Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

 

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

For the quarterly period ended October 31, 20202021

or

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

For the transition period from            to             ..

 

Commission File No. 000-56196

 

Odyssey Group International, Inc.

(Exact name of registrant as specified in its charter)

   
Nevada 47-1022125

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

2372 Morse Avenue, Irvine, CA92614

(Address of principal executive offices, including zip code)

 

(619) 832-2900(702)780-6559

(Registrant’s telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each ClassTrading SymbolName of each exchange on which registered
N/AN/AN/A

 

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

 

Title of each ClassTrading SymbolName of each exchange on which registered
Common Stock ($0.001 par value)ODYYOTC

 

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.    Yesx  ☒    No  ¨

 

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yesx  ☒    No  ¨

 

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 the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

 

 Large accelerated filer  oAccelerated filer  o
 Non-accelerated filero  ☐Smaller reporting company  x
 Emerging growth company  o 

 

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. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐    Nox  ☒

 

90,570,20291,015,650 shares of common stock, par value $.001 per share, outstanding as of December 10, 20202021

 

 

   

 

ODYSSEY GROUP INTERNATIONAL, INC.

FORM 10-Q

For the Quarter Ended October 31, 20202021

 

INDEX

 

  Page
PART I. FINANCIAL INFORMATION3
Item 1Financial Statements3
 Balance Sheets3
 Statements of Operations and Comprehensive Loss4
 Statements of Stockholders’ Equity (Deficit)5
 Statements of Cash Flows6
 Notes to Financial Statements7
Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations1413
Item 3Quantitative and Qualitative Disclosures About Market Risk1917
Item 4Controls and Procedures1917
  
PART II. OTHER INFORMATION
Item 1ARisk Factors2119
Item 6Exhibits3219
Signature2220

 

 

 

 

 2 

 

Part I - FINANCIAL INFORMATION

Item 1 - Financial Statements

 

Odyssey Group International, Inc.

Balance Sheets

(Unaudited)

 

  October 31,  July 31, 
  2020  2020 
       
Assets        
Current assets:        
Cash $292,756  $62,952 
Prepaid expenses  102,500   36,667 
Total current assets  395,256   99,619 
         
Property and equipment, net of accumulated depreciation of $2,483 and $2,345  827   965 
Intangible assets, net of accumulated amortization of $47,500 and $45,000  2,500   5,000 
Total assets $398,583  $105,584 
         
Liabilities and Stockholders' Deficit        
Current liabilities:        
Accounts payable $424,040  $269,388 
Accrued wages  211,736   211,702 
Accrued interest  22,810   14,743 
Notes payable, net of unamortized debt discount of $455,024 and $233,770  239,976   211,230 
Total current liabilities  898,562   707,063 
         
Long-term debt  50,000   50,000 
Total liabilities  948,562   757,063 
         
Shareholders' equity (deficit):        
Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares issued or outstanding      
Common stock, $0.001 par value, 500,000,000 shares authorized, 90,570,202 and 88,559,978 shares issued and outstanding  90,570   88,560 
Additional paid-in-capital  28,921,693   28,110,689 
Accumulated deficit  (29,562,242)  (28,850,728)
Total stockholders' deficit  (549,979)  (651,479)
Total liabilities and stockholders' deficit $398,583  $105,584 

         
  October 31,  July 31, 
  2021  2021 
       
Assets        
Current assets:        
Cash $471,140  $556,584 
Prepaid expenses and other current assets  460,397   53,535 
Total current assets  931,537   610,119 
         
Property and equipment, net of accumulated depreciation of $3,034 and $2,896  276   414 
Total assets $931,813  $610,533 
         
Liabilities and Stockholders' Deficit        
Current liabilities:        
Accounts payable $1,368,592  $1,224,783 
Accrued wages  255,768   259,487 
Accrued interest  64,221   32,351 
Asset purchase liability  1,123,090   1,125,026 
Notes payable, net of unamortized debt discount and closing costs of $184,089 and $351,030  1,115,911    736,240  
Total current liabilities  3,927,582   3,377,887 
         
Total liabilities  3,927,582   3,377,887 
         
Commitments and contingencies (Note 3)      
         
Stockholders' deficit:        
Preferred stock, $0.001 par value, 100,000,000 shares authorized, 0 shares issued or outstanding  0   0 
Common stock, $0.001 par value, 500,000,000 shares authorized, 91,015,650 and 88,559,978 shares issued and outstanding  91,016   87,191 
Additional paid-in-capital  44,293,312   42,879,278 
Accumulated deficit  (47,380,097)  (45,733,823)
Total stockholders' deficit  (2,995,769)  (2,767,354)
Total liabilities and stockholders' deficit $931,813  $610,533 

 

The accompanying notes are an integral part of these financial statements.

 3 

 

Odyssey Group International, Inc.

Statements of Operations and Comprehensive Loss

(Unaudited)

 

  For the Three Months Ended October 31, 
  2020  2019 
       
       
General and administrative expense $525,269  $1,322,721 
Loss from operations  (525,269)  (1,322,721)
         
Interest expense  186,245   93,891 
Net loss and comprehensive loss $(711,514) $(1,416,612)
         
         
Basic and diluted net loss per share $(0.01) $(0.02)
         
Shares used for basic and diluted net loss per share  90,281,255   86,990,400 

         
  For the Three Months Ended October 31, 
  2021  2020 
       
Research and development expense $322,504  $0 
General and administrative expense  1,106,884   525,269 
Loss from operations  (1,429,388)  (525,269)
         
Interest expense  216,886   186,245 
Net loss and comprehensive loss $(1,646,274) $(711,514)
         
         
Basic and diluted net loss per share $(0.02) $(0.01)
         
Shares used for basic and diluted net loss per share  88,064,376   90,281,255 
         

 

The accompanying notes are an integral part of these financial statements.

 4 

 

Odyssey Group International, Inc.

Statements of Stockholders' Equity (Deficit)

(Unaudited)

 

 

        Additional     Total 
        Paid-In  Accumulated Equity 
  Shares  Dollars  In Capital  Deficit  (Deficit) 
Balances, July 31, 2020  88,559,978  $88,560  $28,110,689  $(28,850,728) $(651,479)
Note payable converted to common stock  214,000   214   106,786      107,000 
Stock-based compensation        130,301      130,301 
Common stock issued in debt financing  420,000   420   196,980      197,400 
Common stock issued in equity financing  1,396,224   1,396   248,604      250,000 
Stock forfeited  (20,000)  (20)        (20)
Warrants issued in connection with financings        128,333      128,333 
Net loss           (711,514)  (711,514)
Balances, October 31, 2020  90,570,202  $90,570  $28,921,693  $(29,562,242) $(549,979)
                     
  Shares  Dollars  Additional
Paid-In
Capital
  Accumulated
Deficit
  Total Equity (Deficit) 
Balances, July 31, 2021  87,191,168  $87,191  $42,879,278  $(45,733,823) $(2,767,354)
Stock-based compensation        533,105      533,105 
Common stock issued in debt financing  200,000   200   17,518      17,718 
Common stock issued in equity financings  3,974,482   3,974   863,061      867,035 
Return of reserved shares  (350,000)  (350)  350       
Net loss           (1,646,274)  (1,646,274)
Balances, October 31, 2021  91,015,650  $91,016  $44,293,312  $(47,380,097) $(2,995,769)

 

 

        Additional     Total 
        Paid-In  Accumulated  Equity 
  Shares  Dollars  In Capital  Deficit  (Deficit) 
Balances, July 31, 2019  86,990,400  $86,990  $23,821,124  $(24,501,872) $(593,758)
Stock-based compensation        1,048,312      1,048,312 
Warrants and beneficial conversion feature issued with convertible notes        85,430      85,430 
Net loss           (1,416,612)  (1,416,612)
Balances, October 31, 2019  86,990,400  $86,990  $24,954,866  $(25,918,484) $(876,628)
  Shares  Dollars  Additional
Paid-In
Capital
  Accumulated
Deficit
  Total Equity (Deficit) 
Balance, July 31, 2020  88,559,978  $88,560  $28,110,689  $(28,850,728) $(651,479)
Note payable converted to common stock  214,000   214   106,786      107,000 
Stock-based compensation        130,301      130,301 
Common stock issued in debt financing  420,000   420   196,980      197,400 
Common stock issued in equity financing  1,396,224   1,396   248,604      250,000 
Stock forfeited  (20,000)  (20)        (20)
Warrants issued in connection with financings        128,333      128,333 
Net loss           (711,514)  (711,514)
Balance, October 31, 2020  90,570,202  $90,570  $28,921,693  $(29,562,242) $(549,979)

 

The accompanying notes are an integral part of these financial statements.

