.~~March 31, 2022.

~~Common Stock Sales~~
~~On December 30, 2020,~~During the six months ended March 31, 2022, the Company ~~sold~~issued ~~900,000~~1,500,000 shares of its common stock ~~to its Chairman of the Board~~ in exchange for ~~proceeds of $20,250~~.
~~Debt Conversions~~
~~On February 22, 2021,~~ ~~a convertible noteholder converted $90,000~~ ~~of principal into~~ ~~3,000,000~~ ~~shares at a conversion price of $0.03~~ ~~per share.~~ ~~The note was converted in accordance with~~services rendered to the ~~conversion terms; therefore, no gain or loss has been recognized.~~
~~On December 29, 2020,~~ Company, by the ~~three holders~~chairman of the ~~Company’s~~ 9~~% Secured Convertible Notes converted debt in the aggregate original principal amount~~board of $~~110,000~~ ~~into an aggregate of~~ ~~3,666,668~~ ~~shares at~~directors, with a ~~conversion price of $0.03~~ ~~per share.~~ ~~The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.~~
~~Common Stock Issued for Services, Related Parties~~
~~On June 25, 2021, the Company issued~~ ~~250,000~~ ~~shares of common stock to its former CFO for services rendered pursuant to his employment agreement. The~~total fair value ~~of the common stock was~~ $~~15,000~~98,679 based on the closing price of the Company’s common stock on the ~~date~~dates of ~~grant, and was expensed over the requisite service period.~~grant.

17
During the six months ended March 31, 2022, the Company issued 2,166,667
~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~
~~On June 25, 2021, the Board approved the issuance of~~ ~~250,000~~shares of its common stock ~~to Bruce Raben~~in exchange for services ~~rendered. The~~rendered to the Company by third party consultants, with a total fair value ~~of the common stock was~~ $~~15,000~~103,464 based on the closing price of the Company’s common stock on the ~~date~~dates of ~~grant, and was expensed over the requisite service period.~~
~~On June 25, 2021, the Board approved the issuance of~~ ~~125,000~~ ~~shares of common stock to Dennis Hartmann for services rendered. The fair value of the common stock was $7,500~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~On June 25, 2021, the Board approved the issuance of~~ ~~83,333~~ ~~shares of common stock to Edmond A. DeFrank for services rendered. The fair value of the common stock was $5,000~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~On June 2, 2021, the Board approved the issuance of~~ ~~840,000~~ ~~shares of common stock to Bruce Raben for services rendered. The fair value of the common stock was $42,000~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~On March 25, 2021, the Company issued~~ ~~266,430~~ ~~shares of common stock to its former CFO for services rendered pursuant to his employment agreement. The fair value of the common stock was $15,000~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~On March 25, 2021, the Board approved the issuance of~~ ~~200,000~~ ~~shares of common stock as a bonus to each of Edmond A. DeFrank, Dennis Hartmann and Bruce Raben, or~~ ~~600,000~~ ~~shares in the aggregate. The aggregate fair value of the common stock was $33,780~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~On December 25, 2020, the Company issued~~ ~~728,155~~ ~~shares of common stock to its former CFO for services rendered pursuant to his employment agreement. The fair value of the common stock was $15,000~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~grant.

~~Common Stock Issued for Services~~
OnDuring the six months ended March ~~25, 2021,~~31, 2022, the Company issued 250,000 shares of its common stock to ~~a consultant as a bonus for services rendered. The aggregate fair value of~~settle outstanding payables in the ~~common stock was $14,075~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~On December 28, 2020, the Company issued~~ ~~500,000~~ ~~shares of common stock to a consultant for services rendered pursuant to his consulting agreement. The aggregate fair value of the common stock was $12,000~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.~~
~~Amortization of Stock-Based Compensation~~
~~A total~~amount of $~~63,768~~7,500 ~~of stock-based compensation expense was recognized from the amortization of options and warrants over their vesting period during the nine months ended June 30, 2021.~~.
Note 1310 – Common Stock Options

Stock Incentive Plan

On June 21, 2016, we amended and restated our 2012 Stock Incentive Plan (the “2012 Plan”), which was originally adopted on March 5, 2012 and previously amended on May 20, 2014. As amended, the 2012 Plan provides for the issuance of up to 11,500,000 shares of common stock pursuant to the grant of options or other awards, including stock grants, to employees, officers or directors of, and consultants to, the Company and its subsidiaries. Options granted under the 2012 Plan may either be intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or may be non-qualified options, and are exercisable over periods not exceeding ten years from date of grant. Options to purchase a total of 6,020,000 shares of common stock were outstanding as of March 31, 2022.

~~A total of~~ ~~4,120,000~~ ~~options were outstanding as of June 30, 2021.~~ During the ~~nine~~six months ended ~~June 30, 2021, options~~March 31, 2022, the Company issued to ~~purchase~~ an ~~aggregate total of~~ ~~750,000~~ ~~shares of common stock at a weighted average exercise price of $0.10~~ ~~per share expired.~~
18
~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~
~~Options Granted~~
~~On June 2, 2021, we granted to A. Stone Douglass, a consultant of ours at the time of grant, and currently our Chief Financial Officer,~~unrelated third party, options to purchase 1,000,000 shares of ~~the Company’s~~its common stock ~~having an exercise price of $0.06~~ ~~per share, exercisable over a~~ ~~ten-year term. The options vest as to one quarter on July 1, 2021, and quarterly over the next seven quarters as~~in exchange for services rendered to the ~~remaining shares, beginning on October 1, 2021.~~Company with a total fair value $33,716. The Company estimated the fair value using the Black-Scholes Pricing Model, based on a volatility rate of ~~170~~186% and a call option ~~value~~values of $~~0.0576~~0.0337~~, was~~ and exercise prices of $~~57,592~~0.035~~, resulting in~~.
Amortization of Stock-Based Compensation
A total of $~~14,398~~53,739 and $41,126 of stock-based compensation expense was recognized during the ~~nine~~six months ended ~~June 30, 2021.~~March 31, 2022 and 2021, respectively, as a result of the vesting of common stock options issued. As of March 31, 2022 a total of $31,798 of unamortized expense remains to amortized over the vesting period.

OnThe following is a summary of information about the stock options outstanding at March ~~25, 2021, we granted~~31, 2022.
Summary of Common Stock Options Outstanding
Shares Underlying
Shares Underlying Options Outstanding Options Exercisable

Weighted
Shares Average Weighted Shares Weighted
Range of Underlying Remaining Average Underlying Average
Exercise Options Contractual Exercise Options Exercise
Prices Outstanding Life Price Exercisable Price

$ 0.05 – $0.13 6,020,000 6.51 years $ 0.07 5,359,285 $ 0.07
The following is a summary of activity of outstanding common stock options:
Schedule of Activity of Outstanding Common Stock Options
Weighted
Average
Number Exercise
of Shares Price
Balance, September 30, 2021 5,620,000 $ 0.08
Options issued 1,000,000 $ 0.04
Options forfeited (600,000 ) $ 0.11

Balance, March 31, 2022 6,020,000 $ 0.07

Exercisable, March 31, 2022 5,359,285 $ 0.07
As of March 31, 2022, these options ~~to an individual to purchase~~ in the aggregate had no intrinsic value as the per share market price of $~~300,000~~0.023 ~~shares~~ of the Company’s common stock ~~having an~~as of such date was less than the weighted-average exercise price of $~~0.06~~ ~~per share, exercisable over a~~ ~~ten-year term. The~~these options ~~are fully vested. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of~~ ~~167% and a call option value~~ of $~~0.0527~~0.07~~, was $15,822, resulting in $15,822~~ ~~of stock-based compensation expense during the nine months ended June 30, 2021.~~
~~Options Forfeited~~.

