UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For Quarterly Period Ended June 30, ~~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 August ~~15, 2022~~18, 2023 was ~~75,146,820~~87,096,820.

TABLE OF CONTENTS

			Page
			No.
PART I - FINANCIAL INFORMATION			3
ITEM 1.		FINANCIAL STATEMENTS (Unaudited)	3
		~~Condensed~~ Consolidated Balance Sheets as of June 30, ~~2022~~2023 (Unaudited) and September 30, ~~2021~~2022	3
		~~Condensed~~ Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2023 and 2022 ~~and 2021~~ (Unaudited)	4
		~~Condensed~~ Consolidated Statements of Stockholders’ ~~Equity (Deficit)~~Deficit for the ~~Three and~~ Nine Months Ended June 30, 2023 and 2022 ~~and 2021~~ (Unaudited)	5
		~~Condensed~~ Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 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	1720
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2224
ITEM 4.		CONTROLS AND PROCEDURES	2224
PART II –- OTHER INFORMATION			2325
ITEM 1.		Legal Proceedings	2325
ITEM 1A.		RISK FACTORS	2325
ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	2325
ITEM 3.		DEFAULTS UPON SENIOR SECURITIES	2325
ITEM 4.		MINE SAFETY DISCLOSURES	2325
ITEM 5.		OTHER INFORMATION	2325
ITEM 6.	~~EXHIBITS~~	23EXHIBITS	26
	~~SIGNATURES~~	25SIGNATURES	27

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

DIGIPATH, INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED BALANCE SHEETS


	June 30, 2022			September 30, 2021			June 30, 2023			September 30, 2022
	(Unaudited)						(Unaudited)
Assets

Current assets:
Cash	$	225,233		$	295,932		$	325,587		$	56,168
Accounts receivable, net		245,095			214,900
Note receivable		551,969			230,929			-			100,000
Other current assets		64,425			60,353			10,010			12,739
Deposits		25,141			24,751
Assets held for sale - current								353,375			393,197
Total current assets		1,111,863			826,865			688,972			562,104

Right-of-use asset		341,734			413,884
Fixed assets, net		481,539			647,252			-			55,000
Assets held for sale – long term								606,588			722,784
Total non-current assets		823,273			1,061,136			606,588			777,784

Total Assets	$	1,935,136		$	1,888,001		$	1,295,560		$	1,339,888

Liabilities and Stockholders’ Deficit

Current liabilities:
Accounts payable	$	487,078		$	370,977		$	202,685		$	215,558
Accrued expenses		438,664			220,002			209,520			152,986
Current portion of operating lease liabilities		100,685			93,601
Current portion of finance lease liabilities		-			20,379
Current maturities of convertible notes payable		1,728,702			1,050,000
Accrued expenses – related party								7,813			192,811
Current maturities of notes payable		545,880			259,425			665,000			665,000
Current maturities of convertible notes payable, net of discounts								1,364,158			1,198,469
Current maturities of convertible notes payable related parties, net of discounts								332,007			-
Liabilities held for sale - current								474,800			529,085
Total current liabilities		3,301,009			2,014,384			3,255,983			2,953,909

Non-current liabilities:
Operating lease liabilities		254,376			330,151
Notes payable		400,188			339,516
Convertible notes payable, net of discounts of $-0- and $8,322 at June 30, 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								175,634			310,253
Total non-current liabilities		654,564			926,949			175,634			795,251

Total Liabilities		3,955,573			2,941,333			3,431,617			3,749,160

Series B convertible preferred stock, $0.001 par value, 1,500,000 shares authorized; 333,600 and 0 shares issued and outstanding as of June 30, 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 June 30, 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 June 30, 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 June 30, 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 June 30, 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 June 30, 2023 and September 30, 2022, respectively								-			1
Preferred stock value
Common stock, $0.001 par value, 250,000,000 shares authorized; 87,096,820 and 75,146,820 shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively								87,097			75,147
Common stock payable								-			71,745
Additional paid-in capital		16,762,075			16,825,765			17,465,264			17,117,958
Accumulated deficit		(19,192,307	)		(17,951,653	)		(20,023,066	)		(20,008,771	)

Total Stockholders’ Deficit		(2,354,037	)		(1,053,332	)		(2,469,657	)		(2,742,872	)

Total Liabilities and Stockholders’ Deficit	$	1,935,136		$	1,888,001		$	1,295,560		$	1,339,888

See accompanying notes to unaudited consolidated financial statements.

DIGIPATH, INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

													2023			2022			2023			2022 revised
	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Nine Months Ended
	June 30,						June 30,						June 30,						June 30,
	2022			2021			2022			2021			2023			2022			2023			2022 revised

Revenues	$	682,665		$	764,015		$	1,986,985		$	1,897,560		$	-		$	-		$	-		$	-
Cost of sales		414,299			551,976			1,232,932			1,389,776			-			-			-			-
Gross profit		268,366			212,039			754,053			507,784			-			-			-			-

Operating expenses:
General and administrative		278,765			278,082			755,199			715,093			8,815			35,711			94,013			117,846
Professional fees		81,108			91,001			635,969			313,364			86,435			74,201			262,072			624,423
Change in allowance for doubtful accounts		66,712			(10,960	)		64,589			(28,945	)
Total operating expenses		426,585			358,123			1,455,757			999,512			95,250			109,912			356,085			742,269

Operating loss		(158,219	)		(146,084	)		(701,704	)		(491,728	)		(95,250	)		(109,912	)		(356,085	)		(742,269	)

Other income (expense):
Other Expense														-			-			(55,000	)		-
Recovery of previously written off receivables														40,000			-			175,000			-
Credit Loss														-			(358,670	)		-			(358,670	)
Interest income		12,386			-			37,061			-			-			12,386			-			37,061
Interest expense		(72,230	)		(31,130	)		(217,341	)		(105,840	)		(97,748	)		(67,560	)		(277,607	)		(204,235	)
Credit loss		(358,670	)		-			(358,670	)		-
Other Income		-			-			-			47,918
Total other income (expense)		(418,514	)		(31,130	)		(538,950	)		(57,922	)
Total other expense														(57,748	)		(413,844	)		(157,607	)		(525,844	)

Net loss	$	(576,733	)	$	(177,214	)	$	(1,240,654	)	$	(549,650	)
Net loss from continuing operations														(152,998	)		(523,756	)		(513,692	)		(1,268,113	)
Net income (loss) from discontinued operations														446,531			(52,977	)		499,397			40,181
Net income (loss)														293,533			(576,733	)		(14,295	)		(1,227,932	)
Preferred deemed dividend														-			-			-			(192,154	)
Net income (loss) to common shareholders													$	293,533		$	(576,733	)	$	(14,295	)	$	(1,420,086	)

Weighted average number of common shares outstanding – basic		75,146,820			68,479,201			73,845,233			64,081,692			84,055,062			75,146,820			82,856,710			73,845,233
Weighted average number of common shares outstanding – fully diluted		75,146,820			68,479,201			73,845,233			64,081,692			84,055,062			75,146,820			82,856,710			73,845,233

Net loss per share – basic and fully diluted	$	(0.01	)	$	(0.00	)	$	(0.02	)	$	(0.01	)
Net loss per share – basic and fully diluted	$	(0.01	)	$	(0.00	)	$	(0.02	)	$	(0.01	)
Net loss per share from continuing operations – basic													$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.02	)
Net income (loss) per share from discontinued operations – basic													$	0.01		$	(0.00	)	$	0.01		$	0.00
Net loss per share – basic													$	0.00		$	(0.01	)	$	(0.00	)	$	(0.02	)

Net loss per share from continuing operations – diluted													$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.02	)
Net income (loss) per share from discontinued operations – diluted													$	0.01		$	(0.00	)	$	0.01		$	0.00
Net loss per share – diluted													$	0.00		$	(0.01	)	$	(0.00	)	$	(0.02	)

See accompanying notes to unaudited consolidated financial statements.

