FUNI 10-Q
Hypha Labs, Inc. (FUNI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
Quarterly Period Ended
or
For the transition period from __________ to __________
Commission
File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
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.
| ☒ | 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| ☒ | 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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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 |
The number of shares of the registrant’s common stock outstanding as of August 21, 2025 was .
TABLE OF CONTENTS
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
HYPHA LABS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| June
30, 2025 | September
30, 2024 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaids and other current assets | ||||||||
| Deferred offering costs | ||||||||
| Total current assets | ||||||||
| Fixed assets, net | ||||||||
| Right-of-use asset | ||||||||
| Total non-current assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued expenses – related parties | ||||||||
| Current maturities of notes payable | ||||||||
| Current maturities of convertible notes payable, net of discounts | ||||||||
| Lease liability – current | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Lease liability - long term | ||||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | ||||||||
| Series B convertible preferred stock, $ par value, shares authorized; shares issued and outstanding as of June 30, 2025 and September 30, 2024 | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Deficit: | ||||||||
| Series A convertible preferred stock, $ par value, shares authorized; shares issued and outstanding as of June 30, 2025 and September 30, 2024 | ||||||||
| Series C preferred stock, $ par value, shares authorized; and shares issued and outstanding as of June 30, 2025 and September 30, 2024, respectively | ||||||||
| Series D preferred stock, $ par value, shares authorized; shares issued and outstanding as of June 30, 2025 and September 30, 2024, respectively | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding as of June 30, 2025 and September 30, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
See accompanying notes to unaudited consolidated financial statements.
| 3 |
HYPHA LABS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Gain on sale of subsidiary assets | ( | ) | ( | ) | ||||||||||||
| Interest income | ||||||||||||||||
| Recovery of previously written off receivables | ||||||||||||||||
| Other income | ||||||||||||||||
| Loss on debt extinguishment | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss from continuing operations before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ( | ) | ||||||||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income from discontinued operations, net of taxes | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding – basic | ||||||||||||||||
| Weighted average number of common shares outstanding – fully diluted | ||||||||||||||||
| Net loss per share from continuing operations – basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) per share from discontinued operations – basic | $ | $ | $ | $ | ||||||||||||
| Net income (loss) per share – basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Net loss per share from continuing operations – diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) per share from discontinued operations – diluted | $ | $ | $ | $ | ( | ) | ||||||||||
| Net income (loss) per share – diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See accompanying notes to unaudited consolidated financial statements.
| 4 |
HYPHA LABS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
| Series B Convertible Preferred Stock | Series A Convertible Preferred Stock | Series C Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Issuance of shares of Series C preferred stock | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Series B Convertible Preferred Stock | Series A Convertible Preferred Stock | Series C Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Net Income | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of notes payable | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Modification of conversion price in debt extinguishment | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
| 5 |
HYPHA LABS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended | ||||||||
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Gain on sale of subsidiary net assets | ( | ) | ||||||
| Loss on debt extinguishment | ||||||||
| Stock-based compensation | ||||||||
| Amortization of debt discounts | ||||||||
| Amortization of right-of-use asset | ||||||||
| Decrease (increase) in assets: | ||||||||
| Other current assets | ( | ) | ||||||
| Increase (decrease) in liabilities: | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| Accrued expenses – related parties | ||||||||
| Lease liability | ( | ) | ||||||
| Net cash used in operating activities from continuing operations | ( | ) | ( | ) | ||||
| Net cash provided by operating activities from discontinued operations | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Cash received from sale of subsidiary net assets | ||||||||
| Net cash provided by (used in) investing activities from continuing operations | ( | ) | ||||||
| Net cash used in investing activities from discontinued operations | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Proceeds from notes payable | ||||||||
| Repayments of notes payable | ( | ) | ||||||
| Proceeds from convertible notes payable | ||||||||
| Repayments of convertible notes payable | ( | ) | ||||||
| Proceeds from sale of Series C Preferred shares | ||||||||
| Payment of deferred offering costs | ( | ) | ||||||
| Net cash used in financing activities from continuing operations | ( | ) | ||||||
| Net cash used in financing activities from discontinued operations | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net increase (decrease) in cash | ||||||||
| Cash – beginning | ||||||||
| Cash – ending | $ | $ | ||||||
| Supplemental disclosures: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Accounts payable and accrued interest added to note principal balance | $ | $ | ||||||
| Common stock issued for conversion of note payable | $ | $ | ||||||
| Note payable issued for fixed assets and accounts payable | $ | $ | ||||||
See accompanying notes to unaudited consolidated financial statements.
| 6 |
HYPHA LABS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 – Nature of Business and Significant Accounting Policies
Nature of Business
Hypha Labs, Inc. was incorporated in Nevada on October 5, 2010. Hypha Labs, Inc. and its subsidiaries (“Hypha Labs,” the “Company,” “we,” “our” or “us”) was a service-oriented independent testing laboratory, data analytics and media firm focused on the developing cannabis and hemp markets and supported the cannabis industry’s best practices for reliable testing. Our mission was to provide pharmaceutical-grade analysis and testing to the cannabis industry, under ISO-17025:2017 guidelines, to ensure consumers and patients knew exactly what was in the cannabis they ingest and to help maximize the quality of our clients’ products through research, development, and standardization. Hypha Labs had been operating a cannabis-testing lab in Nevada since 2015.
