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):
|
|
|
|
|
|
|
|
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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
|
|
The accompanying
notes are an integral part of these financial statements.
Odyssey Group
International, Inc.
Statements of
Operations and Comprehensive Loss
(Unaudited)
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|
For the Three Months Ended October 31,
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|
|
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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
|
|
The accompanying
notes are an integral part of these financial statements.
Odyssey Group
International, Inc.
Statements of
Stockholders' Equity (Deficit)
(Unaudited)
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|
|
|
|
|
|
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Additional
|
|
|
|
|
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Total
|
|
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|
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Paid-In
|
|
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Accumulated
|
|
|
Equity
|
|
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|
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
|
)
|
|
|
|
|
|
|
|
|
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
|
)
|
The accompanying
notes are an integral part of these financial statements.
Odyssey Group
International, Inc.
Statements of
Cash Flows
(Unaudited)
|
|
For the Three Months Ended October 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(711,514
|
)
|
|
$
|
(1,416,612
|
)
|
Adjustments to reconcile net loss to net cash flows used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,638
|
|
|
|
2,638
|
|
Stock-based compensation
|
|
|
130,281
|
|
|
|
1,048,312
|
|
Amortization of beneficial conversion feature
|
|
|
88,333
|
|
|
|
70,309
|
|
Amortization of debt discount and closing costs
|
|
|
82,846
|
|
|
|
–
|
|
Other non-cash interest expense
|
|
|
7,000
|
|
|
|
–
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase in prepaid expenses
|
|
|
(65,833
|
)
|
|
|
82,977
|
|
Increase in accounts payable
|
|
|
154,652
|
|
|
|
1,031
|
|
Increase (decrease) in accrued wages
|
|
|
34
|
|
|
|
(27,013
|
)
|
Increase in accrued interest
|
|
|
8,067
|
|
|
|
23,583
|
|
Net cash used in operating activities
|
|
|
(303,496
|
)
|
|
|
(214,775
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from notes payable
|
|
|
315,000
|
|
|
|
150,000
|
|
Financing closing costs paid
|
|
|
(31,700
|
)
|
|
|
–
|
|
Proceeds from equity financing
|
|
|
250,000
|
|
|
|
–
|
|
Net cash provided by financing activities
|
|
|
533,300
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
229,804
|
|
|
|
(64,775
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
62,952
|
|
|
|
167,095
|
|
End of period
|
|
$
|
292,756
|
|
|
$
|
102,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
$
|
–
|
|
Common stock issued for debt financing commitment shares
|
|
$
|
197,400
|
|
|
$
|
–
|
|
Warrants issued in connection with financings
|
|
$
|
128,333
|
|
|
$
|
–
|
|
Original issue discount on debt
|
|
$
|
35,000
|
|
|
$
|
–
|
|
The accompanying
notes are an integral part of these financial statements.
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, 2020 is derived from our 2020 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 2020 Annual Report on Form 10-K filed with the SEC on November 16, 2020. 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, 2020 from those disclosed in our Annual Report on Form 10-K for the year
ended July 31, 2020.
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 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 different life-saving technologies; the CardioMap®
heart monitoring and screening device, the Save a Life choking rescue device and a unique neurosteroid drug compound intended to
treat rare brain disorders. 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 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.
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 the adoption of ASU 2019-12 to 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 adoption 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, 2020 or the year ended July 31, 2020.
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.
Contingent Liability
At October 31,
2020 and July 31, 2020, 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.
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:
|
|
October 31, 2020
|
|
|
July 31, 2020
|
|
Carrying value
|
|
$
|
695,000
|
|
|
$
|
445,000
|
|
Fair value
|
|
$
|
694,987
|
|
|
$
|
445,000
|
|
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, 2020 or the fiscal
year ended July 31, 2020.
Note 4. Debt
Labrys
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 with a value of $197,400. 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,” 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.
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.
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
|
|
Note 5. Stock-Based
Compensation
Stock Options
Stock option activity during the quarter ended October 31, 2020
was as follows:
|
|
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, there were unvested RSUs outstanding covering 400,000 shares of our common stock.
Unrecognized Compensation Costs
At October 31, 2020, we had unrecognized
stock-based compensation of $5,387, which will be recognized over the weighted average remaining vesting period of 0.25 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:
|
|
Three Months Ended October 31,
|
|
|
|
2020
|
|
|
2019
|
|
Options to purchase common stock
|
|
|
375,000
|
|
|
|
600,000
|
|
Shares issuable upon conversion of convertible notes and related accrued interest
|
|
|
448,711
|
|
|
|
712,063
|
|
Warrants to purchase common stock
|
|
|
584,500
|
|
|
|
35,000
|
|
Restricted stock units
|
|
|
1,350,000
|
|
|
|
1,500,000
|
|
Total potentially dilutive securities
|
|
|
2,758,211
|
|
|
|
2,847,063
|
|
Note 7. Common Stock Issuances
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.
Lincoln Park
On August 14, 2020, we entered into a Purchase
Agreement (the “LPC Purchase Agreement”) 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 our
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 of our common stock to LPC.
Upon entering into the LPC Purchase Agreement,
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 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), 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.