 

 

 

 5 

 

 

Odyssey Group International, Inc.

Statements of Cash Flows

(Unaudited)

 

 

        
 For the Three Months Ended October 31,  For the Three Months Ended October 31, 
 2020  2019  2021 2020 
          
Cash flows from operating activities:                
Net loss $(711,514) $(1,416,612) $(1,646,274) $(711,514)
Adjustments to reconcile net loss to net cash flows used in operating activities:                
Depreciation and amortization  2,638   2,638   138   2,638 
Stock-based compensation  130,281   1,048,312   533,105   130,281 
Amortization of beneficial conversion feature  88,333   70,309 
Amortization of debt discount and closing costs  82,846    
Common stock issued for debt financing commitment shares  17,718   0 
Amortization of beneficial conversion feature, debt discount and closing costs  166,940   171,179 
Other non-cash interest expense  7,000      0   7,000 
Asset purchase liability  (1,936)  0 
Changes in operating assets and liabilities:                
Increase in prepaid expenses  (65,833)  82,977 
Increase in prepaid expenses and other current assets  (142,653)  (65,833)
Increase in other current assets  (264,209)  0 
Increase in accounts payable  154,652   1,031   143,810   154,652 
Increase (decrease) in accrued wages  34   (27,013)
Decrease in accrued wages  (3,719)  34 
Increase in accrued interest  8,067   23,583   31,870   8,067 
Net cash used in operating activities  (303,496)  (214,775)  (1,165,210)  (303,496)
                
Cash flows from investing activities  0   0 
        
Cash flows from financing activities:                
Proceeds from notes payable  315,000   150,000   250,000   315,000 
Principal payments made on notes payable  (37,269)  0 
Financing closing costs paid  (31,700)     0   (31,700)
Proceeds from equity financing  250,000      867,035   250,000 
Net cash provided by financing activities  533,300   150,000   1,079,766   533,300 
                
Increase (decrease) in cash and cash equivalents  229,804   (64,775)  (85,444)  229,804 
                
Cash and cash equivalents:                
Beginning of period  62,952   167,095   556,584   62,952 
End of period $292,756  $102,320  $471,140  $292,756 
                
                
Supplemental disclosure of non-cash information:                
Beneficial conversion feature related to Note payable $  $85,430 
Common stock issued for conversion of notes payable $107,000  $   0   107,000 
Common stock issued for debt financing commitment shares $197,400  $   17,718   197,400 
Warrants issued in connection with financings $128,333  $   0   128,333 
Original issue discount on debt $35,000  $   0   35,000 

 

The accompanying notes are an integral part of these financial statements.

 6 

 

Odyssey Group International, Inc.

Notes to Financial Statements

(Unaudited)

 

 

Note 1. Basis of Presentation and Nature of Operations

 

Basis of Presentation

The accompanying financial information of Odyssey Group International, Inc. is unaudited and has been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). However, such information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of July 31, 20202021 is derived from our 20202021 Annual Report on Form 10-K. The financial statements included herein should be read in conjunction with the financial statements and the notes thereto included in our 20202021 Annual Report on Form 10-K filed with the SEC on November 16, 2020.October 29, 2021. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

 

Significant Accounting Policies

Our significant accounting policies have not changed during the three months ended October 31, 20202021 from those disclosed in our Annual Report on Form 10-K for the year ended July 31, 2020.2021.

 

Reclassifications

Certain immaterial reclassifications were made to the prior period financial statements to conform to the current period presentation. There was no effect on our Statements of Operations and Comprehensive Loss and Statement of Cash Flows.

Nature of Operations

Our business model is to develop or acquire medical relatedunique medical-related products, engage third parties to manufacture such products and then distribute the products through various distribution channels, including third parties. We have product development projects in three differentare developing potentially life-saving technologies;technologies: the CardioMap® heart monitoring and screening device,device; the Save aA Life choking rescue device, and a unique neurosteroid drug compound intended to treat concussions, and a unique drug compound to treat rare brain disorders. We intend to acquire other technologies and assets and plan to be a trans-disciplinarydisorders in partnership with Prevacus, Inc. To date, none of our product development company involved in the discovery, development and commercialization of products and technologies that may be applied over various medical markets.candidates has received regulatory clearance or approval for commercial sale.

 

We plan to license, improve, and develop our products and identify and select distribution channels. We intend to establish agreements with distributors to get products to market quickly, as well as to undertake and engage in our own direct marketing efforts. We will determine the most effective method of distribution for each unique product that we include in our portfolio. We will engage third-party research and development firms who specialize in the creation of our products to assist us in the development of our own products, and we will apply for trademarks and patents once we have developed proprietary products.

 

We are not currently selling or marketing any products, as our products are in late-stage development and Food and Drug Administration ("FDA") clearance or approval to market our products will be required in order to sell in the United States.

Research and Development

Research and development expense is expensed as incurred and totaled $322,504 and 0 zero for the three months ended October 31, 2021 and 2020, respectively.

 

Note 2. New Accounting Pronouncements

 

ASU 2019-12

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740),” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments is permitted, including adoption in any interim period for which financial statements have not yet been issued. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. We do not expect theThe adoption of ASU 2019-12 toeffective August 1, 2021, on a prospective basis did not have a material effect on our financial position, results of operations, or cash flows.

 

 

 

 7 

 

 

ASU 2020-06

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40),” which simplifies the accounting for convertible instruments, reduces complexity for preparers and practitioners and improves the decision usefulness and relevance of the information provided to financial statement users. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. We have not yet determined the impact of adoptionadopting this standard on our financial position, results of operations or cash flows.

 

Note 3.  Fair Value

 

The fair value of financial assets and liabilities are determined utilizing a three-level framework as follows:

 

Level 1 – Observable inputs, such as unadjusted quoted prices in active markets, for substantially identical assets and liabilities.

 

Level 2 – Observable inputs other than quoted prices within Level 1 for similar assets and liabilities. These include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.  If the asset or liability has a specified or contractual term, the input must be observable for substantially the full term of the asset or liability. 

 

Level 3 – Unobservable inputs that are supported by little or no market activity, generally requiring a significant amount of judgment by management. 

 

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Further, although we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

We did not have any transfers of assets or liabilities measured at fair value on a recurring basis to or from Level 1, Level 2, or Level 3 during the three months ended October 31, 20202021, or the year ended July 31, 2020.2021.

 

The carrying values of cash, prepaid expenses, accounts payable and accrued wages approximate their fair value due to their short maturities.

 

No changes were made to our valuation techniques during the quarter ended October 31, 2020.2021.

