Odyssey Health, Inc. - Quarter Report: 2022 April (Form 10-Q)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________

Form 10-Q

_________________________________

(Mark One)

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

For the quarterly period ended April 30, 2022

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 Health, Inc.

(Formerly known as Odyssey Group International, Inc.)

(Exact name of registrant as specified in its charter)

____________________________________

2300 West Sahara Avenue, Suite 800 - #4012, Las Vegas, NV 89102

(Address of principal executive offices, including zip code)

(702) 780-6559

(Registrant’s telephone number, including area code

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒    No ☐

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).    Yes ☒    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)

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐    No ☒

84,609,444 shares of common stock, par value $.001 per share, outstanding as of June 14, 2022.

ODYSSEY HEALTH, INC.

(FORMERLY KNOWN AS ODYSSEY GROUP INTERNATIONAL, INC.)

FORM 10-Q

For the Quarter Ended April 30, 2022

INDEX

Part I - FINANCIAL INFORMATION

Item 1 - Financial Statements

Odyssey Health, Inc.

(Formerly known as Odyssey Group International, Inc.)

Balance Sheets

(Unaudited)

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

Odyssey Health, Inc.

(Formerly known as Odyssey Group International, Inc.)

Statements of Operations and Comprehensive Loss

(Unaudited)

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

Odyssey Health, Inc.

(Formerly known as Odyssey Group International, Inc.)

Statements of Stockholders' Equity (Deficit)

(Unaudited)

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

Odyssey Health, Inc.

(Formerly known as Odyssey Group International, Inc.)

Statements of Cash Flows

(Unaudited)

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

Odyssey Health, Inc.

(Formerly known as Odyssey Group International, Inc.)

Notes to Financial Statements

(Unaudited)

Note 1.       Basis of Presentation and Nature of Operations

Name Change

On December 1, 2021, we received notice that our name change to Odyssey Health, Inc. was approved by the state of Nevada, where we are incorporated.

Basis of Presentation

The accompanying financial information of Odyssey Health, Inc., f/k/a 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, 2021, is derived from our 2021 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 2021 Annual Report on Form 10-K filed with the SEC on 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 nine months ended April 30, 2022, from those disclosed in our Annual Report on Form 10-K for the year ended July 31, 2021.

Nature of Operations

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 are developing potentially life-saving technologies: the CardioMap® heart monitoring and screening device; the Save A Life choking rescue device, a unique neurosteroid drug compound intended to treat concussions, and a unique drug compound to treat rare brain disorders in partnership with Prevacus, Inc. To date, none of our product 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 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.

Going Concern

We did not recognize any revenues for the year ended July 31, 2021, or the nine months ended April 30, 2022, and we had an accumulated deficit of $52,172,081 as of April 30, 2022. For the foreseeable future, we expect to experience continuing operating losses and negative cash flows from operations. Cash available at April 30, 2022, of $266,300 may not provide enough working capital to meet our current operating expenses through June 14, 2023.

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.

The COVID-19 global pandemic has had an unfavorable impact on our business operations. The pandemic has impacted our ability to get financing, engage third-party vendors and the timing of our clinical trial in Australia. 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.

If we are unable to raise additional capital by June 14, 2023, 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. Given our recurring losses, negative cash flow, and accumulated deficit, there is substantial doubt about our ability to continue as a going concern.

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. The adoption of ASU 2019-12 effective August 1, 2021, on a prospective basis did not have a material effect on our financial position, results of operations, or cash flows.

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 adopting this standard on our financial position, results of operations or cash flows.

Note 3.       Intangible Assets

Intangible assets at April 30, 2022, consisted of costs related to a patent for our PRV-002 drug device combination.

Amortization expense was as follows: 

Future amortization of intangible assets is as follows:

Note 4.        Asset Purchase Liability

In connection with our Asset Purchase Agreement with Prevacus in March 2021, we withheld 1,000,000 shares of our common stock with a value of $1.18 per share for an original value of $1,180,000 for payment of future Prevacus liabilities. This amount was recorded as an asset purchase liability on our Balance Sheets. The balance at April 30, 2022, and July 31, 2021, was $1,123,090 and $1,125,026, respectively.