On February 20, 2024, we completed the sale of the net assets of our wholly-owned subsidiary Digipath Labs, Inc. (“Digipath Labs”). As of that date, we were no longer in business as a service-oriented independent testing laboratory, data analytics and media firm focused on the developing cannabis and hemp markets, which supported the cannabis industry’s best practices for reliable testing, cannabis education and training. Following closing of the asset sale, the Company changed its name from Digipath, Inc. to Hypha Labs, Inc.
Hypha Products Inc., a wholly owned subsidiary of the Company, was formed on April 18, 2024 to engage in the research, development and commercialization of an accelerator, the Hypha Micropearl accelerator, a home appliance designed to accelerate the production of nutritionally beneficial mushrooms for human consumption. The Company’s easy-to-use device, together with its replacement cartridges, safely and effectively produces enriched mycelium of functional mushrooms, or Micropearls, in just eight days. These Micropearls contain active mushroom ingredients that offer a way to harness the medicinal properties of fungi in a concentrated, easy-to-handle, tasteless and odorless form. These Micropearls can be incorporated into various food and beverages without altering the flavor.
Our Hypha Micropearl accelerator will be sold with replaceable cartridges which are delivered pre-sterilized to the home and ready to be inserted into the device. These cartridges will be filled with powerful nutrient formulations which allow for the production of the Micropearls. The QR codes on the cartridges are scanned to the Hypha Labs app and inserted into the device and the Micropearls are produced and fully formed in eight days. After harvesting the Micropearls with a strainer, they are ready to be incorporated into a variety of foods. The cartridges help to minimize the risk of mold or yeast contamination and help improve the success of the at home mushroom growth. We believe that our innovative accelerator technology will disrupt traditional methods of mushroom production and bring lab-quality nutrient ingredients into the home with convenience and efficiency.
We intend to continue the design, development and testing of the Hypha Micropearl accelerator over the next six months. Initially, we will produce a limited number of accelerators at our headquarters for testing purposes, both with mycologists and experts in the functional mushroom industry. Upon completion of the design and successful testing of the Hypha Micropearl accelerator, we will seek to enter into a manufacturing arrangement outside the United States to manufacture the Hypha Micropearl accelerator for commercial sale. Our goal is to be in the position to market the Hypha Micropearl accelerator by the end of calendar year 2025, although there can be no assurance we will achieve our goal in this time period, or at all.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Intercompany accounts and transactions have been eliminated.
| 7 |
The unaudited condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Condensed Consolidated Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Condensed Consolidated Financial Statements, and the accompanying notes, are prepared in accordance with GAAP and do not contain certain information included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024. The interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the following entities, all of which were under common control and ownership at June 30, 2025:
| Jurisdiction of | ||||
| Name of Entity | Incorporation | Relationship | ||
| (1) | |
| (2) | |
| (3) | |
| (4) |
The consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements. The parent company and subsidiaries will be collectively referred to herein as the “Company”, “Hypha” or “FUNI”. The Company’s headquarters are located in Las Vegas, Nevada.
These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
Our historical revenue was primarily generated through our subsidiary, Digipath Labs, which recognized revenue from the analytical testing of cannabis products for licensed producers and cultivators within the state of Nevada on a determinable fixed fee per test, or panel of tests, basis. Revenue from the performance of those services was recognized upon completion of the tests, at which time test results were delivered to the customer, provided collectability of the fee is reasonably assured. We typically required payment within thirty days of the delivery of results.
The Company had revenues for the three and nine months ended June 30, 2025. For the three and nine months ended June 30, 2024, all revenues are classified as part of Net income from discontinued operations in the accompanying consolidated statement of operations.
| 8 |
Discontinued Operations
On
April 20, 2023, the Company and Digipath Labs entered into an Asset Purchase Agreement (the “Purchase Agreement”) with DPL
NV, LLC (“Buyer”), pursuant to which Digipath Labs agreed to sell substantially all of its assets to Buyer for a cash purchase
price of $
The results of discontinued operations are aggregated and presented separately in the Consolidated Statements of Operations as net income from discontinued operations for the periods ended June 30, 2024. The cash flows of the discontinued operations are reflected as cash flows of discontinued operations within the Company’s Consolidated Statements of Cash Flows for the periods ended June 30, 2024.
Amounts presented in discontinued operations have been derived from our consolidated financial statements and accounting records using the historical basis of assets, liabilities, results of operations, and cash flows of Digipath Labs. The discontinued operations exclude general corporate allocations.
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the three and nine months ended June 30, 2025, shares issuable upon conversion of convertible notes payable, shares issuable upon exercise of options, shares issuable upon exercise of warrants, and shares issuable upon conversion of Series A Preferred and Series B Preferred shares, had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share. For the three and nine months ended June 30, 2024, shares issuable upon conversion of convertible notes payable, shares of common stock issuable upon exercise of options, shares issuable upon exercise of warrants, and shares issuable upon conversion of Series A Preferred and Series B Preferred shares, had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.
Segment Reporting
The
Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company’s
Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer. The CODM allocates resources and evaluates the performance
of the Company at the consolidated level using information about its operating expenses and income (loss) from operations. All significant
operating decisions are based upon an analysis of the Company as
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The pronouncement should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
Note 2 – Going Concern
As
shown in the accompanying consolidated financial statements, as of June 30, 2025, the Company had negative working capital of $
The consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. These financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
| 9 |
Note 3 – Fair Value of Financial Instruments
Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.