~~On December 30, 2020, a total of~~ ~~750,000~~ ~~options with a weighted average exercise price of $0.10~~ ~~were forfeited.~~
16

Note 1411 – Common Stock Warrants

Warrants to purchase a total of ~~2,868,335~~2,535,001 shares of common stock were outstanding as of ~~June 30, 2021.~~March 31, 2022.

~~During the nine months ended June 30, 2021,~~The following is a summary of information about our warrants to purchase ~~an aggregate total of~~ ~~1,405,934~~ ~~shares of~~ common stock outstanding at March 31, 2022.
Summary of Common Stock Warrants Outstanding
Shares Underlying
Shares Underlying Warrants Outstanding Warrants Exercisable

Weighted
Shares Average Weighted Shares Weighted
Range of Underlying Remaining Average Underlying Average
Exercise Warrants Contractual Exercise Warrants Exercise
Prices Outstanding Life Price Exercisable Price

$ 0.10 - 0.26 2,535,001 4.84 years $ 0.17 2,535,001 $ 0.17
The following is a ~~weighted average~~summary of activity of outstanding common stock warrants:
Schedule of Outstanding Common Stock Warrants Activity
Weighted
Average
Number Exercise
of Shares Price
Balance, September 30, 2021 2,535,001 $ 0.17
Warrants granted - -
Warrants expired - -

Balance, March 31, 2022 2,535,001 $ 0.17

Exercisable, March 31, 2022 2,535,001 $ 0.17
As of March 31, 2022, these warrants in the aggregate had no intrinsic value as the per share market price of $0.023 of the Company’s common stock as of such date was less than the weighted-average exercise price of these warrants of $~~0.24~~0.17 ~~per share expired.~~.

Note 1512 – ~~Other Income (Expense)~~
~~Other income (expense) for the nine months ended June 30, 2021~~Commitments and ~~2020 consisted of the following:~~
~~Schedule of Other Income (Expense)~~
2021 2020
June 30,
2021 2020
Gain on early extinguishment of debt $ 40,338 $ -
Settlement of accrued wages owed to former CEO with distribution of assets 7,580 -
Rental income on subleases - 63,000
Loss on disposal of fixed assets - (28,238 )
Interest expense (105,840 ) (107,005 )
Total other income (expense) $ (57,922 ) $ (72,243 )
19
~~DIGIPATH, INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements~~
~~(Unaudited)~~
~~Note 16 -~~ ~~Income Tax~~
The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.
For the nine months ended June 30, 2021 and the year ended September 30, 2020, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At June 30, 2021, the Company had approximately $~~13,143,000~~ ~~of federal net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in~~ ~~2031~~.
Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at June 30, 2021 and September 30, 2020, respectively.
~~In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.~~
~~Note 17 –~~ ~~Subsequent Events~~Contingencies

~~Termination of Equipment Purchase Agreement~~Legal Contingencies

~~On July 22, 2021, the Company elected~~There are no material pending legal proceedings to ~~terminate its asset purchase agreement with PharmaLabs San Diego. In addition~~which we are a party or to ~~the $55,000~~ ~~non-refundable deposit that was paid on April 30, 2021~~which any of our property is subject, nor are there any such proceedings known to be contemplated by governmental authorities. None of our directors, officers or affiliates is involved in ~~exchange for lab equipment that~~a proceeding adverse to our business or has ~~not yet been delivered~~a material interest adverse to ~~us, we paid an additional $27,000~~ ~~of extension and termination fees.~~
our business.
~~Common Stock Issued for Services~~

~~On July 1, 2021, the Company issued~~ ~~1,500,000~~ ~~shares of common stock to Todd Denkin in conjunction with his appointment as the Company’s President. The aggregate fair value of the common stock was $81,900~~ ~~based on the closing price of the Company’s common stock on the date of grant, and was expensed on the date of grant.~~
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended September 30, ~~2020~~2021 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.

The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Annual Report on Form 10-K for the year ended September 30, ~~2020~~2021 in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.

Overview

Digipath, Inc. was incorporated in Nevada on October 5, 2010. Digipath, Inc. and its subsidiaries (“Digipath,” the “Company,” “we,” “our” or “us”) supports the cannabis industry’s best practices for reliable testing, cannabis education and training. Our mission is to provide pharmaceutical-grade analysis and testing to the cannabis industry, under ISO-17025:2017 guidelines, to ensure consumers and patients know exactly what is in the cannabis they ingest and to help maximize the quality of our clients’ products through research, development, and standardization. Digipath has been operating a cannabis-testing lab in Nevada since 2015 and has plans to open labs in other states that have legalized the sale of cannabis, beginning with California.

Results of Operations for the Three Months Ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

The following table summarizes selected items from the statement of operations for the three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Three Months Ended June 30, Increase / Three Months Ended March 31, Increase /
2021 2020 (Decrease) 2022 2021 (Decrease)
Revenues $ 764,015 $ 407,229 $ 356,786 $ 604,735 $ 633,160 $ (28,425 )
Cost of sales 551,976 347,724 204,252 396,032 416,915 (20,883 )
Gross profit 212,039 59,505 152,534 208,703 216,245 (7,542 )

Operating expenses:
General and administrative 278,082 328,128 (50,046 ) 235,470 211,961 23,509
Professional fees 91,001 177,835 (86,834 ) 286,390 107,819 178,571
Change in allowance for doubtful accounts (10,960 ) 25,420 (36,380 ) 16 (106,155 ) 106,171
Total operating expenses: 358,123 531,383 (173,260 ) 521,876 213,625 308,251

Operating income (loss) (146,084 ) (471,878 ) (325,794 ) (313,173 ) 2,620 (315,793 )

Total other income (expense) (31,130 ) (48,809 ) (17,679 ) (60,423 ) 15,581 (76,004 )

Net loss $ (177,214 ) $ (520,687 ) $ (343,473 ) $ (373,596 ) $ 18,201 $ (391,797 )

Revenues

Aggregate revenues for the three months ended ~~June 30, 2021~~March 31, 2022 were ~~$764,015,~~$604,735, compared to revenues of ~~$407,229~~$633,160 during the three months ended ~~June 30, 2020, an increase~~March 31, 2021, a decrease of ~~$356,786,~~$28,425 or ~~88%~~4%. The ~~increase~~decrease in revenue was due to ~~the increase~~a slight decrease in tourism in Nevada during the current period ~~in comparison~~as opposed to the ~~prior year~~same period in ~~which Nevada tourism was significantly depressed because of the COVID-19 coronavirus pandemic.~~2021.