Note 5.       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 nine months ended April 30, 2022, or the year ended July 31, 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 April 30, 2022.

Contingent Liabilities

At April 30, 2022, and July 31, 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 April, 2022 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:

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 nine months ended April 30, 2022, or the fiscal year ended July 31, 2021.

Note 6.       Debt

Promissory Notes

On December 21, 2021, and December 22, 2021, we entered into a total of five Promissory Notes (the “Notes”) with three of our directors and two officers.

Mr. Joseph Michael Redmond, President and Chief Executive Officer, Ms. Christine M. Farrell, Chief Financial Officer, Mr. Jerome H. Casey, Director, Mr. John P. Gandolfo, Director, and Mr. Ricky W. Richardson, Director, each loaned us $25,000 for total proceeds of $125,000. The Notes bear interest at 8% per annum and were originally due March 31, 2022. In April 2022, the maturity date of the Notes was extended to May 31, 2022.

Tysadco Partners

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 was originally 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 relative 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 a total of 990,000 shares of our common stock if converted in full, including interest.

On March 31, 2022, the SPA was amended to extend the maturity date to March 1, 2023, and, as consideration, $25,000 was added to the principal.

LGH Amendment

On April 5, 2021, we entered into a Securities Purchase Agreement with LGH Investments, LLC (“LGH”) pursuant to which we entered into a $1,050,000 face value convertible promissory note (the “Note”) which bears interest at a one-time rate of 8.0% applied to the face value of the Note. On February 15, 2022, we entered into Amendment No. 1 (the “Amendment”) to the Note with an effective date of February 1, 2022. Pursuant to the Amendment, the maturity date of the Note was extended from February 5, 2022 to May 31, 2022. As consideration, $200,000 was added to the principal amount outstanding, we issued 100,000 shares of our common stock to LGH with a value of $51,000 and we will pay down principal and interest on the Note in the amount of the lesser of 10% or $250,000 of any future capital raises, investments, donations or financings unless the Note has been converted. The conversion rate of the Note is $1.00 per share for a total of 1,336,000 shares of our common stock if converted in full, including interest.

Notes Payable

The following notes payable were outstanding: 

Note 7.       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 April 30, 2022, 17,725,000 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

Stock option activity during the nine months ended April 30, 2022, was as follows:  

Restricted Stock Units (“RSUs”)

RSU activity during the nine months ended April 30, 2022, was as follows: 

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

Warrants 

Unrecognized Compensation Costs

At April 30, 2022, we had unrecognized stock-based compensation of $283,901, which will be recognized over the weighted average remaining vesting period of 0.67 years.

Note 8.       Research and Development Rebate

On November 2, 2021, we received a research and development rebate from the government of Australia in the amount of $214,120 for clinical work performed in Australia related to our Phase 1 human trial for safety and efficacy for the treatment of concussed individuals. In addition, during the quarter ended April 30, 2022, we accrued $185,035 in Prepaid expenses and other current assets to reflect the anticipated rebate for additional expenses incurred related to the clinical trial. The rebates were accounted for as an offset to Research and development expense.

Note 9.       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:  

Note 10.       Common Stock

Returned 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.

On December 21, 2021, Vivakor, Inc., a shareholder, returned 3,309,578 shares of our common stock and the shares were returned to treasury.

On December 29, 2021, Regal Growth, LLC, a shareholder, returned 5,000,000 shares of our common stock and the shares were returned to treasury.

On February 2, 2022, LBL Professional Consulting, Inc., a shareholder, returned 7,500,000 shares of our common stock and the shares were returned to treasury.

Shares Issuable

Pursuant to our agreement with Prevacus entered into on March 1, 2021, Prevacus earned 1,000,000 shares of our common stock upon successful first dosing in our Phase 1 clinical trial related to our PRV-002 neurosteroid concussion treatment in the quarter ended April 30, 2022. These shares have not yet been issued.

Stock Issuance

On February 9, 2022, in connection with an investor relations consulting agreement with Tysadco, we issued Tysadco 3,000,000 restricted shares of our common stock valued at $0.53 per share. The agreement includes a lock-up - leak out provision.

