# EDGAR Filing Document

**Accession Number:** 0001039466
**File Stem:** 0001185185-23-000128
**Filing Date:** 2023-2
**Character Count:** 94081
**Document Hash:** 0a42e02a39f67b78db17f0043d48e3ea
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001185185-23-000128.hdr.sgml**: 20230214

**ACCESSION NUMBER**: 0001185185-23-000128

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 65

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230214

**DATE AS OF CHANGE**: 20230214

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** NovAccess Global Inc.
- **CENTRAL INDEX KEY:** 0001039466
- **STANDARD INDUSTRIAL CLASSIFICATION:** PHARMACEUTICAL PREPARATIONS [2834]
- **IRS NUMBER:** 841384159
- **STATE OF INCORPORATION:** CO
- **FISCAL YEAR END:** 0930

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-29621
- **FILM NUMBER:** 23626694

**BUSINESS ADDRESS:**
- **STREET 1:** 8584 E. WASHINGTON STREET, NO. 127
- **CITY:** CHAGRIN FALLS
- **STATE:** OH
- **ZIP:** 44023
- **BUSINESS PHONE:** (213) 642-9268

**MAIL ADDRESS:**
- **STREET 1:** 8584 E. WASHINGTON STREET, NO. 127
- **CITY:** CHAGRIN FALLS
- **STATE:** OH
- **ZIP:** 44023

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** XSUNX INC
- **DATE OF NAME CHANGE:** 20031001

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** SUN RIVER MINING INC
- **DATE OF NAME CHANGE:** 20000218

?xml version="1.0" encoding="ASCII"? novaccess20221231_10q.htm

------

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

------

**FORM 10-Q**

------

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended **December 31, 2022**

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: **000-29621**

**<u>NovAccess Global Inc.</u>**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **<u>Colorado</u>** | **<u>84-1384159</u>** |
| (State or other jurisdiction of<br> incorporation or organization) | (I.R.S. employer<br> Identification no.) |

---

Address of principal executive offices, including zip code: **<u>8584 E. Washington Street #127, Chagrin Falls, Ohio 44023</u>**

Registrant's telephone number, including area code: **<u>(213) 642-9268</u>**

Securities registered pursuant to Section 12(b) of the Act: **None**

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 Registrant 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 Registrant 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 definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated Filer ☐ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller Reporting Company ☒ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. There were 20,831,276 shares of common stock outstanding on February 14, 2023.

------

[**Table of Contents**](#toc)

**Table of Contents**

---

| | |
|:---|:---|
| **PART I** — **FINANCIAL INFORMATION** |  |
| [Item 1. Financial Statements.](#i1) | 1 |
| [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](#i2) | &nbsp;&nbsp;&nbsp;&nbsp; 18 |
| [Cautionary and Forward-Looking Statements](#Cautiona) | &nbsp;&nbsp;&nbsp;&nbsp; 18 |
| [Business Plan](#Business) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 18 |
| [Results of Operations for the Three Months Ended December 31, 2022 Compared to the Three Months Ended December 31, 2021](#Results_of_Operati) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 18 |
| [Revenue and Cost of Sales](#Revenue_and) | &nbsp;&nbsp;&nbsp;&nbsp; 18 |
| [Selling, General and Administrative Expenses](#Selling) | &nbsp;&nbsp;&nbsp;&nbsp; 18 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Research and development expenses](#Research_) | 18 |
| [Other Income/(Expenses)](#otherinc) | &nbsp;&nbsp;&nbsp;&nbsp; 19 |
| [Net Loss](#Netloss) | &nbsp;&nbsp;&nbsp;&nbsp; 19 |
| [Liquidity and Capital Resources](#Liquidity_) | &nbsp;&nbsp;&nbsp;&nbsp; 19 |
| [Off-Balance Sheet Arrangements](#Off-Balance) | &nbsp;&nbsp;&nbsp;&nbsp; 19 |
| [Critical Accounting Estimates](#Critical_) | 19 |
| [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](#i3) | 20 |
| [Item 4. Controls and Procedures.](#i4) | 20 |
| [Evaluation of Disclosure Controls and Procedures](#Evaluation_) | &nbsp;&nbsp;&nbsp;&nbsp; 20 |
| [Changes in Internal Control Over Financial Reporting](#Changes_) | 20 |
| **PART II** — **OTHER INFORMATION** |  |
| [Item 1. Legal Proceedings.](#p2i1) | &nbsp;&nbsp;&nbsp;&nbsp; 21 |
| [Item 1.A Risk Factors](#p2i1a) | &nbsp;&nbsp;&nbsp;&nbsp; 21 |
| [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](#p2i2) | &nbsp;&nbsp;&nbsp;&nbsp; 21 |
| [Item 3. Defaults Upon Senior Securities](#p2i3) | &nbsp;&nbsp;&nbsp;&nbsp; 21 |
| [Item 4. Mine Safety Disclosures.](#p2i4) | &nbsp;&nbsp;&nbsp;&nbsp; 21 |
| [Item 5. Other Information](#p2i5) | 21 |
| [Item 6. Exhibit and Financial Statement Schedules.](#p2i6) | 22 |
| [SIGNATURES](#sig) | 23 |