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Cost of Sales

Cost of sales for the three months ended ~~June 30, 2021~~March 31, 2022 were ~~$551,976,~~$396,032, compared to ~~$347,724~~$416,915 during the three months ended ~~June 30, 2020, an increase~~March 31, 2021, a decrease of ~~$204,252,~~$20,883, or ~~59%~~5%. Cost of sales consists primarily of labor, depreciation, maintenance on lab equipment, and supplies consumed in our testing operations. The ~~increased~~decreased cost of sales in the current period was primarily due to our ~~increased labor and~~sales decrease of 4% as well as reducing our outsourced testing fees incurred during the current period. Our gross margins were approximately ~~28%~~35% during the three months ended ~~June 30, 2021,~~March 31, 2022, compared to ~~15%~~34% during the three months ended ~~June 30, 2020,~~March 31, 2021, which translated to ~~$152,534~~$20,883 of ~~increased~~decreased gross profit from our ~~$356,786~~$28,425 of ~~increased~~decreased revenues received in the current period. ~~Our margins increased in the current period due to the increase in revenues, which increased at a greater rate than our labor costs and equipment servicing costs.~~

General and Administrative Expenses

General and administrative expenses for the three months ended ~~June 30, 2021~~March 31, 2022 were ~~$278,082,~~$235,470 compared to ~~$328,128~~$211,961 during the three months ended ~~June 30, 2020, a decrease~~March 31, 2021, an increase of ~~$50,046,~~$23,509, or ~~15%~~11%. The expenses consisted primarily of marketing, rent, salaries and wages, and travel expenses. General and administrative expenses included non-cash, stock-based compensation of ~~$16,952~~$0 and ~~$33,976~~$16,952 during the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. General and administrative expenses decreased primarily due to decreased corporate overhead ~~activities and the discontinuation of rents on warehouse space that we were previously subleasing.~~activities.

Professional Fees

Professional fees for the three months ended ~~June 30, 2021~~March 31, 2022 were ~~$91,001,~~$286,390, compared to ~~$177,835~~$107,819 during the three months ended ~~June 30, 2020, a decrease~~March 31, 2021, an increase of ~~$86,834,~~$178,571, or ~~49%~~166%. Professional fees included non-cash, stock-based compensation of ~~$90,190~~$103,464 and ~~$54,749~~$44,147 during the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Professional fees ~~decreased~~increased primarily due to ~~decreased~~increased corporate consulting services during the current period as we focused primarily on the lab operations during the current period.

Change in Allowance for Doubtful Accounts

Our change in allowance for doubtful accounts for the three months ended ~~June 30, 2021~~March 31, 2022 resulted in ~~$10,960~~$16 of income, compared to ~~$25,420~~$106,155 of expense during the three months ended ~~June 30, 2020,~~March 31, 2021, an improvement of ~~$36,380,~~$106,171, or ~~143%~~100%. Our change in allowance for doubtful accounts improved during the current period primarily as our allowance for doubtful accounts decreased from $110,147 to $96,282 during the quarter, as the Nevada tourism market began to open up again and our customers’ cash flows improved.
~~Operating Loss~~
Our operating loss for the three months ended June 30, 2021 was $146,084, compared to an operating loss of $471,878 during the three months ended June 30, 2020, a decrease of $325,794, or 69%. Our operating loss decreased primarily due to our increased gross profit, as tourism returned in Nevada after we navigated through the height of the effects of the COVID-19 coronavirus pandemic during the comparative period, as we continued to pare our general and administrative and professional fee costs, and decreased our allowance for doubtful accounts and overhead cost saving measures we implemented in response to Covid-19 that we initiated in the three months ended June 30, 2020.
~~Other Income (Expense)~~
Other expense, on a net basis, for the three months ended June 30, 2021 was $31,130, compared to other expense, on a net basis, of $48,809 during the three months ended June 30, 2020, a net decrease of $17,679. Other expense consisted of interest expense of $31,130 for the three months ended June 30, 2021. Other expense consisted of $41,571 of interest expense and a loss of $28,238 on the disposal of fixed assets, as partially offset by other income, consisting of $21,000 of subleased rental income for the three months ended June 30, 2020.
~~Net Loss~~
Net loss for the three months ended June 30, 2021 was $177,214, compared to a net loss of $520,687 during the three months ended June 30, 2020, a decrease of $343,473, or 66%. The decreased net loss was primarily due to our increased revenues, as the returning tourism in Nevada improved, compared to the prior period when we navigated through the height of the effects of the ~~COVID-19 coronavirus pandemic~~.
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~~Results of Operations for the Nine Months Ended June 30, 2021 and 2020:~~
~~The following table summarizes selected items from the statement of operations for the nine months ended June 30, 2021 and 2020.~~
Nine Months Ended June 30, Increase /
2021 2020 (Decrease)
Revenues $ 1,897,560 $ 1,971,141 $ (73,581 )
Cost of sales 1,389,776 1,250,234 139,542
Gross profit 507,784 720,907 (213,123 )

Operating expenses:
General and administrative 715,093 1,123,479 (408,386 )
Professional fees 313,364 688,902 (375,538 )
Change in allowance for doubtful accounts (28,945 ) 186,540 (215,485 )
Total operating expenses: 999,512 1,998,921 (999,409 )

Operating loss (491,728 ) (1,278,014 ) (786,286 )

Total other income (expense) (57,922 ) (72,243 ) (14,321 )

Net loss $ (549,650 ) $ (1,350,257 ) $ (800,607 )
~~Revenues~~
Aggregate revenues for the nine months ended June 30, 2021 were $1,897,560, compared to revenues of $1,971,141 during the nine months ended June 30, 2020, a decrease of $73,581, or 4%. The decrease in revenue was due to the impact the COVID-19 coronavirus pandemic had on the tourism industry in Nevada ~~during the current period~~.
~~Cost of Sales~~
Cost of sales for the nine months ended June 30, 2021 were $1,389,776, compared to $1,250,234 during the nine months ended June 30, 2020, an increase of $139,542, or 11%. Cost of sales consist primarily of labor, depreciation, maintenance on lab equipment, and supplies consumed in our testing operations. The increased cost of sales in the current period was primarily due to our increased labor and outsourced testing fees incurred during the current period. Our gross margins of approximately 27% and 37% during the nine months ended June 30, 2021 and 2020, respectively, translated to $213,123 of decreased gross profit in the current period. Our margins in the nine months ended June 30, 2021 were significantly affected by the decline in revenues, and our inability to reduce labor costs and decrease our equipment servicing costs, in addition to having to outsource a portion of our testing services.
~~General and Administrative Expenses~~
General and administrative expenses for the nine months ended June 30, 2021 were $715,093, compared to $1,123,479 during the nine months ended June 30, 2020, a decrease of $408,386, or 36%. The expenses consisted primarily of marketing, rent, salaries and wages, and travel expenses. ~~General and administrative expenses included non-cash, stock-based compensation of $50,856 and $72,060 during the nine months ended June 30, 2021 and 2020, respectively.~~ ~~General and administrative expenses decreased due primarily to decreased corporate overhead activities and the discontinuation of rents on warehouse space that we were previously subleasing.~~
~~Professional Fees~~
Professional fees for the nine months ended June 30, 2021 were $313,364, compared to $688,902 during the nine months ended June 30, 2020, a decrease of $375,538, or 55%. Professional fees included non-cash, stock-based compensation of $187,267 and $179,678 during the nine months ended June 30, 2021 and 2020, respectively. Professional fees decreased primarily due to decreased corporate consulting and legal services during the current period as we focused primarily on the lab operations during the current period.
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~~Change in Allowance for Doubtful Accounts~~
Our change in allowance for doubtful accounts resulted in $28,945 of income for the nine months ended June 30, 2021, compared to $186,540 of expense during the nine months ended June 30, 2020, an improvement of $215,485, or 116%. Our change in allowance for doubtful accounts improved during the current period primarily as our allowance for doubtful accounts decreased from $128,132 to $96,282 during the period as the Nevada tourism market began to open up again and our customers’ cash flows improved.