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.
|
Note 8. Related Party Transactions
Due to Officers and Executives
The following amounts were due to an officer and an executive
and were included in Accounts payable on our Balance Sheets:
|
|
October 31, 2020
|
|
|
July 31, 2020
|
|
Joseph M. Redmond, CEO
|
|
$
|
–
|
|
|
$
|
2,304
|
|
Christine Farrell, Controller
|
|
|
20,000
|
|
|
|
25,598
|
|
|
|
$
|
20,000
|
|
|
$
|
27,902
|
|
The amount of salary due to Mr. Redmond
for his services was included in Accrued wages on our Balance Sheets and was as follows:
Balance at July 31, 2020
|
|
$
|
183,846
|
|
Salary accrued
|
|
|
–
|
|
Salary paid
|
|
|
–
|
|
Balance at October 31, 2020
|
|
$
|
183,846
|
|
Note 9. Going
Concern
We did not recognize any revenues for
the year ended July 31, 2020 or the quarter ended October 31, 2020 and we had an accumulated deficit of $29,562,242 as of October
31, 2020. For the foreseeable future, we expect to experience continuing operating losses and negative cash flows from operations.
Cash available at October 31, 2020 of $292,756 may not provide enough working capital to meet our current operating expenses through
December 10, 2021.
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 and China, 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.
If we are unable to raise additional capital
by December 10, 2021, 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. 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
On December
4, 2020, our registration statement on 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 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.
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, 2020 (“2020 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
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 saving technologies: the CardioMap®
heart monitoring and screening device; the Save a Life choking rescue device; and a unique neurosteroid drug compound intended
to treat rare brain disorders.
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 to 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 to 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, we entered into two funding
arrangements.
One with Labrys Fund, LP, which provided
us with $315,000 of cash in exchange for a $350,000 promissory note and 420,000 shares of our common stock. See Note 4. of Notes
to Financial Statements for additional information.
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 worth of
our common stock over a 36-month period in exchange for 793,802 shares of our common stock with a value of $369,118. Lincoln Park
made an initial purchase of 602,422 shares of our common stock for $250,000. See Note 7. of Notes to Financial Statements for additional
information.
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 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.
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.
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 as of October 31, 2020 and cash of $292,756.
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 available at October 31, 2020, may not provide enough working capital to meet our current operating
expenses through December 10, 2021.
If we are unable to raise additional capital
by December 10, 2021, 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. 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 closures 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. 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, 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,
2020, which was filed with the Securities and Exchange Commission on November 16, 2020.
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, 2020 or 2019. 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,
|
|
|
$
|
|
|
%
|
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
|
Change
|
|
General and administrative expense
|
|
$
|
525,269
|
|
|
$
|
1,322,721
|
|
|
|
797,452
|
|
|
|
(60%
|
)
|
Loss from operations
|
|
|
(525,269
|
)
|
|
|
(1,322,721
|
)
|
|
|
(797,452
|
)
|
|
|
(60%
|
)
|
Interest expense
|
|
|
186,245
|
|
|
|
93,891
|
|
|
|
92,354
|
|
|
|
98%
|
|
Net loss
|
|
$
|
(711,514
|
)
|
|
$
|
(1,416,612
|
)
|
|
|
(705,098
|
)
|
|
|
(50%
|
)
|
Basic and diluted net loss per share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(50%
|
)
|
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 decrease in General and administrative
expense was due to a $918,032 decrease in board and stock expense due to the vesting of restricted stock units in the 2019 period
and a $10,000 decrease research and development expense, offset by a $240,000 increase in financing expense and a $93,061 increase
in legal and professional fees related to our agreements with Labrys and Lincoln Park, and a $20,393 increase in payroll expense.
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,
|
|
|
|
2020
|
|
|
2019
|
|
Weighted average debt outstanding
|
|
$
|
656,957
|
|
|
$
|
334,783
|
|
Weighted average interest rate
|
|
|
9.5%
|
|
|
|
7.0%
|
|
The increase in interest expense for the
three-month period ended October 31, 2020 compared to the same period of 2019 was due to the increased average debt outstanding
and higher average interest rates due to the issuance of debt to Labrys in August 2020 as discussed above, as well as an $82,846
increase in amortization of debt discount 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.
Net Loss
Net loss decreased in the three-month period
ended October 31, 2020 compared to the same period of 2019 due to the decrease in General and administrative expense, partially
offset by the increase in Interest expense as discussed above.
Liquidity and Capital Resources
The following table sets forth the primary sources and uses
of cash:
|
|
Three Months Ended October 31,
|
|
|
|
2020
|
|
|
2019
|
|
Net cash used in operating activities
|
|
$
|
(303,496
|
)
|
|
$
|
(214,775
|
)
|
Net cash provided by financing activities
|
|
|
533,300
|
|
|
|
150,000
|
|
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 Notes
At October 31, 2020, we had 10 convertible
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.
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.
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.
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 Note
On May 8, 2020, we received loan proceeds
in the amount of $50,000 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus
Aid, Relief 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 payments
for the first six months. We used the proceeds for purposes consistent with the PPP 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 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.
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.
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.