10-Q: Odyssey Health Reports Q1 Loss, Faces Going Concern Doubts

Odyssey Health, Inc. reported a reduced net loss for the first quarter of fiscal 2026 but continues to face substantial doubt about its ability to continue as a going concern due to recurring losses and negative working capital.

Summary

• Net loss decreased to $(483,447) for the three months ended October 31, 2025, compared to $(1,018,906) for the same period in 2024.
• The company reported current liabilities of $7,298,810 against current assets of $143,622, resulting in a working capital deficit of $7,155,188 as of October 31, 2025.
• An accumulated deficit of $63,229,284 was reported as of October 31, 2025.
• No revenues were recognized for the three months ended October 31, 2025, or the prior fiscal year.
• Entered into a Master Technology and Sub-license Agreement with NeuRX Health, Inc. on October 14, 2025, for exclusive worldwide rights to BreastCheck, a non-invasive test for breast abnormalities, with closing anticipated in January 2026.
• Secured new debt financing, including a $100,000 promissory note from Peter DArruda and a $220,000 face value convertible promissory note from Mast Hill Fund L.P.
• Subsequent to the quarter, entered into a Maintenance Agreement with Mast Hill and a Securities Purchase Agreement with Mast Hill for up to $25,000,000 in multiple tranches, with the first tranche providing $437,500 net proceeds.
• Management identified material weaknesses in internal control over financial reporting, specifically insufficient resources and inadequate segregation of duties.

Sentiment

Score: 3

Explanation: While the net loss decreased and new financing was secured, the company remains pre-revenue, has a significant accumulated deficit, a substantial working capital deficit, and an explicit 'going concern' warning. The material weaknesses in internal controls also weigh heavily on the sentiment. The new financing provides some runway but does not fundamentally alter the high-risk profile of this early-stage medical device company.

Positives

• Net loss significantly decreased by 52.6% to $(483,447) in Q1 2026 compared to $(1,018,906) in Q1 2025.
• General and administrative expenses decreased by 47.7% to $303,190, attributed to lower securities filing activity, voluntary executive salary decreases, and no stock-based compensation.
• Recognized a gain on change in fair value of derivative liability of $422,419 for the quarter.
• Secured new financing, including a $100,000 promissory note and a $220,000 convertible note from Mast Hill Fund L.P.
• Expanded the product pipeline by entering into a sub-licensing agreement for BreastCheck, a non-invasive breast abnormality test.
• Subsequent to quarter end, secured additional financing commitments from Mast Hill Fund L.P. totaling up to $25 million, with an initial tranche of $437,500 net proceeds.
• Implemented a third-party independent review and approval process for journal entries to strengthen internal controls.

Negatives

• Substantial doubt exists about the ability to continue as a going concern due to recurring operating losses and negative cash flows from operations.
• Reported a significant working capital deficit of $7,155,188 as of October 31, 2025.
• Accumulated deficit reached $63,229,284 as of October 31, 2025.
• No revenues were generated in the current or prior comparable quarter, indicating a pre-commercialization stage.
• Identified material weaknesses in internal control over financial reporting, specifically insufficient resources and inadequate segregation of duties.
• Interest expense increased by 38.6% to $(95,336) in Q1 2026.
• Incurred significant financing costs of $(507,368) in Q1 2026 related to the derivative liability.
• Cash balance remains low at $25,586 as of October 31, 2025.
• Total liabilities significantly exceed total assets ($7,298,810 vs $143,622).

Risks

• Substantial doubt about the ability to continue as a going concern due to recurring operating losses and negative cash flows.
• Dependence on raising additional capital through debt or equity issuances or collaborative arrangements to meet obligations and execute the business plan.
• Potential for significant dilution of current stockholders if additional equity securities are issued.
• Inability to obtain additional financing on a timely basis or on commercially reasonable terms could lead to scaling down or ceasing operations.
• Products are in development and require FDA clearance or approval for commercial sale, with no assurance of successful approval.
• Material weaknesses in internal control over financial reporting, including insufficient personnel and inadequate segregation of duties, could adversely affect financial reporting reliability.
• Unsecured debt instruments with Mast Hill have priority over other unsecured debt and include restrictive covenants on distributions, stock repurchases, asset sales, and certain advances/loans.
• The fair value of contingent consideration for the anti-choking device is currently zero as FDA clearance is not yet probable.

Future Outlook

The company expects to experience continuing operating losses and negative cash flows for the foreseeable future. Its continued existence depends on successfully raising additional capital through debt or equity issuances or collaborative arrangements. It plans to license, improve, and develop products and identify distribution channels, but products require FDA clearance or approval before commercial sale, with no assurance of success.