The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of June 30, 2025 and September 30, 2024, respectively:
| Fair Value Measurements at June 30, 2025 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Liabilities | ||||||||||||
| Convertible notes payable | $ | |||||||||||
| Fair Value Measurements at September 30, 2024 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Liabilities | ||||||||||||
| Convertible notes payable | $ | |||||||||||
There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the nine months ended June 30, 2025.
Note 4 – Related Party Transactions
During
the nine months ended June 30, 2025 the Company incurred compensation expense of $
During
the nine months ended June 30, 2025 the Company accrued fees of $
As
of June 30, 2025, the Company has accrued a total of $
During
the nine months ended June 30, 2025, the Company entered into an agreement with the sole officer to purchase shares of Series C
Preferred for $
Note 5 – Note Receivable
On
various dates between December 28, 2018 and June 13, 2019, we loaned Northwest Analytical Labs, Inc. a total of $
On
December 8, 2022, the Company entered into an Asset Purchase Agreement with Invictus Wealth Group (“Invictus”), whereby
the Company agreed to sell certain collateralized equipment to Invictus for a total purchase price of $
| 10 |
The Company has recorded a full allowance against the Invictus Note, as of the transaction date, as collectability was not reasonably assured at of the transaction date.
Note 6 – Fixed Assets
Fixed assets consist of the following at June 30, 2025 and September 30, 2024, respectively:
| As of | ||||||||
| June 30, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Lab equipment | $ | $ | ||||||
| Less: accumulated depreciation | ( |
) | ( |
) | ||||
| Total | $ | $ | ||||||
Note 7 –Notes Payable
Notes payable consists of the following at June 30, 2025 and September 30, 2024, respectively:
| June
30, 2025 |
September
30, 2024 |
|||||||
| On
October 15, 2024, the Company entered into a secured credit facility with a third party (the “2024 Secured Credit Facility”). Under the facility, the Company is able
to borrow up to $ |
$ | $ | ||||||
| On
January 25, 2025, the Company entered into a |
||||||||
| Total notes payable | ||||||||
| Less: current maturities | ( |
) | ||||||
| Notes payable | $ | $ | ||||||
The
Company recorded interest expense pursuant to the stated interest rate on the notes payable in the amount of $
| 11 |
Note 8 – Convertible Notes Payable
Convertible notes payable consist of the following at June 30, 2025 and September 30, 2024, respectively:
| June 30, | September 30, | |||||||
| 2025 | 2024 | |||||||
| (1)
On February 11, 2020, the Company completed the sale to an accredited investor of a 9% Secured Convertible Promissory Note in the
principal amount of $ |
$ | $ | ||||||
| (2)
On September 23, 2019, the Company received proceeds of $ |
||||||||
| (3)
On November 8, 2018, the Company received proceeds of $ |
||||||||
| (4)
On October 1, 2022, the Company entered into a senior secured convertible note that carries an |
||||||||
| (5)
On June 5, 2025, the Company received proceeds of $ |
||||||||
| Total convertible notes payable | $ | $ | ||||||
| Less: current maturities | ( |
) | ( |
) | ||||
| Convertible notes payable | $ | $ | ||||||
The
Company recorded interest expense pursuant to the stated interest rates on the convertible notes in the amount of $
| 12 |
The Company recognized interest expense for the nine months ended June 30, 2025 and 2024, respectively, as follows:
| June 30, | June 30, | |||||||
| 2025 | 2024 | |||||||
| Interest on notes payable | $ | $ | ||||||
| Amortization of debt discounts | ||||||||
| Interest on convertible notes | ||||||||
| Total interest expense | $ | $ | ||||||
Note 9 – Stockholders’ Equity
Preferred Stock
As of June 30, 2025, the Company was authorized to issue shares of preferred stock with a par value of $ per share. As of June 30, 2025, shares of preferred stock have been designated as Series A Convertible Preferred Stock (“Series A Preferred”), shares have been designated as Series B Convertible Preferred Stock (“Series B Preferred”), shares have been designated as Series C Preferred Stock (“Series C Preferred”) and effective as of April 2, 2025, shares have been designated as Series D Preferred Stock (“Series D Preferred”). The remaining shares of preferred stock are available for designation from time to time by our board of directors as set forth below. As of June 30, 2025, there were shares of Series A Preferred issued and outstanding, shares of Series B Preferred issued and outstanding, and shares of Series C Preferred issued and outstanding. There are currently shares of Series D Preferred issued and outstanding. Our board of directors is authorized to determine any number of series into which the undesignated shares of preferred stock may be divided and to determine the rights, preferences, privileges and restrictions granted to any series of the preferred stock. Each share of Series A Preferred is currently convertible into five shares of common stock, each share of Series B Preferred is currently convertible into twenty-five shares of common stock, and each share of Series D Preferred is currently convertible into one share of common stock. The Series C Preferred is not convertible into common stock.
Series A Preferred
The
conversion price is adjustable in the event of stock splits and other adjustments in the Company’s capitalization, and in the event
of certain negative actions undertaken by the Company. At the current conversion price, the shares of Series A Preferred outstanding
at June 30, 2025 are convertible into shares of the common stock of the Company.