Reverse Split

At our 2021 annual stockholder meeting, which was held on September 14, 2021, the stockholders approved the proposal that granted the Board discretionary authority to amend our Certificate of Incorporation to effect a reverse stock split of the issued and outstanding shares of our common stock. As determined by our Board, such stock split could be effected at a time and choosing of the Board. 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 to whether and when to effect the reverse 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 our common stock.

Lincoln Park

Securities Purchase Agreement

On October 22, 2021, we entered into a Securities Purchase Agreement (the “SPA”) with Lincoln Park Capital Fund, LLC (“LPC”) pursuant to which we received $250,000 in cash from LPC and LPC received (i) 1,500,000 restricted shares of our common stock, and (ii) 833,333 warrants exercisable at $0.50 per common share expiring in five years. 5

LPC Purchase Agreement Draws

During the nine months ended April 30, 2022, LPC purchased a total of 1,174,482 shares of our common stock for total proceeds of $467,236 pursuant to the August 14, 2020 LPC Purchase Agreement. As of April 30, 2022, LPC had purchased a total of 4,121,610 shares of our common stock pursuant to the agreement and remaining purchase availability was $8,311,289 and remaining shares available were 15,943,556.

Tysadco Partners

On October 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 Tysadco received (i) 1,500,000 restricted shares of our common stock, and (ii) 833,333 warrants exercisable at $0.50 per common share expiring in five years. 5

LGH

In connection with an amendment to the LGH Note, we issued LGH 100,000 shares of our common stock with a value of $51,000. See Note 6 above for additional information.

Private Placement

On February 2, 2022, we entered into an agreement to raise money through a private investment in a public entity (“PIPE”). We offered up to 14,285,714 Units (the “Units”), each Unit consisting of one share of our common stock (the “Shares”) and one-half of an accompanying warrant (the “Investor Warrants”) exercisable for one share of our common stock. The Units will be sold at a price of $0.35 per Unit (the “Offering”). The Investor Warrants have a term of 5 five years and are exercisable at a price of $0.70 per share and, in certain circumstances, may be exercised on a cashless basis. The Share and Investor Warrant comprising each Unit are immediately separable and will be issued separately.

The Offering is made on a “Minimum” basis, meaning a minimum amount of money must be raised. The minimum amount of 1,000,000 was raised effective April 14, 2022. Accordingly, we issued a total of 2,870,800 Units, consisting of 2,870,800 Shares and 1,435,400 Investor Warrants for gross proceeds to us of $1,004,780. Net proceeds after deducting commissions and fees were $849,302.

In connection with the Offering, we paid Laidlaw & Company (UK) Ltd. (“Laidlaw”), our introducing broker, 10% of the proceeds, or $100,478 in cash, as a finder fee. At the final closing of the Offering, we are obligated to issue Laidlaw warrants equal to 10% of the Shares sold in the Offering, including any common stock issued or issuable. The Warrants will have an exercise price equal to the lowest price per share of the share of common stock issued or issuable to investors in the offering and will expire in five years. The Laidlaw warrants will include cashless exercise provisions.

We are required to file a registration statement for resale of all shares issued or issuable in connection with the Offering within 60 days of the final closing of the Offering. Failure to file a registration statement for the resale of the shares would require us to pay to the purchasers, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to one and one-half percent (1.5%) of the aggregate subscription amount of such purchaser’s securities on the day of failure to file the registration statement and on every thirtieth (30^th) day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such filing is cured and (b) such time that such the filing is no longer required  for the purchasers to transfer the shares and warrant shares pursuant to Rule 144. The payments shall bear interest at the rate of eighteen percent (18%) per month (prorated for partial months) until paid in full.

Note 11.        Related Party Transactions

Due to Officers

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

The amount of unpaid salary and bonus due to our officers was included in Accrued wages on our Balance Sheets and was as follows:  

On January 31, 2022, the Compensation Committee and our full Board approved the 2021 bonus plan. Pursuant to the plan, Mr. Redmond received a $360,000 bonus and Ms. Farrell received a $40,000 bonus based upon meeting fund raising goals. The bonuses will be paid when funds are available and are included in the amounts disclosed in the above table.

See also Note 6 for a discussion of $25,000 Promissory Notes payable to officers and directors.

