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 March 31, ~~2022~~2023

☐ 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

☒

☐

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

☒

☐

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

☐

☒

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 May ~~16, 2022~~26, 2023 was ~~75,146,820~~82,296,820.

TABLE OF CONTENTS

		Page
		No.
PART I - FINANCIAL INFORMATION		3
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)	3
	~~Condensed~~ Consolidated Balance Sheets as of March 31, ~~2022~~2023 (Unaudited) and September 30, ~~2021~~2022	3
	~~Condensed~~ Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	4
	~~Condensed~~ Consolidated Statements of Stockholders’ Deficit for the ~~Three and~~ Six Months Ended March 31, 2023 and 2022 ~~and 2021~~ (Unaudited)	5
	~~Condensed~~ Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2023 and 2022 ~~and 2021~~ (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	1820
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23
~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~	23
~~PART II – OTHER INFORMATION~~		24
~~ITEM 1.~~	~~Legal Proceedings~~	24
~~ITEM 1A.~~	~~RISK FACTORS~~	24
~~ITEM 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~	24
~~ITEM 3.~~	~~DEFAULTS UPON SENIOR SECURITIES~~	24
ITEM 4.	CONTROLS AND PROCEDURES	24
PART II - OTHER INFORMATION		25
ITEM 1.	Legal Proceedings	25
ITEM 1A.	RISK FACTORS	25
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	25
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	25
ITEM 4.	MINE SAFETY DISCLOSURES	2425
ITEM 5.	OTHER INFORMATION	2425
ITEM 6.	EXHIBITS	2526
	SIGNATURES	2627

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

DIGIPATH, INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED BALANCE SHEETS

	March 31,			September 30,
	2022			2021			March 31, 2023			September 30, 2022
	(Unaudited)						(Unaudited)
Assets

Current assets:
Cash	$	82,769		$	295,932		$	115,868		$	56,168
Accounts receivable, net		259,268			214,900
Note receivable		1,029,227			230,959			-			100,000
Other current assets		27,241			24,751			11,450			12,739
Deposits		71,093			60,353
Assets held for sale - current								358,661			393,197
Total current assets		1,469,598			826,865			485,979			562,104

Right-of-use asset		366,089			413,884
Fixed assets, net		534,435			647,252			-			55,000
Assets held for sale – long term								627,048			722,784
Total non-current assets		900,524			1,061,136			627,048			777,784

Total Assets	$	2,370,122		$	1,888,001		$	1,113,027		$	1,339,888

Liabilities and Stockholders’ Deficit

Current liabilities:
Accounts payable	$	419,500		$	370,977		$	248,942		$	215,558
Accrued expenses		359,274			220,002			341,544			345,797
Current portion of operating lease liabilities		98,281			93,601
Current portion of finance lease liabilities		3,822			20,379
Current maturities of convertible notes payable		1,700,650			1,050,000
Current maturities of notes payable		486,458			259,425			665,000			665,000
Current maturities of convertible notes payable, net of discounts								1,342,383			1,198,469
Current maturities of convertible notes payable related parties, net of discounts								324,762			-
Liabilities held for sale - current								557,163			529,085
Total current liabilities		3,067,985			2,014,384			3,479,794			2,953,909

Non-current liabilities:
Operating lease liabilities		279,981			330,151
Notes payable		474,166			339,516
Convertible notes payable, net of discounts of $-0- and $8,322 at March 31, 2022 and September 30, 2021, respectively		-			257,282
Convertible notes payable related parties, net of discounts								-			310,272
Convertible notes payable, net of discounts and current maturities								-			174,726
Liabilities held for sale – long term								206,865			310,253
Total non-current liabilities		754,147			926,949			206,865			795,251

Total Liabilities		3,822,132			2,941,333			3,686,659			3,749,160

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			-
Series B convertible preferred stock, $0.001 par value, 1,500,000 shares authorized; 333,600 shares issued and outstanding as of March 31, 2023 and September 30, 2022								333,600			333,600

Stockholders’ Equity (Deficit):
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
Stockholders’ Deficit:
Series A convertible preferred stock, $0.001 par value, 6,000,000 shares authorized; 1,047,942 shares issued and outstanding as of March 31, 2023 and September 30, 2022								1,048			1,048
Series C convertible preferred stock, $0.001 par value, 1,000 shares authorized; 0 and 1,000 shares issued and outstanding as of March 31, 2023 and September 30, 2022, respectively								-			1
Preferred stock, value								-			-
Common stock, $0.001 par value, 250,000,000 shares authorized; 82,296,820 and 75,146,820 shares issued and outstanding at March 31, 2023 and September 30, 2022, respectively								82,297			75,147
Common stock payable								32,120			71,745
Additional paid-in capital		16,753,769			16,825,765			17,293,902			17,117,958
Accumulated deficit		(18,615,574	)		(17,951,653	)		(20,316,599	)		(20,008,771	)

Total Stockholders’ Deficit		(1,785,610	)		(1,053,332	)		(2,907,232	)		(2,742,872	)

Total Liabilities and Stockholders’ Deficit	$	2,370,122		$	1,888,001		$	1,113,027		$	1,339,888

See accompanying notes to unaudited consolidated financial statements.

DIGIPATH, INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	2022			2021			2022			2021
	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended						For the Six Months Ended
	March 31,						March 31,						March 31,						March 31,
	2022			2021			2022			2021			2023			2022			2023			2022 revised

Revenues	$	604,735		$	633,160		$	1,304,320		$	1,133,545		$	-		$	-		$	-		$	-
Cost of sales		396,032			416,915			818,633			837,800			-			-			-			-
Gross profit		208,703			216,245			485,687			295,745			-			-			-			-

Operating expenses:
General and administrative		235,470			211,961			476,434			437,011			45,674			42,479			85,198			82,135
Professional fees		286,390			107,819			554,861			222,363			128,440			259,977			175,637			470,822
Change in allowance for doubtful accounts		16			(106,155	)		(2,123	)		(17,985	)
Total operating expenses		521,876			213,625			1,029,172			641,389			174,114			302,456			260,835			552,957

Operating loss		(313,173	)		2,620			(543,485	)		(345,644	)		(174,114	)		(302,456	)		(260,835	)		(552,957	)

Other income (expense):
Other Expense														-			-			(55,000	)		-
Recovery of previously written off receivables														135,000			-			135,000			-
Interest income		15,295			47,918			24,675			47,918			-			15,295			-			24,675
Interest expense		(75,718	)		(32,337	)		(145,111	)		(74,710	)		(82,707	)		(70,814	)		(179,859	)		(136,675	)
Total other income (expense)		(60,423	)		15,581			(120,436	)		(26,792	)		52,293			(55,519	)		(99,859	)		(112,000	)

Net income (loss)	$	(373,596	)	$	18,201		$	(663,921	)	$	(372,436	)
Net loss from continuing operations														(121,821	)		(357,975	)		(360,694	)		(664,957	)
Net income (loss) from discontinued operations														54,323			(15,621	)		52,866			13,758
Net loss														(67,498	)		(373,596	)		(307,828	)		(651,199	)
Preferred deemed dividend														-			-			-			(192,154	)
Net loss to common shareholders													$	(67,498	)	$	(373,596	)	$	(307,828	)	$	(843,353	)

Weighted average number of common shares outstanding – basic		74,019,042			65,418,890			73,194,439			61,882,937			82,296,820			74,019,042			82,257,534			73,194,439
Weighted average number of common shares outstanding – fully diluted		74,019,042			114,702,490			73,194,439			61,882,937			82,296,820			74,019,042			82,257,534			73,194,439

Net loss per share from continuing operations – basic													$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
Net income (loss) per share from discontinued operations – basic													$	0.00		$	(0.00	)	$	0.00		$	0.00
Net loss per share – basic	$	(0.00	)	$	0.00		$	(0.01	)	$	(0.01	)	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)

Net loss per share from continuing operations – diluted													$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
Net income (loss) per share from discontinued operations – diluted													$	0.00		$	(0.00	)	$	0.00		$	0.00
Net loss per share – diluted	$	(0.00	)	$	0.00		$	(0.01	)	$	(0.01	)	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)

See accompanying notes to unaudited consolidated financial statements.