Additional terms of the Series A Preferred include the following:
| ● | The
shares of Series A Preferred are entitled to dividends when, as and if declared by our board of directors as to the shares of the
common stock of the Company into which such Series A Preferred may then be converted, subject to the |
| ● | Upon
the liquidation or dissolution of the Company, or any merger or sale of all or substantially all of the assets, the shares of Series
A Preferred are entitled to receive, prior to any distribution to the holders of common stock, |
| 13 |
| ● | The Series A Preferred plus all declared but unpaid dividends thereon automatically will be converted into common stock, at the then applicable conversion rate, upon the affirmative vote of the holders of a majority of the outstanding shares of Series A Preferred. |
| ● | Each
share of Series A Preferred will carry a number of votes equal to the number of shares of common stock into which such Series A Preferred
may then be converted, subject to the |
| ● | Consent of the holders of the outstanding Series A Preferred, voting separately as a class, is required in order for the Company to: (i) amend or change the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the Series A Preferred; (ii) authorize, create or issue shares of any class of stock having rights, preferences, privileges or powers superior to the Series A Preferred; (iii) reclassify any outstanding shares into shares having rights, preferences, privileges or powers superior to the Series A Preferred; or (iv) amend the Company’s Articles of Incorporation or Bylaws in a manner that adversely affects the rights of the Series A Preferred. |
| ● | Pursuant to various Securities Purchase Agreements, holders of Series A Preferred are entitled to unlimited “piggyback” registration rights on registrations by the Company, subject to pro rata cutback at any underwriter’s discretion. |
Series C Preferred
The
Series C Preferred stock was designated on July 20, 2022. The principal feature of the Series C Preferred is that it provides the holder
thereof, so long as he or she is an executive officer of the Company, with the ability to vote with the holders of
On December 10, 2024, the Company entered into a Securities Purchase Agreement with A. Stone Douglass (the “Douglass Purchase Agreement”), the Company’s Chairman, President, Chief Executive Officer, Chief Financial Officer, Secretary and Director, pursuant to which Mr. Douglass purchased shares of the Company’s Series C Preferred stock for a purchase price of $. The Company determined that the shares had value in excess of the stated value in the amount of $, which the Company recorded as compensation expense to the officer.
Additional terms of the Series C Preferred include the following:
| ● | The shares of Series C Preferred are not entitled to dividends. |
| ● | |
| ● | The shares of Series C Preferred have no conversion rights. |
Series D Preferred
The Series D Preferred ranks, as to dividend rights and rights upon our liquidation, dissolution, or winding up, junior to the Series A Preferred and Series B Preferred and senior to the Series C Preferred and all classes or series of common stock. The terms of the Series D Preferred do not limit our ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or senior in rank to the shares of Series D Preferred as to distribution rights and rights upon our liquidation, dissolution or winding up.
| 14 |
The shares of Series D Preferred are not entitled to dividends, provided that if dividends are paid on the shares of common stock, the Series D Preferred will be entitled to dividends based on the number shares of common stock into which the Series D Preferred may then be converted.
The
liquidation preference for each share of Series D Preferred is $
The shares of Series D Preferred have no maturity date, and the Company is not required to redeem shares of Series D Preferred at any time. Accordingly, the shares of Series D Preferred will remain outstanding indefinitely, unless otherwise converted at the option of the holder thereof or pursuant to a mandatory conversion described below.
At any time after issuance, each share of Series D Preferred is convertible into one share of common stock at the option of the holder. At any time after issuance upon the occurrence of any of the following events, the Company shall have a right to direct the mandatory conversion of the Series D Preferred: (a) a change in control, or (b) if the closing price of the common stock closes at or above $ per share for 10 consecutive trading days.
Holders of Series D Preferred generally have no voting rights. However, certain material and adverse changes to the terms of the Series D Preferred cannot be made without the affirmative vote of holders of at least a majority of the outstanding shares of Series D Preferred, voting as a separate class.
Common Stock
The common stock has a par value of $, and shares were authorized as of June 30, 2025, of which shares were issued and outstanding as of June 30, 2025.
Common Stock Transactions for the Nine Months Ended June 30, 2025
During
the nine months ended June 30, 2025, the Company issued shares of common stock to outside consultants in exchange for services
performed. The shares were valued at the closing price on the date of issuance for an aggregate value of $
During
the nine months ended June 30, 2025, the Company issued an aggregate of shares of common stock to the Board of Directors in
exchange for services performed. The shares were valued at the closing price on the date of issuance for an aggregate value of $
Note 10 – Mezzanine Equity
Series B Preferred
The
shares of Series B Preferred were designated on December 29, 2021. Each share of Series B Preferred has a stated value of $ and is
currently convertible into common stock at a conversion price equal to $
| 15 |
Additional terms of the Series B Preferred include the following:
| ● | The shares of Series B Preferred are not entitled to dividends, provided that if dividends are paid on the shares of common stock of the Company, the Series B Preferred will be entitled to dividends based on the number of shares of common stock into which the Series B Preferred may then be converted. |
| ● | |
| ● | Each share of Series B Preferred carries a number of votes equal to the number of shares of common stock into which such shares of Series B Preferred may then be converted. |
Due to the change in control provision of the Series B Preferred, the Series B Preferred is classified as temporary equity on the balance sheet.
Stock Incentive Plan
On June 21, 2016, we amended and restated our 2012 Stock Incentive Plan (the “2012 Plan”), which was originally adopted on March 5, 2012, and terminated on March 5, 2022. As amended, the 2012 Plan provided for the issuance of up to shares of common stock pursuant to the grant of options or other awards, including stock grants, to employees, officers or directors of, and consultants to, the Company and its subsidiaries. Options granted under the 2012 Plan may either be intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or may be non-qualified options, and are exercisable over periods not exceeding ten years from date of grant.
