UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MarchDecember 31, 2022
or
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number:file number: 000-29621
NovAccess Global Inc.
(Exact name of registrant as specified in its charter)
Colorado | 84-1384159 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Identification |
Address of principal executive offices, including zip code: 8584 E. Washington Street #127, Chagrin Falls, Ohio 44023
(Address of principal executive offices)(Zip Code)
(213) 642-9268
(Registrant’s telephone number, including area code)code: (213) 642-9268
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrantRegistrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§(Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitionsdefinition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (check one):
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Large accelerated Filer ☐ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller Reporting Company ☒ Emerging Growth Company ☐ |
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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
Indicate the number of shares outstanding of each of the issuer’sregistrant’s classes of common stock, as of the latest practicable date. There were 18,398,67320,831,276 shares of common stock outstanding on May 13, 2022.February 14, 2023.
Table of Contents
PART I — FINANCIAL INFORMATION |
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1 | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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Cautionary |
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18 | |
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18 | |
| Research and development expenses | 18 |
19 | |
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19 | |
Item 3. Quantitative and Qualitative Disclosures About Market Risk. |
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PART II — OTHER INFORMATION |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. |
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Part I — I- Financial Information
Item 1. Financial Statements.Statements
NOVACCESS GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2022 | September 30, 2021 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 61,609 | $ | 180,668 | ||||
Employee Advances | - | 380 | ||||||
Prepaid expenses | 21,898 | 27,086 | ||||||
TOTAL ASSETS | $ | 83,507 | $ | 208,134 | ||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 161,922 | $ | 143,074 | ||||
Other payable | 66,894 | 66,894 | ||||||
Accrued expenses and interest on notes payable | 105,783 | 356,683 | ||||||
Accrued payroll | 11,268 | 10,712 | ||||||
Deferred Compensation | 270,433 | 201,383 | ||||||
License Fees Payable | 36,912 | 40,402 | ||||||
Derivative liability | 2,400,203 | 2,553,979 | ||||||
Derivative liability warrants | 597,997 | 372,643 | ||||||
Due to related party | 86,073 | 82,922 | ||||||
Payable to TN3 | 200,000 | - | ||||||
Promissory notes payable net of debt discount and debt issuance costs of $188,247 and $395,027, respectively | 561,753 | 104,973 | ||||||
Bridge Loans Payable - related parties | 4,608 | - | ||||||
Convertible loan payable | 12,000 | 12,000 | ||||||
Convertible promissory notes net of debt discount and debt issuance costs of $0 and $69,567, respectively | - | 24,683 | ||||||
Total Current Liabilities | 4,515,846 | 3,970,348 | ||||||
LONG TERM LIABILITIES | ||||||||
Convertible promissory notes | 165,880 | 165,880 | ||||||
Total Long Term Liabilities | 165,880 | 165,880 | ||||||
TOTAL LIABILITIES | 4,681,726 | 4,136,228 | ||||||
SHAREHOLDERS' DEFICIT | ||||||||
Preferred stock 50,000,000 shares authorized, shares issued and outstanding designated as follows: | ||||||||
Preferred Stock Series B, $0.01 par value, 25,000 authorized 600 and 25,000 shares issued and outstanding, respectively | 6 | 250 | ||||||
Common stock, 0 par value; 2,000,000,000 authorized common shares 17,523,673 and 14,404,030 shares issued and outstanding, respectively | 42,921,963 | 41,882,535 | ||||||
Additional paid in capital | 5,356,398 | 5,351,398 | ||||||
Paid in capital, common stock warrants | 4,210,960 | 4,210,960 | ||||||
Paid in capital, preferred stock | 4,747,108 | 5,088,324 | ||||||
Accumulated deficit | (61,834,654 | ) | (60,461,561 | ) | ||||
TOTAL SHAREHOLDERS' DEFICIT | (4,598,219 | ) | (3,928,094 | ) | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | 83,507 | $ | 208,134 | ||||
December 31, 2022 | September 30, 2022 | |||||||
Unaudited | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 38,944 | $ | 64,251 | ||||
Prepaid expenses | 19,600 | 60,650 | ||||||
TOTAL ASSETS | $ | 58,544 | $ | 124,901 | ||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 443,402 | $ | 375,682 | ||||
Accrued expenses and other current liabilities | 1,295,271 | 1,486,561 | ||||||
Derivative and warrants liabilities | 3,623,096 | 1,440,012 | ||||||
Due to related parties | 183,717 | 186,217 | ||||||
Short term loan, related party | 12,500 | 12,500 | ||||||
Convertible promissory notes, net of debt discount and debt issuance costs of $202,770 and $340,503 respectively | 1,514,360 | 1,266,627 | ||||||
Convertible promissory note related party, net of debt discount and debt issuance cost of $0 and $2,132, respectively | 12,500 | 10,368 | ||||||
Total Current Liabilities | 7,084,846 | 4,777,967 | ||||||
TOTAL LIABILITIES | 7,084,846 | 4,777,967 | ||||||
SHAREHOLDERS' DEFICIT | ||||||||
Preferred stock 50,000,000 shares authorized, shares issued and outstanding designated as follows: | ||||||||
Preferred Stock Series B, $0.01 par value, 25,000 authorized 600 shares issued and outstanding, respectively | 6 | 6 | ||||||
Common stock, no par value; 2,000,000,000 authorized common shares 20,326,276 and 18,669,507 shares issued and outstanding, respectively | 43,489,152 | 43,225,982 | ||||||
Additional paid in capital | 5,335,398 | 5,340,398 | ||||||
Paid in capital, common stock warrants | 4,210,960 | 4,210,960 | ||||||
Paid in capital, preferred stock | 4,747,108 | 4,747,108 | ||||||
Accumulated deficit | (64,808,926 | ) | (62,177,520 | ) | ||||
TOTAL SHAREHOLDERS' DEFICIT | (7,026,302 | ) | (4,653,066 | ) | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | 58,544 | $ | 124,901 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NOVACCESS GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED MARCHDECEMBER 31, 2022 AND 2021
(Unaudited)
Three Months Ended | Six Months Ended | Three Months Ended | ||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
SALES | $ | - | $ | - | ||||||||||||||||||||
COST OF GOODS SOLD | - | - | ||||||||||||||||||||||
GROSS PROFIT | - | - | ||||||||||||||||||||||
March 31, 2022 | March 31, 2021 | March 31, 2022 | March 31, 2021 | |||||||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||||
Research and development expenses | 45,516 | 8,446 | 87,915 | 8,446 | 34,963 | 42,399 | ||||||||||||||||||
Selling, general and administrative expenses | 381,428 | 272,873 | 661,358 | 1,672,764 | 482,155 | 279,930 | ||||||||||||||||||
TOTAL OPERATING EXPENSES | 426,944 | 281,319 | 749,273 | 1,681,210 | 517,118 | 322,329 | ||||||||||||||||||
LOSS FROM OPERATIONS BEFORE OTHER INCOME/(EXPENSES) | (426,944 | ) | (281,319 | ) | (749,273 | ) | (1,681,210 | ) | (517,118 | ) | (322,329 | ) | ||||||||||||
OTHER INCOME/(EXPENSES) | ||||||||||||||||||||||||
Extinguishment of derivative liability | - | 96,205 | ||||||||||||||||||||||
Gain (Loss) on change in derivative liability | (492,425 | ) | (382,539 | ) | (33,399 | ) | 1,180,067 | (2,081,584 | ) | 459,026 | ||||||||||||||
Extinguishment of derivatives | - | - | 96,205 | - | ||||||||||||||||||||
Extinguishment of debt | (54,813 | ) | - | (54,813 | ) | - | ||||||||||||||||||
Change in Commitment Fee Guarantee | 267,750 | - | ||||||||||||||||||||||
Interest expense | (255,603 | ) | (5,348 | ) | (631,813 | ) | (12,949 | ) | (300,454 | ) | (376,210 | ) | ||||||||||||
TOTAL OTHER INCOME/(EXPENSES) | (802,841 | ) | (387,887 | ) | (623,820 | ) | 1,167,118 | (2,114,288 | ) | 179,021 | ||||||||||||||
NET INCOME (LOSS) | (1,229,785 | ) | (669,206 | ) | (1,373,093 | ) | (514,092 | ) | ||||||||||||||||
NET LOSS | $ | (2,631,406 | ) | $ | (143,308 | ) | ||||||||||||||||||
BASIC INCOME (LOSS) PER SHARE | $ | (0.08 | ) | $ | (0.05 | ) | $ | (0.09 | ) | $ | (0.06 | ) | ||||||||||||
DILUTED INCOME (LOSS) PER SHARE | $ | (0.08 | ) | $ | (0.05 | ) | $ | (0.09 | ) | $ | (0.06 | ) | ||||||||||||
BASIC LOSS PER SHARE | $ | (0.14 | ) | $ | (0.01 | ) | ||||||||||||||||||
DILUTED LOSS PER SHARE | $ | (0.14 | ) | $ | (0.01 | ) | ||||||||||||||||||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||||||||||
BASIC | 15,379,289 | 12,455,164 | 14,914,920 | 9,099,121 | 18,979,871 | 14,460,284 | ||||||||||||||||||
DILUTED | 15,379,289 | 12,455,164 | 14,914,920 | 9,099,121 | 18,979,871 | 14,460,284 | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NOVACCESS GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE SIXTHREE MONTHS ENDED MARCHDECEMBER 31, 2022 AND 2021
(Unaudited)
SIX MONTHS ENDED MARCH 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock Options/ Warrants Paid in | ||||||||||||||||||||||||||||||||||||||||||||
| Paid in Capital, Preferred | ||||||||||||||||||||||||||||||||||||||||||||
Additional Paid-in | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock, Class A | Preferred Stock, Class B | Common Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Capital | Stock | Deficit | Total | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | - | $ | - | 25,000 | $ | 250 | 1,603,492 | $ | 33,369,424 | $ | 11,710,398 | $ | 4,210,960 | $ | 5,088,324 | $ | (57,949,086 | ) | $ | (3,569,730 | ) | |||||||||||||||||||||||
Common stock issued for StemVax Acquisition - from stock payable | - | - | - | - | 7,500,000 | 6,375,000 | (6,375,000 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
Stock compensation cost | - | - | - | - | 2,000,000 | 936,000 | - | - | - | - | 936,000 | |||||||||||||||||||||||||||||||||
Common stock issued for Services | - | - | - | - | 311,945 | 145,941 | - | - | - | - | 145,941 | |||||||||||||||||||||||||||||||||
Common Stock Issued - Subscriptions | - | - | - | - | 1,440,905 | 295,000 | - | - | - | - | 295,000 | |||||||||||||||||||||||||||||||||
Net Income | - | - | - | - | - | - | - | - | - | (514,092 | ) | (514,092 | ) | |||||||||||||||||||||||||||||||