DIGIPATH, INC. AND SUBSIDIARIES

C~~ONDENSED~~ CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

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 )

																			��
	Series B Convertible Preferred Stock				Series A Convertible Preferred Stock				Series C Preferred Stock						Common Stock				Stock			Additional Paid-in			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Shares			Amount			Shares		Amount		Payable			Capital			Deficit			Deficit

Balance, September 30, 2022		333,600	$	333,600		1,047,942	$	1,048		1,000		$	1			75,146,820	$	75,147	$	71,745		$	17,117,958		$	(20,008,771	)	$	(2,742,872	)

Issuance of common shares to settle stock payable		-		-		-		-		-			-			7,150,000		7,150		(71,745	)		64,595			-			-

Warrants issued as debt financing costs		-		-		-		-		-			-			-		-		-			93,938			-			93,938

Stock-based compensation		-		-		-		-		-			-			-		-		-			8,306			-			8,306

Net loss		-		-		-		-		-			-			-		-		-			-			(240,330	)		(240,330	)

Balance, December 31, 2022		333,600		333,600		1,047,942		1,048		1,000			1			82,296,820		82,297		-			17,284,797			(20,249,101	)		(2,880,958	)

Repurchased of preferred C stock		-		-		-		-		(1,000	)		(1	)		0		0		0			(99	)		-			(100	)

Common shares to be issued for compensation		-		-		-		-		-			-			-		-		32,120			-			-			32,120

Stock-based compensation		-		-		-		-		-			-			-		-		-			9,204			-			9,204

Net loss		-		-		-		-		-			-			-		-		-			-			(67,498	)		(67,498	)

Balance, March 31, 2023		333,600	$	333,600		1,047,942	$	1,048		-		$	-			82,296,820	$	82,297	$	32,120		$	17,293,902		$	(20,316,599	)	$	(2,907,232	)

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 )

	Series B Convertible Preferred Stock				Series A Convertible Preferred Stock						Series C Preferred Stock				Common Stock				Stock		Additional Paid-in			Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount			Shares		Amount		Shares		Amount		Payable		Capital Revised			Deficit Revised			Deficit

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

Series B Preferred shares sold for cash		55,600		55,600		-			-			-		-		-		-		-		-			-			-

Conversion of Series A Preferred Shares into Series B Preferred		278,000		278,000		(278,000	)		(278	)		-		-		-		-		-		(85,568	)		-			(85,846	)

Common stock issued for services		-		-		-			-			-		-		1,500,000		1,500		-		51,000			-			52,500

Stock-based compensation		-		-		-			-			-		-		-		-		-		33,457			-			33,457

Deemed dividend on preferred exchange		-		-		-			-			-		-		-		-		-		(192,154	)		-			(192,154	)

Net loss		-		-		-			-			-		-		-		-		-		-			(277,603	)		(277,603	)

Balance, December 31, 2021		333,600	$	333,600		1,047,942		$	1,048			-	$	-		72,730,153	$	72,730	$	-	$	16,632,500		$	(18,229,256	)	$	(1,522,978	)
Balance		333,600	$	333,600		1,047,942		$	1,048			-	$	-		72,730,153	$	72,730	$	-	$	16,632,500		$	(18,229,256	)	$	(1,522,978	)

Common Shares issued for settlement of accounts payable		-		-		-			-			-		-		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	$	-	$	16,741,047		$	(18,602,852	)	$	(1,785,610	)
Balance		333,600	$	333,600		1,047,942		$	1,048			-	$	-		75,146,820	$	75,147	$	-	$	16,741,047		$	(18,602,852	)	$	(1,785,610	)

See accompanying notes to unaudited consolidated financial statements.

DIGIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2022			2021			2023			2022
	For the Six Months Ended						For the Six Months Ended
	March 31,						March 31,
	2022			2021			2023			2022 Revised
Cash flows from operating activities
Net loss	$	(663,921	)	$	(372,436	)
Net loss from continuing operations							$	(360,694	)	$	(664,957	)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in allowance for doubtful accounts		(2,123	)		(17,985	)
Depreciation and amortization expense		117,063			159,209
Loss on disposal of fixed assets		-			2,227
Gain on early extinguishment of debt		-			(40,338	)
Recovery of previously written off receivables								(135,000	)		-
Stock-based compensation		202,143			130,981			49,630			189,421
Amortization of debt discounts		39,103			8,322			77,616			39,103
Impairment of fixed assets								55,000			-
Decrease (increase) in assets:
Accounts receivable		(42,245	)		49,400
Other current assets		(35,416	)		12,677			1,289			(24,509	)
Deposits		(2,490	)		-
Right-of-use assets		47,795			45,308
Increase (decrease) in liabilities:
Accounts payable		56,023			(58,639	)		33,384			53,726
Accrued expenses		139,272			27,814			(4,253	)		103,086
Lease liabilities		(45,490	)		(41,143	)
Net cash (used) in operating activities		(190,286	)		(94,603	)
Net cash used in operating activities from continuing operations								(283,028	)		(304,130	)
Net cash provided by operating activities from discontinued operations								141,538			113,844
Net cash used in operating activities								(141,490	)		(190,286	)

Cash flows from investing activities
Purchase of fixed assets		(4,246	)		(1,206	)
Advance of note receivable		(773,622	)		-			-			(773,622	)
Net cash (used) in investing activities		(777,868	)		(1,206	)
Proceeds from sale of collateralized assets								235,000			-
Net cash provided by (used in) investing activities from continuing operations								235,000			(773,622	)
Net cash used in investing activities from discontinued operations								(3,687	)		(4,246	)
Net cash provided by (used in) investing activities								231,313			(777,868	)

Cash flows from financing activities
Principal payments on finance lease		(16,557	)		(16,715	)
Principal payments on note payable, equipment financing		(28,317	)		(26,769	)
Proceeds from short term advances		-			40,000
Proceeds from notes payable		390,000			-			-			390,000
Proceeds from convertible notes		394,265			110,000			-			394,265
Payments on convertible notes		(40,000	)					-			(40,000	)
Proceeds from sale of common stock		-			20,250			-			-
Proceeds from sale of preferred stock		55,600			-			-			55,600
Net cash provided by financing activities		754,991			126,766
Repurchase of preferred C stock								(100	)		-
Net cash provided by (used in) financing activities from continuing operations								(100	)		799,865
Net cash provided by (used in) financing activities from discontinued operations								(30,023	)		(44,874	)
Net cash provided by (used in) financing activities								(30,123	)		754,991

Net increase (decrease) in cash		(213,163	)		30,957			59,700			(213,163	)
Cash - beginning		295,932			82,749
Cash - ending	$	82,769		$	113,706
Cash – beginning								56,168			295,932
Cash – ending							$	115,868		$	82,769

Supplemental disclosures:
Interest paid	$	42,809		$	32,294		$	151,927		$	42,809
Income taxes paid		-			-			-			-

Non-cash investing and financing activities:
Common stock issued for debt conversion	$	-		$	110,000
Fixed assets acquired with note payable, equipment financing	$	-		$	200,000
Common stock issued for settlement of accounts payables	$	7,500		$	-
Common stock issued for settlement of stock payable							$	71,745		$	-
Warrants issued for debt financing							$	93,938		$	-
Common stock issued for settlement of accounts payable							$	-		$	7,500
Conversion of Series A preferred into Series B preferred	$	278,000		$	-		$	-		$	85,846
Deemed dividend on preferred exchange							$	-		$	192,154

See accompanying notes to unaudited consolidated financial statements.