Common Stock Option Issuances
During
the nine months ended June 30, 2025, the Company issued options to an outside consultant with the following terms;
Amortization of Stock-Based Compensation
A total of $ and $ of stock-based compensation expense was recognized during the nine months ended June 30, 2025 and 2024, respectively, as a result of the vesting of common stock options issued in prior periods. As of June 30, 2025, $ of unamortized expense remains to be amortized over the vesting period.
| Shares Underlying Options Outstanding | Shares
Underlying Options Exercisable |
|||||||||||||||||||
| Weighted | ||||||||||||||||||||
| Shares | Average | Weighted | Shares | Weighted | ||||||||||||||||
| Range of | Underlying | Remaining | Average | Underlying | Average | |||||||||||||||
| Exercise | Options | Contractual | Exercise | Options | Exercise | |||||||||||||||
| Prices | Outstanding | Life | Price | Exercisable | Price | |||||||||||||||
| $ | - | years | $ | $ | ||||||||||||||||
| 16 |
| Weighted | ||||||||
| Average | ||||||||
| Number | Exercise | |||||||
| of Shares | Price | |||||||
| Balance, September 30, 2024 | $ | |||||||
| Options issued | ||||||||
| Options forfeited | ( |
) | ||||||
| Balance, June 30, 2025 | $ | |||||||
| Exercisable, June 30, 2025 | $ | |||||||
As of June 30, 2025, these options in the aggregate had $ of intrinsic value for the outstanding and exercisable options, based on the per share market price of $ of the Company’s common stock as of such date.
Note 12 – Common Stock Warrants
Warrants to purchase a total of shares of common stock were outstanding as of June 30, 2025.
During
the nine months ended June 30, 2025, the Company issued warrants to an outside consultant with an exercise price of $
The following is a summary of information about our warrants to purchase common stock outstanding at June 30, 2025 (including those issued to both investors and service providers).
| Shares Underlying | ||||||||||||||||||||
| Shares Underlying Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||
| Weighted | ||||||||||||||||||||
| Shares | Average | Weighted | Shares | Weighted | ||||||||||||||||
| Range of | Underlying | Remaining | Average | Underlying | Average | |||||||||||||||
| Exercise | Warrants | Contractual | Exercise | Warrants | Exercise | |||||||||||||||
| Prices | Outstanding | Life | Price | Exercisable | Price | |||||||||||||||
| $ | - | years | $ | $ | ||||||||||||||||
The following is a summary of activity of outstanding common stock warrants:
| Weighted | ||||||||
| Average | ||||||||
| Number | Exercise | |||||||
| of Shares | Price | |||||||
| Balance, September 30, 2024 | $ | |||||||
| Warrants granted | ||||||||
| Warrants expired | ||||||||
| Balance, June 30, 2025 | $ | |||||||
| Exercisable, June 30, 2025 | $ | |||||||
As of June 30, 2025, these warrants in the aggregate had $ of intrinsic value as the per share market price of $ of the Company’s common stock as of such date was greater than the exercise price of certain warrants.
| 17 |
Note 13 – Leases
On
May 6, 2024, the Company entered into a lease to lease its operating and office facility under a non-cancelable real property lease agreement
that expires on
The components of lease expense were as follows:
| For the | For the | |||||||
| Nine Months | Nine Months | |||||||
| Ended June 30, | Ended June 30, | |||||||
| 2025 | 2024 | |||||||
| Operating lease cost | $ | $ | ||||||
| Total net lease cost | $ | $ | ||||||
Supplemental balance sheet information related to leases was as follows:
| June 30, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Operating leases: | ||||||||
| Operating lease assets | $ | $ | ||||||
| Current portion of operating lease liabilities | $ | |||||||
| Noncurrent operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term: | ||||||||
| Operating leases | ||||||||
| Weighted average discount rate: | ||||||||
| Operating leases | % | % | ||||||
Supplemental cash flow and other information related to leases was as follows:
| For the | For the | |||||||
| Nine Months | Nine Months | |||||||
| Ended June 30, | Ended June 30, | |||||||
| 2025 | 2024 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows used for operating leases | $ | $ | ||||||
| Financing cash flows used for finance leases | $ | $ | ||||||
| Leased assets obtained in exchange for lease liabilities: | - | |||||||
| Total operating lease liabilities | $ | $ | ||||||
| Total finance lease liabilities | $ | $ | ||||||
| 18 |
The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities on a fiscal year basis, including common area maintenance fees, under non-cancelable operating leases as of June 30, 2025:
| Fiscal Year Ending | Minimum Lease | |||
| June 30, | Commitments | |||
| 2025 (3 months) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total future undiscounted lease payments | ||||
| Less interest | ( | ) | ||
| Present value of lease payments | ||||
| Less current portion | ( | ) | ||
| Long-term operating lease liabilities | $ | |||
Note 14 – Commitments and Contingencies
Legal Contingencies
There are no material pending legal proceedings to which we are a party or to which any of our property is subject, nor are there any such proceedings known to be contemplated by governmental authorities. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.