---

------

[**Table of Contents**](#toc)

**Part I- Financial Information**

**Item 1. Financial Statements**

**NOVACCESS GLOBAL INC.**

**CONSOLIDATED BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **September 30, 2022** |
|  | Unaudited |  |
| ASSETS |  |  |
| CURRENT ASSETS |  |  |
| &nbsp;&nbsp;&nbsp; Cash | $38944 | $64251 |
| &nbsp;&nbsp;&nbsp; Prepaid expenses | 19600 | 60650 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; TOTAL ASSETS | $58544 | $124901 |
| LIABILITIES AND SHAREHOLDERS' DEFICIT |  |  |
| CURRENT LIABILITIES |  |  |
| &nbsp;&nbsp;&nbsp; Accounts payable | $443402 | $375682 |
| &nbsp;&nbsp;&nbsp; Accrued expenses and other current liabilities | 1295271 | 1486561 |
| &nbsp;&nbsp;&nbsp; Derivative and warrants liabilities | 3623096 | 1440012 |
| &nbsp;&nbsp;&nbsp; Due to related parties | 183717 | 186217 |
| &nbsp;&nbsp;&nbsp; Short term loan, related party | 12500 | 12500 |
| &nbsp;&nbsp;&nbsp; Convertible promissory notes, net of debt discount and debt issuance costs of $202,770 and $340,503 respectively | 1514360 | 1266627 |
| &nbsp;&nbsp;&nbsp; Convertible promissory note related party, net of debt discount and debt issuance cost of $0 and $2,132, respectively | 12500 | 10368 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Current Liabilities | 7084846 | 4777967 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; TOTAL LIABILITIES | 7084846 | 4777967 |
| SHAREHOLDERS' DEFICIT |  |  |
| &nbsp;&nbsp;&nbsp; Preferred stock 50,000,000 shares authorized, shares issued and outstanding designated as follows: |  |  |
| &nbsp;&nbsp;&nbsp; Preferred Stock Series B, $0.01 par value, 25,000 authorized<br> 600 shares issued and outstanding, respectively | 6 | 6 |
| &nbsp;&nbsp;&nbsp; Common stock, no par value; 2,000,000,000 authorized common shares<br> 20,326,276 and 18,669,507 shares issued and outstanding, respectively | 43489152 | 43225982 |
| &nbsp;&nbsp;&nbsp; Additional paid in capital | 5335398 | 5340398 |
| &nbsp;&nbsp;&nbsp; Paid in capital, common stock warrants | 4210960 | 4210960 |
| &nbsp;&nbsp;&nbsp; Paid in capital, preferred stock | 4747108 | 4747108 |
| &nbsp;&nbsp;&nbsp; Accumulated deficit | (64808926) | (62177520) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; TOTAL SHAREHOLDERS' DEFICIT | (7026302) | (4653066) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $58544 | $124901 |

---

The accompanying notes are an integral part of these consolidated financial statements.

------

[**Table of Contents**](#toc)

**NOVACCESS GLOBAL INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 AND 2021**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** |
|  | **December 31, 2022** | **December 31, 2021** |
| SALES | $- | $- |
| COST OF GOODS SOLD |  |  |
| GROSS PROFIT |  |  |
| OPERATING EXPENSES |  |  |
| &nbsp;&nbsp;&nbsp; Research and development expenses | 34963 | 42399 |
| &nbsp;&nbsp;&nbsp; Selling, general and administrative expenses | 482155 | 279930 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; TOTAL OPERATING EXPENSES | 517118 | 322329 |
| LOSS FROM OPERATIONS BEFORE OTHER INCOME/(EXPENSES) | (517118) | (322329) |
| OTHER INCOME/(EXPENSES) |  |  |
| &nbsp;&nbsp;&nbsp; Extinguishment of derivative liability |  | 96205 |
| &nbsp;&nbsp;&nbsp; Gain (Loss) on change in derivative liability | (2081584) | 459026 |
| &nbsp;&nbsp;&nbsp; Change in Commitment Fee Guarantee | 267750 |  |
| &nbsp;&nbsp;&nbsp; Interest expense | (300454) | (376210) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; TOTAL OTHER INCOME/(EXPENSES) | (2114288) | 179021 |
| NET LOSS | $(2631406) | $(143308) |
| BASIC LOSS PER SHARE | $(0.14) | $(0.01) |
| DILUTED LOSS PER SHARE | $(0.14) | $(0.01) |
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING |  |  |
| &nbsp;&nbsp;&nbsp; BASIC | 18979871 | 14460284 |
| &nbsp;&nbsp;&nbsp; DILUTED | 18979871 | 14460284 |