DIGIPATH, INC. AND SUBSIDIARIES

Notes to ~~Condensed~~ Consolidated Financial Statements

(Unaudited)

Note 1 – ~~Organization, Basis~~Nature of ~~Presentation~~Business and Significant Accounting Policies

~~Organization~~Nature of Business

Digipath, Inc. was incorporated in Nevada on October 5, 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.~~2015.

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, ~~2021.~~2022. 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 March 31, ~~2022:~~2023:

Schedule of Entities Under Common Control and Ownership

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

Formed during the second fiscal quarter of 2021, but has not yet commenced significant operations.

⁽⁴⁾⁽³⁾

Formed during the first fiscal quarter of 2019, but has not yet commenced significant operations.

⁽⁵⁾⁽⁴⁾

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.

Correction of an Error

Stock-based compensation were reported in the six months ended June 30, 2022 as $202,143 in error. The error was corrected in the annual 2022 10-K as a component of professional fees. In addition, the Company reported the exchange of Series A Preferred Stock for Series B Stock as an exchange with equal value in error. The effect of the error corrections on the prior periods has been determined to be immaterial, however, the Company has labeled the column headings for the prior periods as “revised.” For the six months ended March 31, 2022, the financial statements of the line items affected by the revision are as follows:

Schedule of Correction of an Error

Consolidated Statement of Operations

Line items for Q2-2022 effected by the restatement	Previously Reported			Correction of Error			Effect of Discontinued operations			Revised
Professional Fees	$	554,861		$	(12,722	)	$	(71,317	)	$	470,822
Total operating expenses		1,029,172			(12,722	)		(463,493	)		552,957
Operating loss		(543,485	)		12,722			(22,194	)		(552,957	)
Net Income (loss)		(663,921	)		12,722			(13,758	)		(664,957	)
Deemed Dividend		-			(192,154	)		-			(192,154	)
Net Income (loss) to common shareholders		(663,921	)		(179,432	)		-			(843,353	)

Consolidated Statement of Cash Flows

Line items for Q2-2022 effected by the restatement	Previously Reported			Correction of Error			Effect of Discontinued operations			Revised
Net Loss	$	(663,921	)	$	12,722		$	(13,758	)	$	(664,957	)
Stock-based compensation		202,143			(12,722	)		-			189,421

Non-cash Investing and Financing Activities
Conversion of Series A preferred into Series B preferred		278,000			(192,154	)		-			85,846
Deemed dividend on preferred exchange					192,154	)		-			192,154

Fair Value of Financial Instruments

~~Under FASB~~The Company adopted ASC ~~820-10-05, the Financial Accounting Standards Board~~820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a ~~framework~~three-level valuation hierarchy for ~~measuring~~disclosures of fair value ~~in generally accepted accounting principles~~measurement and ~~expands disclosures about~~enhances disclosure requirements for fair value ~~measurements. This Statement reaffirms that fair value is the relevant measurement attribute.~~measures. The ~~adoption of this standard did not have a material effect on the Company’s financial statements~~three levels are defined as ~~reflected herein.~~ follows:

	-	Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
	-	Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
	-	Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.

The carrying ~~amounts~~value of cash, accounts receivable, accounts ~~payable~~payables and accrued expenses ~~reported on the balance sheets~~ are estimated by management to approximate fair value primarily due to the ~~short-term~~short term nature of the 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 commercial sales of 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~~Our revenue is primarily generated through our subsidiary, Digipath Labs, Inc. (“Digipath Labs”), 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. 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. We 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.

Discontinued Operations

On April 20, 2023, the Company and Digipath Labs entered into an Asset Purchase Agreement (the “Purchase Agreement”) with DPL NV, LLC (“Buyer”), pursuant to which Digipath Labs has agreed to sell substantially all of its assets to Buyer for a cash purchase price of $2,300,000 (the “Purchase Price”). The business of an entity that is in the process of disposing its assets by sale, or that intends to cease operations, is reported as discontinued operations if the transaction represents a strategic shift that will have a major effect on an entity’s operations and financial results. As such, the Company’s lab testing business is now reported as discontinued operations.

Assets and liabilities of the discontinued operations are aggregated and reported separately as assets and liabilities of discontinued operations in the Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022. The results of discontinued operations are aggregated and presented separately in the Consolidated Statements of Operations as net income from discontinued operations for the periods ended March 31, 2023 and 2022. The cash flows of the discontinued operations are reflected as cash flows of discontinued operations within the Company’s Consolidated Statements of Cash Flows for the periods ended March 31, 2023 and 2022.

Amounts presented in discontinued operations have been derived from our consolidated financial statements and accounting records using the historical basis of assets, liabilities, results of operations, and cash flows of Digipath Labs. The discontinued operations exclude general corporate allocations.

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 ~~are the consideration received for~~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.

Income Taxes

The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.

Uncertain Tax Positions

In accordance with ASC 740, “Income Taxes” (“ASC 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.

The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.

Recently Issued Accounting Pronouncements

~~In August 2020,~~There are no recently issued accounting pronouncements that the ~~FASB issued ASU 2020-06,~~ ~~Debt -~~~~Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40):~~~~Accounting for Convertible Instruments and Contracts in an Entity's Own Equity).~~ ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, which results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Additionally, ASU 2020-06 affects the diluted earnings per share calculation for instrumentsCompany has yet to adopt 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 entitiesare expected to ~~use~~have a modified or full retrospective transition method and is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the impact that this ASU may havematerial effect on its ~~consolidated~~ financial ~~statements.~~

position, results of operations, or cash flows.

Note 2 – Going Concern

As shown in the accompanying ~~condensed~~ consolidated financial statements, asAs of March 31, ~~2022,~~2023, the Company had negative working capital of $~~1,598,387~~2,993,815, an accumulated recurring losses of $~~18,615,574~~20,316,599, and ~~only~~ $~~82,769~~115,868 of cash on hand, which ismay not be 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~~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 – 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.

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.~~

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of March 31, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively:

Summary of Financial Instruments at Fair Value on Recurring Basis

							Level 1		Level 2		Level 3
	Fair Value Measurements at March 31, 2022						Fair Value Measurements at March 31, 2023
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Cash	$	82,769	$	-	$	-	$	115,868	$	-	$	-

Liabilities
Lease liabilities		-		-		382,084
Notes payable		-		960,624		-		-		665,000		-
Convertible notes payable		-		-		1,700,650
Convertible notes payable, net of discounts of $81,752								-		-		1,686,482

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 1		Level 2		Level 3
	Fair Value Measurements at September 30, 2022
	Level 1		Level 2		Level 3
Assets
Cash	$	56,168	$	-	$	-

Liabilities
Notes payable		-		665,000		-
Convertible notes payable, net of discounts of $84,767		-		-		1,683,467

There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the six months ended March 31, ~~2022 or the year ended September 30, 2021.~~2023.

