Annual Report for Fiscal Year Ending September 30, 2024 (Form 10-K)

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 Annual Report on Form 10-K. 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 under "Item 1A: Risk Factors" and elsewhere in this Annual Report on Form 10-K.

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.

Organization

NovAccess Global Inc. is a Colorado corporation that was formerly known as XsunX, Inc. and Sun River Mining Inc.

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 LLC ("StemVax") for 7.5 million shares of our unregistered common stock. The acquisition was completed on September 8, 2020.

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 II application. We are currently executing on their recommendations and plan to submit an IND application in 2026. 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. In May 2024, NovAccess submitted a provisional patent, and in May 2025 a non-provisional patent, for new intellectual property developed at Cedars-Sinai to advance the Company's immunotherapy platform. The patent pertains to the use of a specific protein, IDH1, which is commonly mutated in brain and other tumors. Pre-clinical and clinical research published by Dr. Wheeler, has shown that mutated IDH1 in the tumor predicts poor response to dendritic cell (DC) immunotherapy treatment for brain cancer, while high expression of non-mutated IDH1 in tumor tissue discerns long-term from short-term survivors in patients with brain tumors such as glioblastoma. With the filing, NovAccess effectively doubled its patent portfolio, and intends to use analysis of IDH1 in tumors to promote the delivery of TLR-AD1 to only the patients most likely to benefit from it. The Company plans to approach the US Food and Drug Administration to determine how best to co-develop IDH1 and TLR-AD1.

Results of Operations for the Fiscal Year Ended September 30, 2024, Compared to Fiscal Year Ended September 30, 2023

Revenue and Cost of Sales

The Company generated no revenue or cost of goods sold in the fiscal years ended September 30, 2024, and 2023.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses decreased by $1,564,623 during fiscal 2024 to $747,776 as compared to $2,312,399 for fiscal 2023. The primary decrease in SG&A expenses $1,180,813 was related to the Company recognizing $29,000 in warrant expense in fiscal 2023 compared to $563,315 in stock compensation expense and $563,998 in warrant expense in fiscal 2023. The stock compensation expense resulted from the issuance of stock options to board members, employees and other service providers as compensation for their services during 2023. The warrant expense was the result of issuing warrants in return for the extension of the due dates on certain loans. The professional services fees decreased by $328,872 during fiscal 2024 to $338,469 as compared to $667,341 for fiscal 2023. The decreases resulted from investor relations expenses of $262,343, legal and accounting of $52,007, and all other professional fees of $14,522. All other expenses were at similar levels between the two years and resulted in a net decrease of $54,474.

Research and development Expenses

Research and development expenses were at a similar level of $153,898 and $154,362 for fiscal 2024 and 2023, respectively. There were no new product investments in the year.

Other Income/(Expenses)

Other expenses decreased by $501,970 to $1,756,215 for fiscal 2024 from other expenses of $2,258,158 for fiscal 2023. The change was primarily due to a decrease in the loss on derivative liabilities of $868,225 from a loss in fiscal 2023 of $1,246,842 to a loss of $378,671 in fiscal 2024. This change was the result of additional convertible debt entered into and retired during 2024 as well as the overall decline in the stock price and increase in volatility. Additionally, interest expense decreased by $516,737 because of lower debt amortization costs This decrease was offset by a legal provision of $509,842, an impairment charge of $221,932 and by an increase in an expense of $177,553 relating to the price guarantee on shares issued as a commitment fee to one of our note holders.

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 fiscal year 2024, our net loss was $2,657,889 as compared to a net loss of $4,724,946 for fiscal 2023. The decrease in net loss of $2,067,057 was due to the decrease in SG&A and Other Expenses described above.

Liquidity and Capital Resources

We had a working capital deficit as of September 30, 2024 of $10,023,523, as compared to a working capital deficit of $7,798,484 as of September 30, 2023. The increase of $2,225,039 in working capital deficit was the result of an increase in the derivative liability on convertible notes amounting to $410,461. There were also increases in accrued expenses and other liabilities of $1,041,732, an increase in accrued legal settlement of $509,842 and an increase in accounts payable of $245,533 because of the deferral of payments to some service providers and our CEO. Cash and prepaid expenses reduced by $24.

For fiscal 2024, our cash flow used by operating activities was $215,402, as compared to cash flow used by operating activities of $624,636 for fiscal 2023. The decrease of $409,234 in cash flow used by operating activities was primarily due to lower cash expenses because of the lack of funding for operations.

Cash flow used by investing activities was $0 in fiscal 2024 and 2023.

Cash flow provided by financing activities was $214,878 for fiscal 2024, as compared to cash provided by financing activities of $581,800 during fiscal 2023. The decrease in cash flow provided by financing activities reflects the difficulty in raising additional capital.

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 plan to raise this capital through the issuance of equity 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.