UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ Quarterly Report Pursuant to SectionQUARTERLY REPORT PURSUANT TO SECTION 13 orOR 15(d) of The Securities Exchange Act ofOF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended: the quarterly period ended June 30, 2021, 2020
or
☐ Transition Report Pursuant to SectionTRANSITION REPORT PURSUANT TO SECTION 13 orOR 15(d) of The Securities Exchange Act ofOF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From ___________the transition period from _______________ to _______________
Commission File Number:000-29621
XSUNX, INC.NovAccess Global Inc.
(Exact name of registrant as specified in its charter)
Colorado | 84-1384159 | |
(State or other jurisdiction of | incorporation or organization) | (I.R.S. Employer Identification No.) |
8834 Mayfield Road, Suite C, Chesterland, Ohio 44026
(Address of principal executive offices) (Zip(Zip Code)
440-644-1027
(Registrant’s telephone number: (949) 330-8060number, including area code)
Securities registered pursuant to Section 12(g)12(b) of the Act: Common Stock, no par value
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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|
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ☐ No ☐
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 as amended, during the preceding twelve (12)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 (§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 definitionthe definitions of “large accelerated filer,” accelerated filer”“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:Act.
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 Exchange Act). ☐ Yes ☐☒ No ☒
Securities registered pursuant to Section 12(b)Indicate the number of shares outstanding of each of the Act: None.
The numberissuer’s classes of common stock, as of the latest practicable date. There were 13,511,252 shares of common stock issued and outstanding as ofon August 19, 2020 was 1,601,887,74412, 2021.
Table of Contents
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Item 3. |
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PART II | |||
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Item 2. Unregistered Sales of Equity Securities and Use of |
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PARTPart I – FINANCIAL INFORMATION— Financial Information
XSUNX,
NOVACCESS GLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2020 | September 30, 2019 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 154 | $ | 7,964 | ||||
Contract receivables of discontinued operations | - | 198,083 | ||||||
Prepaid expenses | 868 | 6,575 | ||||||
Total Current Assets | 1,022 | 212,622 | ||||||
NET PROPERTY & EQUIPMENT DISCONTINUED OPERATIONS | - | 2,570 | ||||||
TOTAL ASSETS | $ | 1,022 | $ | 215,192 | ||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 43,409 | $ | 129,425 | ||||
Other payable | 61,706 | 67,155 | ||||||
Accrued expenses and interest on notes payable | 53,558 | 54,478 | ||||||
Contract liabilities of discontinued operations | - | 33,138 | ||||||
Derivative liability | 748,255 | 1,945,650 | ||||||
Due to related party | 68,312 | - | ||||||
Promissory note, related party (Note 6) | - | 7,200 | ||||||
Convertible promissory note, related party (Note 5) | 12,000 | 12,000 | ||||||
Convertible promissory notes, current portion net of debt discount of $0 and $36,297, respectively (Note 4) | 55,494 | 36,217 | ||||||
Total Current Liabilities | 1,042,734 | 2,285,263 | ||||||
LONG TERM LIABILITIES | ||||||||
Convertible promissory notes, net of debt discount of $0 and $12, respectively | 150,000 | 165,880 | ||||||
Total Long Term Liabilities | 150,000 | 165,880 | ||||||
TOTAL LIABILITIES | 1,192,734 | 2,451,143 | ||||||
SHAREHOLDERS' DEFICIT | ||||||||
Preferred stock 50,000,000 shares authorized, shares issued and outstanding designated as follows: | ||||||||
Preferred Stock Series A, $0.01 par value, 10,000 authorized 5,000 and 5,000 shares issued and outstanding, respectively | 50 | 50 | ||||||
Common stock, no par value; 2,000,000,000 authorized common shares 1,601,887,744 and 1,601,887,744 shares issued and outstanding, respectively | 33,369,424 | 33,369,424 | ||||||
Additional paid in capital | 5,335,398 | 5,335,398 | ||||||
Paid in capital, common stock warrants | 4,210,959 | 3,811,700 | ||||||
Accumulated deficit | (44,107,543 | ) | (44,752,523 | ) | ||||
TOTAL SHAREHOLDERS' DEFICIT | (1,191,712 | ) | (2,235,951 | ) | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | 1,022 | $ | 215,192 | ||||