Note 4 – Related Party Transactions

During the six months ended March 31, 2023 the Company incurred fees of $30,000 for services from its CFO. As of March 31, 2023 the Company has accrued a total of $45,000 in fees related to past services to its CFO.

During the six months ended March 31, 2023 the Company incurred fees of $42,000 for services from its Board of directors. As of March 31, 2022 the Company has accrued a total of $168,000 in fees related to past services to the Board of Directors.

During the six months ended March 31, 2023, the Company granted 3,400,000 shares of its common stock to the officers and 1,000,000 shares of its common stock to members of the board of directors as compensation for services performed with a fair value of $24,820 and $7,300, respectively. As of March 31, 2023, the shares have not been issued and therefore has been recorded as a stock payable.

Note 45 – Note Receivable

On various dates between December 28, 2018 and June 13, 2019, we loaned Northwest Analytical Labs, Inc. a total of $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.

On various dates between August 23, 2021 and ~~March 31,~~September 30, 2022, we loaned C3 Labs, Inc. (“C3 Labs”) a total of $~~1,003,622~~1,047,649. The loans ~~bear~~bore interest at an annual rate of 8%. These loans ~~are~~were evidenced by secured demand notes, and ~~are~~were secured by a lien on the borrower’s assets and have a maturity date of August 23, 2022. The Company ~~has~~had recorded ~~interest income of $15,120~~ ~~during the six months ended March 31, 2022 with~~ total accrued interest of $~~25,605~~64,017 as of ~~March 31,~~September 30, 2022.

The loans were made in connection with a potential acquisition of a controlling interest in C3 ~~Labs.~~Labs pursuant to a letter of intent. On March 11, 2022, the Company notified the current owners of C3 Labs of its termination of the letter of ~~intent. The Company is currently in~~intent and took possession of the equipment of C3 Labs (“C3 Equipment”), 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.~~

On December 8, 2022, the Company entered into an Asset Purchase Agreement with Invictus Wealth Group (“Invictus”), whereby the Company agreed to sell the C3 Equipment to Invictus for a total purchase price of $900,000. The purchase price consisted of an upfront payment of $275,000, and a Note Receivable (“Invictus Note”) in the amount of $625,000. The Invictus Note has a maturity date of December 31, 2023, accrues interest at a rate of 10% per annum, and provides for principal payments of $100,000 each due on June 30, 2023 and September 30, 2023, with the final payment of $425,000 due on December 31, 2023. The Company has recorded a full allowance against the Invictus Note as collectability cannot be assured as of the date of this filing. As of March 31, 2023 the Company received $235,000 of the initial $275,000, and the final $40,000 was received in May 2023. The Company is working to amend the Invictus Note to reflect the delays of the initial closing conditions.

Note 56 – Fixed Assets

Fixed assets consist of the following at March 31, ~~2022~~2023 and September 30, ~~2021:~~2022:

Schedule of Fixed Assets

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

	2023		2022
	As of
	March 31,		September 30,
	2023		2022
Lab equipment		-		55,000
Fixed assets, gross		-		55,000
Less: accumulated depreciation		-		-
Total	$	-	$	55,000

~~Depreciation and amortization expense totalled $117,063~~ ~~and $159,209~~ ~~for~~During the six months ended March 31, ~~2022 and 2021, respectively.~~

~~Note 6 –~~ ~~Leases~~

~~The~~2023, the Company ~~leases its operating and office facility under a non-cancellable real property lease agreement that expires on~~ recorded impairment expense in the amount of $~~August 31, 2025~~55,000~~. The Company also has a financing lease for lab~~ related to equipment ~~subject to~~acquired with the ~~recently adopted ASU 2016-02. In~~anticipation of 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. AsC3 Labs acquisition. Upon the Company’s ~~leases do not provide implicit discount rates,~~decision to terminate the ~~Company uses an incremental borrowing rate based on~~acquisition, the ~~information available at the commencement date in determining the present value of lease payments.~~equipment was deemed to be impaired.

~~The components of lease expense were as follows:~~

~~Schedule of Components of Lease Expense~~

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

~~Supplemental balance sheet information related to leases was as follows:~~

~~Schedule of Supplemental Balance Sheet Information~~

March 31, September 30,
2022 2021
Operating leases:
Operating lease assets $ 366,089 $ 413,884

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

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 3.42 years 3.92 years
Finance leases 0.05 years 1.55 years

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

~~Supplemental cash flow and other information related to leases was as follows:~~

~~Schedule of Supplemental Cash Flow and Other Information~~

For the Six For the Six
Months Ended Months Ended
March 31, March 31,
2022 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases $ 45,490 $ 41,143
Financing cash flows used for finance leases $ 16,557 $ 16,715

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

The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities on a fiscal year basis, including common area maintenance fees, under non-cancellable operating leases as of March 31, 2022:

~~Schedule of Future Minimum Annual Lease Commitments Under Operating Leases~~

Fiscal Year Ending Minimum Lease
September 30, Commitments
2022 (for the six months remaining) $ 58,419
2023 119,468
2024 123,543
2025 116,892
2026 -
Total future undiscounted lease payments 418,322
Less interest 40,060
Present value of lease payments 378,262
Less current portion 98,281
Long-term operating lease liabilities $ 279,981

~~Future minimum annual lease payments required under the finance lease and the present value of the net minimum lease payments are as follows at March 31, 2022:~~

~~Schedule of Future Minimum Annual Lease Payments Under Finance Lease~~

Finance
Leases

2022 $ 3,865
2023 -
Total minimum lease payments 3,865
Less interest 43
Present value of lease liabilities 3,822
Less current portion 3,822
Long-term finance lease liabilities $ -

Note 7 –Notes Payable

Notes payable consists of the following at March 31, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively:

Schedule of Notes Payable

	March 31,			September 30,			March 31, 2023			September 30, 2022
	2022			2021

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 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
Notes payable							$	-		$	-
On September 10, 2021, the Company issued a Secured Promissory note in the principal amount of $675,000 to US Canna Lab I, LLC (the “Canna Lab Note”). The 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. In addition, the Company was advanced an additional $115,000 of funds during the year ended September 30, 2022 under the same terms as the original note. During the year ended September 30, 2022, the Company repaid $125,000 of the principal balance on the note. As a result of the Company not meeting the monthly payment obligations, the CannaLab Note is in technical default, however, no default notice has been provided by CannaLab as of the date of this filing. There are no additional obligations of the Company under default with the exception of being due on demand.							$	665,000		$	665,000

Total notes payable		960,624			598,941			665,000			665,000
Less: current maturities		(486,458	)		(259,425	)		(665,000	)		(665,000	)
Notes payable	$	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 $~~41,277~~29,770 and $~~7,970~~39,444 during the six months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~2022.

Notes payable – discontinued operations

12On 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.