DI~~DIGIPATH,~~GIPATH, INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

Series B Convertible Preferred Stock Series A Convertible Preferred Stock Common Stock Additional Paid-in Accumulated Total 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 )

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

Net loss - - - - - - - (576,733 ) (576,733 )

Balance, June 30, 2022 333,600 $ 333,600 1,047,942 $ 1,048 75,146,820 $ 75,147 $ 16,762,075 $ (19,192,307 ) $ (2,354,037 )

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 )

Issuance of common shares to settle stock payable - - - - 4,400,000 4,400 (32,120 ) 27,720 - -

Issuance of common shares for services - - - - 400,000 400 2,160 - 2,560

Forgiveness of accrued compensation by members of the Board of Directors - - - - - - - - - 138,000 - 138,000

Stock-based compensation - - - - - - - - - 3,482 - 3,482

Net income - - - - - - - - - - 293,533 293,533

Balance, June 30, 2023 333,600 $ 333,600 1,047,942 $ 1,048 - $               - 87,096,820 $ 87,097 $ - $ 17,465,264 $ (20,023,066 ) $ (2,469,657 )

Series B Convertible Preferred Stock Series A Convertible Preferred Stock Common Stock Additional Paid-in Accumulated Total 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

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

Stock-based compensation - related parties - - - - 83,333 83 27,559 - 27,642

Stock-based compensation - - - - 1,465,000 1,465 78,035 - 79,500

Net loss - - - - - - - (177,214 ) (177,214 )
Net Income (loss) - - - - - - - (177,214 ) (177,214 )

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

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

Net loss - - - - - - - - - - (576,733 ) (576,733 )

Balance, June 30, 2022 333,600 $ 333,600 1,047,942 $ 1,048 - $ - 75,146,820 $ 75,147 $ - $ 16,749,353 $ (19,179,585 ) $ (2,354,037 )
See accompanying notes to unaudited consolidated financial statements.
5

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

2023 2022 Revised
For the Nine Months Ended For the Nine Months Ended
June 30, June 30,
2022 2021 2023 2022 Revised
Cash flows from operating activities
Net loss $ (1,240,654 ) $ (549,650 )
Net loss from continuing operations $ (513,692 ) $ (1,268,113 )
Adjustments to reconcile net loss to net cash used in operating activities:
Change in allowance for doubtful accounts 64,589 (28,945 )
Credit loss 358,670 -
Depreciation and amortization expense 169,959 233,663
Loss on disposal of fixed assets - 2,227
Gain on early extinguishment of debt - (40,338 )
Recovery of previously written off receivables (175,000 ) -
Stock-based compensation 210,449 238,123 55,672 197,727
Amortization of debt discounts 58,654 8,322 106,636 58,654
Impairment of fixed assets 55,000 -
Credit loss - 358,670
Decrease (increase) in assets:
Accounts receivable (94,784 ) 77,280
Other current assets (41,133 ) (15,277 ) 2,729 (33,666 )
Deposits (390 ) (55,000 )
Right-of-use assets 72,150 68,408
Increase (decrease) in liabilities:
Accounts payable 123,602 (47,454 ) (12,873 ) 49,867
Accrued expenses 218,662 32,016 56,534 192,253
Lease liabilities (68,691 ) (62,471 )
Net cash (used) in operating activities (168,917 ) (139,096 )
Accrued expenses – related parties (46,998 ) -
Net cash used in operating activities from continuing operations (471,992 ) (444,608 )
Net cash provided by operating activities from discontinued operations 520,843 275,691
Net cash provided by (used in) operating activities 48,851 (168,917 )

Cash flows from investing activities
Purchase of fixed assets (4,246 ) (1,206 )
Advance of note receivable (817,649 ) - - (817,649 )
Proceeds from sale of collateralized assets 175,000 - 275,000 175,000
Net cash (used) in investing activities (646,895 ) (1,206 )
Net cash provided by (used in) investing activities from continuing operations 275,000 (642,649 )
Net cash used in investing activities from discontinued operations (8,971 ) (4,246 )
Net cash provided by (used in) investing activities 266,029 (646,895 )

Cash flows from financing activities
Principal payments on finance lease (20,379 ) (24,443 )
Principal payments on note payable, equipment financing (42,873 ) (40,445 )
Proceeds from short term advances - 65,000
Proceeds from notes payable 390,000 - - 390,000
Proceeds from convertible notes 402,765 110,000 - 402,765
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 745,113 130,362
Repurchase of preferred C stock (100 ) -
Net cash provided by (used in) financing activities from continuing operations (100 ) 808,365
Net cash used in financing activities from discontinued operations (45,361 ) (63,252 )
Net cash provided by (used in) financing activities (45,461 ) 745,113

Net increase (decrease) in cash (70,699 ) (9,940 ) 269,419 (70,699 )
Cash - beginning 295,932 82,749
Cash - ending $ 225,233 $ 72,809
Cash – beginning 56,168 295,932
Cash – ending $ 325,587 $ 225,233

Supplemental disclosures:
Interest paid $ 57,439 $ 49,508 $ 187,449 $ 57,439
Income taxes paid - - - -

Non-cash investing and financing activities:
Common stock issued for debt conversion $ - $ 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 $ -
Receipt of assets on deposit $ 6,076 $ -
Forgiveness of related party accrued compensation $ 138,000 $ -
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.

6

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 June 30, ~~2022:~~2023:
Schedule of Entities Under Common Control and Ownership
Jurisdiction of
Name of Entity⁽¹⁾ Incorporation Relationship
Digipath, Inc.⁽²⁾⁽¹⁾ Nevada ~~Nevada~~ Parent
Digipath Labs, Inc. Nevada ~~Nevada~~ Subsidiary
Digipath Labs CA, ~~Inc.~~Inc⁽³⁾⁽²⁾ California ~~California~~ Subsidiary
Digipath Labs S.A.S.⁽⁴⁾⁽³⁾ Colombia ~~Colombia~~ Subsidiary
VSSL Enterprises, Ltd.⁽⁵⁾⁽⁴⁾ Canada ~~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.