Note 15 – Discontinued Operations
On
April 20, 2023, the Company and Digipath Labs entered into the Purchase Agreement with Buyer pursuant to which Digipath Labs agreed to
sell substantially all of its assets to Buyer for the Purchase Price as described in Note 1 above. The Purchase Price was subject to
adjustments at closing based on, among other things, the amount by which the working capital of Digipath Labs at the closing was greater
or less than $
The Purchase Agreement included a number of representations, warrantees, covenants and conditions to closing customary for this type of transaction. In addition, the closing of the transaction was subject to the approval of the Nevada Cannabis Compliance Board (the “CCB”). On January 18, 2024, the Company received approval from the CCB to transfer the assets pursuant to the Purchase Agreement.
Pursuant
to the Purchase Agreement, the Buyer deposited $
In
connection with the transactions contemplated by the Purchase Agreement, the Company, Digipath Labs and Buyer entered into a Management
Services Agreement (the “Management Services Agreement”), dated as of April 30, 2023, pursuant to which Buyer was engaged
to manage the operation of Digipath Labs’ cannabis testing laboratory (the “Lab”).
| 19 |
On
February 20, 2024, we completed the sale of the net assets of our subsidiary Digipath Labs to Buyer. On June 24, 2024, the Company and
Buyer settled the final amount owed on the working capital adjustment for an additional payment of $
The statements of operations of Digipath Labs are summarized below:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| June 30, | June 30 | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income(loss) | ||||||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ||||||||||||||
| Total other income (expense) | ( | ) | ||||||||||||||
| Net income (loss) | $ | $ | $ | $ | ||||||||||||
Note 16 – Subsequent Events
On
August 18, 2025, (i) the holder of the 2024 Secured Credit Facility agreed to further extend the maturity date thereof to
| 20 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information contained in this Quarterly Report on Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended September 30, 2024 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Quarterly Report on Form 10-Q.
The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Annual Report on Form 10-K for the year ended September 30, 2024 in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this Quarterly Report on Form 10-Q. The following should also be read in conjunction with the unaudited financial statements and notes thereto that appear elsewhere in this Quarterly Report on Form 10-Q.
Overview
Hypha Labs, Inc. was incorporated in Nevada on October 5, 2010. Hypha Labs, Inc. and its subsidiaries (“Hypha Labs,” the “Company,” “we,” “our” or “us”) was a service-oriented independent testing laboratory, data analytics and media firm focused on the developing cannabis and hemp markets, and supported the cannabis industry’s best practices for reliable testing. Our mission was to provide pharmaceutical-grade analysis and testing to the cannabis industry, under ISO-17025:2017 guidelines, to ensure consumers and patients knew exactly what was in the cannabis they ingest and to help maximize the quality of our clients’ products through research, development, and standardization. Hypha Labs had been operating a cannabis-testing lab in Nevada since 2015.
On February 20, 2024, we completed the sale of the net assets of our wholly owned subsidiary Digipath Labs, Inc. (“Digipath Labs”). As of that date, we were no longer in the business as a service-oriented independent testing laboratory, data analytics and media firm focused on the developing cannabis and hemp markets, which supported the cannabis industry’s best practices for reliable testing, cannabis education and training. Following closing of the asset sale, the Company changed its name from Digipath, Inc. to Hypha Labs, Inc.
Hypha Products Inc., a wholly owned subsidiary of the Company, was formed on April 18, 2024 to engage in the research, development and commercialization of an accelerator, the Hypha Micropearl accelerator, a home appliance designed to accelerate the production of nutritionally beneficial mushrooms for human consumption. The Company’s easy-to-use device, together with its replacement cartridges, safely and effectively produces enriched mycelium of functional mushrooms, or Micropearls, in just eight days. These Micropearls contain active mushroom ingredients that offer a way to harness the medicinal properties of fungi in a concentrated, easy-to-handle, tasteless and odorless form. These Micropearls can be incorporated into various food and beverages without altering the flavor.
Our Hypha Micropearl accelerator will be sold with replaceable cartridges which are delivered pre-sterilized to the home and ready to be inserted into the device. These cartridges will be filled with powerful nutrient formulations which allow for the production of the Micropearls. The QR codes on the cartridges are scanned to the Hypha Labs app and inserted into the device and the Micropearls are produced and fully formed in eight days. After harvesting the Micropearls with a strainer, they are ready to be incorporated into a variety of foods. The cartridges help to minimize the risk of mold or yeast contamination and help improve the success of the at home mushroom growth. We believe that our innovative accelerator technology will disrupt traditional methods of mushroom production and bring lab-quality nutrient ingredients into the home with convenience and efficiency.
| 21 |
We intend to continue the design, development and testing of the Hypha Micropearl accelerator over the next six months. Initially, we will produce a limited number of accelerators at our headquarters for testing purposes, both with mycologists and experts in the functional mushroom industry. Upon completion of the design and successful testing of the Hypha Micropearl accelerator, we will seek to enter into a manufacturing arrangement outside the United States to manufacture the Hypha Micropearl accelerator for commercial sale. Our goal is to be in the position to market the Hypha Micropearl accelerator by the end of calendar year 2025, although there can be no assurance we will achieve our goal in this time period, or at all.