---

The accompanying notes are an integral part of these consolidated financial statements.

------

[**Table of Contents**](#toc)

**NOVACCESS GLOBAL INC.**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT**

**FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 AND 2021**

**(Unaudited)**

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Preferred Stock,** <br> **Class B** | **Preferred Stock,** <br> **Class B** | **Common Stock** | **Common Stock** | **Additional**<br> **Paid-in** | **Stock Options/**<br> **Warrants**<br> **Paid in**  | **Paid in** <br> **Capital,**<br> **Preferred** | **Accumulated** |  |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Capital** | **Capital** | **Stock** | **Deficit** | **Total** |
| **Balance as of September 30, 2021** | **25000** | $**250** | **14404030** | $**41882535** | $**5351398** | $**4210960** | $**5088324** | $**(60461561)** | $**(3928094)** |
| Common Stock issued for services |  |  | 36667 | 21955 |  |  |  |  | 21955 |
| Common Stock issued, subscriptions |  |  | 201000 | 50200 |  |  |  |  | 50200 |
| Stock compensation cost |  |  | 10000 | 8000 |  |  |  |  | 8000 |
| Net Loss |  |  |  |  |  |  |  | (143308) | (143308) |
| **Balance as of December 31, 2021** | **25000** | $**250** | **14651697** | $**41962690** | $**5351398** | $**4210960** | $**5088324** | $**(62604869)** | $**(3991247)** |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Preferred Stock,** <br> **Class B** | **Preferred Stock,** <br> **Class B** | **Common Stock** | **Common Stock** | **Additional**<br> **Paid-in** | **Stock Options/**<br> **Warrants**<br> **Paid in**  | **Paid in** <br> **Capital,**<br> **Preferred** | **Accumulated** |  |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Capital** | **Capital** | **Stock** | **Deficit** | **Total** |
| **Balance as of September 30, 2022** | **600** | $**6** | **18669507** | $**43225982** | $**5340398** | $**4210960** | $**4747108** | $**(62177520)** | $**(4653066)** |
| Common Stock issued for services |  |  | 1281769 | 223170 |  |  |  |  | 223170 |
| Common Stock issued, subscriptions |  |  | 375000 | 40000 | (5000) |  |  |  | 35000 |
| Net Loss |  |  |  |  |  |  |  | (2631406) | (2631406) |
| **Balance as of December 31, 2022** | **600** | $**6** | **20326276** | $**43489152** | $**5335398** | $**4210960** | $**4747108** | $**(64808926)** | $**(7026302)** |

---

The accompanying notes are an integral part of these consolidated financial statements.

------

[**Table of Contents**](#toc)

**NOVACCESS GLOBAL INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 AND 2021**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** |
|  | **December 31, 2022** | **December 31, 2021** |
| CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |
| Net Loss | $(2631406) | $(143308) |
| Adjustment to reconcile net loss to net cash<br> provided by (used in) operating activities |  |  |
| Amortization of debt discount and debt issuance costs recorded as interest expense | 249862 | 324295 |
| Loss (Gain) on change in derivative liability | 2081584 | (459026) |
| (Gain) on settlement of derivative liability |  | (96205) |
| Stock compensation expense |  | 8000 |
| Stock issued and issuable for services | 223170 | 21955 |
| Changes in Assets and Liabilities: |  |  |
| Prepaid expenses | 41050 | 16129 |
| Accounts payable | 67723 | 29584 |
| Accrued expenses and other current liabilities | (191290) | 108506 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NET CASH USED IN OPERATING ACTIVITIES | (159307) | (190070) |
| CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |
| Stock subscriptions received | 35000 | 50200 |
| Due to related party |  | 3151 |
| Payments on convertible notes payable |  | (94250) |
| Payments to related party for redemption of preferred stock | (2500) |  |
| Proceeds from promissory notes and short-term loan | 101500 |  |
| Proceeds from bridge loans payable - related parties |  | 75000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NET CASH PROVIDED BY FINANCING ACTIVITIES | 134000 | 34101 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NET (DECREASE) IN CASH | (25307) | (155969) |
| CASH, BEGINNING OF PERIOD | 64251 | 180668 |
| CASH, END OF PERIOD | $38944 | $24699 |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |  |  |
| Interest paid | $25916 | 54714 |
| Taxes paid | $- | $- |
| SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS |  |  |
| Fair value of shares issued for services | $223170 | $21955 |