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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 expenses were reported in the nine months ended June 30, 2022 as $210,449 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 nine months ended June 30, 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 Q3-2022 effected by the restatement Previously Reported Correction of Error Effect of Discontinued operations Revised
Professional Fees $ 635,969 $ (12,722 ) $ 1,176 $ 624,423
Total operating expenses 1,455,757 (12,722 ) (700,766 ) 742,269
Operating loss (701,704 ) 12,722 (53,287 ) (742,269 )
Net loss (1,240,654 ) 12,722 - (1,227,932 )
Deemed Dividend - (192,154 ) - (192,154 )
Net Income (loss) to common shareholders (1,240,654 ) (179,432 ) - (1,420,086 )
Consolidated Statement of Cash Flows
Line items for Q3-2022 effected by the restatement Previously Reported Correction of Error Effect of Discontinued operations Revised
Net Loss $ (1,240,654 ) $ 12,722 $ (40,181 ) $ (1,268,113 )
Stock-based compensation 210,449 (12,722 ) - 197,727

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.
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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 June 30, 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 June 30, 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 June 30, 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.
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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.
Basic and Diluted Loss Per Share
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the three and nine months ended June 30, 2023 and 2022, potential dilutive securities of 96,705,198 and 72,520,865, respectively, had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.
Reclassifications
Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation. These reclassifications had no effect on our previously reported results of operations or accumulated deficit.
Recently Issued Accounting Pronouncements

There are no recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material effect on its financial position, results of operations, or cash flows.

Note 2 – Going Concern

As shown in the accompanying ~~condensed~~ consolidated financial statements, asAs of June 30, ~~2022,~~2023, the Company had negative working capital of $~~2,189,146~~2,567,011, and accumulated recurring losses of $~~19,192,307~~20,023,066, and ~~only~~ $~~225,233~~325,587 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.

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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 June 30, ~~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 June 30, 2022 Fair Value Measurements at June 30, 2023
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets
Cash $ 225,233 $ - $ - $ 325,587 $ - $ -

Liabilities
Lease liabilities - - 355,061
Notes payable - 946,068 - - 665,000 -
Convertible notes payable - - 1,728,701
Convertible notes payable, net of discounts of $72,069 - - 1,696,165

Level 1 Level 2 Level 3
Fair Value Measurements at September 30, 2021 Fair Value Measurements at September 30, 2022
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets
Cash $ 295,932 $ - $ - $ 56,168 $ - $ -

Liabilities
Lease liabilities - - 444,131
Notes payable - 598,941 - - 665,000 -
Convertible notes payable, net of discounts of $98,188 - - 1,307,282
Convertible notes payable, net of discounts of $84,767 - - 1,683,467

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

Note 4 – Related Party Transactions
During the nine months ended June 30, 2023 the Company incurred compensation expense of $45,000 for services provided by its CFO and paid its CFO $111,437 for accrued compensation related to services provided in prior periods. As of June 30, 2023, no amounts were owed to the CFO for services provided.
During the nine months ended June 30, 2023 the Company incurred fees of $47,000 for services provided by its directors and paid its directors $30,000 for services provided, and its directors waived the payment of $138,000 that had been accrued for services provided. As of June 30, 2023, the Company has accrued a total of $5,000 in fees for services provided by its directors.
As of June 30, 2023, the Company has accrued a total of $2,813 in reimbursable expenses owed to the officers and directors.
During the nine months ended June 30, 2023, the Company granted 3,400,000 and 1,400,000 shares of its common stock to the officers and directors as compensation for services performed with a fair value of $24,820 and $9,860, respectively.
Note 5 – 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 ~~June~~September 30, ~~2021,~~2022, we loaned C3 Labs, Inc. (“C3 Labs”) a total of $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 $37,061~~ ~~during the nine months ended June 30, 2022, with~~ total accrued interest of $~~37,991~~64,017 as of ~~June~~September 30, 2022. As of September 30, 2022, the Company recorded a full allowance against the loans and related accrued interest.

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The loans were made in connection with a potential acquisition of a controlling interest in C3 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 ~~which it is~~(“C3 Equipment”).
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 ~~process~~amount of ~~liquidating.~~$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 ~~anticipates that the proceeds of such liquidation will be insufficient to repay the Company in full all amounts owed to it by C3 Labs, and as such~~ has recorded ana full allowance against the Invictus Note as collectability cannot be assured as of ~~358,670~~.the date of this filing. As of June 30, ~~2022,~~2023 the ~~company has sold equipment of C3 Labs for proceeds~~Company received the full down payment of $~~175,000~~275,000~~, which it has applied~~. In April 2023, the Invictus Note was amended and restated to extend the ~~outstanding balance owed~~maturity date to ~~it by C3 Labs.~~March 31, 2024, with principal payments of $100,000 each due on September 30, 2023 and December 31, 2023, with the final payment of $425,000 due on March 31, 2024.
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Note 56 – Fixed Assets

Fixed assets consist of the following at June 30, ~~2022~~2023 and September 30, ~~2021:~~2022:
Schedule of Fixed Assets

June 30, 2022 September 30, 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 (1,797,116 ) (1,627,157 )
Total $ 481,539 $ 647,252
June 30, September 30,
As of
June 30, September 30,
2023 2022
Lab equipment - 55,000
Fixed assets, gross - 55,000
Less: accumulated depreciation        - -
Total $ - $ 55,000

~~Depreciation and amortization expense totaled $169,959~~ ~~and $233,663~~ ~~for~~During the nine months ended June 30, ~~2022 and 2021, respectively.~~
~~Note 6 –~~ ~~Leases~~
~~The~~2023, the Company ~~leases its operating and office facility under a non-cancelable real property lease agreement that expires~~recorded impairment expense in the amount of $55,000 related to equipment acquired with the anticipation of the C3 Labs acquisition, which is included in other expenses on ~~August 31, 2025. The Company also has a financing lease for lab equipment subject to~~ the recently adopted ASU 2016-02. In the locations in which it is economically feasible to continue to operate, management expects to enter into a new lease upon expiration. The real property lease contains provisions requiring paymentstatement of ~~property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. As~~operations. 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.~~
~~The components of lease expense were as follows:~~
~~Schedule of Components of Lease Expense~~

For the Nine For the Nine
Months Ended Months Ended
June 30, 2022 June 30, 2021
Operating lease cost $ 89,155 $ 6,477
Finance lease cost:
Amortization of assets 72,187 68,408
Interest on lease liabilities 1,266 20,747
Total net lease cost $ 162,608 $ 95,632
~~Supplemental balance sheet information related~~equipment was deemed to ~~leases was as follows:~~
~~Schedule of Supplemental Balance Sheet Information~~

June 30, 2022 September 30, 2021
Operating leases:
Operating lease assets $ 341,734 $
413,884

Current portion of operating lease liabilities 100,685 $ 93,601
Noncurrent operating lease liabilities 254,376 330,151
Total operating lease liabilities $ 355,061 $ 423,752
Finance lease:
Equipment, at cost $ 99,193 $ 99,193
Accumulated amortization (54,556 ) (39,677 )
Equipment, net $ 44,637 $ 59,516

Current portion of finance lease liabilities $ - $ 20,379
Noncurrent finance lease liabilities - -
Total finance lease liabilities $ - $ 20,379

Weighted average remaining lease term:
Operating leases 3.17 years 3.92 years
Finance leases 0.00 years .55 years

Weighted average discount rate:
Operating leases 5.75 % 5.75 %
Finance lease 18.41 % 18.41 %
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~~Supplemental cash flow and other information related to leases was as follows:~~
~~Schedule of Supplemental Cash Flow and Other Information~~

For the Nine For the Nine
Months Ended Months Ended
June 30, 2022 June 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases $ 45,490 $ 62,471
Financing cash flows used for finance leases $ 20,379 $ 24,443

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-cancelable operating leases as of June 30, 2022:
~~Schedule of Future Minimum Annual Lease Commitments Under Operating Leases~~

Fiscal Year Ending Minimum Lease
September 30, Commitments
2022 (for the three months remaining) $ 29,532
2023 119,468
2024 123,543
2025 116,891
2026 -
Total future undiscounted lease payments 389,434
Less interest 34,373
Present value of lease payments 355,061
Less current portion 100,685
Long-term operating lease liabilities $ 254,376
~~There Company does not have any obligations under finance leases as of June 30, 2022:~~be impaired.

