10-Q: Odyssey Health Reports Q3 2024 Results, Highlights Asset Sale and Financial Restructuring

Sentiment:

Quarterly Report 14 June 2024 5:10 PM

Odyssey Health's Q3 2024 report details a significant asset sale to Oragenics, impacting financials and future strategy, alongside ongoing financial challenges.

Capital raiseThe company's continued existence depends on the success of its efforts to raise additional capital.The company may obtain capital primarily through issuances of debt or equity or entering into collaborative arrangements with corporate partners.The company may be required to further scale down or perhaps even cease operations if it is not able to obtain additional financing on a timely basis.

Worse than expectedThe company's cash balance is insufficient to meet operating expenses through June 14, 2025.The company has an accumulated deficit of $48,263,640.The company's financial statements indicate substantial doubt about its ability to continue as a going concern.

Summary

Odyssey Health, Inc. filed its Form 10-Q for the quarter ended April 30, 2024, reporting a net loss of $842,341 for the quarter and a net income of $11,833,735 for the nine-month period due to a gain on the sale of assets.
The company sold assets related to brain-related illnesses to Oragenics for $1 million in cash, 8 million shares of Series F preferred stock, and the assumption of $325,672 in accounts payable.
Odyssey's cash balance stood at $66,014 as of April 30, 2024, and the company has an accumulated deficit of $48,263,640.
The company's financial statements indicate substantial doubt about its ability to continue as a going concern, requiring additional capital to meet obligations.
The company's total assets were $13,575,877, and total liabilities were $5,696,323 as of April 30, 2024.
The company's research and development expenses decreased significantly due to the sale of assets to Oragenics.
The company's stock-based compensation expenses also decreased due to fewer grants and unvested awards.
The company's general and administrative expenses decreased due to reduced business development activities and fewer employees.

Sentiment

Score: 3

Explanation: The document highlights significant financial challenges and going concern issues, despite a one-time gain from asset sales. The company's reliance on future capital raises and material weaknesses in internal controls contribute to a negative outlook.

Positives

The sale of assets to Oragenics generated a significant gain of $16,400,687, leading to a net income of $11,833,735 for the nine-month period.
The company reduced its operating expenses, including research and development, stock-based compensation, and general and administrative costs.
The company converted debt into equity, reducing the outstanding debt balance.

Negatives

The company's cash balance of $66,014 is insufficient to meet operating expenses through June 14, 2025.
The company has an accumulated deficit of $48,263,640, indicating significant financial challenges.
The company's financial statements indicate substantial doubt about its ability to continue as a going concern.
The company experienced a loss on investment of $367,929 for the three months ended April 30, 2024, due to the revaluation of Oragenics common stock.
The company has material weaknesses in internal control over financial reporting.

Risks

The company's ability to continue as a going concern is dependent on raising additional capital.
The company may be required to scale down or cease operations if additional financing is not obtained.
The company's reliance on debt financing could negatively impact its financial stability.
The company's products require further development and FDA clearance or approval to market in the United States.
The company faces risks related to market conditions, interest rates, and the perception of its future earnings.
The company has material weaknesses in internal control over financial reporting, which could affect the reliability of its financial statements.

Future Outlook

The company's future is dependent on its ability to raise additional capital, develop and commercialize its products, and obtain regulatory approvals. The company plans to license, improve, and develop its products and identify and select distribution channels.

Management Comments

Management believes the motion to dismiss the lawsuit will be granted and no monetary award will be awarded to the plaintiff.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives.

Industry Context

The company operates in the medical device and pharmaceutical industry, which is characterized by high research and development costs, lengthy regulatory approval processes, and intense competition. The company's focus on acquiring and developing unique medical products aligns with the industry trend of innovation and differentiation.

Comparison to Industry Standards

Odyssey Health's financial situation is precarious compared to established medical device companies. For example, companies like Medtronic or Johnson & Johnson have substantial revenue streams and strong cash positions, while Odyssey is struggling with a significant accumulated deficit and limited cash.
The company's reliance on debt financing and equity offerings is common for early-stage biotech and medical device companies, but the level of financial distress is higher than many peers. Companies like InMode or Shockwave Medical, while also relying on capital raises, have demonstrated more robust revenue growth and product commercialization.
The sale of assets to Oragenics is a strategic move to generate cash, but it also indicates a shift in the company's focus and a potential reduction in its long-term growth prospects. This is in contrast to companies that are focused on expanding their product portfolios and market reach.
The company's material weaknesses in internal control over financial reporting are a concern and are not typical for publicly traded companies. This indicates a need for significant improvements in its financial management and governance practices. Companies like Stryker or Boston Scientific have well-established internal control systems.

Legal Proceedings

The company is a party to a lawsuit in Superior Court, Kent County in the State of Rhode Island, where a motion to dismiss has been filed and a hearing is scheduled for July 8, 2024.

Related Party Transactions

The company has outstanding promissory notes payable to officers and directors.
The company has amounts due to officers for reimbursement of expenses.
The company has unpaid salary and bonus due to officers.

Stakeholder Impact

Shareholders face significant risk due to the company's financial instability and going concern issues.
Employees may be impacted by potential layoffs or reduced compensation if the company is unable to secure additional funding.
Customers may be affected by delays in product development and commercialization.
Suppliers and creditors face the risk of non-payment if the company's financial situation does not improve.

Next Steps

The company needs to secure additional financing to continue operations.
The company needs to develop and commercialize its products.
The company needs to obtain regulatory approvals for its products.
The company needs to improve its internal control over financial reporting.

Key Dates

Date	Description
2021-12-21	Promissory notes issued to directors and officers.
2022-12-13	Securities Purchase Agreement with Mast Hill Fund, L.P.
2023-06-13	Amendment No. 1 to the Securities Purchase Agreement with Mast Hill Fund, L.P.
2023-07-07	Received $150,000 advance from an accredited investor related to a Note Purchase Agreement.
2023-08-28	Paid LGH $30,000 of principal on a note.
2023-10-04	Entered into an Asset Sale Agreement with Oragenics, Inc.
2023-10-19	John Gandolfo, former director, converted his convertible note into common stock.
2023-11-01	Entered into Promissory Note Amendments with directors and officers.
2023-12-11	Received additional $500,000 from Oragenics upon stockholder approval.
2023-12-15	Paid LGH $50,000 of principal on a note.
2023-12-20	ClearThink Capital Partners, LLC converted their convertible note into common stock.
2023-12-28	Closing of the Asset Sale Agreement with Oragenics, Inc.
2023-12-29	Accredited investors provided notice to convert their Note Purchase Agreement.
2023-12-30	Entered into Amendment No. 7 to the Convertible Promissory Note with LGH Investments, LLC.
2024-01-26	Converted $528,767 of principal and interest from accredited investors into common stock.
2024-01-31	Entered into Promissory Note Amendments with directors and officers.
2024-02-13	Entered into a six-month promissory note with Jonathan Lutz.
2024-03-13	Entered into Amendment No. 2 to the Securities Purchase Agreement with Mast Hill.
2024-03-14	Mast Hill converted their outstanding warrant into common stock.
2024-04-30	End of the reporting period for the Form 10-Q.
2024-06-14	Date of the report.

Keywords

asset sale, Oragenics, financial results, going concern, debt financing, equity financing, research and development, medical devices, FDA approval, capital raise

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