Operating Loss

Our operating loss for the ~~nine~~three months ended ~~June 30, 2021~~March 31, 2022 was ~~$491,728,~~$313,173, compared to ~~$1,278,014~~operating income of $2,620 during the ~~nine~~three months ended ~~June 30, 2020,~~March 31, 2021, a decrease of ~~$999,409,~~$315,793, or ~~50%~~12,053%. Our operating loss ~~decreased~~increased primarily due to our decreased ~~general~~gross profit and ~~administrative expenses and professional fees, which in part reflect overhead cost saving measures we implemented in response to Covid-19, and improvements in the collection~~not having a reversal of our ~~accounts receivable that reduced our change in~~ allowance for doubtful ~~accounts by $215,485, that were not reflected in the nine months ended June 30, 2021, compared to the nine months ended June 30, 2020.~~accounts.

Other Income (Expense)

Other expense, on a net basis, for the ~~nine~~three months ended ~~June 30,~~March 31, 2022 was $60,423, compared to other income, on a net basis, of $15,581 during the three months ended March 31, 2021, a net decrease of $76,004. Other expense consisted of interest expense of $75,718 for the three months ended March 31, 2022. partially offset by other income, consisting of $15,295 of interest income.
Net Loss
Net loss for the three months ended March 31, 2022 was ~~$57,922,~~$373,596, compared to net income of $18,201 during the three months ended March 31, 2021, a decrease of $391,797, or 2,153%. The net loss was primarily due to our decreased revenues, increase interest expense, and not having a reversal in our doubtful accounts from the March 31, 2021 period.
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Results of Operations for the Six Months Ended March 31, 2022 and 2021:
The following table summarizes selected items from the statement of operations for the six months ended March 31, 2022 and 2021.
Six Months Ended March 31, Increase /
2022 2021 (Decrease)
Revenues $ 1,304,320 $ 1,133,545 $ 170,775
Cost of sales 818,633 837,800 (19,167 )
Gross profit 485,687 295,745 189,942

Operating expenses:
General and administrative 476,434 437,011 39,423
Professional fees 554,861 222,363 332,498
Change in allowance for doubtful accounts (2,123 ) (17,985 ) 15,862
Total operating expenses: 1,029,172 641,389 387,783

Operating loss (543,485 ) (345,644 ) (197,841 )

Total other income (expense) (120,436 ) (26,792 ) (93,644 )

Net loss $ (663,921 ) $ (372,436 ) $ (291,485 )
Revenues
Aggregate revenues for the six months ended March 31, 2022 were $1,304,320, compared to revenues of $1,133,545 during the six months ended March 31, 2021, an increase of $170,775, or 15%. The increase in revenue was due to the Nevada tourism market beginning to open up again and our customers’ cash flows improved during the current period.
Cost of Sales
Cost of sales for the six months ended March 31, 2022 were $818,633, compared to $837,800 during the six months ended March 31, 2021, a decrease of $19,167, or 2%. Cost of sales consists primarily of labor, depreciation, maintenance on lab equipment, and supplies consumed in our testing operations. The decreased cost of sales in the current period was primarily due to our decrease in outsourcing to other labs. Our gross margins of approximately 37% and 26% during the six months ended March 31, 2022 and 2021, respectively, translated to $189,942 of increased gross profit in the current period.
General and Administrative Expenses
General and administrative expenses for the six months ended March 31, 2022 were $476,434, compared to $437,011 during the six months ended March 31, 2021, an increase of $39,423, or 9%. The expenses consisted primarily of marketing, rent, salaries and wages, and travel expenses. General and administrative expenses included non-cash, stock-based compensation of $0 and $33,904 during the six months ended March 31, 2022 and 2021, respectively. General and administrative expenses increased due primarily to increased corporate overhead activities offset by the discontinuation of rents on warehouse space that we were previously subleasing.
Professional Fees
Professional fees for the six months ended March 31, 2022 were $554,861, compared to $222,363 during the six months ended March 31, 2021, an increase of $332,498, or 150%. Professional fees included non-cash, stock-based compensation of $202,143 and $97,077 during the six months ended March 31, 2022 and March 31, 2021, respectively. Professional fees increased primarily due to increased use of corporate consulting services during the current period.
Change in Allowance for Doubtful Accounts
Our change in allowance for doubtful accounts resulted in $2,123 of income for the six months ended March 31, 2022, compared to $17,985 during the six months ended March 31, 2021, a decrease of $15,862, or 88%. Our change in allowance for doubtful accounts improved during the current period primarily as our allowance for doubtful accounts decreased from $96,285 to $88,711 during the period, as the Nevada tourism market began to open up again and our customers’ cash flows improved.
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Operating Loss
Our operating loss for the six months ended March 31, 2022 was $543,485, compared to $345,644 during the six months ended March 31, 2021, an increase of $197,841, or 57%. Our operating loss increased primarily due to a large increase in professional fees.
Other Expense
Other expense, on a net basis, for the six months ended March 31, 2022 was $120,436, compared to other expense, on a net basis, of ~~$72,243~~$26,792 during the ~~nine~~six months ended ~~June 30, 2020,~~March 31, 2021, a net ~~decrease~~increase of ~~$14,321.~~$93,644. Other expense consisted of ~~$105,840~~$145,111 of interest expense,, as offset by interest income of $15,295, compared to $65,434 of interest expense, as offset by a gain on early extinguishment of debt in the amount of $40,338 and a gain on the distribution of $7,580 of previously impaired inventory to our former CEO,~~, compared to~~ ~~$107,005 of interest expense and a loss of $28,238 on the disposal of fixed assets, as offset by $63,000 of sublet rental income,~~ during the ~~nine~~six months ended ~~June 30, 2020.~~March 31, 2021.

Net Loss

Net loss for the ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 was ~~$549,650,~~$663,921, compared to ~~$1,350,257~~$372,436 during the ~~nine~~six months ended ~~June 30, 2020,~~March 31, 2021, an ~~improvement~~increase of ~~$800,607,~~$291,485, or ~~59%~~78%. The ~~decreased~~increased net loss was due primarily to ~~overhead cost savings, as offset~~larger professional fees and an increase in part by reduced sales and diminished profit margins, as we focused all of our efforts on operating the lab due to the effects of Covid-19, as described above, during the nine months ended June 30, 2021, compared to the nine months ended June 30, 2020.
other expenses.
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Liquidity and Capital Resources

The following is a summary of the Company’s cash flows provided by (used in) operating, investing, and financing activities for the ~~nine-month~~six-month periods ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

2021 2020 2022 2021
Operating Activities $ (139,096 ) $ (614,937 ) $ (190,286 ) $ (94,603 )
Investing Activities (1,206 ) (341,008 ) (777,868 ) (1,206 )
Financing Activities 130,362 759,068 754,991 126,766
Net Decrease in Cash $ (9,940 ) $ (196,877 ) $ (213,163 ) $ 30,957

Net Cash Used in Operating Activities

During the ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, net cash used in operating activities was ~~$139,096,~~$190,286, compared to net cash used in operating activities of ~~$614,937~~$94,603 for the same period ended ~~June 30, 2020.~~March 31, 2021. The ~~decrease~~increase in cash used in operating activities was primarily attributable to our ~~decreased~~increased net loss.