 

Contingent LiabilityLiabilities

At October 31, 20202021 and July 31, 2020,2021, we had contingent consideration related to the acquisition of intellectual property, know-how and patents for an anti-choking, life-saving medical device in fiscal 2019. According to the agreement, we will make a one-time cash payment totaling $250,000 upon FDA clearance of the device. The fair value of the contingent consideration is reviewed quarterly and determined based on the current status of the project (Level 3). We determined the value was zero at both periods since it is not yet probable that we will file for FDA clearance.

We also had contingent consideration at October 31, 2021 and July 31, 2021 related to milestones in our Asset Purchase Agreement with Prevacus, Inc. The fair value of the contingent consideration is reviewed quarterly and determined based on the current status of the project (Level 3). Based on these reviews, the fair value of the contingent consideration was determined to be zero at both periods as it is not yet probable that any of the milestones will be met.

 

Fixed-Rate Debt

We have fixed-rate debt that is reported on our Balance Sheets at carrying value less unamortized debt discount and closing costs. The fair value of our fixed rate debt was calculated using a discounted cash flow methodology with estimated current interest rates based on similar risk profile and duration (Level 2). The carrying value, excluding unamortized debt discount and debt issuance costs, and the fair value of our fixed-rate long-term debt was as follows:

Schedule of Fixed-Rate Debt        
 October 31, 2020  July 31, 2020  October 31, 2021 July 31, 2021 
Carrying value $695,000  $445,000  $1,300,000  $1,087,270 
Fair value $694,987  $445,000  $1,300,000  $1,094,212 

 

 

 

 8 

 

Non-Financial Assets

Non-financial assets, such as Property and equipment, and Intangible assets, are measured at fair value on a non-recurring basis when events or circumstances indicate that an impairment may have occurred. If we determine these assets to be impaired, they are reported at fair value as calculated during the period. No non-financial assets were recorded at fair value during the three months ended October 31, 20202021 or the fiscal year ended July 31, 2020.2021.

 

Note 4. Debt

 

LabrysTysadco Partners

On August 14, 2020,29, 2021, we entered into a Securities Purchase Agreement (the “Labrys SPA”“SPA”) with Labrys Fund, LPTysadco Partners (“Labrys”Tysadco”), pursuant to which Labrys purchasedwe entered into a $350,000 (the “Principal Amount”) Self-Amortization Promissory Note (the “Note”) for $315,000 in$250,000 face value convertible promissory note which bears interest at a one-time rate of 8.0% applied to the face value and is due March 1, 2022. We received $250,000 net cash with an originalfrom the issuance discount of approximately 10%. In consideration for entering into the Labrys SPA, wepromissory note and issued 420,000200,000 shares (the “Commitment Shares”) of our common stock with a relative fair value of $197,400. 350,000$17,718 which is being expensed over the life of the Commitment Shares (the “Second Commitment Shares”) will be returned to us ifnote as a component of interest expense. The conversion rate of the Notenote is fully repaid and satisfied on or prior to August 14, 2021 (the “Maturity Date”). The Note bears interest at 12% per year.

Upon the occurrence$0.30 for a total of any “Event of Default,” the Note is convertible into900,000 shares of our common stock at a price per share equal to the closing bid price of the common stock on the trading day immediately preceding the date of conversion (the “Conversion Price”); provided, however, that Labrys may not convert any portion of the Note which would cause Labrys, collectively with its affiliates, to hold more than 4.99% of our issued and outstanding common stock, unless such limit is waived. Labrys may not execute any short sales on any of our common stock at any time while the Note is outstanding.

The Note requires that we reserve from our authorized and unissued common stock a number of shares equal to the greater of: (a) 1,140,000 shares or (b) the sum of (i) the number of shares of common stock issuable upon conversion of or otherwise pursuant to the Note and such additional shares of common stock, if any, as are issuable on account of interest on the Note pursuant to the Labrys SPA issuable upon theconverted in full, conversion of the Note (assuming no payment of the principal amount or interest) as of any issue date multiplied by (ii) one and a half. We are subject to penalties for failure to timely deliver shares to Labrys following a conversion request.

The Labrys SPA and the Note contain covenants and restrictions common with this type of debt transaction. Furthermore, we are subject to certain negative covenants under the Labrys SPA and the Note, which we believe are customary for transactions of this type. At October 31, 2020, we were in compliance with all covenants and restrictions.

We paid Alliance Group Partners, LLP (“A.G.P.”) as a placement agent a fee of $25,200 and other closing costs of $6,500 for total closing costs of $31,700 which are being amortized over the one-year life of the Note.

Conversion of Convertible Note Payable

On August 14, 2020, we converted a Convertible Promissory Note with a face value of $100,000 and accrued interest of $7,000 into 214,000 shares of our common stock as calculated by the conversion price of the Convertible Promissory Note of $0.50 per share.including interest.

 

Notes Payable

The following notes payable were outstanding:

  October 31, 2020  July 31, 2020 
Convertible notes with maturities ranging from February 19, 2021 to May 8, 2021 with interest rates of 7% and convertible at $0.80 per share $345,000  $445,000 
Note issued to Labrys due August 14, 2021 with an interest rate of 12%  350,000    
   695,000   445,000 
Unamortized debt discount and closing costs  455,024   233,770 
  $239,976  $211,230 

9

Schedule of Notes Payable        
  October 31, 2021  July 31, 2021 
Note issued to Labrys due August 14, 2021 with an interest rate of 12% $0  $37,270 
Convertible note issued to LGH due February 5, 2022 with an interest rate of 8.0% and convertible at $1.00 per share  1,050,000   1,050,000 
Tysadco convertible promissory note payable due March 1, 2022 with an interest rate of 8.0% and convertible at $0.30 per share  250,000   0 
   1,300,000   1,087,270 
Unamortized debt discount and closing costs  (184,089)  (351,030)
  $1,115,911  $736,240 

 

Note 5. Stock-Based Compensation

2021 Omnibus Stock Incentive Plan

At our annual stockholder meeting held September 14, 2021, the stockholders approved the Amended and Restated 2021 Omnibus Stock Incentive Plan (the “2021 Plan”). The purpose of the Amended and Restated 2021 Omnibus Stock Incentive Plan is to enable us to recruit and retain highly qualified employees, directors and consultants and to provide incentives for productivity and the opportunity to share in the our growth and value. Subject to certain adjustments, the maximum number of shares of common stock, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, cash or other stock-based awards that may be issued under the Amended and Restated 2021 Omnibus Stock Incentive Plan is 20,000,000. At October 31, 2021, 18,500,000 shares remained available for future awards and 20,000,000 shares of our common stock were reserved for issuance pursuant to the 2021 Plan.

 

Stock Options

StockThere was no stock option activity during the quarter ended October 31, 2020 was as follows:2021

  

 

 

Number of Options

  Weighted Average Exercise Price 
Options outstanding at July 31, 2020  15,000,000  $0.25 
Options canceled  (15,000,000)  0.25 
Options outstanding at October 31, 2020    $ 

 

Restricted Stock Units (“RSUs”)

There was no RSU activity during the quarter ended October 31, 2020. At October 31, 2020, there2021 was as follows: 

Schedule of RSU activity
RSUs outstanding at July 31, 20214,396,819
RSUs issued1,500,000
RSUs vested(877,083)
RSUs canceled0
RSUs outstanding at October 31, 20215,019,736

9

On September 14, 2021, following the annual stockholders meeting, three re-elected board members were unvestedgranted 500,000 RSUs outstanding covering 400,000 shareseach vesting equally over 12 months at a total fair value of $675,000 based on the fair value of our common stock.stock on September 14, 2021, of $0.45 per share.