Balance at March 31, 2021 (Unaudited) | - | $ | - | 25,000 | $ | 250 | 12,856,342 | $ | 41,121,365 | $ | 5,335,398 | $ | 4,210,960 | $ | 5,088,324 | $ | (58,463,178 | ) | $ | (2,706,881 | ) | |||||||||||||||||||||||
SIX MONTHS ENDED MARCH 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock Options/ Warrants Paid in | ||||||||||||||||||||||||||||||||||||||||||||
| Paid in Capital, Preferred | ||||||||||||||||||||||||||||||||||||||||||||
Additional Paid-in | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock, Class A | Preferred Stock, Class B | Common Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Capital | Stock | Deficit | Total | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | - | $ | - | 25,000.00 | $ | 250 | 14,404,030 | $ | 41,882,535 | $ | 5,351,398 | $ | 4,210,960 | $ | 5,088,324 | $ | (60,461,561 | ) | $ | (3,928,094 | ) | |||||||||||||||||||||||
Preferred Stock Redemption | - | - | (24,400 | ) | (244 | ) | 1,502,670 | 525,935 | - | - | (341,216 | ) | - | 184,475 | ||||||||||||||||||||||||||||||
Stock compensation cost | - | - | - | - | 10,000 | 8,000 | - | - | - | - | 8,000 | |||||||||||||||||||||||||||||||||
Common Stock issued for services | - | - | - | - | 265,973 | 119,480 | - | - | - | - | 73,861 | |||||||||||||||||||||||||||||||||
Common Stock issued , subscriptions | - | - | - | - | 791,000 | 170,200 | - | - | - | - | 170,200 | |||||||||||||||||||||||||||||||||
Common Stock issued as repayment of loans | - | - | - | - | 250,000 | 104,813 | - | - | - | - | 50,000 | |||||||||||||||||||||||||||||||||
Common Stock issued as commitment fee on promissory note payable | - | - | - | - | 300,000 | 111,000 | - | - | - | - | 111,000 | |||||||||||||||||||||||||||||||||
Common Stock Issuable, Subscriptions | - | - | - | - | - | - | 5,000 | - | - | - | 5,000 | |||||||||||||||||||||||||||||||||
Net Loss | - | - | - | - | - | - | - | - | - | (1,373,093 | ) | (1,373,093 | ) | |||||||||||||||||||||||||||||||
Balance at March 31, 2022 (Unaudited) | - | $ | - | 600.00 | $ | 6 | 17,523,673 | $ | 42,921,963 | $ | 5,356,398 | $ | 4,210,960 | $ | 4,747,108 | $ | (61,834,654 | ) | $ | (4,598,219 | ) | |||||||||||||||||||||||
Preferred Stock, Class B | Common Stock | Additional Paid-in | Stock Options/ Warrants Paid in | Paid in Capital, Preferred | Accumulated | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Capital | Stock | Deficit | Total | ||||||||||||||||||||||||||||
Balance as of September 30, 2021 | 25,000 | $ | 250 | 14,404,030 | $ | 41,882,535 | $ | 5,351,398 | $ | 4,210,960 | $ | 5,088,324 | $ | (60,461,561 | ) | $ | (3,928,094 | ) | ||||||||||||||||||
Common Stock issued for services | - | - | 36,667 | 21,955 | - | - | - | - | 21,955 | |||||||||||||||||||||||||||
Common Stock issued, subscriptions | - | - | 201,000 | 50,200 | - | - | - | - | 50,200 | |||||||||||||||||||||||||||
Stock compensation cost | - | - | 10,000 | 8,000 | - | - | - | - | 8,000 | |||||||||||||||||||||||||||
Net Loss | - | - | - | - | - | - | - | (143,308 | ) | (143,308 | ) | |||||||||||||||||||||||||
Balance as of December 31, 2021 | 25,000 | $ | 250 | 14,651,697 | $ | 41,962,690 | $ | 5,351,398 | $ | 4,210,960 | $ | 5,088,324 | $ | (62,604,869 | ) | $ | (3,991,247 | ) | ||||||||||||||||||
Preferred Stock, Class B | Common Stock | Additional Paid-in | Stock Options/ Warrants Paid in | Paid in Capital, Preferred | Accumulated | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Capital | Stock | Deficit | Total | ||||||||||||||||||||||||||||
Balance as of September 30, 2022 | 600 | $ | 6 | 18,669,507 | $ | 43,225,982 | $ | 5,340,398 | $ | 4,210,960 | $ | 4,747,108 | $ | (62,177,520 | ) | $ | (4,653,066 | ) | ||||||||||||||||||
Common Stock issued for services | - | - | 1,281,769 | 223,170 | - | - | - | - | 223,170 | |||||||||||||||||||||||||||
Common Stock issued, subscriptions | - | - | 375,000 | 40,000 | (5,000 | ) | - | - | - | 35,000 | ||||||||||||||||||||||||||
Net Loss | - | - | - | - | - | - | - | (2,631,406 | ) | (2,631,406 | ) | |||||||||||||||||||||||||
Balance as of December 31, 2022 | 600 | $ | 6 | 20,326,276 | $ | 43,489,152 | $ | 5,335,398 | $ | 4,210,960 | $ | 4,747,108 | $ | (64,808,926 | ) | $ | (7,026,302 | ) | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NOVACCESS GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIXTHREE MONTHS ENDED MARCHDECEMBER 31, 2022 AND 2021
(Unaudited)
For the Six Months Ended | Three Months Ended | |||||||||||||||
March 31, 2022 | March 31, 2021 | December 31, 2022 | December 31, 2021 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net Loss | $ | (1,373,093 | ) | $ | (514,092 | ) | $ | (2,631,406 | ) | $ | (143,308 | ) | ||||
Adjustment to reconcile net loss to net cash provided by (used in) operating activities | ||||||||||||||||
Amortization of debt discount and debt issuance costs recorded as interest expense | 479,689 | - | 249,862 | 324,295 | ||||||||||||
(Gain)/Loss on change in derivative liability | 33,399 | (1,180,067 | ) | |||||||||||||
Extinguishment of derivatives | (96,205 | ) | - | |||||||||||||
Extinguishment of debt | 54,813 | - | ||||||||||||||
Loss (Gain) on change in derivative liability | 2,081,584 | (459,026 | ) | |||||||||||||
(Gain) on settlement of derivative liability | - | (96,205 | ) | |||||||||||||
Stock compensation expense | 53,619 | 936,000 | - | 8,000 | ||||||||||||
Stock issued and issuable for services | 73,861 | 145,941 | 223,170 | 21,955 | ||||||||||||
Stock issued as commitment fee on promissory note payable | 79,043 | - | ||||||||||||||
Non-cash interest expense on bridge loan | 546 | - | ||||||||||||||
Changes in Assets and Liabilities: | ||||||||||||||||
Employee advances | 380 | - | ||||||||||||||
Prepaid expenses | 5,188 | - | 41,050 | 16,129 | ||||||||||||
Accounts payable | 39,700 | 163,310 | 67,723 | 29,584 | ||||||||||||
Other payable | - | 1,590 | ||||||||||||||
License fees payable | (3,490 | ) | (10,000 | ) | ||||||||||||
Accrued expenses and interest on notes payable | 144,100 | 32,999 | ||||||||||||||
Accrued payroll | 556 | 23,290 | ||||||||||||||
Deferred Compensation | 69,050 | 120,508 | ||||||||||||||
Accrued expenses and other current liabilities | (191,290 | ) | 108,506 | |||||||||||||
NET CASH USED IN OPERATING ACTIVITIES | (438,844 | ) | (280,521 | ) | (159,307 | ) | (190,070 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Stock subscriptions received | 175,200 | 295,000 | 35,000 | 50,200 | ||||||||||||
Due to related party | 3,151 | 6,628 | - | 3,151 | ||||||||||||
Proceeds from a note payable | 213,000 | - | ||||||||||||||
Payments to TN3 for redemption of preferred stock | (50,000 | ) | - | |||||||||||||
Payments on convertible notes payable | (94,250 | ) | - | - | (94,250 | ) | ||||||||||
Payments to related party for redemption of preferred stock | (2,500 | ) | - | |||||||||||||
Proceeds from promissory notes and short-term loan | 101,500 | - | ||||||||||||||
Proceeds from bridge loans payable - related parties | 75,000 | - | - | 75,000 | ||||||||||||
Payment on the bridge loans payable | (2,316 | ) | ||||||||||||||
Proceeds from a related party loan | - | 25,000 | ||||||||||||||
Payments on related party loan payable | - | (24,287 | ) | |||||||||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 319,785 | 302,341 | 134,000 | 34,101 | ||||||||||||
NET INCREASE (DECREASE) IN CASH | (119,059 | ) | 21,820 | |||||||||||||
NET (DECREASE) IN CASH | (25,307 | ) | (155,969 | ) | ||||||||||||
CASH, BEGINNING OF PERIOD | 180,668 | 178 | 64,251 | 180,668 | ||||||||||||
CASH, END OF PERIOD | $ | 61,609 | $ | 21,998 | $ | 38,944 | $ | 24,699 | ||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||||||||||
Interest paid | $ | 71,245 | $ | 1,386 | $ | 25,916 | 54,714 | |||||||||
Taxes paid | $ | - | $ | - | $ | - | $ | - | ||||||||
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS | ||||||||||||||||
Accrued interest capitalized into convertible note | $ | 546 | $ | 2,505 | ||||||||||||
Shares issued for StemVax Acquisition – from stock payable | $ | - | $ | 6,375,000 | ||||||||||||
Cash payable to TN3 for preferred stock | $ | 200,000 | $ | - | ||||||||||||
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS | ||||||||||||||||
Fair value of shares issued for services | $ | 223,170 | $ | 21,955 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NOVACCESS GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCHDECEMBER 31, 2022 AND 2021
1. ORGANIZATION AND LINE OF BUSINESS
Organization
NovAccess Global Inc. (“NovAccess,” the “Company” or the “issuer”) is a Colorado corporation formerly known as Sun River Mining Inc. and XsunX, Inc.). The Company was originally incorporated in Colorado on February 25, 1997. Effective September 24, 2003, the Company completed a plan of reorganization and name change to XsunX, Inc. In JuneEffective August 25, 2020, we filed articles of amendment to our articles of incorporation with the Colorado Secretary of State to: effectuate a 1-for-1,000 reverse stock split of the Company’s outstanding shares of common stock; and change the name of the Company was acquiredto “NovAccess Global Inc.” After completing the acquisition of StemVax, in September, 2020, we exited the solar business and changed its name to NovAccess Global Inc.focused all our efforts on our biopharmaceutical business.
Line of Business
NovAccess Global Inc. is a biopharmaceutical company that is developing novel immunotherapies to treat brain tumor patients in the United States with plans to expand globally. We specialize in cutting-edge research related to utilizing a patient’s own immune system to attack the cancer. We are filing an Investigational New Drug Application (IND) and working closely with the Food and Drug Administration (FDA) to obtain approval for human clinical trials to determine safety and efficacy of our drug product for brain cancer patients. Once we have successfully completed the clinical trials and proven that the new therapy is safe and efficacious, we plan to commercialize the product. We also have expertise in successfully executing clinical trials, bringing products to market and increasing the market size of products through our advisory board. Our scientists are well versed in immunology, stem cell biology, neuroscience, molecular biology, imaging, small molecules development, gene therapy and other technical assays needed for protein and genetic analysis of cancer cells.