---

The accompanying notes are an integral part of these consolidated financial statements.

------

[**Table of Contents**](#toc)

**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2022 AND 2021**

1. ORGANIZATION AND LINE OF BUSINESS

<u>Organization</u>

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. 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; and change the name of the Company to "NovAccess Global Inc." After completing the acquisition of StemVax, in September, 2020, we exited the solar business and focused all our efforts on our biopharmaceutical business.

<u>Line of Business</u>

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.

<u>Going Concern</u>

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 since its inception through the period ended December 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.

<u>Basis of Presentation</u>

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 consolidated financial statements.

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[**Table of Contents**](#toc)

**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2022 AND 2021**

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

<u>Use of Estimates</u>

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 the deferred tax valuation allowance, the fair value of stock options, and derivative liabilities. Actual results could differ from those estimates.

<u>Cash and Cash Equivalents</u> 

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.

<u>Stock-Based Compensation</u>

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.

<u>Net Earnings (Loss) per Share Calculations</u>

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 (see notes 4 and 5).

---

| | | |
|:---|:---|:---|
|  | **For the Quarter Ended** | **For the Quarter Ended** |
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| (Loss) to common shareholders (Numerator) | $(2631406) | $(143308) |
| Basic weighted average number of common shares outstanding (Denominator) | 18979871 | 14460284 |
| Diluted weighted average number of common shares outstanding (Denominator) | 18979871 | 14460284 |

---

Diluted weighted average number of shares for the quarter ended December 31, 2022 and 2021 is the same as basic weighted average number of shares because the Company had net losses for both quarters.

<u>Fair Value of Financial Instruments</u>

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 December 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, 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.

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[**Table of Contents**](#toc)

**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2022 AND 2021**

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

<u>Fair Value of Financial Instruments (continued)</u>

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 December 31, 2022 and September 30, 2022. The Company had liabilities that are required to be measured at fair value on a recurring basis as follows at December 31 and September 30, 2022:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Total** | **(Level 1)** | **(Level 2)** | **(Level 3)** |
| **Assets:** | $- | $- | $- | $- |
| **Liabilities:**  |  |  |  |  |
| Derivative Liability at fair value as of September 30, 2022 | $1207403 | $- | $- | $1207403 |
| Derivative Liability warrants at fair value as of September 30, 2022 | $232609 | $- | $- | $232609 |
| **Total Derivative Liability as of September 30, 2022** | $**1440012** |  |  | $**1440012** |
| Derivative Liability at fair value as of December 31, 2022 | $3008450 |  |  | $3008450 |
| Derivative Liability warrants at fair value as of December 31, 2022 | $614646 |  |  | $614646 |
| **Total Derivative Liability as of December 31, 2022** | $**3623096** |  |  | $**3623096** |

---

The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:

---

| | | | |
|:---|:---|:---|:---|
|  | **Derivative Liability** <br> **Promissory Notes** | **Derivative** <br> **Liability Warrants** | **Total** <br> **Derivative Liability** |
| **Balance as of September 30, 2021** | $**2553979** | $**372643** | $**2926622** |
| Fiscal year 2022 initial derivative liabilities | 593297 | 282051 | 875348 |
| Net (Gain)/Loss on change in fair value of derivative liability | (1662156) | (422086) | (2084242) |
| Extinguishment of derivative | (277716) |  | (277716) |
| **Ending balance as of September 30, 2022** | $**1207403** | $**232609** | $**1440012** |
| Quarter ended December 31, 2022, initial derivative liabilities | 101500 |  | 101500 |
| Net (Gain)/Loss on change in fair value of derivative liability | 1699547 | 382037 | 2081584 |
| **Ending balance as of December 31, 2022** | $**3008450** | $**614646** | $**3623096** |

---

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[**Table of Contents**](#toc)

**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2022 AND 2021**

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

<u>Recent Accounting Pronouncements</u>

In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-04, "Liabilities-Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations". This guidance requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services. The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. 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 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sales Restrictions, which (1) clarifies the guidance in Topic 820 on the fair 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

As 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'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.