 

Unrecognized Compensation Costs

At October 31, 2020,2021, we had unrecognized stock-based compensation of $5,387,$1,275,665, which will be recognized as a component of General and administrative expenses over the weighted average remaining vesting period of 0.251.36 years.

 

Note 6. Net Loss Per Share

 

Basic and diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Potentially dilutive common stock and common stock equivalents, including stock options, RSUs and warrants are excluded as they would be antidilutive.

 

The following anti-dilutive securities were excluded from the calculations of diluted net loss per share:

Schedule of anti-dilutive shares        
 Three Months Ended October 31,  Three Months Ended October 31, 
 2020  2019  2021 2020 
Options to purchase common stock  375,000   600,000   300,000   25,000 
Shares issuable upon conversion of convertible notes and related accrued interest  448,711   712,063   2,034,000   448,711 
Warrants to purchase common stock  584,500   35,000   5,745,666   934,500 
Restricted stock units  1,350,000   1,500,000   902,083   1,350,000 
Total potentially dilutive securities  2,758,211   2,847,063   8,981,749   2,758,211 

 

Note 7. Common Stock Issuances

 

Conversion of Convertible Note PayableReturned Shares

On August 5, 2021, our loan with Labrys Fund, LP was repaid in full and per the agreement, on August 6, 2021, 350,000 restricted stock shares were returned to treasury.

Reverse Split

At the annual stockholder meeting held September 14, 2020, we converted2021, the stockholders approved the proposal to grant the Board discretionary authority to amend our Certificate of Incorporation to effect a Convertible Promissory Note with a face valuereverse stock split of $100,000the issued and accrued interest of $7,000 into 214,000outstanding shares of our common stock, par value $0.001 per share, such split to combine a whole number of outstanding shares of our Common Stock in a range of not less than two shares and not more than 30 shares, into one share of common stock at any time prior to January 31, 2022. The amendment did not change the number of authorized shares of common stock or preferred stock or the relative voting power of our stockholders. The number of authorized shares will not be reduced. The number of authorized but unissued shares of our common stock will materially increase and will be available for re-issuance. We reserve the right not to effect any reverse stock split if the Board does not deem it to be in the best interests of our stockholders and the Board's decision as calculated byto whether and when to effect the conversionreverse stock split will be based on a number of factors, including prevailing market conditions, existing and expected trading prices for our common stock, actual or forecasted results of operations, and the likely effect of such results on the market price of the Convertible Promissory Note of $0.50 per share.our common stock.

 

Lincoln Park

Securities Purchase Agreement

On August 14, 2020,October 22, 2021, we entered into a Securities Purchase Agreement (the “LPC Purchase Agreement”“SPA”) with Lincoln Park Capital Fund, LLC (“LPC”). Upon the satisfaction of the conditions pursuant to our right to commence sales under thewhich we received $250,000 in cash from LPC Purchase Agreement, including the registration ofand LPC received (i) 1,500,000 restricted shares of our common stock, issuable under the LPC Purchase Agreementand (ii) 833,333 warrants exercisable at $0.50 per common share expiring in accordance with the RRA (the “Commencement”) and the date of satisfaction of such conditions the “Commencement Date”), we have the right, in our sole discretion, to sell to LPC up to $10,250,000 in shares of our common stock, from time to time over a 36-month period. In consideration for entering into the LPC Purchase Agreement, we issued 793,802 shares of our common stock to LPC.five years

 

 

 

 10 

 

 

Upon entering into the LPC Purchase Agreement we sold 602,422 Draws

During the quarter ended October 31, 2021, LPC purchased a total of 974,482 shares of our common stock for total proceeds of $367,035 pursuant to the August 14, 2020 LPC in an initial purchase forPurchase Agreement. As of October 31, 2021, LPC purchased a total purchase price of $250,000. Thereafter, and subject to the conditions of the LPC Purchase Agreement and RRA, on any business day and subject to certain customary conditions, we may direct LPC to purchase to up to 200,000 3,127,808 shares of our common stock (such purchases, “Regular Purchases”)pursuant to the agreement and remaining purchase availability is $8,411,489 and remaining shares available are 16,143,556. The amount of

Tysadco Partners 

On October 18, 2021, we entered into a Regular Purchase may increase up to 100,000 shares of common stock under certain circumstances based on the market price of the common stock. There are no limits on the price per share that LPC may pay to purchase common stock under the LPCSecurities Purchase Agreement provided that LPC’s committed obligation under any Regular Purchase shall not exceed $50,000 unless the median aggregate dollar value of the volume of shares of common stock during the 20 consecutive trading day period ending on the date of the applicable Regular Purchase equals or exceeds $100,000, (the “SPA”) with Tysadco pursuant to which we received $250,000 in which case LPC’s committed obligation under such single Regular Purchase shall not exceed $500,000.

In addition, if we have directed LPC to purchase the full amount of common stock available as a Regular Purchase on a given day, we may direct LPC to purchase additional amounts as “accelerated purchases”cash from Tysadco and “additional accelerated purchases” as set forth in the LPC Purchase Agreement. The purchase price ofTysadco received (i) 1,500,000 restricted shares of our common stock, will be based on the then prevailing market prices of such shares at the time of sale. The LPC Purchase Agreement limits our sale of shares of common stock to LPC, and LPC’s purchase or acquisition of common stock from us, to an amount of common stock that, when aggregated with all other shares of our common stock then beneficially owned by LPC would result in LPC having beneficial ownership, at any single point in time, of more than 4.99% of the then total outstanding shares of our common stock.

The LPC Purchase Agreement contains customary representations, warranties, covenants, closing conditions and indemnification and termination provisions. LPC has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of our common stock. The LPC Purchase Agreement does not limit our ability to raise capital from other sources in our sole discretion; provided, however, that we shall not enter into any “Variable Rate Transaction” as defined in the LPC Purchase Agreement, including the issuance of any floating conversion rate or variable priced equity-like securities, but excluding any “At-the-Market” offering with a registered broker-dealer, until the later of (i) the 36-month anniversary of the date of the LPC Purchase Agreement, and (ii) the 36-month anniversary of the Commencement Date (if the Commencement has occurred),833,333 warrants exercisable at $0.50 per common share expiring in either case irrespective of any earlier termination of the LPC Purchase Agreement. The LPC Purchase Agreement may be terminated by us at any time and at our discretion without any cost to us.five years.

In connection with the LPC transaction, we engaged A.G.P. as a placement agent to help raise capital. A.G.P. introduced us to LPC, for which we agreed to pay A.G.P. a fee of 8% of the amount of the funds received from LPC, which totaled $20,000 in the quarter ended October 31, 2020. A.G.P. will also receive a fee totaling 8% of any additional funds raised pursuant to the LPC Purchase Agreement.

In addition, and in consideration for the service provided in connection with Labrys and LPC, we granted warrants that were immediately exercisable for a total of 550,000 shares of our common stock at $0.50 per share to A.G.P. and two partners of A.G.P. The warrants had a value of $220,000 and expire August 6, 2024. Of the $220,000, $91,667 was netted against the LPC equity transaction and $128,333 was recorded as debt closing costs related to the Labrys transaction and is being amortized over the one-year life of the note.