Net Cash Used in Investing Activities

During the ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, net cash used in investing activities was ~~$1,206,~~$777,868, compared to ~~$341,008~~$1,206 for the same period ended ~~June 30, 2020.~~March 31, 2022. The ~~decrease~~increase in cash used in investing was a result of secured loans we made to C3 Labs, Inc. in connection with a potential acquisition. On March 11, 2022, the Company notified C3 Labs of its termination of the letter of intent. The Company is ~~attributable to fewer investments made for cannabis testing~~currently in possession of equipment of C3 Labs, which it is in the ~~current period, and~~process of liquidating. The Company anticipates that the ~~$200,000 purchase~~proceeds of ~~VSSL Enterprises, Ltd.~~such liquidation will be sufficient to repay the Company in full all amounts owed to it by C3 Labs under the ~~prior period.~~secured loans.

Net Cash Provided by Financing Activities

During the ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, net cash provided by financing activities was ~~$130,362,~~$754,991, compared to net cash provided by financing activities of ~~$759,068~~$126,766 for the same period ended ~~June 30, 2020.~~March 31, 2021. The current period consisted primarily of ~~$175,000~~$390,000 of proceeds received on debt financing, $407,243 proceeds from convertible debt financing, proceeds of $55,600 from the sale of preferred stock, as offset by $28,317 of principal payments on an equipment lease and $16,557 of principal payments on an equipment loan, compared to $110,000 of net proceeds received on convertible debt financing, $40,000 of proceeds from short term advances and proceeds of $20,250 from the sale of stock, as offset by ~~$24,443~~$26,769 of principal payments on an equipment lease and $40,445 of principal payments on an equipment loan, compared to $770,034 of net proceeds received on debt financing and proceeds of $56,500 from the sale of stock, as offset by $41,824 of principal payments on an equipment lease and $25,642$16,715 of principal payments on an equipment loan in the comparative period.

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Ability to Continue as a Going Concern

As of ~~June 30, 2021,~~March 31, 2022, our balance of cash on hand was ~~$72,809,~~$82,769, and we had negative working capital of ~~$417,788~~$1,598,387 and an accumulated deficit of $18,615,574 resulting from recurring ~~losses of $17,814,800.~~losses. We currently may not have sufficient funds to sustain our operations for the next twelve months and we may need to raise additional cash to fund our operations and expand our lab testing business. As we continue to develop our lab testing business and attempt to expand operational activities, we expect to experience net negative cash flows from operations in amounts not now determinable, and will be required to obtain additional financing to fund operations through common stock offerings to the extent necessary to provide working capital. We have and expect to continue to have substantial capital expenditure and working capital needs.

The Company has incurred recurring losses from operations resulting in an accumulated deficit, and, as set forth above, the Company’s cash on hand is not sufficient to sustain operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new customers to increase revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. In the event sales do not materialize at the expected rates, management would seek additional financing or would attempt to conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives, becoming profitable or continuing our business without either a temporary interruption or a permanent ~~cessation~~.cessation. In addition, additional financing may result in substantial dilution to existing stockholders.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. The unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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Off-Balance Sheet Arrangements

We have no outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations and require management’s subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.

While our significant accounting policies are more fully described in notes to our consolidated financial statements appearing elsewhere in this Form 10-Q, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we used in the preparation of our financial statements.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the ~~sale~~commercial sales of ~~lab testing services through our subsidiary Digipath Labs, Inc.~~products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.

Revenue is primarily generated through our subsidiary, Digipath Labs, Inc., which recognizes revenue from the analytical testing of cannabis products for licensed producers and cultivators within the state of Nevada on a determinable fixed fee per test, or panel of tests ~~basis~~.basis. Revenue from the performance of those services is recognized upon completion of the tests, at which time test results are delivered to the customer, provided collectability of the fee is reasonably assured. WeWe typically require payment within thirty days of the delivery of results. Management estimates an allowance for doubtful accounts based on the aging of its receivables.
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Stock-Based Compensation

The Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718) and Equity-Based Payments to Non-employees pursuant to ASC 2018-07 (ASC 2018-07). All transactions in which the consideration provided in exchange for the purchase of goods or services consists of the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item
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ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Our management, with the participation of our ~~President~~Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~June 30, 2021.~~March 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of ~~June 30, 2021,~~March 31, 2022, our ~~President~~Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or in other factors that occurred during the period of our evaluation or subsequent to the date we carried out our evaluation which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any system of controls and procedures will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

27 23
PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are not a party to any legal or administrative proceedings that we believe, individually or in the aggregate, would be likely to have a material adverse effect on our financial condition or results of operations.

ITEM 1A. RISK FACTORS.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following issuances of equity securities by the Company were exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933 during the ~~three-month~~six-month period ended ~~June 30, 2021:~~March 31, 2022:

Common Stock Issued for Services

On ~~June 25, 2021, we~~February 11, 2022, the Company issued ~~an aggregate 375,000~~2,166,667 shares of its common stock ~~restricted~~ in ~~accordance with Rule 144, to two of our directors as payment in lieu of cash for services rendered.~~
~~On June 25, 2021, we issued 83,333 shares of common stock, restricted in accordance with Rule 144, to a former director as payment in lieu of cash for services rendered.~~
~~On June 25, 2021, we issued 250,000 shares of common stock, restricted in accordance with Rule 144, to our former CFO~~exchange for services rendered ~~pursuant~~ to ~~his employment agreement.~~the Company by third party consultants, with a total fair value $65,000 based on the closing price of the Company’s common stock on the dates of grant.

On ~~June 2, 2021, we~~February 11, 2022, the Company issued ~~840,000~~250,000 shares of its common stock ~~restricted~~to settle outstanding payables in ~~accordance with Rule 144, to one~~the amount of ~~our directors as payment in lieu of cash for settlement of services rendered.~~$7,500.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.
24

ITEM 6. EXHIBITS.