<u>Preferred Stock</u>

As of December 31, 2022, the Company had 600 shares of issued and outstanding Series B 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 that TN3 previously held. At the time, Mr. Martin was our Chief Executive Officer and sole Board Member. On March 14, 2022, 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 11 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.

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**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2022 AND 2021**

3. CAPITAL STOCK (Continued)

<u>Common Stock</u>

During the quarter ended December 31, 2022, the Company issued 1,281,769 shares of common stock. 798,769 shares were issued to various 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 shares issuable on subscription, now recorded as common stock.

During the period ended December 31, 2021, the Company issued 147,667 shares of common stock. 36,667 shares were issued to various vendors for services provided; 101,000 shares were issued in relation to stock subscriptions; and 10,000 shares were issued to related parties.

4. CONVERTIBLE PROMISSORY NOTES

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| | | | | |
|:---|:---|:---|:---|:---|
| **Promissory notes as of December 31, 2022** | **Principal** <br> **Amount** | **Unamortized balance** <br> **of Debt Discount** | **Outstanding balance, net of debt discount as of December 31, 2022** | **Derivative balance as of** <br> **December 31, 2022** |
| 2013 Note | 12000 |  | 12000 |  |
| 2014 Note | 50880 |  | 50880 | 408004 |
| 2017 Note | 115000 |  | 115000 | 857061 |
| February 2022 Note | 250000 |  | 250000 | 256482 |
| May 2022 Note | 1000000 |  | 1000000 | 981152 |
| August 2022 Note | 100000 | 46566 | 53434 | 138478 |
| September 2022 Note | 79250 | 58499 | 20751 | 138860 |
| November 2022 Note | 55000 | 46727 | 8273 | 120905 |
| December 2022 Note | 55000 | 50978 | 4022 | 92726 |
| **Total** | **1717130** | **202770** | **1514360** | **2993668** |

---

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| <br> **Promissory note, related party, as of December 31, 2022** | **Principal Amount** | **Principal Amount** | **Unamortized balance** <br> **of Debt Discount** | **Outstanding balance, net of debt discount as of Sep 30, 2022** | **Outstanding balance, net of debt discount as of Sep 30, 2022** | **Derivative balance as of** <br> **September 30, 2022** | **Derivative balance as of** <br> **September 30, 2022** |
| July 2022 Note |  | 12500 |  |  | 12500 |  | 14782 |

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<u>2013 Note</u>

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 December 31, 2022, the outstanding principal balance was $12,000.

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**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2022 AND 2021**

4. CONVERTIBLE PROMISSORY NOTES (Continued)

<u>2014 Note</u> 

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 matured 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 traded 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 December 31, 2022, outstanding principal balance was $50,880.

<u>2017 Note</u>

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 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.. 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 traded 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 December 31, 2022, and December 31, 2021, the outstanding principal balance was $115,000.

<u>May 2021 Note</u>

On May 28, 2021, the Company issued a 12% unsecured convertible promissory note (the "May 2021 Note") for the principal sum of $55,500 plus accrued interest. The May 2021 Note was to mature on May 28, 2022. The May 2021 Note was convertible after November 23, 2021, by the lender into shares of common stock of the Company at sixty-one percent (61%) of the lowest traded 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. As of December 31, 2022, the balance of the June 2021 Note was $0.

<u>July 2021 Note</u>

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 with a maturity date of July 6, 2022. The July Note was 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. As of September 30, 2022, the balance of the July 2021 Note was $0.

<u>August 2021 Note</u>

On August 20, 2021, the Company issued a 10% secured 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 could 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. 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.

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[**Table of Contents**](#toc)

**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2022 AND 2021**

4. CONVERTIBLE PROMISSORY NOTES (Continued)

<u>February 2022 Note</u>

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 as 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.

<u>May 2022 Note</u>

On May 5, 2022, the Company issued a 12% secured promissory note (the "May 2022 note") for the principal sum of $1,000,000 plus accrued interest. The May 2022 Note was to mature 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 Company 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 had an original issuance discount amounting to $100,000, debt issuance costs of $25,500 and the 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 and amortized over the term of the loan. 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 $1,000,000.

On February 9, 2023 the principal amount and terms of this note were amended as discussed in note 14.

<u>August 2022 Note</u>

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 Company at a conversion price of $0.15. The initial recognition of derivative liability of $77,259 was recorded as debt discount and amortized over the term of the loan. The balance in debt discount as on December 31, 2022, was $46,566. As of December 31, 2022, the balance outstanding net of debt discount was $53,434.