The following table sets forth the amount of gross proceeds we would receive from additional sales of our stock to LPC under the LPC Purchase Agreement at varying purchase prices:

 

Assumed Average
Purchase Price
Per Share

 

 

Number of
Shares
to be Sold if
Full Purchase(1)

  Percentage of
Outstanding Shares Owned
After Giving Effect
to the Shares Sold(2)
 Proceeds from
the Sale of Shares
to LPC(1)
 
$0.10  18,668,942  18.4% $1,866,984 
0.25  18,668,942  18.4     4,667,236 
0.30(3)  18,668,942  18.4     5,600,683 
0.50  18,668,942  18.4     9,334,471 
1.00  10,000,000  11.3     10,000,000 
1.50     6,666,667  8.3   10,000,000 

(1)Although the Purchase Agreement provides that we may sell up to an additional $10,000,000 of our common stock to LPC, depending on the assumed average price per share, we may or may not be able to ultimately sell to Lincoln Park a number of shares of our common stock with a total value of $10,000,000.
(2)The numerator is based on the maximum number of shares purchased at the corresponding assumed purchase price plus the 1,396,224 shares already owned by LPC. The denominator is based on 90,570,202 shares outstanding as of October 31, 2020 plus the number of shares assumed purchased. The table does not give effect to the prohibition contained in the LPC Purchase Agreement that prevents us from selling to LPC the number of shares such that, after giving effect to such sale, LPC and its affiliates would beneficially own more than 4.99% of the then outstanding shares of our common stock. Assuming the closing stock price of $0.30 per share on October 31, 2020 and the 4.99% limitation mentioned above, the total number of additional shares we could sell to LPC would be 1,891,039 for proceeds of $567,312.
(3)The closing price of our common stock on October 31, 2020.

11

 

Note 8. Related Party Transactions

 

Due to Officers and ExecutivesOfficer

The following amounts were due to an officer and an executiveofficers for reimbursement of expenses and were included in Accounts payable on our Balance Sheets:

Schedule of due to officer        
 October 31, 2020  July 31, 2020  October 31, 2021 July 31, 2021 
Joseph M. Redmond, CEO $  $2,304  $7,173  $2,568 
Christine Farrell, Controller  20,000   25,598 
 $20,000  $27,902 
Christine M. Farrell  2,238   0 

 

The amount of unpaid salary due to Mr. Redmond for his services from November 2017 was included in Accrued wages on our Balance Sheets and was as follows: 

Balance at July 31, 2020 $183,846 
Schedule of accrued compensation    
Balance at July 31, 2021 $183,846 
Salary accrued     0 
Salary paid     0 
Balance at October 31, 2020 $183,846 
Balance at October 31, 2021 $183,846 

 

Note 9. Going Concern

 

We did not recognize any revenues for the quarter ended October 31, 2021 or the year ended July 31, 2020 or the quarter ended October 31, 20202021 and we had an accumulated deficit of $29,562,242$47,380,097 as of October 31, 2020.2021. For the foreseeable future, we expect to experience continuing operating losses and negative cash flows from operations. Cash available at October 31, 20202021 of $292,756$471,140 may not provide enough working capital to meet our current operating expenses through December 10, 2021.2022.

 

The operating deficit indicates substantial doubt about our ability to continue as a going concern. Our continued existence depends on the success of our efforts to raise additional capital necessary to meet our obligations as they come due and to obtain sufficient capital to execute our business plan. We may obtain capital primarily through issuances of debt or equity or entering into collaborative arrangements with corporate partners. There can be no assurance that we will be successful in completing additional financing or collaboration transactions or, if financing is available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we may be required to further scale down or perhaps even cease operations.

 

The issuance of additional equity securities could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, would increase our liabilities and future cash commitments. Our financial statements do not include adjustments that might result from the outcome of this uncertainty.

 

Additionally, as the novel coronavirus (“COVID-19”) pandemic continues to severely impact the U.S. and global economy, our business may be impacted in a variety of ways. Political, legal or regulatory actions as a result of the COVID-19 pandemic in jurisdictions where we may plan to manufacture, source or distribute products have created supply disruptions which could affect our plans, and may cause additional supply disruptions or shortages in the future. We cannot currently predict the frequency, duration or scope of these governmental actions and supply disruptions. For example, several countries, including India, China, Australia and China,the UK, have increased or instituted new restrictions on the export of medical or pharmaceutical products that we distribute or use in our business, including key components or raw materials. Governmental authorities in many countries, including the U.S., are enacting legislative or regulatory changes to address the impact of the pandemic, which may restrict or require changes in our operations, increase our costs, or otherwise adversely affect our operations.

  

 

 

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If we are unable to raise additional capital by December 10, 2021,2022, we will adjust our current business plan. Due to the unknown and volatile nature of the stock price and trading volume of our common stock, is it is difficult to predict the timing and amount of availability pursuant to our equity line of credit with LPC (see Note 7.7 above). Given our recurring losses, negative cash flow, accumulated deficit, and the impact of COVID-19, there is substantial doubt about our ability to continue as a going concern.

 

Note 10. Subsequent Event

 

Research and Development Rebate

On November 2, 2021, we received a research and development rebate from the government of Australia in the amount of $284,981 AUD ($214,120 USD) for clinical work performed in Australia related to our Phase 1 human trial for safety and efficacy for the treatment of concussed individuals. The $214,120 is accounted for as an offset to research and development expense, which is a component of General and administrative on our Statements of Operations.

Name Change

On December 4, 2020,1, 2021, we received notice that our registration statement on S-1 thatname change to Odyssey Health, Inc. was filed on November 23, 2020, was declared effectiveapproved by the Securities and Exchange Commission. The final prospectus was filed on December 8, 2020. The registration statement contains one prospectus which is incorporated by reference into this filing and is available in electronic form through the Securities and Exchange Commission EDGAR system. We have not sold any shares under the prospectus.state of Nevada, where we are incorporated.

 

 

 

 

 

 

 

 

 

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This quarterly report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management are forward-looking statements. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

 

We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that the expectations underlying our forward-looking statements are reasonable, these expectations may prove to be incorrect, and all of these statements are subject to risks and uncertainties. Therefore, you should not place undue reliance on our forward-looking statements.

 

Many possible events or factors could affect our future financial results and performance and could cause actual results or performance to differ materially from those expressed, including those risks and uncertainties described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended July 31, 20202021 (“20202021 Annual Report”) and those described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”). We believe these risks and uncertainties could cause actual results or events to differ materially from the forward-looking statements that we make. Should one or more of these risks and uncertainties materialize, or should underlying assumptions, projections or expectations prove incorrect, actual results, performance or financial condition may vary materially and adversely from those anticipated, estimated or expected. Our forward-looking statements do not reflect the potential impact of future acquisitions, mergers, dispositions, joint ventures or investments that we may make. We do not assume any obligation to update any of the forward-looking statements contained herein, whether as a result of new information, future events or otherwise, except as required by law. In the light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not occur, and actual results could differ materially from those anticipated or implied in the forward-looking statements.

 

Overview

 

Our business model is to develop or acquire unique medical related products, engage third parties to manufacture such products and then distribute the products through various distribution channels, including third parties. We have made significant investments in three different life savingare developing potentially life-saving technologies: the CardioMap® heart monitoring and screening device; the Save aA Life choking rescue device; anddevice, a unique neurosteroid drug compound intended to treat concussions and a unique drug compound to treat rare brain disorders.disorders in partnership with Prevacus, Inc. To date, none of our product candidates has received regulatory clearance or approval for commercial sale.

 

We intend to acquire other technologies and assets and plan to be a trans-disciplinary product development company involved in the discovery, development and commercialization of products and technologies that may be applied over various medical markets. We intend to license, improve, and develop our products and identify and select distribution channels. We intend to establish agreements with distributors to get products to market quickly, as well as to undertake and engage in our own direct marketing efforts. We will determine the most effective method of distribution for each unique product that we include in our portfolio. We intend towill engage third-party research and development firms who specialize in the creation of our products to assist us in the development of our own products, We intend toand we will apply for trademarks and patents once we have developed proprietary products.