111,325

141,348

Note 8 – Convertible Notes Payable

Related Party Convertible notes payable ~~consists~~consist of the following at March 31, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively:

Schedule of Related Party Convertible Notes Payable

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

	March 31,			September 30,
	2023			2022
Convertible notes payable	$	-		$	310,272
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. On August 8, 2022, the note holder agreed to extend the maturity date of the note to February 11, 2024. In exchange for the extension the Company agreed to issue 4,550,000 common shares, which were recorded as debt discount with a relative fair value of $43,788. As a result of the shares issued upon the extension agreement, the lender now holds more the 5% of the total outstanding common shares, and is therefore considered a related party.	$	350,000		$	350,000

Total related party convertible notes payable		350,000			350,000
Less: unamortized debt discounts		(25,238	)		(39,728	)
Total convertible debt		324,762			310,272
Less: current maturities		(324,762	)		-
Related party convertible notes payable	$	-		$	310,272

1312

Convertible notes payable consist of the following at March 31, 2023 and September 30, 2022, respectively:

Schedule of Convertible Notes Payable

	March 31,		September 30,
	2023		2022
Convertible notes payable	$	-	$	174,726
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. On August 8, 2022, the note holder agreed to extend the maturity date of the note to February 11, 2024. In exchange for the extension, the Company agreed to issue 650,000 common shares, which were recorded as debt discount, with a relative fair value of $6,989.	$	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. On August 8, 2022, the note holder agreed to extend the maturity date of the note to February 11, 2024. In exchange for the extension the Company agreed to issue 1,950,000 common shares, which were recorded as debt discount, with a relative fair value of $20,968.		150,000		150,000

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 the 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. On October 1, 2022, the Company further extended the maturity date to February 11, 2024. In connection with the modification, the Company issued warrants to purchase 4,621,105 shares of common stock, with a fair value of $32,166 which was recorded as a debt discount.		355,469		355,469

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. On October 1, 2022, the Company further extended the maturity date to February 11, 2024. In connection with the modification, the Company issued warrants to purchase 4,550,000 shares of common stock, with a fair value of $31,671 which was recorded as a debt discount.		350,000		350,000

On October 1, 2022, The Company entered into a senior secured convertible note that carries an 8% interest rate, which matures on February 11, 2024. The Note documented the advances made during the year ended September 30, 2022 in the amount of $362,765. The principal and interest on the Note are convertible into common shares at a conversion price of $0.01. In connection with the note, the Company issued warrants to purchase 4,715,945 shares of common stock, with a fair value of $30,102 which was recorded as a debt discount.		362,765			362,765

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		1,418,234			1,418,234
Less: unamortized debt discounts		(75,851	)		(45,039	)
Total convertible debt		1,342,383			1,373,195
Less: current maturities		(1,342,383	)		(1,198,469	)
Convertible notes payable	$	-		$	174,726

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 $~~98,188.~~93,938 during the six months ended March 31, 2023. 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,~~debt, as noted above, or the actual settlement date. The Company recorded debt amortization expense onattributed to the aforementioned debt discount in the ~~amount~~amounts of $77,616 and $39,103 ~~for~~, during the six months ended March 31, ~~2022.~~2023 and 2022, respectively. Unamortized discount as of March 31, ~~2022~~2023 is $~~59,085~~101,089.

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 $~~46,380~~72,473 and $~~51,802~~58,128 for the six months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

The Company recognized interest expense for the six months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, as follows:

Schedule of Interest Expense

	March 31,		March 31,		March 31,		March 31,
	2022		2021		2023		2022

Interest on short term loans	$	-	$	1,687
Interest on capital leases		6,603		4,929
Interest on notes payable		41,277		7,970		29,770		39,444
Amortization of beneficial conversion features		39,103		8,322		77,616		39,103
Interest on convertible notes		58,128		51,802		72,473		58,128
Total interest expense	$	145,111	$	74,710	$	179,859	$	136,675

Note 9 -– ~~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”), and 1,000 shares have been designated as Series C Preferred Stock (“Series C Preferred”) with the remaining ~~2,500,000~~2,499,000 shares available for designation from time to time by the Board as set forth below. As of March 31, ~~2022,~~2023, there were 1,047,942 shares of Series A Preferred issued and outstanding, ~~and~~ 333,600 shares of Series B Preferred issued and outstanding and no shares of Series C 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 1,047,942 shares of Series A Preferred outstanding at March 31, ~~2022~~2023 are convertible into 5,239,710 shares 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~~%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 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~~2023 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~~%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~~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.

Series C

The Series C Preferred were designated on July 20, 2022. The principal feature of the Series C Preferred Stock is that it provides the holder thereof, so long as he or she is an executive officer of the Company, with the ability to vote with the holders of the Company’s common stock on all matters presented to the holders of common stock, whether at a special or annual meeting, by written action in lieu of a meeting or otherwise, on the basis of 200,000 votes for each share of Series C Preferred Stock. The shares of Series C Preferred Stock are not convertible into common stock, are not entitled to dividends, are not subject to redemption, and have a stated value of $0.10 per share payable on any liquidation of the Company in preference to any payment payable to the holders of common stock. As of March 31, 2023, there we no shares of Series C Preferred outstanding.

Additional terms of the Series C Preferred and include the following:

●	The shares of Series C Preferred are not entitled to dividends.

●	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 C Preferred are entitled to receive, prior to any distribution to the holders of common stock, 100% of the stated value per share of Series C Preferred.

●	The shares of Series C Preferred are not entitled to conversion rights.

On ~~December 30, 2021,~~March 2, 2023, the Company entered into ~~an Exchange~~a Preferred Stock Repurchase Agreement with ~~one of~~Todd Denkin, the Company’s ~~institutional investors (the “Investor”),~~president, pursuant to which Mr. Denkin surrendered his Series C Preferred back to the ~~Investor exchanged~~ ~~278,000~~ ~~shares of~~Company for 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~~purchase price of $~~1.00~~ ~~per share, resulting in gross proceeds to the Company of $55,600~~100.

Common Stock

Common stock consists of $0.001 par value, 250,000,000 shares authorized, of which ~~75,146,820~~82,296,820 shares were issued and outstanding as of March 31, ~~2022.~~2023.

During the six months ended March 31, ~~2022,~~2023, the Company issued ~~1,500,000~~ 7,150,000shares of its common stock in ~~exchange for services rendered to the Company, by the chairman~~settlement of the ~~board of directors, with a total fair value $98,679~~ ~~based on the closing price of the Company’s~~ common stock onpayable in the ~~dates~~amount of ~~grant.~~$71,745.

During the six months ended March 31, ~~2022,~~2023, the Company ~~issued~~ granted ~~2,166,667~~ 3,400,000shares of its common stock ~~in exchange for services rendered~~ to the ~~Company by third party consultants, with a total fair value $~~officers and ~~103,464~~ ~~based on the closing price of the Company’s common stock on the dates of grant.~~

~~During the six months ended March 31, 2022, the Company issued~~ ~~250,000~~1,000,000 shares of its common stock to ~~settle outstanding payables in~~members of the ~~amount~~board of directors as compensation for services performed with a fair value of $~~7,500~~24,820. and $7,300, respectively. As of March 31, 2023, the shares have not been issued and as therefore has been recorded as a stock payable.