Note 12.       Donation Received

On January 5, 2022, we received a donation in the amount of $500,000 in partnership with the Erase PTSD Now organization and the Glenn Greenberg and Linda Vester Foundation. These funds were recorded as Other income in our Statements of Operations and will be used to progress the Phase 1 human clinical trials for drug candidate PRV-002 for the treatment of concussion.

Note 13.        Subsequent Events

On May 3, 2022, the second and final closing of the PIPE occurred, pursuant to which we issued one 1,187,572 Units, consisting of 1,187,572 shares of our common stock and warrants to purchase 593,786 shares of our common stock for which we received $415,650 in gross proceeds. As part of the closing, we issued Laidlaw 608,755 warrants with an exercise prices of $0.35 per share with a five-year cashless exercise.

In June 2022, the maturity date of the promissory notes outstanding to our officers and directors was extended to September 30, 2022.

In June 2022, the maturity date of the LGH Note was extended to August 30, 2022. As consideration, the Note conversion price changed to twenty cents ($0.20) per common share.

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, 2021 (“2021 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 are developing potentially life-saving technologies: the CardioMap® heart monitoring and screening device; the Save A Life choking rescue device, a unique neurosteroid drug compound intended to treat concussions and a unique drug compound to treat rare brain disorders in partnership with Prevacus, Inc. To date, none of our product 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.

Recent Funding

Private Placement

On February 2, 2022, we entered into an agreement to raise money through a private investment in a public entity. We offered up to 14,285,714 Units (the “Units”), each Unit consisting of one share of our common stock (the “Share”) and one-half of an accompanying warrant (the “Investor Warrants”) exercisable for one share of our common stock. The Units will be sold at a price of $0.35 per Unit (the “Offering”).

To date, we have issued a total of 4,058,372 Units for gross proceeds to us of $1,420,430. No additional sales will be made pursuant to this agreement.

See Notes 10 and 13 of Notes to Financial Statements for additional information.

Donation

In January 2022, we received a donation in the amount of $500,000 in partnership with the Erase PTSD Now organization and the Glenn Greenberg and Linda Vester Foundation. These funds were recorded as Other income in our Statements of Operations and will be used to progress the Phase 1 human clinical trials for drug candidate PRV-002 for the treatment of concussion

Promissory Notes

On December 21, 2021, and December 22, 2021, we entered into a total of five Promissory Notes (the “Notes”) with three of our directors and two officers.

Mr. Joseph Michael Redmond, President and Chief Executive Officer, Ms. Christine M. Farrell, Chief Financial Officer, Mr. Jerome H. Casey, Director, Mr. John P. Gandolfo, Director, and Mr. Ricky W. Richardson, Director, each loaned us $25,000 for total proceeds of $125,000. The Notes bear interest at 8% per annum and are due March 31, 2022. The notes have been extended to September 30, 2022.

LPC Securities Purchase Agreement

On October 22, 2021, we entered into a Securities Purchase Agreement (the “SPA”) with Lincoln Park Capital Fund, LLC (“LPC”) pursuant to which we received $250,000 in cash from LPC and LPC received (i) 1,500,000 restricted shares of our common stock, and (ii) 833,333 warrants exercisable at $0.50 per common share expiring in five years.

LPC Purchase Agreement Draws

During the nine months ended April 30, 2022, LPC purchased a total of 1,174,482 shares of our common stock for total proceeds of $467,236 pursuant to the August 14, 2020, LPC Purchase Agreement. As of April 30, 2022, LPC had purchased a total of 4,121,610 shares of our common stock for total proceeds of $1,938,711 and remaining purchase availability was $8,311,289 and remaining shares available were 15,943,556.

Tysadco Partners

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 had an original maturity date of 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 a total of 900,000 shares of our common stock if converted in full, including interest.

On March 31, 2022, the SPA was amended to extend the maturity date to March 1, 2023, and, as consideration, $25,000 was added to the principal.

On October 18, 2021, we entered into a Securities Purchase Agreement with Tysadco pursuant to which we received $250,000 in cash from Tysadco and Tysadco received (i) 1,500,000 restricted shares of our common stock, and (ii) 833,333 warrants exercisable at $0.50 per common share expiring in five years.

Going Concern

See Note 1 of Notes to Financial Statements.