 

We are not currently selling or marketing any products. Our products are in late-stage development and Food and Drug Administration ("FDA") clearance or approval to market our products will be required in order to sell them in the United States.

Recent Funding

 

In August 2020,LPC Securities Purchase Agreement

On October 22, 2021, we entered into two funding arrangements.

Onea Securities Purchase Agreement (the “SPA”) with LabrysLincoln Park Capital Fund, LP,LLC (“LPC”) pursuant to which provided us with $315,000 ofwe received $250,000 in cash in exchange for a $350,000 promissory notefrom LPC and 420,000LPC received (i) 1,500,000 restricted shares of our common stock. See Note 4. of Notes to Financial Statements for additional information.stock, and (ii) 833,333 warrants exercisable at $0.50 per common share expiring in five years.

 

 

 

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The second arrangement was with Lincoln Park Capital Fund, LLC (“Lincoln Park”) pursuant to which Lincoln Park agreed to purchase up to $10,250,000 worthLPC Purchase Agreement Draws

During the first quarter of our common stock over a 36-month period in exchange for 793,802Fiscal 2022, we sold 974,482 shares of our common stock withto LPC for total proceeds of $367,035. As of December 10, 2021, LPC purchased a valuetotal of $369,118. Lincoln Park made an initial purchase of 602,4223,127,808 shares of our common stock pursuant to the agreement and remaining purchase availability is $8,411,489 and remaining shares available are 16,143,556.

Tysadco

On August 29, 2021, we entered into a Securities Purchase Agreement (the “SPA”) with Tysadco Partners (“Tysadco”) pursuant to which we entered into a $250,000 face value convertible promissory note which bears interest at a one-time rate of 8.0% applied to the face value and is due March 1, 2022. We received $250,000 net cash from the issuance of the promissory note and issued 200,000 shares of common stock with a fair value of $17,718 which is being expensed over the life of the note as a component of interest expense. The conversion rate of the note is $0.30 for $250,000. See Note 7.a total of Notes to Financial Statements for additional information. 900,000 shares of our common stock if converted in full, including interest.

 

On December 4, 2020, our registration statement on Form S-1 that was filed on November 23, 2020, was declared effective by theOctober 18, 2021, we entered into a Securities Purchase Agreement (the “SPA”) with Tysadco pursuant to which we received $250,000 in cash from Tysadco and Exchange Commission. The final prospectus was filed on December 8, 2020. The registration statement contains one prospectus which is incorporated by reference into this filing and is available in electronic form through the Securities and Exchange Commission EDGAR system. We have not sold anyTysadco received (i) 1,500,000 restricted shares under the prospectus.

We intend to use the proceeds from both the Labrys and Lincoln Park agreements for general corporate purposes, including for working capital, capital expenditures and for funding additional preclinical development and potentially future clinical development of our pipeline candidates.common stock, and (ii) 833,333 warrants exercisable at $0.50 per common share expiring in five years.

 

Going Concern

 

Substantial doubt exists as to our ability to continue as a going concern based on the facts that we may not have adequate working capital to finance our day-to-day operations and we do not have any sources of revenue. We had an accumulated deficit of $29,562,242$47,380,097 as of October 31, 20202021 and cash of $292,756.$471,140. Management’s plans include engaging in further research and development and raising additional capital in the short term to fund such activities through sales of its common stock. Our continued existence depends on the success of our efforts to raise additional capital necessary to meet our obligations as they come due and to obtain sufficient capital to execute our business plan.

 

We may obtain capital primarily through issuances of debt or equity or entering into collaborative arrangements with corporate partners. There can be no assurance that we will be successful in completing additional financing or collaboration transactions or, if financing is available, that it can be obtained on commercially reasonable terms. If we are not able to obtain additional financing on a timely basis, we may be required to further scale down or cease the operation of our business. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. Our financial statements do not include adjustments that might result from the outcome of this uncertainty.

 

For the foreseeable future, we expect to experience continuing operating losses and negative cash flows from operations as our management executes our current business plan. The cash of $292,756$471,140 available at October 31, 2020,2021, may not provide enough working capital to meet our current operating expenses through December 10, 2021.2022.

 

If we are unable to raise additional capital by December 10, 2021,2022, we will adjust our current business plan. Due to the unknown and volatile nature of the stock price and trading volume of our common stock, is it is difficult to predict the timing and amount of availability pursuant to our equity line of credit with LPC (see Note 7.7 of Notes to Financial Statements). Given our recurring losses, negative cash flow, accumulated deficit, and the impact of COVID-19, there is substantial doubt about our ability to continue as a going concern.

 

Impact of COVID-19

 

The COVID-19 global pandemic has had an unfavorable impact on our business operations. Mandatory closuresThe pandemic has impacted our ability to get financing, engage third-party vendors and timing of businesses imposed by the federal, state and local governments to control the spread of the virus are disrupting the operations of our management, business and finance teams.clinical trials. In addition, the COVID-19 outbreak has adversely affected the U.S. and global economies and financial markets, which may result in a long-term economic downturn that could negatively affect future performance and our ability to secure additional debt or equity funding.

 

Significant Accounting Policies and Use of Estimates

 

During the three months ended October 31, 2020,2021, there were no significant changes to our significant accounting policies and estimates areas described in Note 2. Summary of Significant Accounting Policies included in Part II, Item 8. of our Annual Report on Form 10-K for the year ended July 31, 2020,2021, which was filed with the Securities and Exchange Commission on November 16, 2020.

October 29, 2021.

  

 

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Results of Operations

 

We do not currently sell or market any products and we did not have any revenue in the three-month periods ended October 31, 20202021 or 2019.2020. We will commence actively marketing products after the products and drugs in development have been FDA cleared or approved, but there can be no assurance, however, that we will be successful in obtaining FDA clearance or approval for our products.

 

 Three Months Ended October 31,  $  %  Three Months Ended October 31, $ % 
 2020  2019  Change  Change  2021 2020 Change Change 
Research and development expense $322,504  $  $322,504   100% 
General and administrative expense $525,269  $1,322,721   797,452   (60%)  1,106,884   525,269   581,615   111% 
Loss from operations  (525,269)  (1,322,721)  (797,452)  (60%)  (1,429,388)  (525,269)  904,119   172% 
Interest expense  186,245   93,891   92,354   98%   216,886   186,245   30,641   16% 
Net loss $(711,514) $(1,416,612)  (705,098)  (50%) $(1,646,274) $(711,514) $934,760   131% 
Basic and diluted net loss per share $(0.01) $(0.02)  (0.01)  (50%) $(0.02) $(0.01) $0.01   137% 

 

Research and Development Expense

Our Research and development expense includes expenses related to our current projects and include, clinical research, design and manufacturing, formulation, regulatory and consultants. Research and development expense is expensed as incurred and totaled $322,504 and zero for the three months ended October 31, 2021 and 2020, respectively.

General and Administrative Expense

Our General and administrative expense includes salaries and related benefits for employees in finance, accounting, sales, administrative and research and developmentadministrative activities, as well as stock-based compensation, costs related to maintaining compliance as a public company and legal and professional fees.