28
Exhibit Description
2.1 Stock Purchase Agreement between Digipath, Inc., VSSL Enterprises Ltd., Kyle Joseph Remenda, Philippe Olivier Henry, PhD, Audim Ventures Ltd. and Britt Ash Enterprises Ltd., dated March 9, 2020 (incorporated by reference to Exhibit 2.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on March 16, 2020)
3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Form 10 filed with the Securities and Exchange Commission by Digipath, Inc. on July 15, 2011)
3.2 Bylaws (incorporated by reference to Exhibit 3.2 of the Form 10 filed with the Securities and Exchange Commission by Digipath, Inc. on July 15, 2011)
3.3 Certificate of Amendment to Articles of Incorporation dated April 4, 2014 (incorporated by reference to Exhibit 3.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on April 10, 2014)
3.4 Certificate of Designations, Preferences, Limitations, Restrictions and Relative Rights of Series A Convertible Preferred Stock dated April 9, 2014 (incorporated by reference to Exhibit 3.2 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on April 10, 2014)
3.5 Certificate of Amendment to Articles of Incorporation dated May 22, 2015 (incorporated by reference to Exhibit 3.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on May 26, 2015)
3.6 Certificate of Amendment to Articles of Incorporation dated May 14, 2019 (incorporated by reference to Exhibit 3.6 of the Current Report on Form 10-Q filed with the Securities and Exchange Commission by Digipath, Inc. on August 13, 2019)
3.7 Certificate of Designations of the Series B Preferred Stock dated December 29, 2021 (incorporated by reference to Exhibit 3.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on January 6, 2022)
4.1 Form of 8% Senior Secured Convertible Notes due December 31, 2020 (incorporated by reference to Exhibit 4.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on November 21, 2018)
4.2 Form of 8% Senior Secured Convertible Notes due September 23, 2020 (incorporated by reference to Exhibit 4.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on September 26, 2019)
4.3 9% Secured Convertible Note, between Digipath, Inc. and holder, due August 10, 2022 (incorporated by reference to Exhibit 4.3 of the Current Report on Form 10-Q filed with the Securities and Exchange Commission by Digipath, Inc. on February 14, 2020)
4.4 9% Secured Subordinated Convertible Note, between Digipath, Inc. and holder, due August 11, 2022 (incorporated by reference to Exhibit 4.4 of the Current Report on Form 10-Q filed with the Securities and Exchange Commission by Digipath, Inc. on February 14, 2020)
4.5 9% Secured Subordinated Convertible Note, between Digipath, Inc. and holder, due August 11, 2022 (incorporated by reference to Exhibit 4.5 of the Current Report on Form 10-Q filed with the Securities and Exchange Commission by Digipath, Inc. on May 15, 2020)
4.6 Form of Amendment to 9% Secured Convertible Note, between Digipath, Inc. and holder, due August 10, 2022 (incorporated by reference to Exhibit 4.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on January 6, 2021)
31.1* Section 302 Certification of Principal Executive Officer
31.2* Section 302 Certification of Principal Financial Officer
32.1* Section 906 Certification of Principal Executive Officer
32.2* Section 906 Certification of Principal Financial Officer
101.INS* XBRL Instance Document
101.SCH* XBRL Schema Document
101.CAL* XBRL Calculation Linkbase Document
101.DEF* XBRL Definition Linkbase Document
101.LAB* XBRL Labels Linkbase Document
101.PRE* XBRL Presentation Linkbase Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed herewith.

29 25
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~August~~May 16, ~~2021~~2022

DIGIPATH, INC.

By: /s/ Todd Denkin
Name: Todd Denkin
Title: ~~President~~Chief Executive Officer

By:
/s/ A. Stone Douglass

Name:
A. Stone Douglass

Title: Chief Financial Officer

30 26

	Shares		Amount		Shares		Amount		Capital		Payable			(Deficit)			(Deficit)
	For the Three Months Ended June 30, 2020
	Series A Convertible								Additional								Total Stockholders’
	Preferred Stock				Common Stock				Paid-in		Subscriptions			Accumulated			Equity
	Shares		Amount		Shares		Amount		Capital		Payable			(Deficit)			(Deficit)

Balance, March 31, 2020		1,325,942	$	1,326		56,737,672	$	56,738	$	15,879,225	$	37,500		$	(15,785,230	)	$	189,559

Common stock sold for cash
Common stock sold for cash, shares
Common stock issued for acquisition of VSSL Enterprises, Ltd.
Common stock issued for acquisition of VSSL Enterprises, Ltd., shares
Common stock issued for debt conversions
Common stock issued for debt conversions, shares
Common stock issued for services		-		-		875,000		875		97,318		(37,500	)		-			60,693
Common stock issued for services, related parties
Common stock issued for services, related parties, shares

Common stock options issued for services		-		-		-		-		28,032		-			-			28,032
Common stock warrants issued for services

Net loss for the three months ended June 30, 2020		-		-		-		-		-		-			(520,687	)		(520,687	)

Balance, June 30, 2020		1,325,942	$	1,326		57,612,672	$	57,613	$	16,004,575	$	-		$	(16,305,917	)	$	(242,403	)

	For the Three Months Ended June 30, 2021
	Series A Convertible								Additional							Total Stockholders’
	Preferred Stock				Common Stock				Paid-in		Subscriptions		Accumulated			Equity
	Shares		Amount		Shares		Amount		Capital		Payable		(Deficit)			(Deficit)

Balance, March 31, 2021		1,325,942	$	1,326		68,181,820	$	68,182	$	16,457,720	$	-	$	(17,637,586	)	$	(1,110,358	)

Common stock issued for services		-		-		83,333		83		4,917		-		-			5,000

Common stock issued for services, related parties		-		-		1,465,000		1,465		78,035		-		-			79,500

Common stock options issued for services		-		-		-		-		22,642		-		-			22,642

Net income for the three months ended June 30, 2021		-		-		-		-		-		-		(177,214	)		(177,214	)

Balance, June 30, 2021		1,325,942	$	1,326		69,730,153	$	69,730	$	16,563,314	$	-	$	(17,814,800	)	$	(1,180,430	)

	For the Nine Months Ended June 30, 2020
	Series A Convertible								Additional							Total Stockholders’
	Preferred Stock				Common Stock				Paid-in		Subscriptions		Accumulated			Equity
	Shares		Amount		Shares		Amount		Capital		Payable		(Deficit)			(Deficit)

Balance, September 30, 2019		1,325,942	$	1,326		48,361,433	$	48,361	$	15,331,839	$	-	$	(14,955,660	)	$	425,866

Common stock sold for cash		-		-		706,250		706		55,794		-		-			56,500

Common stock issued for acquisition of VSSL Enterprises, Ltd.		-		-		6,500,000		6,500		367,250		-		-			373,750

Common stock issued for services		-		-		2,044,989		2,046		113,360		-		-			115,406

Common stock options issued for services		-		-		-		-		66,320		-		-			66,320

Common stock warrants issued for services		-		-		-		-		70,012		-		-			70,012

Net loss for the nine months ended June 30, 2020		-		-		-		-		-		-		(1,350,257	)		(1,350,257	)

Balance, June 30, 2020		1,325,942	$	1,326		57,612,672	$	57,613	$	16,004,575	$	-	$	(16,305,917	)	$	(242,403	)

	For the Nine Months Ended June 30, 2021
	Series A Convertible								Additional							Total Stockholders’
	Preferred Stock				Common Stock				Paid-in		Subscriptions		Accumulated			Equity
	Shares		Amount		Shares		Amount		Capital		Payable		(Deficit)			(Deficit)

Balance, September 30, 2020		1,325,942	$	1,326		58,270,567	$	58,271	$	16,116,400	$	-	$	(17,265,150	)	$	(1,089,153	)