June 30, 2021 | September 30, 2020 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 1,594 | $ | 178 | ||||
Employee advances | 2,107 | 0 | ||||||
Prepaid expenses | 22,024 | 0 | ||||||
TOTAL ASSETS | $ | 25,725 | $ | 178 | ||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 374,849 | $ | 88,519 | ||||
Other payable | 66,894 | 65,304 | ||||||
Accrued expenses and interest on notes payable | 84,867 | 65,215 | ||||||
Accrued payroll | 14,429 | 0 | ||||||
Deferred Compensation | 174,663 | 0 | ||||||
License Fees Payable | 40,402 | 50,402 | ||||||
Derivative liability | 3,449,667 | 2,989,165 | ||||||
Due to related party | 79,771 | 68,312 | ||||||
Loan payable, related party | 20,000 | 24,287 | ||||||
Convertible promissory note, related party | 12,000 | 12,000 | ||||||
Convertible promissory notes net of unamortized portions of debt discount of $50,482 and $0 and debt issuance costs of $3,208 and $0, current portion | 1,810 | 91,704 | ||||||
Total Current Liabilities | 4,319,352 | 3,454,908 | ||||||
LONG TERM LIABILITIES | ||||||||
Convertible promissory notes | 165,880 | 115,000 | ||||||
Total Long Term Liabilities | 165,880 | 115,000 | ||||||
TOTAL LIABILITIES | 4,485,232 | 3,569,908 | ||||||
SHAREHOLDERS' DEFICIT | ||||||||
Preferred stock 50,000,000 shares authorized, shares issued and outstanding designated as follows: | ||||||||
Preferred Stock Series B, $0.01 par value, 25,000 authorized 25,000 and 25,000 shares issued and outstanding, respectively | 250 | 250 | ||||||
Common stock, 0 par value; 2,000,000,000 authorized common shares 13,511,252 and 1,603,492 shares issued and outstanding, respectively | 41,441,001 | 33,369,424 | ||||||
Additional paid in capital | 5,360,398 | 11,710,398 | ||||||
Paid in capital, common stock warrants | 4,210,960 | 4,210,960 | ||||||
Paid in capital, preferred stock | 5,088,324 | 5,088,324 | ||||||
Accumulated deficit | (60,560,440 | ) | (57,949,086 | ) | ||||
TOTAL SHAREHOLDERS' DEFICIT | (4,459,507 | ) | (3,569,730 | ) | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | 25,725 | $ | 178 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
XSUNX,NOVACCESS GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 20202021 AND 20192020
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||
SALES | $ | - | $ | - | $ | - | $ | - | ||||||||
COST OF GOODS SOLD | - | - | - | - | ||||||||||||
GROSS PROFIT | - | - | - | - | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Selling, general and administrative expenses | 489,873 | 119,882 | 750,682 | 405,464 | ||||||||||||
Depreciation and amortization expense | - | - | - | - | ||||||||||||
TOTAL OPERATING EXPENSES | 489,873 | 119,882 | 750,682 | 405,464 | ||||||||||||
OTHER INCOME/(EXPENSES) | ||||||||||||||||
Loss on conversion of debt | - | - | - | (33,829 | ) | |||||||||||
Gain (Loss) on change in derivative liability | 1,272,932 | (434,387 | ) | 1,197,395 | 1,433,500 | |||||||||||
Interest expense | (7,433 | ) | (8,067 | ) | (22,985 | ) | (64,094 | ) | ||||||||
TOTAL OTHER INCOME/(EXPENSES) | 1,265,499 | (442,454 | ) | 1,174,410 | 1,335,577 | |||||||||||
NET LOSS FROM CONTINUING OPERATIONS | $ | 775,626 | $ | (562,336 | ) | $ | 423,728 | $ | 930,111 | |||||||
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS | $ | (67,525 | ) | $ | 101,896 | $ | 221,252 | $ | 497,900 | |||||||
NET INCOME (LOSS) | $ | 708,101 | $ | (460,440 | ) | $ | 644,980 | $ | 1,428,011 | |||||||
BASIC INCOME (LOSS) PER SHARE | $ | 0.00 | $ | (0.00 | ) | $ | 0.00 | $ | 0.00 | |||||||
DILUTED INCOME (LOSS) PER SHARE | $ | 0.00 | $ | (0.00 | ) | $ | 0.00 | $ | 0.00 | |||||||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||
BASIC | 1,601,887,744 | 1,601,887,744 | 1,601,887,744 | 1,545,192,198 | ||||||||||||
DILUTED | 6,078,865,776 | 1,601,887,744 | 6,078,865,776 | 1,545,192,198 | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||||
SALES | $ | - | $ | - | $ | - | $ | - | ||||||||
COST OF GOODS SOLD | - | - | - | - | ||||||||||||
GROSS PROFIT | - | - | - | - | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Selling, general and administrative expenses | 501,492 | 489,873 | 2,182,702 | 750,682 | ||||||||||||
TOTAL OPERATING EXPENSES | 501,492 | 489,873 | 2,182,702 | 750,682 | ||||||||||||
LOSS FROM OPERATIONS BEFORE OTHER INCOME/(EXPENSES) | (501,492 | ) | (489,873 | ) | (2,182,702 | ) | (750,682 | ) | ||||||||
OTHER INCOME/(EXPENSES) | ||||||||||||||||
Gain (Loss) on change in derivative liability | (1,585,069 | ) | 1,272,932 | (405,002 | ) | 1,197,395 | ||||||||||
Interest expense | (10,701 | ) | (7,433 | ) | (23,650 | ) | (22,985 | ) | ||||||||