NovAccess operates as a research and development (R&D) company out of Ohio and California, and our executive management and scientific advisory board provide over 15 years of extensive experience in all aspects of biopharmaceutical R&D and commercialization of drug candidates. We guide our performance by striving to deliver consistently on the following core objectives: (1) Accountability — taking responsibility for providing safe and effective options for patients; (2) Integrity — doing what is ethically right for the patient; (3) Excellence — doing your best and working hard; and (4) Teamwork — bringing together a strong working team to deliver the best products for brain tumor patients.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ended September 30, 2022. For further information refer to the financial statements and footnotes thereto included in the Company’s Form 10-K for the year ended September 30, 2021.
Going Concern
The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company does not generate significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion. The Company has obtained funds from its shareholders and lenders since its inception through the period ended MarchDecember 31, 2022. Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company’s obligations as they become due and will allow the development of its business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of NovAccess Global Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
NOVACCESS GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCH 31, 2022 AND 2021
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary StemVax, LLC. All significant inter-company accounts and transactions between these entities have been eliminated in these condensed consolidated financial statements.
NOVACCESS GLOBAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements. Significant estimates made in preparing these consolidated financial statements include the estimate of derivative liabilities, the deferred tax valuation allowance, and the fair value of stock options.options, and derivative liabilities. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents include cash in banks and money markets with an original maturity of three months or less.
Property and Equipment
Property and equipment are stated at cost, and are depreciated using the straight-line method over its estimated useful lives:
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The Company capitalizes property and equipment over $500. Property and equipment under $500 are expensed in the year purchased.
Stock-Based Compensation
Share-based Payment applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are to follow a fair value of those equity instruments. We are required to follow a fair value approach using an option-pricing model, such as the Binomial lattice valuation model, at the date of a stock option grant. The deferred compensation calculated under the fair value method would then be amortized over the respective vesting period of the stock option. This has not had a material impact on our results of operations.
Net Earnings (Loss) per Share Calculations
Net earnings (Loss) per share dictates the calculation of basic earnings (loss) per share and diluted earnings (loss) per share. Basic earnings (loss) per share are computed by dividing by the weighted average number of common shares outstanding during the period. Diluted net earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the effect of stock options and stock-based awards plus the assumed conversion of convertible debt (Notes(see notes 4 and 5).
For the three months ended | For the six months ended | For the Quarter Ended | ||||||||||||||||||||||
March 31, | March 31, | December 31, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Loss to common shareholders (Numerator) | $ | (1,229,785 | ) | $ | (669,206 | ) | $ | (1,373,093 | ) | $ | (514,092 | ) | ||||||||||||
(Loss) to common shareholders (Numerator) | $ | (2,631,406 | ) | $ | (143,308 | ) | ||||||||||||||||||
Basic weighted average number of common shares outstanding (Denominator) | 15,379,289 | 12,455,164 | 14,914,920 | 9,099,121 | 18,979,871 | 14,460,284 | ||||||||||||||||||
Diluted weighted average number of common shares outstanding (Denominator) | 15,379,289 | 12,455,164 | 14,914,920 | 9,099,121 | 18,979,871 | 14,460,284 | ||||||||||||||||||
Diluted weighted average number of shares for the three and six monthsquarter ended MarchDecember 31, 2022 and March 31, 2021 is the same as basic weighted average number of shares because the Company had net losses for these respective periods.both quarters.
NOVACCESS GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCH 31, 2022 AND 2021
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
Fair Value of Financial Instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of MarchDecember 31, 2022, the balances reported for cash, prepaid expenses, accounts payable, accrued expenses approximate the fair value because of their short maturities.
We adopted Accounting Standards Codification (“ASC”) Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, an established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.
NOVACCESS GLOBAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments (continued)
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. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
We measure certain financial instruments at fair value on a recurring basis. The Company had no assets that are required to be valued on a recurring basis as of MarchDecember 31, 2022 and September 30, 2021.2022. The Company had liabilities that are required to be measured at fair value on a recurring basis as follows at MarchDecember 31 2022 and September 30, 2021:2022:
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets: | $ | - | $ | - | $ | - | $ | - | ||||||||
Liabilities: | ||||||||||||||||
Derivative Liability at fair value as of September 30, 2021 | $ | 2,553,979 | $ | - | $ | - | $ | 2,553,979 | ||||||||
Derivative Liability warrants at fair value as of September 30, 2021 | $ | 372,643 | $ | - | $ | - | $ | 372,643 | ||||||||
Derivative Liability at fair value as of March 31, 2022 | $ | 2,400,203 | $ | - | $ | - | $ | 2,400,203 | ||||||||
Derivative Liability warrants at fair value as of March 31, 2022 | $ | 597,997 | $ | - | $ | - | $ | 597,997 | ||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets: | $ | - | $ | - | $ | - | $ | - | ||||||||
Liabilities: | ||||||||||||||||
Derivative Liability at fair value as of September 30, 2022 | $ | 1,207,403 | $ | - | $ | - | $ | 1,207,403 | ||||||||
Derivative Liability warrants at fair value as of September 30, 2022 | $ | 232,609 | $ | - | $ | - | $ | 232,609 | ||||||||
Total Derivative Liability as of September 30, 2022 | $ | 1,440,012 | $ | 1,440,012 | ||||||||||||
Derivative Liability at fair value as of December 31, 2022 | $ | 3,008,450 | $ | 3,008,450 | ||||||||||||
Derivative Liability warrants at fair value as of December 31, 2022 | $ | 614,646 | $ | 614,646 | ||||||||||||
Total Derivative Liability as of December 31, 2022 | $ | 3,623,096 | $ | 3,623,096 | ||||||||||||
The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:
Derivative Liability | Derivative Liability Warrants | |||||||
Balance as of September 30, 2021 | 2,553,979 | 372,643 | ||||||
Extinguishment of derivatives | (96,205 | ) | - | |||||
Initial derivative liabilities | 134,384 | - | ||||||
Net (Gain)/Loss on change in fair value of derivative liability | (191,955 | ) | 225,354 | |||||
Ending balance as of March 31, 2022 | $ | 2,400,203 | $ | 597,997 | ||||
Derivative Liability Promissory Notes | Derivative Liability Warrants | Total Derivative Liability | ||||||||||
Balance as of September 30, 2021 | $ | 2,553,979 | $ | 372,643 | $ | 2,926,622 | ||||||
Fiscal year 2022 initial derivative liabilities | 593,297 | 282,051 | 875,348 | |||||||||
Net (Gain)/Loss on change in fair value of derivative liability | (1,662,156 | ) | (422,086 | ) | (2,084,242 | ) | ||||||
Extinguishment of derivative | (277,716 | ) | - | (277,716 | ||||||||
Ending balance as of September 30, 2022 | $ | 1,207,403 | $ | 232,609 | $ | 1,440,012 | ||||||
Quarter ended December 31, 2022, initial derivative liabilities | 101,500 | - | 101,500 | |||||||||
Net (Gain)/Loss on change in fair value of derivative liability | 1,699,547 | 382,037 | 2,081,584 | |||||||||
Ending balance as of December 31, 2022 | $ | 3,008,450 | $ | 614,646 | $ | 3,623,096 | ||||||
NOVACCESS GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCHDECEMBER 31, 2022 AND 2021
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements
In May 2021,September 2022, the Financial Accounting Standards Board (“FASB”("FASB") issued accounting standards update (“ASU”Accounting Standards Update ("ASU") 2021-04—Earnings Per Share (Topic 260), Debt—Modifications2022-04, "Liabilities-Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations". This guidance requires annual and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718),interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.services. The amendments in this ASU areis effective for public and nonpublic entities for fiscal years beginning after December 15, 2021, and interim periods2022, with early adoption permitted, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2021. Early adoption is permitted, including adoption in an interim period. The Company has evaluated2023. We are currently evaluating the extent of the impact of this ASU, but do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.
In June 2022, the FASB issued ASU 2021-04,2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sales Restrictions, which had no effect(1) clarifies the guidance in Topic 820 on the Company’sfair value measurement of an equity security that is subject to contractual restrictions that prohibit the sale of an equity security and (2) requires specific disclosures related to such an equity security. We are currently evaluating the extent of the impact of this ASU, but do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.
In March 2022, the FASB issued ASU No. 2022-02, Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"). ASU 2022-02 eliminates the accounting guidance on troubled debt restructurings for creditors in ASC Topic 310 and amends the guidance on "vintage disclosures" to require disclosure of current-period gross write-offs by year of origination. ASU 2022-02 also updates the requirements related to accounting for credit losses under ASC Topic 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are currently evaluating the extent of the impact of this ASU, but do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
3. CAPITAL STOCK
At MarchAs of December 31, 2022, the Company’s authorized stock consisted of 2,000,000,000 shares of common stock, with no par value. Effective August 25, 2020, we filed articles of amendment to our articles of incorporation with the Colorado Secretary of State to effectuate a 1-for-1,000 reverse stock split of the Company’scompany’s outstanding shares of common stock.
The Company is also authorized to issue 50,000,000 shares of preferred stock with a par value of $0.01 per share. The rights, preferences and privileges of the holders of the preferred stock are determined by the Board of Directors prior to issuance of such shares.
Preferred Stock
As of MarchDecember 31, 2022, the Company had 600 shares of issued and outstanding Series B Preferred Stock following the conversion of 5,000 shares of Series A Preferred Stock and redemption of 24,400 shares of Series B Preferred Stock. The Series A shares were originally issued in consideration for the contribution of services by Tom Djokovich, the former President and Chief Executive Officer, to the Company valued at 50 dollars, which the Board deemed full and fair consideration. Because of such issuance, Mr. Djokovich had the ability to influence and determine stockholder votes. On March 18, 2020, the Company, Mr. Djokovich, and TN3, LLC, a Wyoming limited liability company owned by Daniel G. Martin (“TN3”), entered into a Stock Purchase Agreement (the “Agreement”). Pursuant to the Agreement, Mr. Djokovich agreed to sell his 5,000 shares of Series A Preferred Stock to TN3 in a private sale for cash. The holder of the Series A Preferred Stock could cast votes equal to not less than 60% of the total outstanding voting power of the Company on all matters voted on by the shareholders of the Company.Preferred. On September 4, 2020, the Company issued 25,000 shares of unregistered Series B Convertible Preferred stock, $0.01 par value per share, to TN3, LLC, a Wyoming limited liability company owned by Daniel G. Martin (“TN3”), in exchange for the redemption of all 5,000 shares of Series A preferred stock.stock that TN3 previously held. At the time, Mr. Martin was our Chief Executive Officer and sole Board Member. On March 14, 2022, the Novaccess redeemed 24,400 shares of the Company’s Series B Convertible Preferred Stock held by TN3. Irvin Consulting LLC, a company owned by Dwain Irvin, the CEO of NovAccess, purchased the remaining 600 shares (please refer to Note 1211 for more details).
Each share of outstanding Series B Preferred Stock entitles the holder to cast 40,000 votes. Each share of Series B Preferred Stock is convertible at the option of the holder into 10,000 common shares. In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation, the holders of shares of Series B Preferred Stock shall be paid out based on an as converted basis. Dividend for Series B Preferred Stock shall be declared on an as converted basis.