<u>September 2022 Note</u>

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 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 $58,499. As of December 31, 2022, the balance outstanding net of debt discount was $20,751.

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**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2022 AND 2021**

4. CONVERTIBLE PROMISSORY NOTES (Continued)

<u>November 2022 Note</u>

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 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 $46,727. As of December 31, 2022, the balance outstanding net of debt discount was $8,273.

<u>December 2022 Note</u>

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 this Note 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.

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**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 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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| | |
|:---|:---|
| Risk free interest rate | Between 4.265% and 4.76% |
| Stock volatility factor | Between 153% and 187.0% |
| Years to Maturity | 0.52 years |
| Expected dividend yield |  |

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5. CONVERTIBLE PROMISSORY NOTES, RELATED PARTY

<u>July 2022 Note, related party</u>

On July 28, 2022, the Company issued a 12% unsecured promissory note (the "July 2022 Note") for the principal sum of $12,500 plus accrued interest. All amounts outstanding under the July 2022 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 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 conversion price of $0.15. The initial recognition of derivative liability of $12,500 was recorded as debt discount and amortized over the term of the loan. 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 $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.

On 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, the fair value of the derivative liability warrants was $614,646 and $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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| | |
|:---|:---|
| Risk free interest rate | 4.105% |
| Stock volatility factor | Between 150% and 159% |
| Years to Maturity | 4.04 years |
| Expected dividend yield |  |

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**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2022 AND 2021**

8. OPTIONS

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:

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| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** |
|  |  | **Weighted** |
|  | **Number** | **average** |
|  | **Of** | **exercise** |
|  | **Options** | **price** |
| Outstanding - beginning of period | 2000000 | $.01 |
| Granted |  | $- |
| Exercised |  | $- |
| Forfeited |  | $- |
| Outstanding - end of period | 2000000 | $.01 |

---

At December 31, 2022, the weighted average remaining contractual life of options outstanding:

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| | | | |
|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| <br>**Exercisable**<br>**Prices**  | <br>**Options**<br>**Outstanding**  | <br>**Options**<br>**Exercisable**  | **Weighted**<br>**Average**<br>**Remaining**<br>**Contractual**<br>**Life (years)** |
| $.01 | 2000000 | 2000000 | 7.40 |

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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:

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| | |
|:---|:---|
| Risk Free Interest Rate | 0.32% |
| Stock Volatility Factor | 146.0% |
| Weighted Average Expected Option Life | 5 Years |
| Expected Dividend Yield |  |

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9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and accrued other current liabilities consisted of the following at December 31, 2022 and September 30, 2022:

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| | | |
|:---|:---|:---|
|  | **12/31/2022** | **9/30/2022** |
| Accrued liabilities | 11370 | 4370 |
| Interest payable | 118450 | 94251 |
| Provision for guaranteed commitment fees \* | 693250 | 961000 |
| Accrued payroll | 5973 | 4740 |
| Deferred compensation | 425824 | 344983 |
| License Fees Payable | 40402 | 40402 |
| Insurance finance liability |  | 36815 |
|  | $**1295269** | $**1486561** |

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\* 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.

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**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2022 AND 2021**

10. BRIDGE LOAN PAYABLE

<u>Related parties</u>

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 bore 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 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 September 30, 2022. No balance is due to our CEO as of December 31, 2022.

On January 25, 2022, the Company issued 125,000 shares of its common stock in settlement of the 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.

<u>Service provider, related party</u>

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 year ended 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 December 31, 2022.

The total loss on account of extinguishment of debt on the CFO Note and service provider note amounting to $54,813 was recorded in the income statement.

11. DUE TO RELATED PARTIES

Due to Innovest Global

During the periods prior to the year ended September 30, 2022, Innovest Global, Inc. ("Innovest") advanced funds to the Company for operating expenses in the amount of $86,217. As of December 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.

Due to TN3 LLC

On January 31, 2022, the Company entered into a preferred stock 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. 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 obligated to pay to TN3 a total of $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.

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**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2022 AND 2021**

12. COMMITMENTS AND CONTINGENCIES

There are no material pending legal proceedings to which we are a party, 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.

13. RELATED PARTY TRANSACTIONS

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 this agreement 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. The balance outstanding on December 31, 2022 was $12,500.

On July 28, 2022, the Company issued a 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 of the Company at conversion price of $0.15. As of December 31, 2022, the balance of the July 2022 Note was $12,500.