Common stock sold for cash		-		-		900,000		900		19,350		-		-			20,250

Common stock issued for debt conversions		-		-		6,666,668		6,666		193,334		-		-			200,000

Common stock issued for services		-		-		833,333		833		30,242		-		-			31,075

Common stock issued for services, related parties		-		-		3,059,585		3,060		140,220		-		-			143,280

Common stock options issued for services		-		-		-		-		63,768		-		-			63,768

Net loss for the nine months ended June 30, 2021		-		-		-		-		-		-		(549,650	)		(549,650	)
Net income (loss)		-		-		-		-		-		-		(549,650	)		(549,650	)

Balance, June 30, 2021		1,325,942	$	1,326		69,730,153	$	69,730	$	16,563,314	$	-	$	(17,814,800	)	$	(1,180,430	)

	Series B Convertible				Series A Convertible								Additional					Total
	Preferred Stock				Preferred Stock				Common Stock				Paid-in		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		(Deficit)			Deficit

Balance, September 30, 2020		-	$	-		1,325,942	$	1,326		58,270,567	$	58,271	$	16,116,400	$	(17,265,150	)	$	(1,089,153	)

Common stock sold for cash		-		-		-		-		900,000		900		19,350		-			20,250

Common stock issued for debt conversion		-		-		-		-		3,666,668		3,666		106,334		-			110,000

Stock-based compensation		-		-		-		-		1,228,155		1,228		42,832		-			44,060

Net loss		-		-		-		-		-		-		-		(390,637	)		(390,637	)

Balance, December 31, 2020		-		-		1,325,942		1,326		64,065,390		64,065		16,284,916		(17,655,787	)		(1,305,480	)

Common stock issued for debt conversion		-		-		-		-		3,000,000		3,000		87,000		-			90,000

Stock-based compensation - related parties		-		-		-		-		866,430		867		56,157		-			57,024

Stock-based compensation		-		-		-		-		250,000		250		29,647		-			29,897

Net income		-		-		-		-		-		-		-		18,201			18,201

Net income (loss)		-		-		-		-		-		-		-		18,201			18,201
Balance, March 31, 2021		-	$	-		1,325,942	$	1,326		68,181,820	$	68,182	$	16,457,720	$	(17,637,586	)	$	(1,110,358	)

	Jurisdiction of
Name of Entity⁽¹⁾	Incorporation	Relationship
Digipath, ~~Inc.~~Inc.⁽²⁾	Nevada	Parent
Digipath Labs, ~~Inc.~~Inc.	Nevada	Subsidiary
Digipath Labs CA, ~~Inc.~~Inc.⁽³⁾	California	Subsidiary
Digipath Labs ~~S.A.S.~~S.A.S.⁽⁴⁾	Colombia	Subsidiary
VSSL Enterprises, ~~Ltd.~~Ltd.⁽⁵⁾	Canada	Subsidiary
TNM News ~~Corp.~~Corp.⁽⁶⁾	Nevada	Subsidiary

	Level 1		Level 2			Level 3
	Fair Value Measurements at June 30, 2021								Fair Value Measurements at March 31, 2022
	Level 1		Level 2			Level 3			Level 1		Level 2		Level 3
Assets
Cash	$	72,809	$	-		$	-		$	82,769	$	-	$	-
Total assets		72,809		-			-

Liabilities
Short term advances		-		115,112			-
Lease liabilities		-		-			474,480			-		-		382,084
Notes payable		-		392,665			-			-		960,624		-
Convertible notes payable		-		-			1,160,000			-		-		1,700,650
Total liabilities		-		507,777			1,634,480
Total	$	72,809	$	(507,777	)	$	(1,634,480	)

	Fair Value Measurements at September 30, 2021
	Level 1		Level 2		Level 3
Assets
Cash	$	295,932	$	-	$	-

Liabilities
Lease liabilities		-		-		444,131
Notes payable		-		598,941		-
Convertible notes payable, net of discounts of $98,188		-		-		1,307,282

	For the Nine
	Months Ended
	June 30,
	2021
Finance lease cost	$	6,477
Operating lease cost:
Amortization of assets		68,408
Interest on lease liabilities		20,747
Total lease cost	$	95,632

	For the Six		For the Six
	Months Ended		Months Ended
	March 31,		March 31,
	2022		2021
Operating lease cost	$	59,436	$	21,644
Finance lease cost:
Amortization of assets		17,329		45,308
Interest on lease liabilities		1,223		14,129
Total net lease cost	$	18,552	$	59,437

Fiscal Year Ending	Minimum Lease		Minimum Lease
September 30,	Commitments		Commitments
2021 (for the three months remaining)	$	28,566
2022		115,550
2022 (for the six months remaining)			$	58,419
2023		119,468		119,468
2024		123,543		123,543
2025		116,891		116,892
Total minimum lease payments		504,018
2026				-
Total future undiscounted lease payments				418,322
Less interest		58,006		40,060
Present value of lease liabilities		446,012
Present value of lease payments				378,262
Less current portion		91,311		98,281
Long-term lease liabilities	$	354,701
Long-term operating lease liabilities			$	279,981

	Finance		Finance
	Leases		Leases

2021 (for the three months remaining)	$	9,276
2022		21,644	$	3,865
2023				-
Total minimum lease payments		30,920		3,865
Less interest		2,452		43
Present value of lease liabilities		28,468		3,822
Less current portion		28,468		3,822
Long-term lease liabilities	$	-
Long-term finance lease liabilities			$	-

●	The shares of Series A Preferred are entitled to dividends when, as and if declared by the Board as to the shares of the common stock of the Company into which such Series A Preferred may then be converted, subject to the 4.99% beneficial ownership limitation described above.

●	Upon the liquidation or dissolution of the Company, or any merger or sale of all or substantially all of the assets, the shares of Series A Preferred are entitled to receive, prior to any distribution to the holders of common stock, 100% of the purchase price per share of Series A Preferred plus all accrued but unpaid dividends.

●	The Series A Preferred plus all declared but unpaid dividends thereon automatically will be converted into common stock, at the then applicable conversion rate, upon the affirmative vote of the holders of a majority of the outstanding shares of Series A Preferred.

●	Each share of Series A Preferred will carry a number of votes equal to the number of shares of common stock into which such Series A Preferred may then be converted, subject to the 4.99% beneficial ownership limitation described above. The Series A Preferred generally will vote together with the common stock and not as a separate class, except as provided below.

●	Consent of the holders of the outstanding Series A Preferred is required in order for the Company to: (i) amend or change the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the Series A Preferred; (ii) authorize, create or issue shares of any class of stock having rights, preferences, privileges or powers superior to the Series A Preferred; (iii) reclassify any outstanding shares into shares having rights, preferences, privileges or powers superior to the Series A Preferred; or (iv) amend the Company’s Articles of Incorporation or Bylaws in a manner that adversely affects the rights of the Series A Preferred.

●	Pursuant to the Securities Purchase Agreements, holders of Series A Preferred are entitled to unlimited “piggyback” registration rights on registrations by the Company, subject to pro rata cutback at any underwriter’s discretion.

●	The shares of Series B Preferred are not entitled to dividends, provided that if dividends are paid on the shares of common stock of the Company, the Series B Preferred will be entitled to dividends based on the number shares of common stock which the Series B Preferred may then be converted.