Common Stock
Effective August 25, 2020, we filed articles of amendment to our articles of incorporation with the Colorado Secretary of State to effectuate a 1-for-1,000 reverse stock split of the Company’s outstanding shares of common stock.
NOVACCESS GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCHDECEMBER 31, 2022 AND 2021
3. CAPITAL STOCK (Continued)
Common Stock
During the six monthsquarter ended MarchDecember 31, 2022, the Company issued 3,119,6431,281,769 shares of common stock. 1,502,670798,769 shares were issued to TN3various vendors for services provided, including 108,750 shares issued to a related party for services provided; 375,000 shares were issued in relation to stock subscriptions. The Company issued 25,000 shares to an individual which was pending issuance and included in additional paid in capital as part ofshares issuable on subscription, now recorded as common stock.
During the transaction to redeem 24,400period ended December 31, 2021, the Company issued 147,667 shares of Series B Preferred Stock, 265,973common stock. 36,667 shares were issued to various vendors for services provided; 791,000101,000 shares were issued in relation to stock subscriptions; 300,000 shares were issued as a commitment fee on a promissory note payable; 250,000 shares were issued as repayment of bridge loans (please refer to Note 4 for more details); and 10,000 shares were issued to related parties (please refer to Note 12 for more details).
During the six months ended March 31, 2021, the Company issued 11,252,850 shares of common stock. For an expense of $145,941 based on the closing market value on grant date 311,945 shares were issued to various vendors for services provided; 1,440,905 shares were issued in relation to stock subscriptions for net proceeds of $295,000; and 9,500,000 shares were issued to related parties for services and expense at $936,000 based upon the closing market value on grant date.parties.
4. CONVERTIBLE PROMISSORY NOTES
Promissory notes as of December 31, 2022 | Principal Amount | Unamortized balance of Debt Discount | Outstanding balance, net of debt discount as of December 31, 2022 | Derivative balance as of December 31, 2022 | ||||||||||||
2013 Note | 12,000 | - | 12,000 | - | ||||||||||||
2014 Note | 50,880 | - | 50,880 | 408,004 | ||||||||||||
2017 Note | 115,000 | - | 115,000 | 857,061 | ||||||||||||
February 2022 Note | 250,000 | - | 250,000 | 256,482 | ||||||||||||
May 2022 Note | 1,000,000 | - | 1,000,000 | 981,152 | ||||||||||||
August 2022 Note | 100,000 | 46,566 | 53,434 | 138,478 | ||||||||||||
September 2022 Note | 79,250 | 58,499 | 20,751 | 138,860 | ||||||||||||
November 2022 Note | 55,000 | 46,727 | 8,273 | 120,905 | ||||||||||||
December 2022 Note | 55,000 | 50,978 | 4,022 | 92,726 | ||||||||||||
Total | 1,717,130 | 202,770 | 1,514,360 | 2,993,668 | ||||||||||||
Promissory note, related party, as of December 31, 2022 | Principal Amount | Unamortized balance of Debt Discount | Outstanding balance, net of debt discount as of Sep 30, 2022 | Derivative balance as of September 30, 2022 | ||||||||||||
July 2022 Note | 12,500 | - | 12,500 | 14,782 | ||||||||||||
2013 Note
On October 1, 2013, Company issued an unsecured convertible promissory note (the “2013 Note”) in the amount of $12,000 to a former Board member (the “Holder”) in exchange for retention as a director during the fiscal year ending September 30, 2014. The Note can be converted into shares of common stock by the Holder for $4.50 per share. The Note matured on October 1, 2015 and bore a one-time interest charge of $1,200 which was applied to the principal on October 1, 2014. As of MarchDecember 31, 2022, the outstanding convertible promissory notes are summarized as follows:principal balance was $12,000.
Convertible Promissory Notes | $ | 165,880 | ||
Less current portion | - | |||
Total long-term liabilities | $ | 165,880 |
NOVACCESS GLOBAL INC.
Maturities of long-term debt for the next four years are as follows:NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
4. CONVERTIBLE PROMISSORY NOTES (Continued)
Year Ending |
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2014 Note
On November 20, 2014, the Company issued a 10% unsecured convertible promissory note (the “2014 Note”) for the principal sum of up to $400,000 plus accrued interest on any advanced principal funds. The 2014 Note maturesmatured eighteen months from each advance. The 2014 Note may be converted by the lender into shares of common stock of the Company at the lesser of $12.50 per share or (b) fifty percent (50%) of the lowest tradetraded prices following issuance of the 2014 Note or (c) the lowest effective price per share granted to any person or entity. On November 20, 2014, the lender advanced $50,000 to the Company under the 2014 Note at inception. On various dates from February 18, 2015 through September 30, 2016, the lender advanced an additional $350,000 under the 2014 Note. During the period ended September 30, 2021, the Company and lender agreed to extend the maturity date for the outstanding balance to June 30, 2023. As of MarchDecember 31, 2022, there remains an aggregate outstanding principal balance ofwas $50,880.
2017 Note
On May 10, 2017, the Company issued a 10% unsecured convertible promissory note (the “2017 Note”) for the principal sum of up to $150,000 plus accrued interest on any advanced principal funds. The lender may pay additional consideration at the lender’s discretion. The Company received a tranche in the amount of $25,000 upon execution of the 2017 Note. On various dates, the Company received additional tranches in the aggregate sum of $90,000. The 2017 Note matured twelve months from each tranche. Within thirty (30) days prior to the maturity date, the lender may extend the maturity date to sixty (60) months.tranche.. During the period ended September 30, 2021, the Company and lender agreed to extend the maturity date for the outstanding balance to June 30, 2023. The 2017 Note may be converted by the lender into shares of common stock of the Company at the lesser of $10 per share or (b) fifty percent (50%) of the lowest tradetraded price of common stock recorded on any trade day after the effective date, or (c) the lowest effective price per share granted to any person or entity. As of MarchDecember 31, 2022, and December 31, 2021, the outstanding principal balance remaining on the May Note was $115,000.
May 2021 Note
On June 2,May 28, 2021, the Company issued a 12% unsecured convertible promissory note (the “June“May 2021 Note”) for the principal sum of $55,500 plus accrued interest. The JuneMay 2021 Note was to mature on June 2,May 28, 2022. The JuneMay 2021 Note could be convertedwas convertible after November 23, 2021, by the lender into shares of common stock of the Company at sixty-one percent (61%) of the lowest tradetraded price of common stock recorded during the fifteen (15) trading days prior to conversion. On October 5, 2021, the Company paid the balance of this note to the lender including accrued interest and prepayment settlement fee of $17,520. The Company recorded amortization of debt discount of $36,493 and amortization of debt issuance costs of $1,458, both of which were recognized as interest expense during the six months ended March 31, 2022. The Company also recognized a gain of $59,915 on the extinguishment of this convertible note during the six months ended March 31, 2022.lender. As of MarchDecember 31, 2022, the balance of the June 2021 Note was $0.
July 2021 Note
NOVACCESS GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCH 31, 2022 AND 2021
4. CONVERTIBLE PROMISSORY NOTES (Continued)
On July 6, 2021, the Company issued a 12% unsecured convertible promissory note (the “July 2021 Note”) for the principal sum of $38,750 plus accrued interest. The July Note was to mature oninterest with a maturity date of July 6, 2022. The July Note could be convertedwas convertible after January 1, 2022, by the lender into shares of common stock of the Company at sixty-one percent (61%) of the lowest trade price of common stock recorded during the fifteen (15) trading days prior to conversion. On December 30, 2021, the Company paid the balance of this note to the lender including accrued interest and prepayment settlement fee of $16,936. The Company recorded amortization of debt discount of $29,620 and amortization of debt issuance costs of $1,996, both of which were recognized as interest expense during the six months ended March 31, 2022. The Company also recognized a gain of $36,289 on the extinguishment of this convertible note during the six months ended March 31, 2022.lender. As of March 31,September 30, 2022, the balance of the JuneJuly 2021 Note was $0.
August 2021 Note
On August 20, 2021, the Company issued a 10% unsecuredsecured promissory note (the “August 2021 Note”) for the principal sum of $500,000 plus accrued interest. The August Note was to mature on February 20, 2022, unless extended for up to an additional six months. The August 2021 Note maycould be converted, only following an event of default, and therefore not included in summary of convertibles note, by the lender into shares of common stock of the Company at the lesser of 90% (representing a 10% discount) multiplied by the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous twenty (20) trading day period. In February 2022 the Company extended the term of the August note for an additional six months. The extended maturity date is February 20, 2023. The Company recorded amortization of debt discount of $391,319 related to derivative portion of the August Note, amortization of debt issuance costs of $75,000, and $34,181 amortization of debt discount representing commitment fee all of which were recognized as interest expense during the six months ended March 31, 2022 in the consolidated statement of operations for the six months ended March 31, 2022. As of March 31, 2022, the balance of the August Note was $500,000.
On February 16, 2022, the Company issued a 10% unsecured promissory note (the “February note”) for the principal sum of $250,000 plus accrued interest. The February Note matures on August 15, 2022, unless extended for up to an additional six months. The February Note may be converted, only following an event of default, and therefore is not included in summary of convertibles note, by the lender into shares of common stock of the Company at the lesser of 90% (representing a 10% discount) multiplied by the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous twenty (20) trading day period. The Company issued 1,000,000 warrants at a price of $1.50 in connection with the note (note 7 below) and issued 400,000 shares as a commitment fee. In February 2022, the Company extended the term of the August 2021 note for an additional six months. The Company repaid the August 2021 Note on May 9, 2022 in connection with the issuance of the May 2022 Note described below. As of September 30, 2022, the balance on the August 2021 Note was $0.
On February 9,2023 the warrants were repriced to $0.20 in connection with the February 2023 Letter Modification as discussed in note 14.
NOVACCESS GLOBAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
4. CONVERTIBLE PROMISSORY NOTES (Continued)
February 2022 Note
On February 15, 2022, the Company issued a 10% secured promissory note (the “February 2022 Note”) for the principal sum of $250,000 plus accrued interest. The February Note was to mature on August 15, 2022, unless extended for up to an additional six months. The February Note may be converted, only following an event of default, by the lender into shares of common stock of the Company at the lesser of 90% (representing a 10% discount) multiplied by the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous twenty (20) trading day period. In July 2022, the Company extended the term of the February 2022 note for another six months until February 16, 2023. In connection with the note, the Company issued 500,000 warrants with an exercise price of $1.50 (see note 7 below). The February 2022 Note had an original issuance discount amounting to $25,000, debt issuance cost amounting to $12,000 and the Company issued 300,000 shares as a commitment fee valued at $111,000 based on the share price on the date of the agreement, amortized over the term of the loan. The initial recognition of derivative and warrant liability was recorded amortizationas debt discount and amortized over the term of the loan. The debt discount is fully amortized and the balance in debt discount as on December 31, 2022, was $0. As of December 31, 2022, the balance outstanding net of debt discount was $250,000.