Note 7 –Notes Payable

Notes payable consists of the following at June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively:
Schedule of Notes Payable
June 30, 2023 September 30, 2022
June 30, 2022 September 30, 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 June 30, 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. 156,068 198,941
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 946,068 598,941 665,000 665,000
Less: current maturities (545,880 ) (259,425 ) (665,000 ) (665,000 )
Notes payable $ 400,188 $ 339,516 $ - $ -

The Company recorded interest expense pursuant to the stated interest rate and closing costs on the notes payable in the amount of $~~65,061~~59,686 and $~~11,609~~65,785 during the nine months ended June 30, ~~2022~~2023 and ~~2021, respectively.~~2022.
Notes payable – discontinued operations

11On 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.
95,987 141,348
Note 8 – Convertible Notes Payable

Related Party Convertible notes payable ~~consists~~consist of the following at June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively:
Schedule of Related Party Convertible Notes Payable
June 30, September 30,
2023 2022

Related party 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 (17,993 ) (39,728 )
Total convertible debt 332,007 310,272
Less: current maturities (332,007 ) -
Related party convertible notes payable $ - $ 310,272
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Convertible notes payable consist of the following at June 30, 2023 and September 30, 2022, respectively:
Schedule of Convertible Notes Payable

June 30, 2022 September 30, 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 nine months ended June 30, 2022, the Company repaid $40,000 of the balance of this note. In addition, during the nine months ended June, 2022, the Company was advanced additional loans of $362,765 from the lender under the same terms. 718,235 355,470

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 1,768,235 1,405,470
Less: unamortized debt discounts (39,533 ) (98,188 )
Total convertible debt 1,728,702 1,307,282
Less: current maturities 1,728,702 1,050,000
Convertible notes payable $ - $ 257,282
June 30, 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 $355,469, 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 (54,076 ) (45,039 )
Total convertible debt 1,364,158 1,373,195
Less: current maturities (1,364,158 ) (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.

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The aforementioned accounting treatment resulted in a total debt discount equal to $~~98,188~~93,938. during the nine months ended June 30, 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 $106,636 and $58,654 ~~for~~, during the nine months ended June 30, ~~2022.~~2023 and 2022, respectively. Unamortized discount as of June 30, ~~2022~~2023 is $~~39,533~~72,069.

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 $~~79,795~~111,285 and $~~61,099~~79,796 for the nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.
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The Company recognized interest expense for the nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, as follows:
Schedule of Interest Expense

June 30, 2022 June 30, 2021

Interest on short term loans $ - $ 3,123
Interest on lease liabilities 13,106 6,477
Interest on notes payable 65,785 11,609
Amortization of beneficial conversion features 58,654 8,322
Interest on convertible notes 79,796 76,309
Total interest expense $ 217,341 $ 105,840
June 30, June 30,
2023 2022

Interest on notes payable 59,686 65,785
Amortization of beneficial conversion features 106,636 58,654
Interest on convertible notes 111,285 79,796
Total interest expense $ 277,607 $ 204,235

Note 9 -– ~~Changes in~~ Stockholders’ ~~Deficit~~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 June 30, ~~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 June 30, ~~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% 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.

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● 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.

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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 June 30, 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 March 2, 2023, the Company entered into a Preferred Stock Repurchase Agreement with Todd Denkin, the Company’s president, pursuant to which Mr. Denkin surrendered his Series C Preferred back to the Company for the purchase price of $100.
Common Stock
Common stock consists of $0.001 par value, 250,000,000 shares authorized, of which 87,096,820 shares were issued and outstanding as of June 30, 2023.
During the nine months ended June 30, ~~2022,~~ 2023, the Company ~~offered to~~issued 7,150,000 shares of its common stock in settlement of the ~~Series A Preferred shareholders~~common stock payable in 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 invested additional cash proceeds~~amount of $~~55,600~~71,745.
During the nine months ended June 30, 2023, the Company granted 3,400,000 ~~for~~and ~~55,600~~1,400,000 ~~Series B~~ shares ~~and converted~~ ~~278,000~~ of its ~~Series A into Series B.~~common stock to its officers and directors as compensation for services performed with a fair value of $24,820 and 9,860 respectively.
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Note 10 – Mezzanine Equity

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 June 30, ~~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.

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

Due to the change in control provision of the Series B Preferred, the Series B Preferred is classified as temporary equity on the balance sheet.
~~On December 30, 2021, the Company entered into an Exchange Agreement with one of the Company’s institutional investors (the “Investor”), pursuant to which the Investor exchanged~~ ~~278,000~~ ~~shares of the Series A Preferred for~~ ~~278,000~~ ~~shares of the Series B Preferred. In addition, on December 30, 2021, the Investor purchased~~ ~~55,600~~ ~~shares of Series B Preferred Stock at a price of $1.00~~ ~~per share, resulting in gross proceeds to the Company of $55,600~~.
~~Common Stock~~
~~Common stock consists of $0.001~~ ~~par value,~~ ~~250,000,000~~ ~~shares authorized, of which~~ ~~75,146,820~~ ~~shares were issued and outstanding as of June 30, 2022.~~
~~During the nine months ended June 30, 2022, the Company issued~~ ~~1,500,000~~ ~~shares of its common stock in exchange for services rendered to the Company, by the chairman of the board of directors, with a total fair value $52,500~~ ~~based on the closing price of the Company’s common stock on the dates of grant.~~
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~~During the nine months ended June 30, 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 $91,000~~ ~~based on the closing price of the Company’s common stock on the dates of grant.~~
~~During the nine months ended June 30, 2022, the Company issued~~ ~~250,000~~ ~~shares of its common stock to settle outstanding payables in the amount of $7,500~~.

Note 1011 – 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 June 30, 2022.~~

During the nine months ended June 30, ~~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 $~~66,949~~20,992 and $~~63,768~~66,949 of stock-based compensation expense was recognized during the nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, as a result of the vesting of common stock options issued. As of June 30, ~~2022~~2023 a total of $~~23,488~~4,643 of unamortized expense remains to be amortized over the vesting period.