 

The decreaseincrease in General and administrative expense in the three months ended October 31, 2021 as compared to the same period of 2021 was due to a $918,032 decreasethe following:

  Three months ended
October 31, 2021
compared to
three months
ended
October 31, 2020
 
    
Increase (decrease) in:    
Board and stock expense $400,325 
Business development and investor relations  87,398 
Consulting fees  26,077 
Financing fees  10,113 
Insurance expense  24,939 
Legal and professional fees  (108,063)
Wages  165,324 
Other  (24,498) 
  $581,615 

The increase in boardBoard and stock expense of $400,325 for the quarter ended October 31, 2021 compared to the quarter ended October 31, 2020, was due to board grants in the vesting ofcurrent year quarter, option and restricted stock unitsunit expense for the employees, consultants and the scientific and sports advisory boards. The increase in wages of $165,324 was a result of increased headcount for the 2019 period and a $10,000 decrease research and development expense,quarter ended October 31, 2021, as compared to the quarter ended October 31, 2020. The increases were partially offset by a $240,000 increase in financing expense and a $93,061 increasedecrease in legal and professional fees relatedof $108,063 in the quarter ended October 31, 2021, as compared to our agreements with Labrys and Lincoln Park, and a $20,393 increase in payroll expense.the quarter ended October 31, 2020.

15

 

Interest Expense

Interest expense includes interest on debt outstanding, as well as the amortization of unamortized debt issuance costs and debt closing costs. Certain information regarding debt outstanding was as follows:

 

 Three Months Ended October 31,  Three Months Ended October 31, 
 2020  2019  2021 2020 
Weighted average debt outstanding $656,957  $334,783  $1,221,196  $656,957 
Weighted average interest rate  9.5%   7.0%   8.0%   9.5% 

 

The increase in interest expense for the three-month period ended October 31, 20202021 compared to the same period of 20192020 was due to the increased average debt outstandingLGH and higher average interest rates due to the issuance of debt to LabrysTysadco investments in August 2020 as discussed above, as well as an $82,846 increase in amortization of debt discountApril 2021 and closing costs and an $18,204 increase in amortization of beneficial conversion feature, offset in part by the conversion of a $100,000 note payable also in August 2020.October 2021, respectively.

   

Net Loss

Net loss decreasedincreased in the three-month period ended October 31, 20202021 compared to the same period of 20192020 due to the decrease in Generalincreased board and administrativestock expense, research and development and wages, as well increased interest expense, partially offset by the increase in Interest expense as discussed above.lower weighted average interest rate.

   

16

Liquidity and Capital Resources

See Recent Funding above for a discussion of our recent debt and equity financings.

 

The following table sets forth the primary sources and uses of cash:

 

 Three Months Ended October 31,  Three Months Ended October 31, 
 2020  2019  2021 2020 
Net cash used in operating activities $(303,496) $(214,775) $(1,165,210) $(303,496)
Net cash provided by financing activities  533,300   150,000   1,079,766   533,300 

 

To date, we have financed our operations primarily through debt financing and limited sales of our common stock. Our ability to continue to access capital could be affected adversely by various factors, including general market and other economic conditions, interest rates, the perception of our potential future earnings and cash distributions, any unwillingness on the part of lenders to make loans to us and any deterioration in the financial position of lenders that might make them unable to meet their obligations to us. If these conditions continue and we cannot raise funds through a public or private debt financing, or an equity offering, our ability to grow our business may be negatively affected. In such case, we may need to suspend the creation of new products until market conditions improve.

 

Convertible NotesDebt

At October 31, 2020, we had 10 convertibleThe following notes outstanding with a total principal balance of $345,000, unamortized debt discount of $145,437 and accrued interest of $13,969. The notes bear interest at 7.0% annually and the entire outstanding principal, together with accrued interest are due between February 19, 2021 and May 8, 2021, unless converted before such date. At the option of the holder, the principal amount of the notes and any accrued interest may be converted into shares of our common stock at a conversion price of $1.00 per share, or at a 10% discount to the closing price on the day of conversion, but not lower than $0.80 per share. At maturity, we have the right to either pay off the notes and any accrued interest or convert the notes and any accrued interest into shares of our common stock.payable were outstanding:

 

Conversion of Convertible Note Payable

On August 14, 2020, we provided notice to a noteholder that we elected to convert their Convertible Promissory Note at the conversion price of $0.50 per share as determined in accordance with the terms of the related agreement. Accordingly, the number of shares of our common stock was determined by dividing (i) the sum of the outstanding principal and accrued interest on the Note of $100,000 and $7,000, respectively, by (ii) the conversion price of $0.50 per share, resulting in the issuance of 214,000 shares of our common stock.

Labrys Note Payable

On August 14, 2020, we entered into a Securities Purchase Agreement (the “Labrys SPA”) with Labrys Fund, LP (“Labrys”), pursuant to which Labrys purchased a $350,000 (the “Principal Amount”) Self-Amortization Promissory Note (the “Note”) for $315,000 in cash with an original issuance discount of approximately 10%. In consideration for entering into the Labrys SPA, we issued 420,000 shares (the “Commitment Shares”) of our common stock. 350,000 of the Commitment Shares (the “Second Commitment Shares”) will be returned to us if the Note is fully repaid and satisfied on or prior to August 14, 2021 (the “Maturity Date”). The Note bears interest at 12% per year.

Upon the occurrence of any “Event of Default” as defined in the Note, the Note is convertible into shares of our common stock at a price per share equal to the closing bid price of the common stock on the trading day immediately preceding the date of conversion (the “Conversion Price”); provided, however, that Labrys may not convert any portion of the Note which would cause Labrys, collectively with its affiliates, to hold more than 4.99% of our issued and outstanding common stock, unless such limit is waived. Labrys may not execute any short sales on any of our common stock at any time while the Note is outstanding.

The Note requires that we reserve from our authorized and unissued common stock a number of shares equal to the greater of: (a) 1,140,000 shares or (b) the sum of (i) the number of shares of common stock issuable upon conversion of or otherwise pursuant to the Note and such additional shares of common stock, if any, as are issuable on account of interest on the Note pursuant to the Labrys SPA issuable upon the full conversion of the Note (assuming no payment of the principal amount or interest) as of any issue date multiplied by (ii) one and a half. We are subject to penalties for failure to timely deliver shares to Labrys following a conversion request.

  October 31, 2021 
Convertible note issued to LGH due February 5, 2022 with an interest rate of 8.0% and convertible at $1.00 per share $1,050,000 
Tysadco convertible promissory note payable due March 1, 2022 with an interest rate of 8.0% and convertible at $0.30 per share  250,000 
   1,300,000 
Unamortized debt discount and closing costs  (184,089)
  $1,115,911 

 

 

 

 1716 

 

 

The Labrys SPAAustralian Research and the Note contain covenants and restrictions common with this type of debt transaction. Furthermore, we are subject to certain negative covenants under the Labrys SPA and the Note, which we believe are customary for transactions of this type. At October 31, 2020, we were in compliance with all covenants and restrictions.

In connection with the Labrys transaction, we engaged Alliance Group Partners, LLP (“A.G.P.”) as a placement agent. In exchange for their services, we paid A.G.P. $25,200 in cash and we also paid $6,500 in cash for Labrys’ legal fees in connection with the transaction.

PPP NoteDevelopment Rebate

On May 8, 2020,November 2, 2021, we received loan proceedsa research and development rebate from the government of Australia in the amount of $50,000 under the Paycheck Protection Program (“PPP”).  The PPP, established as part of the Coronavirus Aid, Relief$284,981 AUD ($214,120 USD) for clinical work performed in Australia related to our Phase 1 human trial for safety and Economic Security Act, provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The unforgiven portion of the PPP loan, if any, is payable over two years at an interest rate of 1%, with a deferral of paymentsefficacy for the first six months.  We used the proceedstreatment of concussed individuals. The $214,120 is accounted for purposes consistent with the PPPas an offset to research and anticipate that this PPP Note will be forgiven.