On February 9, 2023, the loan maturity was extended to May 9, 2023, and the warrants were repriced to $0.20 per share exercise price as discussed in note 14.
May 2022 Note
On May 5, 2022, the Company issued a 12% secured promissory note (the “May 2022 note”) for the principal sum of $32,849 related$1,000,000 plus accrued interest. The May 2022 Note was to derivative portionmature on November 5, 2022, unless extended for up to an additional six months. If extended, the interest rate increased to 15% for the remaining six months. The May Note may be converted, only following an event of default, by the lender into shares of common stock of the FebruaryCompany at the lesser of the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous twenty (20) trading day period before conversion. The Company used some of the proceeds from the May 2022 note to pay off the August 2021 note. In November 2022, the Company extended the May 2022 for another six months until May 5, 2023. In connection with the note company issued 1,000,000 warrants at an exercise price of $0.01 (see note 7 below). The May 2022 Note and amortization ofhad an original issuance discount amounting to $100,000, debt issuance costs of $9,250,$ 25,500 and $19,654 amortizationthe Company issued 875,000 shares as a commitment fee valued at $259,875 based on the share price on the date of the agreement. The initial recognition of derivative liability of $412,065 and warrant liability amounting to $282,051 was recorded as debt discount representing commitment fee, alland amortized over the term of which were recognizedthe loan. The balance in debt discount as interest expense during the three months ended Marchon December 31, 2022, in the consolidated statement of operations for the three months ended March 31, 2022.was $0. As of MarchDecember 31, 2022, the balance outstanding net of debt discount was $1,000,000.
On February 9, 2023 the principal amount and terms of this note were amended as discussed in note 14.
August 2022 Note
On August 8, 2022, the Company issued a 12% unsecured promissory note (the “August 2022 Note”) for the principal sum of $100,000 plus accrued interest. The August 2022 Note matures on August 8, 2023, provided, however that after October 31, 2022, if the Company receives debt or equity financing of at least $3 million, the holder may call for payments of outstanding principal and interest at any time from such date giving notice of at least five business days before the date the payment is due. The holder shall have the right, until the date of payment in full of all amounts outstanding to convert unpaid principal and interest and any other amounts into fully paid shares of common stock of the August NoteCompany at a conversion price of $0.15. The initial recognition of derivative liability of $77,259 was $250,000, which is the total of initialrecorded as debt discount and amortized over the term of $134,384,the loan. The balance in debt discount as on December 31, 2022, was $46,566. As of December 31, 2022, the balance outstanding net of debt discount was $53,434.
September 2022 Note
On September 22, 2022, the Company issued an 8% secured promissory note (the “September 2022 note”) for the principal sum of $79,250 plus accrued interest. The September 2022 Note matures on September 22, 2023. In case of default in repayment of the outstanding amount on the due date the balance shall bear interest of 22% per annum. The holder shall have the right, after six months, until the date of payment in full of all amounts outstanding to convert unpaid principal and interest and any other amounts into fully paid shares of common stock of the Company at a variable conversion price defined hereunder. The variable conversion price shall mean 65% multiplied by the market price. Market price means the average of the three lowest trading prices for the Common Stock during the fifteen-trading day period ending on the latest complete trading day prior to the conversion date. The initial recognition of derivative liability amounting to $75,000 was recorded as debt discount and amortized over the term of the loan. The debt issuance costscost of $37,000 and initial$4,250 was recorded as debt discount representingand amortized over the term of the loan. The balance in debt discount as on December 31, 2022 was $58,499. As of December 31, 2022, the balance outstanding net of debt discount was $20,751.
NOVACCESS GLOBAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
4. CONVERTIBLE PROMISSORY NOTES (Continued)
November 2022 Note
On November 1, 2022, the Company issued an 8% secured promissory note (the “November 2022 Note”) for the principal sum of $55,000 plus accrued interest. The November 2022 Note matures on November 1, 2023. In case of default in repayment of the outstanding amount on the due date the balance shall bear interest of 22% per annum. Beginning on April 30, 2023, 1800 Diagonal Lending may convert the amount outstanding under the note into shares of the Company’s common stock at a commitment feeconversion price equal to 65% of $78,616.the average of the three lowest trading prices of the stock during the fifteen trading days before the conversion date. Market price means the average of the three lowest trading prices for the Common Stock during the fifteen-trading day period ending on the latest complete trading day prior to the conversion date. The initial recognition of derivative liability amounting to $50,700 was recorded as debt discount and amortized over the term of the loan. The debt issuance cost of $4,250 was recorded as debt discount and amortized over the term of the loan. The balance in debt discount as on December 31, 2022, was $46,727. As of December 31, 2022, the balance outstanding net of debt discount was $8,273.
December 2022 Note
On December 7, 2022, the Company issued an 8% secured promissory note (the “December 2022 Note”) for the principal sum of $55,000 plus accrued interest. The December 2022 Note matures on December 7, 2023. In case of default in repayment of the outstanding amount on the due date the balance shall bear interest of 22% per annum. Beginning on June 5, 2023, 1800 Diagonal Lending may convert the amount outstanding under the note into shares of the Company’s common stock at a conversion price equal to 65% of the average of the three lowest trading prices of the stock during the fifteen trading days before the conversion date. Market price means the average of the three lowest trading prices for the Common Stock during the fifteen-trading day period ending on the latest complete trading day prior to the conversion date. The initial recognition of derivative liability amounting to $50,700 was recorded as debt discount and amortized over the term of the loan. The debt issuance cost of $4,250 was recorded as debt discount and amortized over the term of the loan. The balance in debt discount as on December 31, 2022, was $50,978. As of December 31, 2022, the balance outstanding net of debt discount was $4,022.
We evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible promissory notes was not afforded the exemption for conventional convertible instruments due to its variable conversion rate. The notes have no explicit limit on the number of shares issuable so they did not meet the conditions set forth in current accounting standards for equity classification. The Company elected to recognize the notes under paragraph 815-15-25-4, whereby, there would be a separation into a host contract and derivative instrument. The Company elected to initially and subsequently measure the notes in their entirety at fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the imputed interest associated with the embedded derivative. The derivative liability is adjusted periodically according to the stock price fluctuations based upon the Binomial lattice model calculation.
The convertible notes issued and described in this Note 4 above, do not have fixed settlement provisions because their conversion prices are not fixed. The conversion feature has been characterized as a derivative liability to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.
We record the full value of the derivative as a liability at issuance with an offset to valuation discount, which will be amortized over the life of the notes.
At March 31, 2022, the fair value of the derivative liability was $2,400,203.
NOVACCESS GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCHDECEMBER 31, 2022 AND 2021
4. CONVERTIBLE PROMISSORY NOTES (Continued)
For purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used Binomial lattice valuation model. The significant assumptions used in the Binomial lattice valuation of the derivatives are as follows:
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5. CONVERTIBLE LOAN PAYABLEPROMISSORY NOTES, RELATED PARTY
As of March 31, 2016,July 2022 Note, related party
On July 28, 2022, the Company issued ana 12% unsecured Convertible Promissorypromissory note (the “July 2022 Note”) for the principal sum of $12,500 plus accrued interest. All amounts outstanding under the July 2022 Note (the “Note”)were payable on the earlier of: (a) October 31, 2022, or (b) the receipt by the Company of debt or equity financing of $3 million. In November 2022, the holder agreed to extend the term of the note until April 2023. The holder has the right, until the date of payment in the amountfull of $12,000all amounts outstanding to a former Board member (the “Holder”) in exchange for retention as a director during the fiscal year ending September 30, 2014. The Note can be convertedconvert unpaid principal and interest and any other amounts into fully paid shares of common stock by the Holder for $4.50 per share. The Note matured on October 1, 2015, and bore a one-time interest charge of $1,200 which was applied to the principal on October 1, 2014. So long as any shares issuable under a conversion are subject to transfer and sale restrictions imposed pursuant to SEC Rule 144 of the Rules promulgated underCompany at conversion price of $0.15. The initial recognition of derivative liability of $12,500 was recorded as debt discount and amortized over the Securities Actterm of 1933, the Company shall, upon written request by Holder, file Form S-8, if applicable, withloan. The balance in debt discount as on December 31, 2022, was $0. As of December 31, 2022, the U.S. Securities and Exchange commission to register the issued.balance outstanding net of debt discount was $12,500.
6. SHORT TERM LOAN, RELATED PARTY
On July 28, 2022, the Company entered into a short-term interest free loan agreement amounting to $12,500, with one of the members of the Board of Directors to fund the operations until longer term financing can be obtained by the Company. The loan terms required repayment of all amounts outstanding under the loan on the earlier of: (a) October 31, 2022 or (b) the receipt by the Company of debt or equity financing of $3 million In November, 2022, the Board Member signed a waiver and extension agreement changing the due date to April 30, 2023. Interest on the aforesaid note was not calculated due to immaterial amount.
7. WARRANTS
On August 20, 2021, for value received in connection with the issuance of the August Note (see note 4 for more details), the Company issued 1,000,000 warrants to the lender with an exercise price of $1.50 per share with a five-year exercise period. On February 9, 2023, the warrants were repriced to $0.20 per share as discussed in note 14.
On February 16, 2022, for value received in connection with the issuance of the February 2022 Note (see note 4 for more details), the Company issued 500,000 warrants to the lender with an exercise price of $1.50 per share with a five-year exercise period. On February 9, 2023, the warrants were repriced to $0.20 per share as discussed in note 14.
At MarchOn May 10, 2022, for value received in connection with the issuance of the May 2022 Note (see note 4 for more details), the Company issued 1,000,000 warrants to the lender with an exercise price of $0.01 per share with a five-year exercise period.
On December 31, 2022, and September 30, 2021, the fair value of the derivative liability warrants was $597,997$614,646 and $372,643, respectively.$232,609 as of September 30, 2021.
For the purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used the Binomial lattice valuation model. The significant assumptions used in the Binomial lattice valuation of the derivatives are as follows:
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7. OPTIONS
On June 2, 2020, the Company issued 2,000,000 options to purchase common stock at an exercise price of $0.01 per share (adjusted for the August 2020 stock split). These options will be exercisable on a cashless basis for a period of ten years from August 25, 2020. The purpose of the options is to compensate our directors for serving on the board without compensation in fiscal 2019. It is difficult to assess the value of the options given the highly limited trading in our common stock, the fact that the options shares have not been and are not expected to be registered for resale and will be restricted, and the speculative nature of the Company’s future business plans. However, we estimated the value of the services provided by each of our directors during 2019 and believe that the value of the options to be issued to each of our resigning directors approximates that amount.
NOVACCESS GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCHDECEMBER 31, 2022 AND 2021
7.8. OPTIONS (Continued)
On June 2, 2020, the Company issued 2,000,000,000 options, on a pre reverse split basis, to purchase common stock to the then directors of the Company as compensation for serving on the board during 2019. These options are exercisable on a cashless basis for a period of ten years from September 30, 2022 at an exercise price of $0.00001. The number of options on the post Stock Split basis is 2,000,000, and the exercise price of $0.01 per share.