The following is a summary of information about the stock options outstanding at June 30, ~~2022.~~2023.
Summary of Common Stock Options Outstanding
Shares Underlying
Shares Underlying Options Outstanding Shares Underlying Options Outstanding Options Exercisable Shares Underlying Options Outstanding Shares Underlying Options Exercisable
Weighted Weighted
Shares Average Weighted Shares Weighted Shares Average Weighted Shares Weighted
Range of Range of Underlying Remaining Average Underlying Average Range of Underlying Remaining Average Underlying Average
Exercise Exercise Options Contractual Exercise Options Exercise Exercise Options Contractual Exercise Options Exercise
Prices Prices Outstanding Life Price Exercisable Price Prices Outstanding Life Price Exercisable Price

$ 0.05 – $0.13 6,020,000 6.26 years $ 0.07 5,466,428 $ 0.07 0.0056 – $0.13 8,120,000 5.28 years $ 0.052 6,020,000 $ 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 nine months ended June 30, 2023:
Schedule of Weighted-Average Assumptions Used for Grants
June 30,
2023
Average risk-free interest rates 3.88 %
Average expected life (in years) 2.90
Volatility 184 %
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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 nine months ended June 30, 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 nine months ended June 30, 2023, was approximately $0.006 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, June 30, 2022 6,020,000 $ 0.07

Exercisable, June 30, 2022 5,466,428 $ 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, June 30, 2023 8,120,000 $ 0.052

Exercisable, June 30, 2023 6,020,000 $ 0.069

As of June 30, ~~2022,~~2023, these options in the aggregate had no$3,150 and $0 of intrinsic value asfor the outstanding and exercisable options, respectively, based on the per share market price of $~~0.0125~~0.007 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.
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Note 1112 – Common Stock Warrants

Warrants to purchase a total of ~~2,368,334~~15,387,050 shares of common stock were outstanding as of June 30, ~~2022.~~2023.

The following is a summary of information about our warrants to purchase common stock outstanding at June 30, ~~2022.~~2023 (including those issued to both investors and service providers).

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

$ 0.10 - 0.26 2,368,334 4.91 years $ 0.16 2,368,334 $ 0.16 0.0074-0.10 15,387,050 9.01 years $ 0.02 15,387,050 $ 0.02
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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 (166,667 ) 0.26

Balance, June 30, 2022 2,368,334 $ 0.16

Exercisable, June 30, 2022 2,368,334 $ 0.16
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, June 30, 2023 15,387,050 $ 0.016

Exercisable, June 30, 2023 15,387,050 $ 0.016

As of June 30, ~~2022,~~2023, these warrants in the aggregate had no$0 of intrinsic value as the per share market price of $~~0.0125~~0.007 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 13 – 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 $~~0.16~~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
June 30, 2023 September 30, 2022
Current assets:
Accounts receivable, net $ 302,300 $ 335,085
Deposits 18,675 25,141
Other current assets 32,400 32,971
Total current assets 353,375 393,197

Right-of-use asset 240,602 316,961
Fixed assets, net 365,986 405,823
Total long term assets 606,588 722,784
Total Assets $ 959,963 $ 1,115,981

Current liabilities:
Accounts payable $ 241,991 $ 334,909
Accrued expenses 58,439 32,571
Current portion of operating lease liabilities 110,772 100,685
Current maturities of notes payable 63,598 60,920
Total current liabilities 474,800 529,085

Operating lease liabilities 143,245 229,825
Notes payable 32,389 80,428
Total long term liabilities 175,634 310,253
Total Liabilities $ 650,434 $ 839,338
18
The statements of operations of Digipath Labs combined are summarized below:

For the Three Months Ended For the Nine Months Ended
June 30, June 30,
2023 2022 2023 2022

Revenues $ 785,224 $ 682,665 $ 2,272,689 $ 1,986,985
Cost of sales 382,655 414,299 1,265,098 1,232,932
Gross profit 402,569 268,366 1,007,591 754,053

Operating expenses:
General and administrative 226,466 309,766 731,457 701,942
Professional fees 50,843 6,907 94,302 (1,176 )
Total operating expenses 277,309 316,673 825,759 700,766

Operating income(loss) 125,260 (48,307 ) 181,832 53,287

Other income (expense):
Other income 322,798 - 322,798 -
Interest expense (1,527 ) (4,670 ) (5,233 ) (13,106 )
Total other income (expense) 321,271 (4,670 ) 317,565 (13,106 )

Net income (loss) $ 446,531 $ (52,977 ) $ 499,397 $ 40,181
Note 1214 – 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.

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~~Note 13 –~~ ~~Subsequent Events~~

~~On July 25, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Todd Denkin, the Company’s President, pursuant to which Mr. Denkin purchased~~ ~~1,000~~ ~~shares of the Company’s newly designated Series C Preferred Stock (“Series C Preferred Stock”) for a purchase price of $0.10~~ ~~per share of Series C Preferred Stock.~~
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.
16
~~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 June 30, ~~2022~~2023 and ~~2021:~~2022:

The following table summarizes selected items from the statement of operations for the three months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

Three Months Ended June 30, Increase /
2022 2021 (Decrease)
Revenues $ 682,665 $ 764,015 $ (81,350 )
Cost of sales 414,299 551,976 (137,677 )
Gross profit 268,366 212,039 56,327

Operating expenses:
General and administrative 278,765 278,082 683
Professional fees 81,108 91,001 (9,893 )
Change in allowance for doubtful accounts 66,712 (10,960 ) 77,672
Total operating expenses: 426,585 358,123 68,462

Operating income (loss) (158,219 ) (146,084 ) (12,135 )

Total other income (expense) (418,514 ) (31,130 ) (387,384 )

Net loss $ (576,733 ) $ (177,214 ) $ (399,519 )
~~Revenues~~
Aggregate revenues for the three months ended June 30, 2022 were $682,665, compared to revenues of $764,015 during the three months ended June 30, 2021, an decrease of $81,350 or 11%. The decrease in revenue was due to a decrease in cannabis production resulting from excess supply in the markets during the current period as opposed to the same period in 2021.
Three Months Ended June 30, Increase /
2023 2022 (Decrease)
Revenues $ - $ - $ -
Cost of sales - - -
Gross profit - - -

Operating expenses:
General and administrative 8,815 35,711 (26,896 )
Professional fees 86,435 74,201 12,234
Total operating expenses: 95,250 109,912 (14,662 )

Operating loss (95,250 ) (109,912 ) 14,662

Total other income (expense) (57,748 ) (413,844 ) 356,096

Net loss from continuing operations (152,998 ) (523,756 ) 370,758
Net income (loss) from discontinued operations 446,531 (52,977 ) 499,508
Net income (loss) $ 293,533 $ (576,733 ) $ 870,266

1720
~~Cost of Sales~~
Cost of sales for the three months ended June 30, 2022 were $414,299, compared to $551,976 during the three months ended June 30, 2021, a decrease of $137,677, or 25%. 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 11% as well as reducing our outsourced testing fees incurred during the current period. Our gross margins were approximately 39% during the three months ended June 30, 2022, compared to 28% during the three months ended June 30, 2021, which translated to $56,327 of increased gross profit in the current period.
General and Administrative Expenses

General and administrative expenses for the three months ended June 30, ~~2022~~2023 were ~~$278,765~~$8,815, compared to $278,082 during the three months ended June 30, 2021, an increase of $683, or 0%. 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$35,711 during the three months ended June 30, 2022, a decrease of $26,896, or 75%. The expenses consisted primarily of salaries and ~~2021,~~wages and included $3,482 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 June 30, ~~2022~~2023 were ~~$81,108,~~$86,435, compared to ~~$91,001~~$74,201 during the three months ended June 30, ~~2021, a decrease~~2022, an increase of ~~$9,893,~~$12,234, or ~~11%~~16%. Professional fees included non-cash, stock-based compensation of ~~$8,306~~$2,160 and ~~$90,190~~$2,135 during the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Professional fees ~~decreased~~increased primarily due to ~~decreased~~increased corporate consulting services during the current period as ~~we focused primarily~~work to close on the ~~lab operations during~~sale of substantially all of the ~~current period.~~
~~Change in Allowance for Doubtful Accounts~~
~~Our change in allowance for doubtful accounts for~~assets of Digipath Labs, LLC through the three months ended June 30, 2022 resulted in $66,712 of bad debt expense, compared to $10,960 of bad debt recovery during the three months ended June 30, 2021, a decrease of $77,672, or 709%. Our change in allowance for doubtful accounts was a result of collection issues from various customers.Purchase Agreement with DPL NV, LLC.