Results of Operations for the Three Months Ended June 30, 2025 and 2024:
The following table summarizes selected items from the statement of operations for the three months ended June 30, 2025 and 2024.
| Three Months Ended June 30, | Increase / | |||||||||||
| 2025 | 2024 | (Decrease) | ||||||||||
| Operating expenses: | ||||||||||||
| General and administrative | 81,683 | 486,209 | (404,526 | ) | ||||||||
| Professional fees | 454,344 | 127,364 | 326,980 | |||||||||
| Total operating expenses: | 536,027 | 613,573 | (77,546 | ) | ||||||||
| Operating loss | (536,027 | ) | (613,573 | ) | 167,622 | |||||||
| Total other income (expense) | (25,996 | ) | (116,072 | ) | 90,076 | |||||||
| Net income (loss) | $ | (562,023 | ) | $ | (706,897 | ) | $ | 144,874 | ||||
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2025 were $81,683, compared to $486,209 during the three months ended June 30, 2024, a decrease of $404,526, or 83%. General and administrative expenses decreased primarily due to decreased corporate overhead activities.
Professional Fees
Professional fees for the three months ended June 30, 2025 were $454,344, compared to $127,364 during the three months ended June 30, 2024, an increase of $326,980, or 257%. Professional fees included non-cash, stock-based compensation of $313,059 and $0 during the three months ended June 30, 2025 and 2024, respectively. Professional fees increased primarily due to corporate consulting services and legal fees during the current period as we increased our focus on developing our new business.
Other Income (expense)
Other expense, on a net basis, for the three months ended June 30, 2025 was $25,996, compared to other expense, on a net basis, of $116,072 during the three months ended June 30, 2024, a decrease of $90,076 in other expenses. Other expense consisted of interest expense of $25,996.
| 22 |
Results of Operations for the Nine Months Ended June 30, 2025 and 2024:
The following table summarizes selected items from the statement of operations for the nine months ended June 30, 2025 and 2024.
| Nine Months Ended June 30, | Increase / | |||||||||||
| 2025 | 2024 | (Decrease) | ||||||||||
| Operating expenses: | ||||||||||||
| General and administrative | 1,172,261 | 683,456 | 488,805 | |||||||||
| Professional fees | 1,338,192 | 574,728 | 763,464 | |||||||||
| Total operating expenses: | 2,510,453 | 1,258,184 | 1,252,269 | |||||||||
| Operating loss | (2,510,453 | ) | (1,258,184 | ) | (1,252,269 | ) | ||||||
| Total other income (expense) | (33,033 | ) | 379,564 | (412,597 | ) | |||||||
| Net loss from continuing operations | (2,543,486 | ) | (904,586 | ) | (1,638,900 | ) | ||||||
| Net income from discontinued operations | - | 585,156 | (585,156 | ) | ||||||||
| Net income (loss) | $ | (2,543,486 | ) | $ | (319,430) | $ | (2,224,056 | ) | ||||
General and Administrative Expenses
General and administrative expenses for the nine months ended June 30, 2025 were $1,172,261, compared to $683,456 during the nine months ended June 30, 2024, an increase of $488,805, or 101%. General and administrative expenses increased primarily due to increased corporate overhead activities and the issuance of the Series C Preferred shares to our sole officer with a value in excess of the purchase price of $968,356.
Professional Fees
Professional fees for the nine months ended June 30, 2025 were $1,338,192, compared to $574,728 during the nine months ended June 30, 2024, an increase of $763,464, or 599%. Professional fees included non-cash, stock-based compensation of $1,737,478 and $537,548 during the nine months ended June 30, 2025 and 2024, respectively. Professional fees increased primarily due to corporate consulting services and legal fees during the current period as we increased our focus on developing our new business.
Operating Loss
Our operating loss for the nine months ended June 30, 2025 was $2,510,453, compared to an operating loss of $1,258,184 during the nine months ended June 30, 2024, an increase of $1,252,269, or 204%. Our operating loss increased primarily due to our increased general and administrative expenses.
Other Income (Expense)
Other expense, on a net basis, for the nine months ended June 30, 2025 was $33,000, compared to other income, on a net basis, of $379,564 during the nine months ended June 30, 2024. Other expense consisted of interest expense of $71,030 and loss on the settlement of the escrow deposit of $20,003, offset by interest income of $8,000 and the recovery of previously written off receivables of $50,000 for the nine months ended June 30, 2025. Other income consisted of interest expense of $179,902, loss on extinguishment of debt of $956,494, the receipt from an insurance claim, and the gain on the sale of the net assets of Digipath Labs of $1,502,064 for the nine months ended June 30, 2024.
Liquidity and Capital Resources
The following is a summary of the Company’s cash flows provided by (used in) operating, investing, and financing activities for the nine months ended June 30, 2025 and 2024:
| 2025 | 2024 | |||||||
| Operating Activities | $ | (64,912 | ) | $ | (598,029 | ) | ||
| Investing Activities | (1,730 | ) | 2,097,800 | |||||
| Financing Activities | 122,668 | (1,261,749 | ) | |||||
| Net increase in Cash | $ | 56,026 | $ | 238,022 | ||||
| 23 |
Net Cash Used In Operating Activities
During the nine months ended June 30, 2025, net cash used in operating activities was $64,912, compared to net cash used in operating activities of $598,029 for the same period ended June 30, 2024, including cash used in operating activities from discontinued operations of $0 for the nine months ended June 30, 2025 compared to cash provided by operating activities from discontinued operations of $373,913 for the nine months ended June 30, 2024. The decrease in cash used in operating activities was primarily attributable to our increase in net loss related to the development of our new business, offset by the total stock based compensation expense of $1,737,478.