Impact of COVID-19

The COVID-19 global pandemic has had an unfavorable impact on our business operations. The pandemic has impacted our ability to get financing, engage third-party vendors and the timing of our clinical trial in Australia. 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 nine months ended April 30, 2022, there were no significant changes to our significant accounting policies and estimates are 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, 2021, which was filed with the Securities and Exchange Commission on October 29, 2021.

Results of Operations

We do not currently sell or market any products and we did not have any revenue in the three or nine-month periods ended April 30, 2022 or 2021. 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.

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.

The decrease in consultants for the three months ended April 30, 2022, compared to the same period of the prior year was the result of the completion of several phases of research and development related primarily to PRV-002.

The decrease in drug development expenses for the three months ended April 30, 2022, compared to the same period of the prior year was the result of completion of initial drug development for PRV-002 in the second quarter of fiscal 2022.

The increases in Phase I clinical trial expenses for the three and nine months ended April 30, 2022, compared to the same periods of the prior year were the result of increased study costs as the trial progresses.

The decrease in prototype phase expenses for the three months ended April 30, 2022, compared to the same period of the prior year was the result of completion of Phase 1 prototype costs for the PRV-002 device used in the clinical trials in the second quarter of fiscal 2022.

The increases in consultants, drug development and Phase 1 clinical trial expense for the nine months ended April 30, 2022, compared to the same period of the prior year were the result of expenses incurred to develop the drug and start the Phase 1 clinical trial with PRV-002.

General and Administrative Expense

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

The changes in General and administrative expense were due to the following:

The increases in business development and investor relations in both periods related to the 3,000,000 shares of our common stock with a value of $1,610,000 issued to a consultant for investor relations, partially offset by decreases in non-recurring investor relations expense.

The decrease in board and stock expense for the three months ended April 30, 2022, compared to the same period of the prior year was due to the lower price of our common stock on the date grants were issued, resulting in lower stock-based compensation.

The decrease in wages for the three months ended April 30, 2022, compared to the same period of the prior year was due to a $20,000 signing bonus issued in the prior year quarter.

The increase in board and stock expense for the nine months ended April 30, 2022, compared to the same period of the prior year was due to the higher price of our common stock on the date grants were issued, resulting in higher stock-based compensation.

The increase in wages in the nine-month period ended April 30, 2022, compared to the same period of the prior year was due to bonuses totaling $400,000 granted to our executive officers in the 2022 period and additional employees hired in the third quarter of 2021.

In-Process Research and Development

In-process research and development in the three and nine month periods ended April 30, 2021, related to the Prevacus Asset Purchase Agreement that closed on March 1, 2021.

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:

The increases in interest expense for the three and nine-month periods ended April 30, 2022, compared to the same periods of 2021 were due to LGH and Tysadco notes issued in April 2021 and October 2021 and amended in February and March 2022, respectively, and the issuance of promissory notes in December 2021.

Other Income, net

Other income, net in the nine-month period ended April 30, 2022, includes a donation in the amount of $500,000 in partnership with the Erase PTSD Now organization and the Glenn Greenberg and Linda Vester Foundation and foreign exchange gains and losses related to invoices denominated and paid in foreign currencies. Other income, net in the 2021 periods represents the forgiveness of our SBA Paycheck Protection Program Loan.

Net Loss

Net loss decreased in the three and nine months ended April 30, 2022, compared to the same periods of the prior year due to the in-process research and development charge in the prior year periods, partially offset by increased research and development expense, general and administrative expense and interest expense in the current year periods as discussed above.

Liquidity and Capital Resources

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

To date, we have financed our operations primarily through debt financing and 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.

Cash used in investing activities in the first nine months of fiscal 2022 were for a patent related to our PRV-002 drug device combination. 

Debt

The following notes payable were outstanding:

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.

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

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 April 30, 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 April 30, 2022, 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, 2021, management identified the following material weaknesses in internal control over financial reporting:

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

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

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

In light of the material weakness described above, prior to the filing of this Form 10-Q for the period ended October 31, 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.

PART II - OTHER INFORMATION

There have been no material changes during the nine months ended April 30, 2022 to the risk factors discussed in our Annual Report on Form 10-K for the year ended July 31, 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, 2021 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.

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

* Management or compensatory agreement.

SIGNATURES

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 June 14, 2022.