A summary of the Company’s options activity and related information follows for fiscal year ended September 30, 2022:
December 31, 2022 | ||||||||
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Outstanding - beginning of period | 2,000,000 | $ | .01 | |||||
Granted | - | $ | - | |||||
Exercised | - | $ | - | |||||
Forfeited | - | $ | - | |||||
Outstanding - end of period | 2,000,000 | $ | .01 | |||||
At MarchDecember 31, 2022, the weighted average remaining contractual life of options outstanding:
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For purpose of determining the fair market value of the options, the Company used the Black Scholes valuation model. The significant assumptions used in the Black Scholes valuation model for the options are as follows:
Risk Free Interest Rate | 0.32% | |
Stock Volatility Factor | 146.0% | |
Weighted Average Expected Option Life | 5 Years | |
Expected Dividend Yield | None |
8. ACCOUNTS PAYABLE9. ACCRUED EXPENSES AND ACCRUEDOTHER CURRENT LIABILITIES
Accounts payableAccrued expenses and accrued other current liabilities consisted of the following at MarchDecember 31, 2022 and September 30, 2021:2022:
03/31/2022 | 9/30/2021 | |||||||
Trade accounts payable | $ | 161,922 | $ | 143,074 | ||||
Credit cards payable | 66,894 | 66,894 | ||||||
Accrued liabilities and interest on notes payable | 105,783 | 356,683 | ||||||
Accrued payroll | 11,268 | 10,712 | ||||||
Deferred compensation | 270,433 | 201,383 | ||||||
License fees payable | 36,912 | 40,402 | ||||||
| 653,212 | 819,148 | |||||||
12/31/2022 | 9/30/2022 | |||||||
Accrued liabilities | 11,370 | 4,370 | ||||||
Interest payable | 118,450 | 94,251 | ||||||
Provision for guaranteed commitment fees * | 693,250 | 961,000 | ||||||
Accrued payroll | 5,973 | 4,740 | ||||||
Deferred compensation | 425,824 | 344,983 | ||||||
License Fees Payable | 40,402 | 40,402 | ||||||
Insurance finance liability | - | 36,815 | ||||||
| $ | 1,295,269 | $ | 1,486,561 | |||||
* Under the terms of the August 2021 Note, February 2022 Note and May 2022 Note the Company issued a total of 1,575,000 shares of common stock as commitment fees. If the lender is unable to sell the shares for more than $1,150,000, it may make a one-time claim for each note to be reimbursed for the difference between their sale proceeds and $1,150,000. The difference between the fair value of the 1,575,000 shares as on December 31, 2022, and the exercise amount of $1,150,000 was recorded as a provision for guaranteed commitment fees and included in the table above.
9.NOVACCESS GLOBAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
10. BRIDGE LOANSLOAN PAYABLE
Related Partiesparties
In December 2021, the Company’s CEO and CFO each advanced funds to the Company for operating expenses in the total amount of $50,000. The notes were payable on demand with a five business day written notice and bearbore interest at a rate of 10% per annum. The Company could prepay all or any part of the balance owed without penalty.
In March, 2022, our CEO purchased 600 shares of Series B Preferred stock and the eventCompany applied $18,616 of the default,loan balance against this purchase. The remaining balance of $6,384 was paid to our CEO in several payments with the notes werefinal balance being paid in May, 2022. The Company recognized and paid interest expense in the amount of $583 to bear additional interest at a rateour CEO during the year ended September 30, 2022. No balance is due to our CEO as of 12% per annum. December 31, 2022.
On January 25, 2022, the Company issued 125,000 shares of its common stock in settlement of athe bridge loan to the Company’s CFO and recognized a loss on extinguishment of debt in the amount of $17,313. Any potential gain would not have been recognized on extinguishment of this loan due to the nature of the relationship between the parties. The companyCompany recognized and paid interest expense in the amount of $237 to our CFO during the periodyear ended MarchSeptember 30, 2022. No balance is due to our CFO as of December 31, 2022.
During the period ended March 31, 2022 the Company made payments to our CEO in the total amount of $20,938, of which $18,616 were used to purchase 600 shares of Serie B Preferred stock, and $2,316 wereService provider, related to reimbursement of expenses. The company recognized and capitalized into the principle of the loan interest expense of $546. As of March 31, 2022, the balance on the bridge loan payable to our CEO was $4,068. No balance was outstanding on the notes payable to our CFO.
Service Providerparty
In December 2021, one of the Company’s service providers advanced funds to the Company for operating expenses in the total amount of $25,000. On February 14, 2022, the Company issued 125,000 shares of its common stock to the service provider in settlement of the note payable. The Company recognized a loss on extinguishment of debt in the amount of $37,500. During the periodyear ended March 31,September 30, 2022, the Company recognized and paid interest expense of $226 in relation to this loan. No balance was outstanding on the note payable to our service provider as of MarchDecember 31, 2022.
NOVACCESS GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCH 31, 2022 AND 2021extinguishment of debt on the CFO Note and service provider note amounting to $54,813 was recorded in the income statement.
10.11. DUE TO RELATED PARTYPARTIES
Due to Innovest Global
During the periods prior to the periodyear ended March 31,September 30, 2022, Innovest Global, Inc. (Innovest)(“Innovest”) advanced funds to the Company for operating expenses in the amount of $86,073.$86,217. As of MarchDecember 31, 2022, the amount has not been reimbursed to Innovest. Our former Chairman Daniel Martin was the CEO of Innovest when the funds were advanced. Imputed interest is calculated on an annual basis
Due to TN3 LLC
On January 31, 2022, the Company entered into a preferred stock redemption agreement with Daniel G. Martin, at the market ratetime, our sole board member and chairman, TN3, LLC, a company owned by Mr. Martin, Dwain K. Irvin, our chief executive officer, and Irvin Consulting, LLC, a company owned by Dr. Irvin. TN3 owned 25,000 shares of the Series B convertible preferred stock. Pursuant to the redemption agreement, on March 14, 2022, NovAccess redeemed 24,400 of the preferred shares and Irvin Consulting purchased 600 of the preferred shares from TN3. The Company also issued to TN3 1,502,670 shares of unregistered common stock, at $ 0.35 amounting to $525,934 which was equal to 10% of our outstanding common stock on the date the redemption agreement was signed. Upon completion of the redemption transaction, the Company is estimatedobligated to equal $516 aspay to TN3 a total of March$250,000 over a period of eleven months, with payment accelerated if the Company raises at least $2.5 million of equity capital. As of September 30, 2022, the Company owed TN3 $97,500 of the redemption price.
NOVACCESS GLOBAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022.2022 AND 2021
11.12. COMMITMENTS AND CONTINGENCIES
There are no material pending legal proceedings to which we are a party, to, 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.
Under the terms of the August 2021 Note, February 2022 Note and May 2022 Note the Company issued a total of 1,575,000 shares of common stock as commitment fees. If the lender is unable to sell the shares for less than $1,150,000, it may make a one-time claim for each note to be reimbursed for the difference between their sale proceeds and $1,150,000. The difference between the fair value of the 1,575,000 shares as on December 31, 2022, and the exercise amount of $1,150,000 was recorded as a make-whole provision for commitment fees and included in the accrued expenses.
12.13. RELATED PARTY TRANSACTIONS
On September 4, 2020, the Company entered into a management services agreement (the “Agreement”) with TN3, LLC. Pursuant to the Agreement, TN3 was to provide NovAccess with office space in Chesterland, Ohio and management, administrative, marketing, bookkeeping and IT services for a fee of $30,000 a month. The initial term of the Agreement was three years, with subsequent one-year renewals. During the three months ended March 31,July 28, 2022, the Company entered into a transactionshort-term interest free loan agreement amounting to $12,500, with TN3 to redeem its sharesone of the Company’s Series B Convertible preferred stock (please refermembers of the Board of Directors to more details below). This transaction terminatedfund the Agreement, including satisfaction foroperations until longer term financing can be obtained by the Company. The loan terms required repayment of all services provided and any amounts outstanding. As of Marchoutstanding under this agreement on the earlier of: (a) October 31, 2022 thereor (b) the receipt by the Company of debt or equity financing of $3 million In November 2022 the Board Member signed a waiver and extension agreement changing the due date to April 30, 2023. The balance outstanding on December 31, 2022 was zero balance reported as the outstanding payable amount in relation to the Agreement.$12,500.
On October 4, 2021,July 28, 2022, the Company issued 10,000a convertible promissory note to Letzhangout, LLC, a company that provides accounting consulting services to NovAccess and also employs our chief financial officer, Neil J. Laird. Pursuant to the note, Letzhangout loaned the Company $12,500 on July 29, 2022. All amounts outstanding under this agreement were payable on the earlier of: (a) October 31, 2022, or (b) the receipt by the Company of debt or equity financing of $3 million. In November 2022, the holder agreed to extend the term of the note until April 2023. The holder has the right, until the date of payment in full. to convert all amounts outstanding under the note and unpaid principal and interest and any other amounts into fully paid shares of common stock to Neil J. Laird to compensate him for serving as our chief financial officer. The stock-based compensation expense inof the amountCompany at conversion price of $8,000$0.15. As of December 31, 2022, the balance of the July 2022 Note was reported on the Company’s financial statements for the six months ended March 31, 2022.$12,500.
On January 31, 2022, the Company entered into a preferred stock redemption agreement (the “redemption agreement”) with Daniel G. Martin, at the time our sole board member and chairman, TN3, LLC, a company owned by Mr. Martin, Dwain K. Morris-Irvin,Irvin, our chief executive officer, and Irvin Consulting, LLC, a company owned by Dr. Irvin. TN3 owned 25,000 shares of ourthe Series B convertible preferred stock. Pursuant to the redemption agreement, on March 14, 2022, NovAccess redeemed 24,400 of the preferred shares and Irvin Consulting purchased 600 of the preferred shares from TN3. In connection with
Upon completion of the redemption we issued to TN3 1,502,670 shares of unregistered common stock. To redeem the preferred shares,transaction, the Company iswas obligated to pay to TN3 a total of $250,000 over a period of teneleven months, with payment accelerated if the companyCompany raises significantat least $2.5 million of equity capital. The company paid $50,000As of December31, 2022, the Company owed TN3 $97,50000 of the redemption price. Pursuant to the redemption agreement, the Company also issued to TN3 in relation1,502,670 shares of unregistered common stock, which was equal to this transaction during10% of our outstanding common stock on the three months ended March 31, 2022. As of March 31, 2022date the balance owed to TN3 on this transaction is $200,000.
redemption agreement was signed. Upon completion of the redemption transaction, Mr. Martin resigned from the NovAccess board of directors and was replaced by John A. Cassarini and Dr. Irvin and John Cassarini. On March 18, 2022, the board of directors of NovAccess voted to expand the size of the company’s board to three members and appointed Jason M. Anderson to the board to fill the resulting vacancy.Irvin.
Also in connection with closing the redemption transaction, on March 14, 2022, the Company entered into a common stock distribution agreement with Innovest Global, Inc. Innovest acquired 7.5 million shares of the Company’s common stock when Innovest sold StemVax, LLC to NovAccess in September 2020. Pursuant to the stock distribution agreement, Innovest agreed to distribute its NovAcess common stock to Innovest’s shareholders. Innovest is currently in the process of effectuating the distribution.