Operating Loss

Our operating loss for the three months ended June 30, ~~2022~~2023 was ~~$158,219,~~$95,250, compared to an operating loss of ~~$146,084~~$109,912 during the three months ended June 30, ~~2021, an increase~~2022, a decrease of ~~$12,135,~~$14,662, or 8%13%. Our operating loss ~~increased~~decreased primarily due to our ~~increased allowance for doubtful accounts.~~decreased general and administrative expenses.

Other Income (Expense)

Other expense, on a net basis, for the three months ended June 30, ~~2022~~2023 was ~~$418,514,~~$57,748, compared to other expense, on a net basis, of ~~$31,130~~$413,844 during the three months ended June 30, ~~2021,~~2022, a net ~~increase~~decrease of ~~$387,384.~~$356,096. Other expense consisted of interest expense of ~~$72,230~~$97,748 and ~~credit losses~~recovery of ~~$358,670~~previously written off receivables of $40,000 for the three months ended June 30, ~~2022, partially offset by other income, consisting of $12,386 of interest income.~~2023.

~~Net Loss~~
Net loss for the three months ended June 30, 2022 was $576,733, compared to net loss of $177,214 during the three months ended June 30, 2021, an increase of $399,519 or 225%. The net loss was primarily due to our decreased revenues, increased interest expense, and the increase in our doubtful accounts from the June 30, 2021 period.
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Results of Operations for the Nine Months Ended June ~~2022~~30, 2023 and ~~2021:~~2022:

The following table summarizes selected items from the statement of operations for the nine months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

Nine Months Ended June 30, Increase / Nine Months Ended June 30, Increase /
2022 2021 (Decrease) 2023 2022 revised (Decrease)
Revenues $ 1,986,985 $ 1,897,560 $ 89,425 $ - $ - $ -
Cost of sales 1,232,932 1,389,776 (156,844 ) - - -
Gross profit 754,053 507,784 246,269 - - -

Operating expenses:
General and administrative 755,199 715,093 40,106 94,013 117,846 (23,833 )
Professional fees 635,969 313,364 322,605 262,072 624,423 (362,351 )
Change in allowance for doubtful accounts 64,589 (28,945 ) 93,534
Total operating expenses: 1,455,757 999,512 456,245 356,085 742,269 (386,184 )

Operating loss (701,704 ) (491,728 ) (209,976 ) (356,085 ) (742,269 ) 386,184

Total other income (expense) (538,950 ) (57,922 ) (481,028 )
Total other expense (157,607 ) (525,844 ) 368,237

Net loss $ (1,240,654 ) $ (549,650 ) $ (691,004 )
Net loss from continuing operations $ (513,692 ) $ (1,268,113 ) $ 754,421
Net income (loss) from discontinued operations 499,397 40,181 459,216
Net income (loss) (14,295 ) (1,227,932 ) 1,213,637

21
~~Revenues~~
Aggregate revenues for the nine months ended June 30, 2022 were $1,986,985, compared to revenues of $1,897,560 during the nine months ended June 30, 2021, an increase of $89,425, or 5%. 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 nine months ended June 30, 2022 were $1,232,932, compared to $1,389,776 during the nine months ended June 30, 2021, a decrease of $156,844, or 11%. 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 38% and 27% during the nine months ended June 30, 2022 and 2021, respectively, translated to $246,269 of increased gross profit in the current period.
General and Administrative Expenses

General and administrative expenses for the nine months ended June 30, ~~2022~~2023 were ~~$755,199,~~$94,013, compared to $715,093 during the nine months ended June 30, 2021, an increase of $40,106, or 6%. 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 $50,856$117,846 during the nine months ended June 30, 2022, a decrease of $23,833, or 20%. The expenses consisted primarily of salaries and ~~2021,~~wages and included $37,162 and $157,013 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 nine months ended June 30, ~~2022~~2023 were ~~$635,969,~~$262,072, compared to ~~$313,364~~$624,423 during the nine months ended June 30, ~~2021, an increase~~2022, a decrease of ~~$322,605,~~$362,351, or ~~103%~~58%. Professional fees included non-cash, stock-based compensation of ~~$210,449~~$18,510 and ~~$238,123~~$124,579 during the nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Professional fees ~~increased~~decreased primarily due to ~~increased use of~~decreased stock-based compensation and corporate consulting services during the current ~~period.~~period as we decreased our focus on expansion efforts.
~~Change in Allowance for Doubtful Accounts~~
Our change in allowance for doubtful accounts resulted in $64,589 of expense for the nine months ended June 30, 2022, compared to income of $28,945 during the nine months ended June 30, 2021, an increase of $93,534, or 323%. Our change in allowance for doubtful accounts was a result of collection issues from various customers.
19

Operating Loss

Our operating loss for the nine months ended June 30, ~~2022~~2023 was ~~$701,704,~~$356,085, compared to ~~$491,728~~$742,269 during the nine months ended June ~~2021, an increase~~30, 2022, a decrease of ~~$209,976,~~$386,184, or ~~43%~~52%. 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 nine months ended June 30, ~~2022~~2023 was ~~$538,950,~~$157,607, compared to other expense, on a net basis, of ~~$57,922~~$525,844 during the nine months ended June 30, ~~2021,~~2022, a net ~~increase~~decrease of ~~$481,028.~~$368,237. Other expense consisted of ~~$217,341 of~~ interest expense of $277,607 and ~~credit losses~~an impairment on equipment of ~~$383,345, as~~$55,000, offset by ~~interest income of $37,061, compared to $105,840 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 June 30, 2021.~~
~~Net Loss~~
~~Net loss~~written off receivables of $175,000 for the nine months ended June 30, 2022 was $1,240,654, compared to $549,650 during the nine months ended June 30, 2021, an increase of $691,004, or 126%. 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 ~~nine-month~~nine month periods ended June 30, ~~2022~~2023 and ~~2021:~~2022:

2022 2021 2023 2022
Operating Activities $ (168,917 ) $ (139,096 ) $ 48,851 $ (168,917 )
Investing Activities (646,895 ) (1,206 ) 266,029 (646,895 )
Financing Activities 745,113 130,362 (45,461 ) 745,113
Net Decrease in Cash $ (70,699 ) $ 9,940
Net increase (Decrease) in Cash $ 269,419 $ (70,699 )

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

During the nine months ended June 30, ~~2022,~~2023, net cash ~~used in~~provided by operating activities was ~~$168,917,~~$48,851, compared to net cash used in operating activities of ~~$139,096~~$168,917 for the same period ended June 30, ~~2021.~~2022, including cash provided by operating activities from discontinued operations of $520,843 for the nine months ended June 30, 2023 compared to cash provided by operating activities from discontinued operations of $275,691 for the nine months ended June 30, 2022. The decrease in cash used in operating activities was primarily attributable to our ~~increased~~decrease in net loss ~~offset by the change~~and accounts receivable, along with increases in ~~allowance for doubtful~~ accounts payable and ~~credit losses.~~accrued expenses.
22

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

During the nine months ended June 30, ~~2022,~~2023, net cash provided by investing activities was $266,029, compared to $646,895 used in investing activities ~~was $646,895, compared to $1,206~~ for the same period ended June 30, ~~2022. The increase in~~2022, including cash used in investing activities from discontinued operations of $8,971 for the nine months ended June 30, 2023 compared to cash used in investing activities from discontinued operations of $4,246 for the nine months ended June 30, 2022. The cash provided by investing activities in the current period was a result of 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 in connection with a potential ~~acquisition, offset by proceeds received from the sale of equipment held as collateral securing the loan.~~acquisition.