Note 10 – 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~~terminated on ~~May 20, 2014.~~March 5, 2022. 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.~~

During the six months ended March 31, ~~2022,~~2023, the Company issued to ~~an unrelated third party,~~certain employees, options to purchase ~~1,000,000~~2,100,000 shares of its common stock in exchange for services rendered to the Company with a total fair value $~~33,716~~10,446. The Company estimated the fair value using the Black-Scholes Pricing Model, based on a volatility rate of ~~186~~184% and call option values of $~~0.0337~~0.00497 and exercise prices of $~~0.035~~0.0056. The options have a term of 5.75 years and vest nine months after the grant date.

Amortization of Stock-Based Compensation

A total of $~~53,739~~17,510 and $~~41,126~~136,921 of stock-based compensation expense was recognized during the six months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, as a result of the vesting of common stock options issued. As of March 31, ~~2022~~2023 a total of $~~31,798~~8,125 of unamortized expense remains to be amortized over the vesting period.

The following is a summary of information about the stock options outstanding at March 31, ~~2022.~~2023.

Summary of Common Stock Options Outstanding

Shares Underlying

Shares Underlying Options Outstanding

Options Exercisable

Shares Underlying Options Outstanding

Options Exercisable

Weighted

Average

Weighted

Average

Weighted

Range of

Underlying

Remaining

Average

Underlying

Average

Range of

Underlying

Remaining

Average

Underlying

Average

Exercise

Options

Contractual

Exercise

Options

Exercise

Options

Contractual

Exercise

Options

Exercise

Prices

Outstanding

Life

Price

Exercisable

Price

Prices

Outstanding

Life

Price

Exercisable

Price

0.05 – $0.13

6,020,000

6.51 years

0.07

5,359,285

0.07

0.0056 – $0.13

8,120,000

5.53 years

0.052

5,912,857

0.069

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants during the six months ended March 31, 2023:

Schedule of Weighted-Average Assumptions Used for Grants

	March 31,
	2023

Average risk-free interest rates		3.88	%
Average expected life (in years)		2.90
Volatility		184	%

The Black-Scholes option pricing model was developed for use in estimating the fair value of short-term traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including expected stock price volatility. Because the Company’s common stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion the existing models do not necessarily provide a reliable single measure of the fair value of its common stock options. During the six months ended March 31, 2023, there were no options granted with an exercise price below the fair value of the underlying stock at the grant date.

The weighted average fair value of options granted with exercise prices at the current fair value of the underlying stock during the six months ended March 31, 2023, was approximately $0.005 per option.

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

			Weighted
			Average
	Number		Exercise
	of Shares		Price
Balance, September 30, 2022		6,020,000	$	0.069
Options issued		2,100,000		0.006
Options forfeited		-		-

Balance, March 31, 2023		8,120,000	$	0.052

Exercisable, March 31, 2023		5,912,857	$	0.069

As of March 31, ~~2022,~~2023, these options in the aggregate had no$4,830 and $0 of intrinsic value asfor the outstanding and exercisable options, respectively, based on the per share market price of $~~0.023~~0.008 of the Company’s common stock as of such ~~date was less than the weighted-average exercise price of these options of $0.07~~.date.

Note 11 – Common Stock Warrants

Warrants to purchase a total of ~~2,535,001~~15,387,050 shares of common stock were outstanding as of March 31, ~~2022.~~2023.

The following is a summary of information about our warrants to purchase common stock outstanding at March 31, ~~2022.~~2023 (including those issued to both investors and service providers).

Summary of Common Stock Warrants Outstanding

Shares Underlying

Shares Underlying Warrants Outstanding

Warrants Exercisable

Shares Underlying Warrants Outstanding

Warrants Exercisable

Weighted

Average

Weighted

Average

Weighted

Range of

Underlying

Remaining

Average

Underlying

Average

Range of

Underlying

Remaining

Average

Underlying

Average

Exercise

Warrants

Contractual

Exercise

Warrants

Exercise

Warrants

Contractual

Exercise

Warrants

Exercise

Prices

Outstanding

Life

Price

Exercisable

Price

Prices

Outstanding

Life

Price

Exercisable

Price

0.10 - 0.26

2,535,001

4.84 years

0.17

2,535,001

0.17

0.0074-0.10

15,387,050

9.26 years

0.02

15,387,050

0.02

The following is a 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

			Weighted
			Average
	Number		Exercise
	of Shares		Price
Balance, September 30, 2022		1,500,000	$	0.10
Warrants granted		13,887,050	$	0.007
Warrants expired		-		-

Balance, March 31, 2023		15,387,050	$	0.016

Exercisable, March 31, 2023		15,387,050	$	0.016

As of March 31, ~~2022,~~2023, these warrants in the aggregate had no$6,944 of intrinsic value as the per share market price of $~~0.023~~0.008 of the Company’s common stock as of such date was ~~less~~greater than the ~~weighted-average~~ exercise price of ~~these warrants~~certain warrants.

Note 12 – Discontinued Operations

On April 20, 2023, the Company, and Digipath Labs entered into the Purchase Agreement with DPL NV, LLC (“Buyer”), pursuant to which Digipath Labs has agreed to sell substantially all of its assets to Buyer for a cash purchase price of $~~0.17~~2,300,000 (the “Purchase Price”) as described in Note 1 above. The Purchase Price is subject to adjustments at closing based on, among other things, the amount by which the working capital of Digipath Labs at the closing is greater or less than $150,000.

The Purchase Agreement includes a number of representations, warrantees, covenants and conditions to closing customary for this type of transaction. In addition, the closing of the transaction is subject to the approval of the Nevada Cannabis Compliance Board (the “CCB”). In the event CCB approval is not obtained by June 30, 2024, or any other condition to closing has not been satisfied by such date, either party may terminate the Purchase Agreement.

Pursuant to the Purchase Agreement, the Buyer deposited $230,000 into an escrow account upon the execution of the Purchase Agreement, and such amount will continue to be held in escrow for a 12-month period following closing to satisfy any indemnification claims Buyer may have against Digipath Labs.

The balance sheets of Digipath Labs are summarized below:

Schedule of Discontinued Operations Income Statement Balance Sheet and Additional Disclosures

	March 31, 2023		September 30, 2022
Current assets:
Accounts receivable, net	$	315,625	$	335,085
Deposits		18,675		25,141
Other current assets		24,361		32,971
Total current assets		358,661		393,197

Right-of-use asset		266,418		316,961
Fixed assets, net		360,630		405,823
Total long term assets		627,048		722,784
Total Assets	$	985,709	$	1,115,981

Current liabilities:
Accounts payable	$	337,758	$	334,909
Accrued expenses		34,964		32,571
Current portion of operating lease liabilities		121,748		100,685
Current maturities of notes payable		62,693		60,920
Total current liabilities		557,163		529,085

Operating lease liabilities		158,233		229,825
Notes payable		48,632		80,428
Total long term liabilities		206,865		310,253
Total Liabilities	$	764,028	$	839,338

The statements of operations of Digipath Labs combined are summarized below:

	2023			2022			2023			2022
	For the Three Months Ended						For the Six Months Ended
	March 31,						March 31
	2023			2022			2023			2022

Revenues	$	760,710		$	604,735		$	1,487,465		$	1,304,320
Cost of sales		459,608			396,032			882,443			818,633
Gross profit		301,102			208,703			605,022			485,687

Operating expenses:
General and administrative		224,346			193,007			504,990			392,176
Professional fees		20,688			26,413			43,460			71,317
Total operating expenses		245,034			219,420			548,450			463,493

Operating income(loss)		56,068			(10,717	)		56,572			22,194

Other income (expense):
Interest expense		(1,745	)		(4,904	)		(3,706	)		(8,436	)
Total other income (expense)		(1,745	)		(4,904	)		(3,706	)		(8,436	)

Net income (loss)	$	54,323		$	(15,621	)	$	52,866		$	13,758

Note 1213 – Commitments and Contingencies

Legal Contingencies

There are no material pending legal proceedings to which we are a party or to 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 a proceeding adverse to our business or has a material interest adverse to our business.