On January 31, 2022, the Company entered into a preferred stock 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. 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.

Upon completion of the redemption transaction, the Company was obligated to pay to TN3 a total of $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 December 31, 2022, the Company owed TN3 $97,50000 of the redemption price. Pursuant to the redemption agreement, the Company also issued to TN3 1,502,670 shares of unregistered common stock, which was equal to 10% of our outstanding common stock on the date the redemption agreement was signed. Upon completion of the redemption transaction, Mr. Martin resigned from the NovAccess board and was replaced by John A. Cassarini and Dr. 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.

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**NOVACCESS GLOBAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 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

<u>January 23 Letter Agreement</u>

The Company, previously entered into three securities purchase agreements dated August 20, 2021, February 15, 2022, and May 5, 2022 (collectively, the "Agreements"), with AJB Capital Investments, LLC ("AJB"). Pursuant to the Agreements, the Company issued promissory notes to AJB representing loans provided by AJB to the Company totaling $1,750,000. Also pursuant to the Agreements, the Company paid AJB commitment fees totaling 1,575,000 unregistered shares of the company's common stock (the "commitment fee shares"). If AJB is unable to sell the commitment fee shares for amounts specified in the Agreements, then AJB may require NovAccess to issue additional shares or pay cash in the amount of the shortfall (the "make-whole rights"). However, AJB may only exercise its make-whole rights within time frames following the loan 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 make-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 commitment 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.

<u>February 9, Letter Agreement</u>

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 $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 letter agreement, the Company also issued to AJB a common stock purchase warrant (the "warrant") to purchase 1,000,000 shares of the company's common stock for $0.20 a share. The warrant expires on February 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.

<u>Related Party Loan</u>

On February 9, 2023, the Company entered into an interest-free loan agreement with Jason M. Anderson, an independent member of the board 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 at least $3.0 million. The Company will use the proceeds of the loan for general working capital purposes.

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**Item 2. Management**'**s Discussion and Analysis of Financial Condition and Results of Operations.**

**Cautionary and 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: Risk Factors*" *in our Annual Report on Form 10-K for the year ended September 30, 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 the 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 December 31, 2022, Compared to Three Months Ended December 31, 2021**

*Revenue and Cost of Sales*

We are in research and development phase, and generated no revenue or cost of goods sold in the three months ended December 31, 2022, and 2021.

*Selling, General and Administrative Expenses*

Selling, general and administrative (SG&A) expenses increased by $202,225 during the three months ended December 31, 2022, to $482,155 as compared to $279,930 for the three months ended December 31, 2021. The increase in SG&A expenses during the three months ended December 31, 2022, was related primarily due to the increase in professional fees by $245,819 due to new consulting agreements entered into in the quarter ended December 31, 2022, increase in the insurance costs by $41,304, increase in payroll costs by $12,832 partially offset by a decrease in outside services of $87,500 and stock-based compensation of $8,000.

*Research and development expenses*

The research and development expense marginally decreased by $7,436 for the three months ended December 31, 2022, to $34,963 as compared to $42,399 for the 2022 quarter. The primary reason for the decrease was on account of the decrease in costs for bio-technical services by $6,000.

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*Other Income/(Expenses)*

Other expenses increased by $2,293,309 from other income of $179,021 for the three months ended December 31, 2021 to other expenses of $2,114,288 for the three months ended December 31, 2022. The change was primarily due to the increase in loss on change in derivative liability by $2,540,610 and decrease in 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 probabilities of certain outcomes based on managements' estimates. These inputs are subject to significant changes from period to period, therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.

*Net Loss*

For the quarter ended December 31, 2022, our net loss was $2,631,406 as compared to a net loss of $143,308 for the same period in 2021. The increase in net loss of $2,488,098 was due to the increase in SG&A, and the increase in other expenses as described above.

**Liquidity and Capital Resources**

We had a working capital deficit at December 31, 2022 of $7,026,302, as compared to a working capital deficit of $4,653,066, as of September 30, 2022. The increase of $2,373,236 in the working capital deficit was the result of an increase in the derivative 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 a decrease in cash of $25,308. This was partially offset by a decrease in accrued expenses and other current liabilities amounting to $191,291, decrease in amounts due to related parties of $2,500 and by decrease in prepaid expenses of $41,050.

For the three months ended December 31, 2022, our cash flow used by operating activities was $159,307, as compared to cash flow used by operating activities of $190,070 for the three months ended December 3l, 2021. The decrease of $30,763 in cash flow used by operating activities was primarily due to changes in assets and liabilities described above as well as the decrease in net loss being primarily the result of non-cash charges recorded in the statement of operations.