Net Cash Provided by (Used in) Financing Activities

During the nine months ended June 30, ~~2022,~~2023, net cash ~~provided by~~used in financing activities was ~~$745,113,~~$45,461, compared to net cash provided by financing activities of ~~$130,362~~$745,113 for the same period ended June 30, ~~2021.~~2022, including cash used in financing activities from discontinued operations of $45,361 for the nine months ended June 30, 2023 compared to cash used financing activities from discontinued operations of $63,252 for the nine months ended June 30, 2022. The current period consisted ~~primarily~~ of $45,361 of principal payments on an equipment loan and repurchase of the Preferred C stock, compared to $390,000 of proceeds received on debt financing, proceeds of $402,765 ~~proceeds from~~received on convertible debt financing proceeds of $55,600 from the sale of preferred stock, as offset by ~~$42,873~~$20,379 of principal payments on an equipment lease and ~~$20,379~~$42,873 of principal payments on an equipment loan ~~compared to $110,000 of net proceeds received on convertible debt financing, $65,000 of proceeds from short term advances~~ and ~~proceeds of $20,250 from the sale of common stock, as offset by $40,445~~$40,000 of principal payments made on ~~an equipment lease and $24,443 of principal payments on an equipment loan~~convertible notes in the comparative ~~period.~~period in the prior year.

20
Ability to Continue as a Going Concern

As of June 30, ~~2022,~~2023, our balance of cash on hand was ~~$225,233,~~$325,587, and we had negative working capital of ~~$2,189,146~~$2,567,011 and an accumulated deficit of ~~$19,192,307~~$20,023,066 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.

23
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.

21
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.

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 June 30, ~~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 June 30, ~~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.

24
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.
22

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.

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

The following issuances of equity securities by the Company were exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933 during the ~~nine-month~~three-month period ended June 30, ~~2022:~~
~~Common Stock Issued for Services~~2023:

On ~~February 11, 2022,~~May 25, 2023, the Company issued ~~2,166,667 shares~~an aggregate 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~~4,400,000 shares of its common stock to ~~settle outstanding payables in~~its officers and directors as compensation for services performed.
On May 26, 2023, the ~~amount~~Company issued 400,000 shares of ~~$7,500.~~its common stock to a former director as compensation for services performed.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

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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)
2.2 Asset Purchase Agreement between Digipath, Inc., Digipath Labs, Inc. and IHE Holdings, LLC, dated April 20, 2023 (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 May 2, 2023)
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)
23
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)
10.1 Management Services Agreement between Digipath, Inc., Digipath Labs, Inc. and IHE Holdings, LLC, dated April 20, 2023(incorporated by reference to Exhibit 10.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on May 2, 2023)
10.2* Amended and Restated Secured Promissory Noted in the principal amount of $625,000, dated April 11, 2023, made by Invictus Wealth Group, LLC in favor of Digipath, Inc.
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 within the Inline XBRL document and included in Exhibit)
* Filed herewith.

2426

SIGNATURES

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

Date: August ~~15, 2022~~18, 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

2527


	Series B Convertible Preferred Stock				Series A Convertible Preferred Stock						Common Stock				Additional Paid-in			Accumulated			Total 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	)

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

Net loss		-		-		-			-			-		-		-			(576,733	)		(576,733	)

Balance, June 30, 2022		333,600	$	333,600		1,047,942		$	1,048			75,146,820	$	75,147	$	16,762,075		$	(19,192,307	)	$	(2,354,037	)


	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	)

Issuance of common shares to settle stock payable		-		-		-		-								4,400,000		4,400		(32,120	)		27,720			-			-

Issuance of common shares for services		-		-		-		-								400,000		400					2,160			-			2,560

Forgiveness of accrued compensation by members of the Board of Directors		-		-		-		-		-			-			-		-		-			138,000			-			138,000

Stock-based compensation		-		-		-		-		-			-			-		-		-			3,482			-			3,482

Net income		-		-		-		-		-			-			-		-		-			-			293,533			293,533

Balance, June 30, 2023		333,600	$	333,600		1,047,942	$	1,048		-		$	-			87,096,820	$	87,097	$	-		$	17,465,264		$	(20,023,066	)	$	(2,469,657	)

							2023			2022 Revised
	For the Nine Months Ended						For the Nine Months Ended
	June 30,						June 30,
	2022			2021			2023			2022 Revised
Cash flows from operating activities
Net loss	$	(1,240,654	)	$	(549,650	)
Net loss from continuing operations							$	(513,692	)	$	(1,268,113	)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in allowance for doubtful accounts		64,589			(28,945	)
Credit loss		358,670			-
Depreciation and amortization expense		169,959			233,663
Loss on disposal of fixed assets		-			2,227
Gain on early extinguishment of debt		-			(40,338	)
Recovery of previously written off receivables								(175,000	)		-
Stock-based compensation		210,449			238,123			55,672			197,727
Amortization of debt discounts		58,654			8,322			106,636			58,654
Impairment of fixed assets								55,000			-
Credit loss								-			358,670
Decrease (increase) in assets:
Accounts receivable		(94,784	)		77,280
Other current assets		(41,133	)		(15,277	)		2,729			(33,666	)
Deposits		(390	)		(55,000	)
Right-of-use assets		72,150			68,408
Increase (decrease) in liabilities:
Accounts payable		123,602			(47,454	)		(12,873	)		49,867
Accrued expenses		218,662			32,016			56,534			192,253
Lease liabilities		(68,691	)		(62,471	)
Net cash (used) in operating activities		(168,917	)		(139,096	)
Accrued expenses – related parties								(46,998	)		-
Net cash used in operating activities from continuing operations								(471,992	)		(444,608	)
Net cash provided by operating activities from discontinued operations								520,843			275,691
Net cash provided by (used in) operating activities								48,851			(168,917	)

Cash flows from investing activities
Purchase of fixed assets		(4,246	)		(1,206	)
Advance of note receivable		(817,649	)		-			-			(817,649	)
Proceeds from sale of collateralized assets		175,000			-			275,000			175,000
Net cash (used) in investing activities		(646,895	)		(1,206	)
Net cash provided by (used in) investing activities from continuing operations								275,000			(642,649	)
Net cash used in investing activities from discontinued operations								(8,971	)		(4,246	)
Net cash provided by (used in) investing activities								266,029			(646,895	)

Cash flows from financing activities
Principal payments on finance lease		(20,379	)		(24,443	)
Principal payments on note payable, equipment financing		(42,873	)		(40,445	)
Proceeds from short term advances		-			65,000
Proceeds from notes payable		390,000			-			-			390,000
Proceeds from convertible notes		402,765			110,000			-			402,765
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		745,113			130,362
Repurchase of preferred C stock								(100	)		-
Net cash provided by (used in) financing activities from continuing operations								(100	)		808,365
Net cash used in financing activities from discontinued operations								(45,361	)		(63,252	)
Net cash provided by (used in) financing activities								(45,461	)		745,113