Note 14 – Subsequent Events

On April 20, 2023, the Company and Digipath Labs entered into the Purchase Agreement with DPL NV, LLC as described in Notes 1 and 12 above.

In connection with the transactions contemplated by the Purchase Agreement, Digipath, Digipath Labs and Buyer entered into a Management Services Agreement (the “Management Services Agreement”), dated as of April 30, 2023, pursuant to which Buyer has been engaged to manage the operation of Digipath Labs’ cannabis testing laboratory (the “Lab”). The effectiveness of the Management Services Agreement is subject to the approval of the CCB, which has not yet been obtained. Pursuant to the Management Services Agreement, after the payment of expenses to third parties and a payment of 15% of cash collections to Digipath (but not less than $15,000) in each month, Buyer will be entitled to a management fee of $10,000 per month. Any remaining cash generated from the operation of the Lab in any month will be payable 45% to the Buyer and 55% to the Company.

1719

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.~~

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, ~~2021~~2022 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, ~~2021~~2022 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 March 31, ~~2022~~2023 and ~~2021:~~2022:

The following table summarizes selected items from the statement of operations for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

Three Months Ended March 31, Increase /
2022 2021 (Decrease)
Revenues $ 604,735 $ 633,160 $ (28,425 )
Cost of sales 396,032 416,915 (20,883 )
Gross profit 208,703 216,245 (7,542 )

Operating expenses:
General and administrative 235,470 211,961 23,509
Professional fees 286,390 107,819 178,571
Change in allowance for doubtful accounts 16 (106,155 ) 106,171
Total operating expenses: 521,876 213,625 308,251

Operating income (loss) (313,173 ) 2,620 (315,793 )

Total other income (expense) (60,423 ) 15,581 (76,004 )

Net loss $ (373,596 ) $ 18,201 $ (391,797 )

~~Revenues~~

Aggregate revenues for the three months ended March 31, 2022 were $604,735, compared to revenues of $633,160 during the three months ended March 31, 2021, a decrease of $28,425 or 4%. The decrease in revenue was due to a slight decrease in tourism in Nevada during the current period as opposed to the same period in 2021.

~~Cost of Sales~~

Cost of sales for the three months ended March 31, 2022 were $396,032, compared to $416,915 during the three months ended March 31, 2021, a decrease of $20,883, or 5%. 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 sales decrease of 4% as well as reducing our outsourced testing fees incurred during the current period. Our gross margins were approximately 35% during the three months ended March 31, 2022, compared to 34% during the three months ended March 31, 2021, which translated to $20,883 of decreased gross profit from our $28,425 of decreased revenues received in the current period.

	Three Months Ended March 31,						Increase /
	2023			2022			(Decrease)
Revenues	$	-		$	-		$	-
Cost of sales		-			-			-
Gross profit		-			-			-

Operating expenses:
General and administrative		45,674			42,479			3,195
Professional fees		128,440			259,977			(131,537	)
Total operating expenses:		174,114			302,456			(128,342	)

Operating loss		(174,114	)		(302,456	)		128,342

Total other income (expense)		52,293			(55,519	)		107,812

Net loss from continuing operations		(121,821	)		(357,975	)		236,154
Net income (loss) from discontinued operations		54,323			(15,621	)		69,944
Net loss	$	(67,498	)	$	(373,596	)	$	306,098

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, ~~2022~~2023 were ~~$235,470~~$45,674, compared to $211,961 during the three months ended March 31, 2021, an increase of $23,509, or 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 $0 and $16,952$42,479 during the three months ended March 31, 2022, an increase of $3,195, or 8%. The expenses consisted primarily of salaries and ~~2021,~~wages and included $30,991 and $6,171 of non-cash stock-based compensation, respectively. General and administrative expenses decreased primarily due to decreased corporate overhead activities.

Professional Fees

Professional fees for the three months ended March 31, ~~2022~~2023 were ~~$286,390,~~$128,440, compared to ~~$107,819~~$259,977 during the three months ended March 31, ~~2021, an increase~~2022, a decrease of ~~$178,571,~~$131,537, or ~~166%~~51%. Professional fees included non-cash, stock-based compensation of ~~$103,464~~$10,333 and ~~$44,147~~$103,464 during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. Professional fees ~~increased~~decreased primarily due to ~~increased~~decreased corporate consulting services during the current period as we ~~focused primarily~~decreased our focus 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 March 31, 2022 resulted in $16 of income, compared to $106,155 of expense during the three months ended March 31, 2021, an improvement of $106,171, or 100%. Our change in allowance for doubtful accounts improved during the current period as the Nevada tourism market began to open up again and our customers’ cash flows improved.expansion efforts.

Operating Loss

Our operating loss for the three months ended March 31, ~~2022~~2023 was ~~$313,173,~~$174,114, compared to an operating ~~income~~loss of ~~$2,620~~$302,456 during the three months ended March 31, ~~2021,~~2022, a decrease of ~~$315,793,~~$128,342, or ~~12,053%~~42%. Our operating loss ~~increased~~decreased primarily due to our decreased ~~gross profit and not having a reversal of our allowance for doubtful accounts.~~professional fees.

Other Income (Expense)

Other ~~expense,~~income, on a net basis, for the three months ended March 31, ~~2022~~2023 was ~~$60,423,~~$52,293, compared to other ~~income,~~expense, on a net basis, of ~~$15,581~~$55,519 during the three months ended March 31, ~~2021,~~2022, a net ~~decrease~~increase of ~~$76,004.~~$107,812. Other ~~expense~~income consisted of interest expense of ~~$75,718~~$82,707 and recovery of previously written off receivables of $135,000 for the three months ended March 31, ~~2022. partially offset by other income, consisting of $15,295 of interest income.~~2023.

~~Net Loss~~

Net loss for the three months ended March 31, 2022 was $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.

Results of Operations for the Six Months Ended March 31, ~~2022~~2023 and ~~2021:~~2022:

The following table summarizes selected items from the statement of operations for the six months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

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.

	Six Months Ended March 31,						Increase /
	2023			2022 revised			(Decrease)
Revenues	$	-		$	-		$	-
Cost of sales		-			-			-
Gross profit		-			-			-

Operating expenses:
General and administrative		85,198			82,135			3,063
Professional fees		175,637			470,822			(295,185	)
Total operating expenses:		260,835			552,957			(292,122	)

Operating loss		(260,835	)		(552,957	)		292,122

Total other income (expense)		(99,859	)		(112,000	)		12,141

Net loss from continuing operations	$	(360,694	)	$	(664,957	)	$	304,263
Net income (loss) from discontinued operations		52,866			13,758			39,108
Net loss		(307,828	)		(651,199	)		343,371

General and Administrative Expenses

General and administrative expenses for the six months ended March 31, ~~2022~~2023 were ~~$476,434,~~$85,198, 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$82,135 during the six months ended March 31, 2022, a increase of $3,063, or 4%. The expenses consisted primarily of salaries and ~~2021,~~wages and included $37,162 and $64,842 of non-cash stock-based compensation, respectively. General and administrative expenses ~~increased~~decreased due primarily to ~~increased~~decreased corporate overhead ~~activities offset by the discontinuation of rents on warehouse space that we were previously subleasing.~~activities.