Net Cash Provided by (Used in) Investing Activities
During the nine months ended June 30, 2025, net cash used in investing activities was $1,730 compared to $2,097,800 provided by investing activities for the same period ended June 30, 2024, including cash used in investing activities from discontinued operations of $0 for the nine months ended June 30, 2025 compared to cash used in investing activities from discontinued operations of $11,667 for the nine months ended June 30, 2024.
Nest Cash Used in Financing Activities
During the nine months ended June 30, 2025, net cash provided by financing activities was $122,668, compared to net cash used in financing activities of $1,261,749 for the same period ended June 30, 2024, including cash used in financing activities from discontinued operations of $0 for the nine months ended June 30, 2025 compared to cash used in financing activities from discontinued operations of $15,784 for the nine months ended June 30, 2024. The cash provided by financing activities in the current period related to proceeds from notes payable of $115,600 and proceeds from convertible notes payable of $130,000 offset by the payment of deferred offering costs in the amount of $123,032. The cash used in financing activities in the prior period related to the repayment of notes payable in the amount of $595,965 and convertible notes payable of $650,000.
Ability to Continue as a Going Concern
As of June 30, 2025, our balance of cash on hand was $147,192, and we had negative working capital of $1,846,324 and an accumulated deficit of $23,090,912 resulting from recurring losses. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Until the agreement to sell the assets of the Company’s lab testing business, management was actively pursuing new customers to increase revenues. In addition, the Company was seeking additional sources of capital to fund short term operations. The Company will seek to raise funds to complete the development and testing of its accelerator over the next 6 to 12 months and to fund the initial launch of commercial sales of its accelerator device. The Company intends to raise such funds through either the sale of equity or debt securities, including through a Regulation A offering, during such 6 to 12-month period to successfully execute its business plan. The Company is also currently evaluating future investments into potential acquisition targets. There can be no assurance that we will be successful in achieving these objectives, becoming profitable or continuing our business without either a temporary interruption or a permanent cessation. In addition, additional equity financing may result in substantial dilution to existing stockholders.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. The unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
We have no outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
| 24 |
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations and require management’s subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.
While our significant accounting policies are more fully described in the notes to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we used in the preparation of our financial statements.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognized revenue from the sale of lab testing services through our subsidiary Digipath Labs.
Our historical revenue was primarily generated through our subsidiary, Digipath Labs, which recognized revenue from the analytical testing of cannabis products for licensed producers and cultivators within the state of Nevada on a determinable fixed fee per test, or panel of tests, basis. Revenue from the performance of those services was recognized upon completion of the tests, at which time test results were delivered to the customer, provided collectability of the fee is reasonably assured. We typically required payment within thirty days of the delivery of results.
Stock-Based Compensation
The Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718) and Equity-Based Payments to Non-employees pursuant to ASC 2018-07 (ASC 2018-07). All transactions in which the consideration provided in exchange for the purchase of goods or services consists of the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under 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, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2025, our Chief Executive and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or in other factors that occurred during the period of our evaluation or subsequent to the date we carried out our evaluation which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any system of controls and procedures will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not a party to any legal or administrative proceedings that we believe, individually or in the aggregate, would be likely to have a material adverse effect on our financial condition or results of operations.
ITEM 1A. RISK FACTORS.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On June 18, 2025, the Company issued 2,500,000 shares of common stock to outside consultants. The shares were valued at the closing price on the date of issuance for a value of $67,500.
On June 23, 2025, the Company issued an aggregate of 3,000,000 shares of common stock to outside consultants. The shares were valued at the closing price on the date of issuance for an aggregate value of $90,000.
On June 23, 2025, the Company issued an aggregate of 3,000,000 shares of common stock to its board of directors. The shares were valued at the closing price on the date of issuance for an aggregate value of $90,000.
Such issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
During
the three months ended June 30, 2025, no director or officer of the Company
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ITEM 6. EXHIBITS.
| Exhibit | Description | |
| 3.1 | Certificate of Designation of the Series D Preferred Stock of the Company, filed with the Secretary of State of the State of Nevada on April 2, 2025 (incorporated by reference to Exhibit 2.11 of the Regulation A Offering Statement on Form 1-A/A filed with the Securities and Exchange Commission by the Company on April 21, 2025) | |
| 31.1* | Section 302 Certification of Principal Executive and Principal Financial Officer | |
| 32.1** | Section 1350 Certification of Principal Executive and Principal Financial Officer | |
| 101.INS* | Inline XBRL Instance Document + | |
| 101.SCH* | Inline XBRL Schema Document + | |
| 101.CAL* | Inline XBRL Calculation Linkbase Document + | |
| 101.DEF* | Inline XBRL Definition Linkbase Document + | |
| 101.LAB* | Inline XBRL Labels Linkbase Document + | |
| 101.PRE* | Inline XBRL Presentation Linkbase Document + | |
| 104 | Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) |
| * | Filed herewith. |
| ** | Furnished herewith. |
| + | This information is furnished and not filed for purposes of Sections 11 and 13 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 |
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SIGNATURES
Pursuant to the requirements 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.
| Hypha Labs, INC. | ||
| (Registrant) | ||
| By: | /s/ A. Stone Douglass | |
| A. Stone Douglass | ||
Chairman, President, Chief Executive Officer, Chief Financial Officer and Secretary (Principal Executive Officer and Principal Financial/Accounting Officer) | ||
| Dated: | August 21, 2025 | |
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