●	Upon the liquidation or dissolution of the Company, or any merger or sale of all or substantially all of the assets, or upon a change in control whereby a stockholder gains control of 50% or more of the outstanding shares of common stock, the shares of Series B Preferred are entitled to receive, prior to any distribution to the holders of common stock, 100% of the purchase price per share of Series B Preferred plus all accrued but unpaid dividends.

●	Each share of Series B Preferred carries a number of votes equal to the number of shares of common stock into which such Series B Preferred may then be converted.

				Weighted
				Average
	Number			Exercise
	of Shares			Price
Balance, September 30, 2021		5,620,000		$	0.08
Options issued		1,000,000		$	0.04
Options forfeited		(600,000	)	$	0.11

Balance, March 31, 2022		6,020,000		$	0.07

Exercisable, March 31, 2022		5,359,285		$	0.07

	Three Months Ended June 30,						Increase /			Three Months Ended March 31,						Increase /
	2021			2020			(Decrease)			2022			2021			(Decrease)
Revenues	$	764,015		$	407,229		$	356,786		$	604,735		$	633,160		$	(28,425	)
Cost of sales		551,976			347,724			204,252			396,032			416,915			(20,883	)
Gross profit		212,039			59,505			152,534			208,703			216,245			(7,542	)

Operating expenses:
General and administrative		278,082			328,128			(50,046	)		235,470			211,961			23,509
Professional fees		91,001			177,835			(86,834	)		286,390			107,819			178,571
Change in allowance for doubtful accounts		(10,960	)		25,420			(36,380	)		16			(106,155	)		106,171
Total operating expenses:		358,123			531,383			(173,260	)		521,876			213,625			308,251

Operating income (loss)		(146,084	)		(471,878	)		(325,794	)		(313,173	)		2,620			(315,793	)

Total other income (expense)		(31,130	)		(48,809	)		(17,679	)		(60,423	)		15,581			(76,004	)

Net loss	$	(177,214	)	$	(520,687	)	$	(343,473	)	$	(373,596	)	$	18,201		$	(391,797	)

	Nine Months Ended June 30,						Increase /
	2021			2020			(Decrease)
Revenues	$	1,897,560		$	1,971,141		$	(73,581	)
Cost of sales		1,389,776			1,250,234			139,542
Gross profit		507,784			720,907			(213,123	)

Operating expenses:
General and administrative		715,093			1,123,479			(408,386	)
Professional fees		313,364			688,902			(375,538	)
Change in allowance for doubtful accounts		(28,945	)		186,540			(215,485	)
Total operating expenses:		999,512			1,998,921			(999,409	)

Operating loss		(491,728	)		(1,278,014	)		(786,286	)

Total other income (expense)		(57,922	)		(72,243	)		(14,321	)

Net loss	$	(549,650	)	$	(1,350,257	)	$	(800,607	)

	Six Months Ended March 31,						Increase /
	2022			2021			(Decrease)
Revenues	$	1,304,320		$	1,133,545		$	170,775
Cost of sales		818,633			837,800			(19,167	)
Gross profit		485,687			295,745			189,942

Operating expenses:
General and administrative		476,434			437,011			39,423
Professional fees		554,861			222,363			332,498
Change in allowance for doubtful accounts		(2,123	)		(17,985	)		15,862
Total operating expenses:		1,029,172			641,389			387,783

Operating loss		(543,485	)		(345,644	)		(197,841	)

Total other income (expense)		(120,436	)		(26,792	)		(93,644	)

Net loss	$	(663,921	)	$	(372,436	)	$	(291,485	)

Exhibit		Description
2.1		Stock Purchase Agreement between Digipath, Inc., VSSL Enterprises Ltd., Kyle Joseph Remenda, Philippe Olivier Henry, PhD, Audim Ventures Ltd. and Britt Ash Enterprises Ltd., dated March 9, 2020 (incorporated by reference to Exhibit 2.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on March 16, 2020)
3.1		Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Form 10 filed with the Securities and Exchange Commission by Digipath, Inc. on July 15, 2011)
3.2		Bylaws (incorporated by reference to Exhibit 3.2 of the Form 10 filed with the Securities and Exchange Commission by Digipath, Inc. on July 15, 2011)
3.3		Certificate of Amendment to Articles of Incorporation dated April 4, 2014 (incorporated by reference to Exhibit 3.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on April 10, 2014)
3.4		Certificate of Designations, Preferences, Limitations, Restrictions and Relative Rights of Series A Convertible Preferred Stock dated April 9, 2014 (incorporated by reference to Exhibit 3.2 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on April 10, 2014)
3.5		Certificate of Amendment to Articles of Incorporation dated May 22, 2015 (incorporated by reference to Exhibit 3.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on May 26, 2015)
3.6		Certificate of Amendment to Articles of Incorporation dated May 14, 2019 (incorporated by reference to Exhibit 3.6 of the Current Report on Form 10-Q filed with the Securities and Exchange Commission by Digipath, Inc. on August 13, 2019)
3.7		Certificate of Designations of the Series B Preferred Stock dated December 29, 2021 (incorporated by reference to Exhibit 3.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on January 6, 2022)
4.1		Form of 8% Senior Secured Convertible Notes due December 31, 2020 (incorporated by reference to Exhibit 4.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on November 21, 2018)
4.2		Form of 8% Senior Secured Convertible Notes due September 23, 2020 (incorporated by reference to Exhibit 4.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on September 26, 2019)
4.3		9% Secured Convertible Note, between Digipath, Inc. and holder, due August 10, 2022 (incorporated by reference to Exhibit 4.3 of the Current Report on Form 10-Q filed with the Securities and Exchange Commission by Digipath, Inc. on February 14, 2020)
4.4		9% Secured Subordinated Convertible Note, between Digipath, Inc. and holder, due August 11, 2022 (incorporated by reference to Exhibit 4.4 of the Current Report on Form 10-Q filed with the Securities and Exchange Commission by Digipath, Inc. on February 14, 2020)
4.5		9% Secured Subordinated Convertible Note, between Digipath, Inc. and holder, due August 11, 2022 (incorporated by reference to Exhibit 4.5 of the Current Report on Form 10-Q filed with the Securities and Exchange Commission by Digipath, Inc. on May 15, 2020)
4.6		Form of Amendment to 9% Secured Convertible Note, between Digipath, Inc. and holder, due August 10, 2022 (incorporated by reference to Exhibit 4.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on January 6, 2021)
31.1*		Section 302 Certification of Principal Executive Officer
31.2*		Section 302 Certification of Principal Financial Officer
32.1*		Section 906 Certification of Principal Executive Officer
32.2*		Section 906 Certification of Principal Financial Officer
101.INS*		XBRL Instance Document
101.SCH*		XBRL Schema Document
101.CAL*		XBRL Calculation Linkbase Document
101.DEF*		XBRL Definition Linkbase Document
101.LAB*		XBRL Labels Linkbase Document
101.PRE*		XBRL Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

DIGIPATH, INC.

By:	/s/ Todd Denkin
Name:	Todd Denkin
Title:	~~President~~Chief Executive Officer

By:	/s/ A. Stone Douglass
Name:	A. Stone Douglass
Title:	Chief Financial Officer