Net increase (decrease) in cash		(70,699	)		(9,940	)		269,419			(70,699	)
Cash - beginning		295,932			82,749
Cash - ending	$	225,233		$	72,809
Cash – beginning								56,168			295,932
Cash – ending							$	325,587		$	225,233

Supplemental disclosures:
Interest paid	$	57,439		$	49,508		$	187,449		$	57,439
Income taxes paid		-			-			-			-

Non-cash investing and financing activities:
Common stock issued for debt conversion	$	-		$	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		$	-
Receipt of assets on deposit							$	6,076		$	-
Forgiveness of related party accrued compensation							$	138,000		$	-
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

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

Line items for Q3-2022 effected by the restatement	Previously Reported			Correction of Error			Effect of Discontinued operations			Revised
Professional Fees	$	635,969		$	(12,722	)	$	1,176		$	624,423
Total operating expenses		1,455,757			(12,722	)		(700,766	)		742,269
Operating loss		(701,704	)		12,722			(53,287	)		(742,269	)
Net loss		(1,240,654	)		12,722			-			(1,227,932	)
Deemed Dividend		-			(192,154	)		-			(192,154	)
Net Income (loss) to common shareholders		(1,240,654	)		(179,432	)		-			(1,420,086	)

	-	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.

							Level 1		Level 2		Level 3
	Fair Value Measurements at June 30, 2022						Fair Value Measurements at June 30, 2023
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Cash	$	225,233	$	-	$	-	$	325,587	$	-	$	-

Liabilities
Lease liabilities		-		-		355,061
Notes payable		-		946,068		-		-		665,000		-
Convertible notes payable		-		-		1,728,701
Convertible notes payable, net of discounts of $72,069								-		-		1,696,165


	June 30, 2022			September 30, 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		(1,797,116	)		(1,627,157	)
Total	$	481,539		$	647,252

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


	For the Nine		For the Nine
	Months Ended		Months Ended
	June 30, 2022		June 30, 2021
Operating lease cost	$	89,155	$	6,477
Finance lease cost:
Amortization of assets		72,187		68,408
Interest on lease liabilities		1,266		20,747
Total net lease cost	$	162,608	$	95,632


	June 30, 2022			September 30, 2021
Operating leases:
Operating lease assets	$	341,734		$	413,884

Current portion of operating lease liabilities		100,685		$	93,601
Noncurrent operating lease liabilities		254,376			330,151
Total operating lease liabilities	$	355,061		$	423,752
Finance lease:
Equipment, at cost	$	99,193		$	99,193
Accumulated amortization		(54,556	)		(39,677	)
Equipment, net	$	44,637		$	59,516

Current portion of finance lease liabilities	$	-		$	20,379
Noncurrent finance lease liabilities		-			-
Total finance lease liabilities	$	-		$	20,379

Weighted average remaining lease term:
Operating leases		3.17 years			3.92 years
Finance leases		0.00 years			.55 years

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


Fiscal Year Ending	Minimum Lease
September 30,	Commitments
2022 (for the three months remaining)	$	29,532
2023		119,468
2024		123,543
2025		116,891
2026		-
Total future undiscounted lease payments		389,434
Less interest		34,373
Present value of lease payments		355,061
Less current portion		100,685
Long-term operating lease liabilities	$	254,376


	June 30, 2022			September 30, 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 nine months ended June 30, 2022, the Company repaid $40,000 of the balance of this note. In addition, during the nine months ended June, 2022, the Company was advanced additional loans of $362,765 from the lender under the same terms.		718,235			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		1,768,235			1,405,470
Less: unamortized debt discounts		(39,533	)		(98,188	)
Total convertible debt		1,728,702			1,307,282
Less: current maturities		1,728,702			1,050,000
Convertible notes payable	$	-		$	257,282

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		(54,076	)		(45,039	)
Total convertible debt		1,364,158			1,373,195
Less: current maturities		(1,364,158	)		(1,198,469	)
Convertible notes payable	$	-		$	174,726


	June 30, 2022		June 30, 2021

Interest on short term loans	$	-	$	3,123
Interest on lease liabilities		13,106		6,477
Interest on notes payable		65,785		11,609
Amortization of beneficial conversion features		58,654		8,322
Interest on convertible notes		79,796		76,309
Total interest expense	$	217,341	$	105,840

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

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

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

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

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

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

●	The shares of Series 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.

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

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

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

	June 30,
	2023

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

				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, June 30, 2022		6,020,000		$	0.07

Exercisable, June 30, 2022		5,466,428		$	0.07

	Three Months Ended June 30,						Increase /
	2022			2021			(Decrease)
Revenues	$	682,665		$	764,015		$	(81,350	)
Cost of sales		414,299			551,976			(137,677	)
Gross profit		268,366			212,039			56,327

Operating expenses:
General and administrative		278,765			278,082			683
Professional fees		81,108			91,001			(9,893	)
Change in allowance for doubtful accounts		66,712			(10,960	)		77,672
Total operating expenses:		426,585			358,123			68,462

Operating income (loss)		(158,219	)		(146,084	)		(12,135	)

Total other income (expense)		(418,514	)		(31,130	)		(387,384	)

Net loss	$	(576,733	)	$	(177,214	)	$	(399,519	)

	Nine Months Ended June 30,						Increase /			Nine Months Ended June 30,						Increase /
		2022			2021			(Decrease)		2023			2022 revised			(Decrease)
Revenues	$	1,986,985		$	1,897,560		$	89,425		$	-		$	-		$	-
Cost of sales		1,232,932			1,389,776			(156,844	)		-			-			-
Gross profit		754,053			507,784			246,269			-			-			-

Operating expenses:
General and administrative		755,199			715,093			40,106			94,013			117,846			(23,833	)
Professional fees		635,969			313,364			322,605			262,072			624,423			(362,351	)
Change in allowance for doubtful accounts		64,589			(28,945	)		93,534
Total operating expenses:		1,455,757			999,512			456,245			356,085			742,269			(386,184	)

Operating loss		(701,704	)		(491,728	)		(209,976	)		(356,085	)		(742,269	)		386,184

Total other income (expense)		(538,950	)		(57,922	)		(481,028	)
Total other expense											(157,607	)		(525,844	)		368,237

Net loss	$	(1,240,654	)	$	(549,650	)	$	(691,004	)
Net loss from continuing operations										$	(513,692	)	$	(1,268,113	)	$	754,421
Net income (loss) from discontinued operations											499,397			40,181			459,216
Net income (loss)											(14,295	)		(1,227,932	)		1,213,637

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)
2.2		Asset Purchase Agreement between Digipath, Inc., Digipath Labs, Inc. and IHE Holdings, LLC, dated April 20, 2023 (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 May 2, 2023)
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)
10.1		Management Services Agreement between Digipath, Inc., Digipath Labs, Inc. and IHE Holdings, LLC, dated April 20, 2023(incorporated by reference to Exhibit 10.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on May 2, 2023)
10.2*		Amended and Restated Secured Promissory Noted in the principal amount of $625,000, dated April 11, 2023, made by Invictus Wealth Group, LLC in favor of Digipath, Inc.
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 within the Inline XBRL document and included in Exhibit)

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