Management Comments

• "Our corporate mission is to create or acquire distinct assets, intellectual property, and technologies with an emphasis on acquisition targets that have superior clinical utility and serve an unmet medical need."
• "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 to sell in the United States."
• "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 are continually adjusting our business plan to reflect our current liquidity expectations."
• "We will commence actively marketing products after the products and drugs in development have been FDA cleared or approved, however, there can be no assurance that we will be successful in obtaining FDA clearance or approval for our products."

Industry Context

Odyssey Health operates in the medical device and biotechnology sector, focusing on developing and acquiring products for unmet medical needs. Its strategy of engaging third parties for development and manufacturing, and seeking FDA approval, is typical for early-stage medical technology companies. The acquisition of BreastCheck and ongoing development of CardioMap and Save-A-Life devices indicate a diversified approach within the health tech space. The reliance on debt and equity financing is common for pre-revenue biotech firms that require substantial capital for research, development, and regulatory processes.

Comparison to Industry Standards

• The company's pre-revenue status and significant accumulated deficit are common for early-stage medical device development companies, which typically require substantial R&D investment and navigate lengthy regulatory processes before commercialization.
• The reliance on convertible debt and equity lines of credit (such as the Mast Hill agreements) is a standard financing mechanism for companies with limited operating history and high capital needs, similar to many small-cap biotech or med-tech firms.
• The identified material weaknesses in internal controls (insufficient resources, inadequate segregation of duties) are not uncommon for smaller reporting companies but represent critical areas for improvement to meet public company standards and investor expectations.
• The acquisition of sub-licensing rights for a non-invasive breast abnormality test (BreastCheck) aligns with industry trends towards less invasive diagnostic tools, similar to developments seen in companies pursuing liquid biopsies or advanced imaging technologies.
• The development of devices like CardioMap (heart monitoring) and Save-A-Life (choking rescue) places the company in competitive markets with established players, necessitating significant product differentiation and successful regulatory navigation to achieve market penetration.

Corporate Governance

Related Party Transactions

• Accounts payable and accrued wages, officers: Joseph M. Redmond (CEO) and Christine Farrell (CFO) have accrued expenses and salaries totaling $1,890,751 as of October 31, 2025.
• Promissory Notes payable to officers and directors: $100,000 of principal and $30,875 of accrued interest outstanding as of October 31, 2025, with a due date of January 31, 2026.

Stakeholder Impact

• Shareholders: Potential for significant dilution from future equity issuances and convertible debt conversions. High risk of investment loss due to going concern doubts and recurring losses.
• Employees: Continued operational uncertainty due to financial instability. Executive salaries were voluntarily decreased.
• Creditors: Unsecured debt holders, particularly those with Mast Hill, have priority. Risk of delayed or non-payment if additional financing is not secured.
• Customers: No current products on the market, so no direct customer impact yet. Future customers depend on successful product development and regulatory approval.
• Suppliers: Potential risk of delayed payments due to liquidity constraints.

Next Steps

• Finalize terms and close the Master Technology and Sub-license Agreement with NeuRX Health, Inc. for BreastCheck (anticipated January 2026).
• Continue efforts to raise additional capital necessary to meet obligations and execute the business plan.
• Develop or acquire medical-related products, engage third parties for development, complete clinical trials, and manufacture products according to FDA regulations.
• Obtain FDA clearance or approval for products (CardioMap, Save-A-Life, BreastCheck) to enable commercial sale.
• Address material weaknesses in internal control over financial reporting by continuing to use third-party specialists, increasing the frequency of independent reconciliations, and potentially appointing additional outside directors and audit committee members.
• Remit service fees received from the Maintenance Agreement to Mast Hill as payment on the Maintenance Note.

Key Dates

Recommendation

The company faces substantial doubt about its ability to continue as a going concern, evidenced by recurring losses, negative cash flows, and a significant working capital deficit. While the net loss decreased and new financing was secured, these are temporary measures for a pre-revenue company with fundamental financial instability. The material weaknesses in internal controls add to the operational risk. The high potential for further shareholder dilution from convertible debt and equity raises, coupled with the inherent risks of medical device development and regulatory approval, makes this a highly speculative investment with significant downside risk. A seasoned investor would likely avoid or sell positions given the severe going concern warning and lack of a clear path to profitability.

Keywords

Medical devices, biotechnology, healthcare, SEC filing, 10-Q, financial results, net loss, going concern, capital raise, debt financing, convertible notes, BreastCheck, CardioMap, Save-A-Life, FDA approval, internal controls, risk factors