Professional Fees

Professional fees for the six months ended March 31, ~~2022~~2023 were ~~$554,861,~~$175,637, compared to ~~$222,363~~$470,822 during the six months ended March 31, ~~2021, an increase~~2022, a decrease of ~~$332,498,~~$295,185, or ~~150%~~63%. Professional fees included non-cash, stock-based compensation of ~~$202,143~~$12,468 and ~~$97,077~~$124,579 during the six months ended March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, respectively. Professional fees ~~increased~~decreased primarily due to ~~increased use of~~decreased 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~~we decreased our ~~customers’ cash flows improved.~~focus on expansion efforts.

Operating Loss

Our operating loss for the six months ended March 31, ~~2022~~2023 was ~~$543,485,~~$260,835, compared to ~~$345,644~~$552,957 during the six months ended March 31, ~~2021, an increase~~2022, a decrease of ~~$197,841,~~$292,122, or ~~57%~~53%. Our operating loss ~~increased~~decreased primarily due to a ~~large increase~~decrease in professional fees.

Other Expense

Other expense, on a net basis, for the six months ended March 31, ~~2022~~2023 was ~~$120,436,~~$99,859, compared to other expense, on a net basis, of ~~$26,792~~$112,000 during the six months ended March 31, ~~2021,~~2022, a net ~~increase~~decrease of ~~$93,644.~~$12,141. Other expense consisted of ~~$145,111 of~~ interest expense asof $179,859 and an impairment on equipment of $55,000, 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~~recovery of previously ~~impaired inventory to our former CEO, during the six months ended March 31, 2021.~~

~~Net Loss~~

~~Net loss~~written off receivables of $135,000 for the six months ended March 31, 2022 was $663,921, compared to $372,436 during the six months ended March 31, 2021, an increase of $291,485, or 78%. The increased net loss was due primarily to larger professional fees and an increase in other expenses.2023.

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 ~~six-month~~three-month periods ended March 31, ~~2022~~2023 and ~~2021:~~2022:

	2022			2021			2023			2022
Operating Activities	$	(190,286	)	$	(94,603	)	$	(141,490	)	$	(190,286	)
Investing Activities		(777,868	)		(1,206	)		231,313			(777,868	)
Financing Activities		754,991			126,766			(30,123	)		754,991
Net Decrease in Cash	$	(213,163	)	$	30,957
Net increase (Decrease) in Cash							$	59,700		$	(213,163	)

Net Cash Used in Operating Activities

During the six months ended March 31, ~~2022,~~2023, net cash used in operating activities was ~~$190,286,~~$141,490, compared to net cash used in operating activities of ~~$94,603~~$190,286 for the same period ended March 31, ~~2021.~~2022, including cash provided by operating activities from discontinued operations of $141,538 for the six months ended March 31, 2023 compared to cash provided by operating activities from discontinued operations of $113,844 for the six months ended March 31, 2022. The ~~increase~~decrease in cash used in operating activities was primarily attributable to our ~~increased~~decrease in net ~~loss.~~loss and accounts receivable, along with increases in accounts payable and accrued expenses.

Net Cash ~~Used in~~Provided by (Used in) Investing Activities

During the six months ended March 31, ~~2022,~~2023, net cash provided by investing activities was $231,313, compared to $777,868 used in investing activities ~~was $777,868, compared to $1,206~~ for the same period ended March 31, ~~2022. The increase in~~2022, including cash used in investing activities from discontinued operations of $3,687 for the six months ended March 31, 2023 compared to cash used in investing activities from discontinued operations of $4,246 for the six months ended March 31, 2022. The cash provided by investing activities in the current period was a result of ~~secured~~the sale of the collateralized assets from the note receivable compared to cash used in investing activities for the prior period which was a result of 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 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.

Net Cash Provided by (Used in) Financing Activities

During the six months ended March 31, ~~2022,~~2023, net cash ~~provided by~~used in financing activities was ~~$754,991,~~$30,123, compared to net cash provided by financing activities of ~~$126,766~~$754,991 for the same period ended March 31, ~~2021.~~2022, including cash used in financing activities from discontinued operations of $30,023 for the six months ended March 31, 2023 compared to cash used financing activities from discontinued operations of $44,874 for the six months ended March 31, 2022. The current period consisted ~~primarily~~ of $30,023 of principal payments on an equipment loan, compared to $390,000 of proceeds received on debt financing, ~~$407,243~~ proceeds ~~from~~of $394,265 received on convertible debt financing proceeds of $55,600 from the sale of preferred stock, as offset by ~~$28,317~~$16,557 of principal payments on an equipment lease and ~~$16,557~~$28,317 of principal payments on an equipment loan ~~compared to $110,000 of net proceeds received on convertible debt financing,~~and $40,000 ~~of proceeds from short term advances and proceeds of $20,250 from the sale of stock, as offset by $26,769~~ of principal payments made on ~~an equipment lease and $16,715 of principal payments on an equipment loan~~convertible notes in the comparative ~~period.~~period in the prior year.

2122

Ability to Continue as a Going Concern

As of March 31, ~~2022,~~2023, our balance of cash on hand was ~~$82,769,~~$115,868, and we had negative working capital of ~~$1,598,387~~$2,993,815 and an accumulated deficit of ~~$18,615,574~~$20,316,599 resulting from recurring 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. 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.

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 ~~commercial sales~~sale of 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.lab testing services through our subsidiary Digipath Labs, Inc.

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. 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. We 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.

2223

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

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, ~~2022.~~2023. 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~~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 March 31, ~~2022,~~2023, our 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.

2324

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~~There were no 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 ~~six-month~~three-month period ended March 31, ~~2022:~~2023:

~~Common Stock Issued for Services~~

On February 11, 2022, the Company issued 2,166,667 shares of its common stock in exchange for services rendered to 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 February 11, 2022, the Company issued 250,000 shares of its common stock to settle outstanding payables in the amount of $7,500.~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

2425

ITEM 6. EXHIBITS.

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*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Schema Document
101.CAL*		Inline XBRL Calculation Linkbase Document
101.DEF*		Inline XBRL Definition Linkbase Document
101.LAB*		Inline XBRL Labels Linkbase Document
101.PRE*		Inline XBRL Presentation Linkbase Document
104		Cover Page Interactive Data File ~~(embedded~~(Embedded within the Inline XBRL ~~document)~~document and included in Exhibit)

* Filed herewith.

2526

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: May ~~16, 2022~~26, 2023

DIGIPATH, INC.

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

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

2627

	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	)

	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
September 30,	Commitments
2022 (for the six months remaining)	$	58,419
2023		119,468
2024		123,543
2025		116,892
2026		-
Total future undiscounted lease payments		418,322
Less interest		40,060
Present value of lease payments		378,262
Less current portion		98,281
Long-term operating lease liabilities	$	279,981

	Finance
	Leases

2022	$	3,865
2023		-
Total minimum lease payments		3,865
Less interest		43
Present value of lease liabilities		3,822
Less current portion		3,822
Long-term finance lease liabilities	$	-