In December 2021, the Company’s CEO and CFO each advanced funds to the Company for operating expenses in the total amount of $25,000 each. The notes were payable on demand with a five business-day written notice and bore interest at a rate of 10% per annum. The Company could prepay all or any part of the balance owed without penalty. On January 25, 2022, the Company issued 125,000 shares of its common stock in settlement of a bridge loan to the Company’s CFO and recognized a loss on extinguishment of debt in the amount of $17,313. Any potential gain would not have been recognized on extinguishment of this loan due to the nature of the relationship between the parties. The Company recognized and paid interest expense in the amount of $237 to our CFO during the year ended September 30, 2022. No balance is due to our CFO as of December 31, 2022. In March, 2022, our CEO purchased 600 shares of Series B Preferred stock and the Company applied $18,616 of the loan balance against this purchase. The remaining balance of $6,384 was paid to our CEO in several payments with the final balance being paid in May, 2022. The Company recognized and paid interest expense in the amount of $583 to our CEO during the year ended December 31, 2022. No balance is due to our CEO as of December 31, 2022.
NOVACCESS GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCHDECEMBER 31, 2022 AND 2021
13. RELATED PARTY TRANSACTIONS (Continued)
On September 4, 2020, the Company entered into a management services agreement with TN3, LLC. Pursuant to the agreement, TN3 provided the Company with office space in Chesterland, Ohio and management, administrative, marketing, bookkeeping and IT services for a fee of $30,000 a month. The initial term of the agreement was three years, with subsequent one-year renewals. We paid TN3 $40,000 under the agreement in fiscal 2022. In connection with the redemption of TN3’s preferred shares, the management services agreement was terminated and outstanding amounts cancelled, and as of December 31, 2022 there were no amounts owed under this agreement.
14. SUBSEQUENT EVENTS
Management has evaluated subsequent events as of May 13, 2022, the date the consolidated financial statements were available to be issued according to the requirements of ASC topic 855.January 23 Letter Agreement
OnThe Company, previously entered into three securities purchase agreements dated August 20, 2021, February 15, 2022, and May 5, 2022 NovAccess entered into a securities purchase agreement (the “SPA”(collectively, the “Agreements”), with AJB Capital Investments, LLC (“AJB”) and. Pursuant to the Agreements, the Company issued a promissory note in the principal amount of $1.0 million (the “note”)notes to AJB pursuantrepresenting loans provided by AJB to the SPA. The loan closed and was funded on May 9, 2022. NovAccess used $500,000 of the proceeds of the loan to repay AJB’s August 20, 2021 loan and will use the remaining loan proceeds for general working capital purposes.
The note has an original issuance discount of 10% of the principal and bears interest at 12% a year. The note is due on November 5, 2022, but may be extended for six months by NovAccess, at which time the rate will increase to 15%. NovAccess must repay the note with the proceeds of any loan or capital raise exceeding $5.0 million and may otherwise prepay the note at any time without penalty. Under the terms of the note, NovAccess may not sell a significant portion of its assets without the approval of AJB, may not issue additional debt that is not subordinate to AJB, must comply with the company’s reporting requirements under the Securities Exchange Act of 1934, and must maintain the listing of the company’s common stock on the OTC Market or other exchange, among other restrictions and requirements. NovAccess’ failure to make required payments under the note or to comply with any of these covenants, among other matters, would constitute an event of default. Upon an event of default under the SPA or note, the note will bear interest at 18%, AJB may immediately accelerate the note due date, AJB may convert the amount outstanding under the note into shares of NovAccess common stock at a discount to the market price of the stock, and AJB will be entitled to its costs of collection, among other penalties and remedies.
NovAccess provided customary representations and covenants to AJB in the SPA. NovAccess’ breach of any representation or failure to comply with the covenants would constitute an event of default.Company totaling $1,750,000. Also pursuant to the SPA, NovAccessAgreements, the Company paid AJB a commitment fee of 875,000fees totaling 1,575,000 unregistered shares of the company’s common stock (the “commitment fee shares”). If after May 5, 2023 and before May 5, 2025, AJB is unable to sell the commitment fee shares for $700,000,amounts specified in the Agreements, then AJB may require NovAccess to issue additional shares or pay cash in the amount of the shortfall.shortfall (the “make-whole rights”). However, if NovAccess paysAJB may only exercise its make-whole rights within time frames following the note off before Novemberloan dates specified in the Agreements (the August 20, 2021 and February 15, 2022 make-whole rights each have a term of 18 months and the May 5, 2022 thenmake-whole rights have a term of 36 months). The August 20, 2021 make-whole rights expire on February 20 of this year. To avoid forcing AJB to sell the company may redeem 437,500commitment fee shares in order to take advantage of its make-whole rights, on January 20, 2023 the Company entered into a letter agreement with AJB extending the exercise period for the make whole-rights to 72 months. As amended by the letter agreement, the make-whole rights now expire on August 20, 2027, February 15, 2028, and May 5, 2028. The letter agreement makes additional less material revisions to AJB’s make-whole rights and harmonizes the make-whole rights among the Agreements.
February 9, Letter Agreement
On May 5, 2022, the Company issued a promissory note to AJB in the principal amount of $1,000,000 in connection with loan from AJB. On February 9, 2023, AJB provided additional loan of $265,000, which was added to the May 2022 note. The $265,000 has an original issuance discount of 10% of the principal and bears interest at 10% a year. This loan is due on May 9, 2023. The Company will use the proceeds of the loan for general working capital purposes. The chief executive officer Dwain K. Irvin guaranteed repayment of the $265,000 loan.
Also pursuant to the letter agreement, the Company paid AJB a commitment fee of 500,000 unregistered shares of the company’s common stock (the “commitment fee shares”). If AJB is unable to sell the commitment fee shares for one dollar. $0.20 a share, then AJB may require the Company to issue additional shares or pay cash in the amount of the shortfall. The Company is also required to register the commitment fee shares for resale under the Securities Act.
Pursuant to the SPA, NovAccessletter agreement, the Company also issued to AJB a common stock purchase warrant (the “warrant”) to purchase 1.0 million1,000,000 shares of the company’s common stock for $0.01$0.20 a share. The warrant expires on May 5, 2027. NovAccess alsoFebruary 9, 2028. Additionally the warrants issued previously in connection with the August 2021 and February 2022 notes with an exercise price of $1.50 per share were repriced to $0.20 per share.
Related Party Loan
On February 9, 2023, the Company entered into a securityan interest-free loan agreement with AJB (the “security agreement”) pursuant to which NovAccess granted to AJB a security interest in allJason M. Anderson, an independent member of the company’s assets, includingboard of directors. Mr. Anderson loaned the company $8,500. The loan does not bear interest (except on default) and is due on the earlier of August 31, 2023 or on receipt of debt or equity financing of StemVax, LLC, securing NovAccess’ obligations underat least $3.0 million. The Company will use the SPA, note and warrant. In addition, NovAccess entered into a registration rights agreement with AJB (the “registration agreement”) pursuant to which NovAccess agreed to file with the Securities and Exchange Commission a Form S-1 by August 3, 2022 to register for resale the commitment fee shares and the shares issuable upon exerciseproceeds of the warrant.
loan for general working capital purposes.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Statement Concerningand Forward-Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors, including those discussed in this Quarterly Report and under “Item 1A.1A: Risk Factors of” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.2022.
We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this report. Readers should carefully review the factors described in other documents that NovAccessthe Company files from time to time with the SEC.
Business Plan
In 2020, we transitioned our operations from solar contracting operations to the commercialization of developmental healthcare solutions in the biotechnology, medical, and health and wellness markets. On June 2, 2020, we entered into a membership interest purchase agreement with Innovest Global, Inc. to acquire StemVax for 7.5 million shares of our unregistered common stock. The acquisition was completed on September 8, 2020.
StemVax, LLC (“StemVax”) is a biopharmaceutical company developing novel therapies for brain tumor patients that holds an exclusive patent license from Cedars-Sinai Medical Center in Los Angeles, California (Cedars-Sinai) known as StemVax Glioblast (SVX-GB/TLR-AD1). TLR-AD1 specifically targets glioblastoma, the most common and lethal type of adult brain tumor. Christopher Wheeler, President of StemVax, has been involved in the pre-clinical research and development of the drug candidate at Cedars-Sinai Department of Neurosurgery since 1997. Dr. Wheeler began preparing the pre-IND application to obtain FDA approval to start human clinical trials. In 2021, Dr. Wheeler led pre-IND interactions with the FDA and obtained a recommended roadmap from the FDA to facilitate the filing of an IND application for a Phase I application or a Phase IIa application. We are currently executing on their recommendations and plan to submit an IND application in 2023. In August 2022, we filed an application with the U.S. Food and Drug Administration for orphan drug designation (“ODD”) for TLR-AD1, which was granted in October 2022. Receiving ODD status represents a milestone in the development of TLR-AD1 and provides us with multiple incentives, including seven-year marketing exclusivity and federal tax credits, among other benefits.
We believe that investing in the biotechnology industry will significantly increase value for our shareholders. However, we cannot guarantee that we will be successful in this endeavor or that we can locate, acquire and finance the acquisition of biotechnology companies.
Results of Operations for the Three Months Ended MarchDecember 31, 2022, Compared to the Three Months Ended MarchDecember 31, 2021
Revenue and Cost of Sales:Sales
The CompanyWe are in research and development phase, and generated no revenue or cost of goods sold in the second quarters of fiscal yearsthree months ended MarchDecember 31, 2022, and 2021.
Research and development expenses
In the second quarter of 2022 the Company incurred $45,516 in research and development expenses related to activities performed by Dr. Christopher Wheeler and Dr. Dwain K. Morris-Irvin related to preparing the application to obtain FDA approval to start human clinical trials for StemVax Glioblast (SVX-GB) compared to $8,446 incurred in the second quarter of 2021.
Selling, General and Administrative Expenses:Expenses
Selling, general and administrative (SG&A) expenses increased by $108,555$202,225 during the second quarterthree months ended December 31, 2022, to $381,428$482,155 as compared to $272,873$279,930 for the second quarter of 2021.three months ended December 31,2021. The increase in SG&A expenses during the three months ended December 31, 2022, was related primarily to increase of $55,541 in legal expenses relateddue to the Series B Convertible Preferred Stock redemption transaction, increase of $48,018 in accounting and CFO servicesprofessional fees recognition of $25,000by $245,819 due to new consulting agreements entered into in the quarter ended December 31, 2022, increase in the insurance expense and $45,619costs by $41,304, increase in stock compensation for a service provider,payroll costs by $12,832 partially offset by $38,643a decrease in payroll related expenses due to the Company having a lower head count in the second quarter of 2022 compared to the second quarter of 2021, as well as a decrease of $25,600 in other professional fees and outside services due to termination of management services Agreement with TN3$87,500 and timingstock-based compensation of investors relations services.$8,000.