Stock Sale to Lincoln Park

On August 14, 2020, we entered into a Purchase Agreement (the “LPC Purchase Agreement”) and a Registration Rights Agreement (the “RRA”) with Lincoln Park Capital Fund, LLC (“LPC”). Upon the satisfaction of the conditions to our right to commence sales under the LPC Purchase Agreement, including the registration of shares of Common Stock issuable under the LPC Purchase Agreement in accordance with the RRA (the “Commencement”) and the date of satisfaction of such conditions the “Commencement Date”), we have the right, in our sole discretion, to sell to LPC up to $10,250,000 in shares of our common stock, from time to time over a 36-month period. In consideration for entering into the LPC Purchase Agreement, we issued 793,802 shares to LPC.

On December 4, 2020, our registration statement on Form S-1 that was filed on November 23, 2020, was declared effective by the Securities and Exchange Commission. The final prospectus was filed on December 8, 2020. The registration statement contains one prospectusdevelopment expense, which is incorporated by reference into this filinga component of General and is available in electronic form through the Securities and Exchange Commission EDGAR system. We have not sold any shares under the prospectus.administrative on our Statements of Operations.

 

Upon entering into the LPC Purchase Agreement and RRA, we sold 602,422 shares of our common stock to LPC in an initial purchase for a total purchase price of $250,000. Thereafter, and subject to the conditions of the LPC Purchase Agreement and RRA, on any business day and subject to certain customary conditions, we may direct LPC to purchase to up to 200,000 shares of our common stock (such purchases, “Regular Purchases”). The amount of a Regular Purchase may increase up to 100,000 shares of common stock under certain circumstances based on the market price of the common stock. There are no limits on the price per share that LPC may pay to purchase common stock under the LPC Purchase Agreement, provided that LPC’s committed obligation under any Regular Purchase shall not exceed $50,000 unless the median aggregate dollar value of the volume of shares of common stock during the 20 consecutive trading day period ending on the date of the applicable Regular Purchase equals or exceeds $100,000, in which case LPC’s committed obligation under such single Regular Purchase shall not exceed $500,000.

In addition, if we have directed LPC to purchase the full amount of common stock available as a Regular Purchase on a given day, we may direct LPC to purchase additional amounts as “accelerated purchases” and “additional accelerated purchases” as set forth in the LPC Purchase Agreement. The purchase price of shares of our common stock will be based on the then prevailing market prices of such shares at the time of sale. The LPC Purchase Agreement limits our sale of shares of our common stock to LPC, and LPC’s purchase or acquisition of our common stock, to an amount of common stock that, when aggregated with all other shares of our common stock then beneficially owned by LPC would result in LPC having beneficial ownership, at any single point in time, of more than 4.99% of the then total outstanding shares of our common stock.

The LPC Purchase Agreement contains customary representations, warranties, covenants, closing conditions and indemnification and termination provisions. LPC has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s common stock. The LPC Purchase Agreement does not limit the Company’s ability to raise capital from other sources at its sole discretion; provided, however, that we shall not enter into any “Variable Rate Transaction” as defined in the LPC Purchase Agreement, including the issuance of any floating conversion rate or variable priced equity-like securities, but excluding any “At-the-Market” offering with a registered broker-dealer, until the later of (i) the 36-month anniversary of the date of the LPC Purchase Agreement, and (ii) the 36-month anniversary of the Commencement Date (if the Commencement has occurred), in either case irrespective of any earlier termination of the LPC Purchase Agreement. The LPC Purchase Agreement may be terminated by us at any time at our discretion without any cost to us.

18

In connection with the LPC transaction, we engaged A.G.P. as a placement agent to help raise capital. A.G.P. introduced us to LPC, for which we agreed to pay A.G.P. a fee of 8% of the amount of the funds received from LPC, which totaled $20,000 in the quarter ended October 31, 2020. A.G.P. will also receive a fee totaling 8% of any additional funds raised pursuant to the LPC Purchase Agreement.

In addition, and in consideration for the services provided related to both Labrys and LPC, we granted warrants that were immediately exercisable for a total of 550,000 shares of our common stock at $0.50 per share to A.G.P. and two partners of A.G.P. The warrants had a value of $220,000 and expire August 6, 2024. Of the $220,000, $91,667 was netted against the LPC equity transaction and $128,333 was recorded as debt closing costs related to the Labrys transaction and is being amortized over the one-year life of the note.

Inflation

 

Inflation did not have a material impact on our business and results of operations during the periods being reported on.

  

Off Balance Sheet Arrangements

 

We do not have any material off balance sheet arrangements.

 

Item 3.Quantitative and Qualitative Disclosures About Market Risk 

 

We are a smaller reporting company and are not required to provide information under this item.

 

Item 4.Controls and Procedures 

 

Evaluation of Disclosure Controls and Procedures

 

Management, with the participation of the Company’s Chief Executive Officer and Chief Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of July 31, 2020.2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of October 31, 2020,2021, our Chief Executive Officer and Chief Accounting Officer concluded that, as of such date, as a result of the material weaknesses in internal control over financial reporting that are described below in Management's Report on Internal Control Over Financial Reporting, our disclosure controls and procedures were not effective.

 

As previously reported in our Annual Report on Form 10-K for the fiscal year ended July 31, 20202021 management identified the following material weaknesses in internal control over financial reporting:

 

Insufficient Resources: ResourcesWe have an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting.

Inadequate Segregation of Duties:Duties: We have an inadequate number of personnel to properly implement segregation of duties control procedures.

  

We are committed to improving ourthe internal control over financial reportingcontrols and will (1) will continue to use third-partythird party specialists to address shortfalls in staffing and to assist us with accounting and finance responsibilities;responsibilities, (2) will increase the frequency of independent reconciliations of significant accounts, which will mitigate the lack of segregation of duties until there are sufficient personnel;personnel, and (3) may consider appointing additional outside directors and audit committee members in the future.

 

 

 

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In light of the material weakness described above, prior to the filing of this Form 10-Q for the period ended October 31, 2020,2021, management determined that key quarterly controls were performed timely and also performed additional procedures, including validating the completeness and accuracy of the underlying data used to support the amounts reported in the quarterly financial statements. These control activities and additional procedures have allowed us to conclude that, notwithstanding the material weaknesses, the financial statements in this Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for the periods presented in conformity with United States GAAP.

 

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

 

 

 2018 

 

 

PART II OTHER INFORMATION

 

Item 1A. Risk Factors 

 

There have been no material changes during the three-month period ended October 31, 20202021 to the risk factors discussed in our Annual Report on Form 10-K for the year ended July 31, 2020.2021. If any of the identified risks actually occur, our business, financial condition and results of operations could suffer. The trading price of our common stock could decline and you may lose all or part of your investment in our common stock. The risks and uncertainties described in our Annual Report on Form 10-K for the year ended July 31, 20202021 are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business operations.

Item 6.Exhibits

 

The following exhibits are filed herewith and this list constitutes the exhibit index.

 

Exhibit Number Exhibit Description
3131.1 Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer andpursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
31.2Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
3232.1 Section 1350 Certification of Chief Executive Officer andpursuant to Section 1350
32.2Certification of Chief Financial Officer pursuant to Section 1350
101.INS Inline XBRL InstancesInstance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted in iXBRL, and included in exhibit 101).

 

 

 

 2119 

 

SIGNATURE

 

Pursuant to the requirements of Section 13 or 15(d) 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, as of December 10, 2020.2021.

 

 ODYSSEY GROUP INTERNATIONAL, INC.
   
 ODYSSEY GROUP INTERNATIONAL, INC.By:   /s/ Joseph Michael Redmond
  
By:   /s/ Joseph Michael Redmond
  Joseph Michael RedmondChief Executive Officer, President and Director
  Chief Executive Officer, Chief Financial Officer, President and Director
(Principal Executive Officer and Principal Financial and Accounting Officer))
   

 

 

 

 

 

 

 

 

 

 

 

 

 2220