Cash flow used by investing activities was $0 during the three months ended December 31, 2022 and 2021.

Cash flow provided by financing activities was $134,000 for the three months ended December 31, 2022, as compared to cash provided by financing activities of $34,301 during same 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 and repayment of convertible notes and bridge loans.

The Company will need to raise additional funds to finance its ongoing operations, complete its IND application to the FDA and to make payments under its loan agreements. We expect this will require at least $3.0 million through December 31, 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.

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**Item 3. Quantitative and Qualitative Disclosures About Market Risk.**

Because NovAccess is a "smaller reporting company" as defined by the Securities and Exchange Commission we are not required to provide additional market 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. 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 December 31, 2022. Based upon this evaluation, Messrs. Irvin and Laird concluded that the Company's disclosure controls and procedures were effective as of 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.

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**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: Risk Factors" in our Annual Report on Form 10-K for the year ended September 30, 2022., for information relating to certain risk factors applicable to NovAccess.

**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.**

During the quarter ended December 31, 2022, we issued 1,281,769 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 December 20, 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 December 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 four investors 350,000 shares for an aggregate amount of $35,000.

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 December 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 December 31, 2022.

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**Part IV**

**Item 6. Exhibit and Financial Statement Schedules.**

(a) Financial Statement Schedules (see Item 1 Financial Statements and Supplementary Data)

(b) Exhibits

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| | |
|:---|:---|
| **Exhibit** | **Description** |
| 31.1\* | [Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — Dwain K. Irvin](ex_472501.htm) |
| 31.2\* | [Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — Neil J. Laird](ex_472502.htm) |
| 32.1\* | [Certification Pursuant to Section 906 of the Sarbanes-Oxley Act](ex_472503.htm) |
| 101 | The following materials from the NovAccess Global Inc. Quarterly Report on Form 10-Q for the period ended December 31, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): |
|  | (i) the Condensed Consolidated Balance Sheets as of December 31, 2022 and September 30, 2022 |
|  | (ii) the Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2022, and December 31, 2021, |
|  | (iii) the Condensed Consolidated Statements of Shareholders' Deficit for the Three Months Ended December 31, 2022, and 2021 |
|  | (iv) the Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2022, and December 30, 2021, and |
|  | (v) Related Notes to the Condensed Consolidated Financial Statements |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |

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**Signatures**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the NovAccess has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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| | |
|:---|:---|
|  | **NovAccess Global Inc.** |
| Date: February 14, 2023 | */s/ Dwain K. Irvin* |
|  | By Dwain K. Irvin, Chief Executive Officer |

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| | |
|:---|:---|
|  | (Principal Executive Officer) |
| Date: February 14, 2023 | */s/ Neil J. Laird* |
|  | Neil J. Laird, Chief Financial Officer |
|  | (Principal Financial and Accounting Officer) |

---

## Exhibit 31.1

**Exhibit 31.1**

**OFFICER**'**S CERTIFICATE**

**PURSUANT TO SECTION 302**

**OF THE SARBANES-OXLEY ACT OF 2002**

I, Dwain Irvin, certify that:

1. I have reviewed this Form 10-Q for the three months ended December 31, 2022, of NovAccess, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer (s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 14, 2023

*<u>/s/ Dwain Irvin, PhD, MPH</u>*

Name: Dwain Irvin

Title: Chief Executive Officer

## Exhibit 31.2

**Exhibit 31.2**

**OFFICER**'**S CERTIFICATE**

**PURSUANT TO SECTION 302**

**OF THE SARBANES-OXLEY ACT OF 2002**

I, Neil J. Laird, certify that:

1. I have reviewed this Form 10-Q for the three months ended December 31, 2022, of NovAccess, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer (s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 14, 2023

*<u>/s/ Neil J. Laird</u>*

Name: Neil J. Laird

Title: Chief Financial Officer

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the filing of the Quarterly Report of NovAccess Global Inc. (the "Company") on Form 10-Q for the period ending December 31, 2022 (the "Report") with the Securities and Exchange Commission, I, Dwain Morris-Irvin, Chief Executive Officer of the Company, and I, Neil J. Laird, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Company for such period.

Date: February 14, 2023

<u>*/s/ Dwain Irvin, PhD, MPH*</u>

Name: Dwain Irvin

Title: Chief Executive Officer

Date: February 14, 2023

<u>*/s/ Neil J. Laird*</u>

Name: Neil J. Laird

Title: Chief Financial Officer