Other Income/(Expenses):Research and development expenses
Other netThe research and development expense increasedmarginally decreased by $414,954 to $802,841$7,436 for the second quarter of fiscalthree months ended December 31, 2022, from $387,887 for the second quarter of fiscal 2021. The increase in net total other expense was primarily due to recognition of a $109,886 higher loss on net change in fair market value of the derivative instruments in the second quarter of 2022 compared to the loss recognized in the second quarter of 2021, as well as recognition of $202,053 amortization of debt discount, commitment fees on notes payable and debt issuance costs on loans entered to in fiscal 2022.
Net Loss:
For the second quarter of fiscal 2022, our net loss was $1,229,785$34,963 as compared to a net loss of $669,206$42,399 for the second quarter2022 quarter. The primary reason for the decrease was on account of fiscal 2021. The increasethe decrease in net loss of $560,579 was due to an increase in net other expenses associated with the net change in derivative instruments estimated each period and increase in interest expense and other financing costs as well as an increase in SG&A expenses and higher research and development expenses recognized in fiscal 2022.for bio-technical services by $6,000.
Results of Operations for the Six Months Ended March 31, 2022 Compared to the Six Months Ended March 31, 2021
Revenue and Cost of Sales:Other Income/(Expenses)
The Company generated no revenue or cost of goods sold for the six months ended March 31, 2022 and March 31, 2021.
Research and developmentOther expenses
In the six months ended March 31, 2022 the Company incurred $87,915 in research and development expenses related to activities performed increased by Dr. Christopher Wheeler and Dr. Dwain K. Morris-Irvin related to preparing the application to obtain FDA approval to start human clinical trials for StemVax Glioblast (SVX-GB) compared to $8,446 recognized in the six months ended March 31, 2021.
Selling, General and Administrative Expenses:
Selling, general and administrative (SG&A) expenses decreased by $1,011,406 during the six months ended March, 31 2022 to $661,358 as compared to $1,672,764 for the six months ended March 31, 2021. The decrease in SG&A expenses was related primarily to the Company recognizing $846,000 in stock compensation expense in connection with the issuance of stock to our chief executive officer in fiscal 2021, as well as a decrease of $36,381 in other stock compensation expense. Payroll expenses also decreased by $117,904 in fiscal 2022 due to a $50,000 bonus accrual for our CEO in fiscal 2021, outsourcing CFO services and allocating a portion of our CEO compensation to research and development expenses in fiscal 2022. The decrease in payroll and stock compensation expenses are partially offset by increases of $61,117 in professional fees and outside services due to change in providers and timing of investors relations services.
Other Income/(Expenses):
Net other income decreased by $1,790,938$2,293,309 from other income of $1,167,118$179,021 for the sixthree months ended MarchDecember 31, 2021 to other expenses of $623,820$2,114,288 for the sixthree months ended MarchDecember 31, 2022. The decrease in net total other incomechange was primarily due to recognition of a $1,213,446 lower gainthe increase in loss on net change in fair market value of the derivative instrumentsliability by $2,540,610 and decrease in the six months ended March 31, 2022 compared to the gain recognized in the six months ended March 31, 2021, as well as recognition of $526,348 amortization of debt discount, commitment fees on notes payable, and debt issuance costs, partially offset by recognition of $96,205 gain on extinguishment of derivative liability amounting to $96,205. During the quarter ended December 31, 2022, the Company recorded gain on account of the change in make whole provision on shares issued as Commitment fees amounting to $267,750 to partially offset the increase in other expenses. The increase was also partially offset by a decrease in interest expense by $75,756 during the current quarter. The estimates of fair market value are based on multiple inputs, including the market price of our stock, interest rates, our stock price, volatility, variable conversion prices based on market prices defined in the respective agreements and lossprobabilities of $54,813certain outcomes based on extinguishmentmanagements’ estimates. These inputs are subject to significant changes from period to period, therefore, the estimated fair value of bridge loans.the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
Net Loss:Loss
For the six monthsquarter ended MarchDecember 31, 2022, our net loss was $1,373,093$2,631,406 as compared to a net loss of $514,092$143,308 for the six months ended March 31,same period in 2021. The increase in net loss of $859,001$2,488,098 was due to a decrease in net other income associated with the net change in derivative instruments estimated each period and increase in interest expenseSG&A, and the increase in other financing costs partially offset by a decrease in SG&A expenses in 2022.as described above.
Liquidity and Capital Resources
We had a working capital deficit as of Marchat December 31, 2022 of $4,432,339,$7,026,302, as compared to a working capital deficit of $3,762,214$4,653,066, as of September 30, 2021.2022. The increase of $670,125$2,373,236 in the working capital deficit was primarily the result of an increase in the balance of promissoryderivative liability on convertible notes amounting to $2183,084, an increase in convertible notes payable of $249,862 an increase in accounts payable of $67,723, and payablea decrease in cash of $25,308. This was partially offset by a decrease in accrued expenses and other current liabilities amounting to TN3 for the Series B Preferred Stock redemption.$191,291, decrease in amounts due to related parties of $2,500 and by decrease in prepaid expenses of $41,050.
For the sixthree months ended MarchDecember 31, 2022, our cash flow used inby operating activities was $438,844,$159,307, as compared to cash flow used inby operating activities of $280,521$190,070 for the first half ofthree months ended December 3l, 2021. The net increasedecrease of $158,323$30,763 in cash flow used inby operating activities was primarily due to lower stock compensation expense, higher net loss and changes in assets and liabilities partially offset by lower gain on changedescribed above as well as the decrease in derivative liabilities.net loss being primarily the result of non-cash charges recorded in the statement of operations.
There was no cashCash flow provided by/(used in)by investing activities forwas $0 during the sixthree months ended MarchDecember 31, 2022 orand 2021.
Cash flow provided by financing activities was $319,785$134,000 for the sixthree months ended MarchDecember 31, 2022, as compared to cash provided by financing activities of $302,341$34,301 during the first half ofsame period in 2021. The increase in cash flow provided by financing activities was primarily the result of the mix of funds raised by selling equity and debt instruments.instruments and repayment of convertible notes and bridge loans.
The Company will need to raise additional funds to finance its ongoing operations, complete its Investigational New Drug (IND)IND application to the FDA and to make payments under its loan agreements. We expect this will require approximatelyat least $3.0 million through December 31, 2022.2023. We plan to raise this capital through the issuance of additional common stock as well as obtaining additional debt as needed.
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships such as entities often referred to as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance-sheet arrangements or for other contractually narrow or limited purposes. As a result, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
Critical Accounting Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements. Significant estimates made in preparing these consolidated financial statements include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, the fair value of stock options, and derivative liabilities. Actual results could differ materially from those estimates.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Because NovAccess is a “smaller reporting company” as defined by the Securities and Exchange Commission (the “SEC”) we are not required to provide quantitative and qualitative disclosures aboutadditional market risk.risk disclosure.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management team, with the participation of our chief executive officer, Dwain K. Morris-Irvin,Irvin, and chief financial officer, Neil J. Laird, evaluated the effectiveness of the design and operation of NovAccess’ disclosure controls and procedures (as defined under the Securities Exchange Act) as of MarchDecember 31, 2022. Based upon this evaluation, Messrs. Morris-IrvinIrvin and Laird concluded that the Company’s disclosure controls and procedures were effective as of March 31.December 31, 2022.
Changes in Internal Control Over Financial Reporting
Our senior management team is responsible for establishing and maintaining adequate internal control over financial reporting, defined under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board, senior management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. We continue to review our internal control over financial reporting and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.
During the quarter the Company implemented enhanced review procedures for the accounting of certain derivatives and other income. This included engaging a third party to review the assumptions and calculation. There were no other changes in our internal control over financial reporting identified in connection with the evaluation required by the Securities Exchange Act that occurred during our first fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II — Other Information
Item 1. Legal Proceedings.
We are not involved in any legal proceedings.
Item 1A. Risk Factors.
Please refer to the risk factors listed under Item 1A.“Item 1A: Risk Factors ofFactors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 20212022., for information relating to certain risk factors applicable to NovAccess.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the quarter end of Marchended December 31, 2022, we issued 1,069,3061,281,769 unregistered shares of our common stock for capital raising and compensatory purposes as described in more detail below.
Effective November 23, 2022, we issued 663,352 unregistered shares of our common stock and s to third parties for consulting services provided to NovAccess. Effective December 31, 2022, we issued 483,000 unregistered shares of our common stock and s to third parties for consulting services provided to NovAccess.
Effective December 20, 2022, we issued 108,750 unregistered shares of our common stock to service provider for accounting services provided to NovAccess. Effective December20, 2022, we issued 26,667 shares of our unregistered shares to service provider, for investor relations services provided to NovAccess.
During the quarter end of MarchDecember 31, 2022, we offered unregistered shares of our common stock in a private placement to accredited investors to fund our working capital needs. During the quarter we sold to tenfour investors 840,000350,000 shares for an aggregate amount of $170,000. Neil J. Laird, the company’s chief financial officer, and Letzhangout, LLC, a company that provides accounting consulting services to NovAccess (“Letzhangout”), each purchased 250,000 shares in the private placement for $0.20 a share (a portion of which was paid by the cancellation of loans made to the company in December 2021). The issuance of shares in the private placement was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506(a) under the Securities Act.$35,000.
On March 31, 2022, we issued 108,750 of our unregistered shares to Letzhangout, LLC for accounting services provided to NovAccess. On February 14, 2022, we issued 85,000 shares to Letzhangout for accounting services. We recognized stock compensation expense in the amount of $45,619 in relation to stock issuances to this service provider. On February 23, 2022, we issued 35,556 shares of our shares to Satya Chillara, an employee of Darrow Associates, for investor relations services provided to NovAccess. The issuances of shares to our service providers were exempt from registration under Section 4(a)(2) of the Securities Act.
Item 3. Defaults Upon Senior Securities.
During the quarter ended MarchDecember 31, 2022, NovAccess was not in material default with respect to any of its material indebtedness.
Item 4. Mine Safety Disclosures.
We are not engaged in mining operations.
Item 5. Other Information.
We have disclosed on Form 8-K all reportable events that occurred in the quarter ended MarchDecember 31, 2022.
Part IV
Item 6. Exhibits.Exhibit and Financial Statement Schedules.
(a) Financial Statement Schedules (see Item 1 Financial Statements and Supplementary Data)
(b) Exhibits
Exhibit |
| Description |
|
| Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — Dwain |
|
| Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — Neil J. Laird |
|
| Certification Pursuant to Section 906 of the Sarbanes-Oxley Act |
101 |
| The following materials from the NovAccess Global Inc. Quarterly Report on Form 10-Q for the period ended |
| (i) the Condensed Consolidated Balance Sheets 2022 | ||
| (ii) the Condensed Consolidated Statements of Operations for the Three | ||
| (iii) the Condensed Consolidated Statements of Shareholders’ Deficit for the | ||
| (iv) the Condensed Consolidated Statements of Cash Flows for the | ||
| (v) Related Notes to the Condensed Consolidated Financial | ||
104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrantNovAccess has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NovAccess Global Inc. |
|
|
Date: | /s/ Dwain K. |
| By Dwain K. |
| (Principal Executive Officer) |
|
|
Date: | /s/ Neil J. Laird |
| Neil J. Laird, Chief Financial Officer |
| (Principal Financial and Accounting Officer) |