TOTAL OTHER INCOME/(EXPENSES) | (1,595,770 | ) | 1,265,499 | (428,652 | ) | 1,174,410 | ||||||||||
NET INCOME (LOSS) FROM CONTINUING OPERATIONS | $ | (2,097,262 | ) | $ | 775,626 | $ | (2,611,354 | ) | $ | 423,728 | ||||||
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS | 0 | (67,525 | ) | 0 | 221,252 | |||||||||||
NET INCOME (LOSS) | (2,097,262 | ) | 708,101 | (2,611,354 | ) | 644,980 | ||||||||||
BASIC INCOME (LOSS) PER SHARE | $ | (0.16 | ) | $ | 0.44 | $ | (0.25 | ) | $ | 0.40 | ||||||
DILUTED INCOME (LOSS) PER SHARE | $ | (0.16 | ) | $ | 0.12 | $ | (0.25 | ) | $ | 0.11 | ||||||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||
BASIC | 13,085,646 | 1,601,888 | 10,397,784 | 1,601,888 | ||||||||||||
DILUTED | 13,085,646 | 6,078,866 | 10,397,784 | 6,078,866 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
XSUNX,NOVACCESS GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’SHAREHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED JUNE 30, 20202021 AND 20192020
FISCAL NINE MONTHS ENDED JUNE 30, 2019 | ||||||||||||||||||||||||||||||||
| Stock Options/ | |||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional Paid-in | Warrants Paid-in- | Accumulated | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Capital | Deficit | Total | |||||||||||||||||||||||||
Balance at September 30, 2018 | 5,000 | 50 | 1,468,106,819 | 33,311,674 | 5,335,398 | 3,811,700 | (47,096,505 | ) | (4,637,683 | ) | ||||||||||||||||||||||
Common stock issued upon conversion of debt and accrued interest | - | - | 133,780,925 | 91,579 | - | - | - | 91,579 | ||||||||||||||||||||||||
Net Income | - | - | - | - | - | - | 1,428,011 | 1,428,011 | ||||||||||||||||||||||||
Balance at June 30, 2019 (unaudited) | 5,000 | $ | 50 | 1,601,887,744 | $ | 33,403,253 | $ | 5,335,398 | $ | 3,811,700 | $ | (45,668,494 | ) | $ | (3,118,093 | ) | ||||||||||||||||
FISCAL NINE MONTHS ENDED JUNE 30, 2020 | ||||||||||||||||||||||||||||||||
| Stock Options/ | |||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional Paid-in | Warrants Paid-in- | Accumulated | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Capital | Deficit | Total | |||||||||||||||||||||||||
Balance at September 30, 2019 | 5,000 | 50 | 1,601,887,744 | 33,369,424 | 5,335,398 | 3,811,700 | (44,752,523 | ) | (2,235,951 | ) | ||||||||||||||||||||||
Stock compensation cost, options | - | - | - | - | - | 399,259 | - | 399,259 | ||||||||||||||||||||||||
Net Income | - | - | - | - | - | - | 644,980 | 644,980 | ||||||||||||||||||||||||
Balance at June 30, 2020 (unaudited) | 5,000 | $ | 50 | 1,601,887,744 | $ | 33,369,424 | $ | 5,335,398 | $ | 4,210,959 | $ | (44,107,543 | ) | $ | (1,191,712 | ) | ||||||||||||||||
NINE MONTHS ENDED JUNE 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock Options/ | Paid in | |||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock, | Preferred Stock, | Additional | Warrants | Capital, | ||||||||||||||||||||||||||||||||||||||||
Class A | Class B | Common Stock | Paid-in | Paid in | Preferred | Accumulated | ||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Capital | Stock | Deficit | Total | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2019 | 5,000 | $ | 50 | 0 | 0 | 1,601,888 | $ | 33,369,424 | $ | 5,335,398 | $ | 3,811,700 | $ | - | $ | (44,752,523 | ) | $ | (2,235,951 | ) | ||||||||||||||||||||||||
Stock compensation cost, options | - | - | - | - | - | - | - | 399,259 | - | - | 399,259 | |||||||||||||||||||||||||||||||||
Net Income | - | - | - | - | - | - | - | - | - | 644,980 | 644,980 | |||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | 5,000 | �� | $ | 50 | 0 | $ | 0 | 1,601,888 | $ | 33,369,424 | $ | 5,335,398 | $ | 4,210,959 | $ | - | $ | (44,107,543 | ) | $ | (1,191,712 | ) | ||||||||||||||||||||||
XSUNX, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2020 AND 2019
(Unaudited)
NINE MONTHS ENDED JUNE 30, 2021 (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock Options/ | Paid in | ||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock, | Preferred Stock, | Additional | Warrants | Capital, | ||||||||||||||||||||||||||||||||||||||||
Class A | Class B | Common Stock | Paid-in | Paid in | Preferred | Accumulated | ||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Capital | Stock | Deficit | Total | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | 0 | $ | 0 | 25,000 | $ | 250 | 1,603,492 | $ | 33,369,424 | $ | 11,710,398 | $ | 4,210,960 | $ | 5,088,324 | $ | (57,949,086 | ) | $ | (3,569,730 | ) | |||||||||||||||||||||||
Common stock issued for StemVax Acquisition - from stock payable | - | - | - | - | 7,500,000 | 6,375,000 | (6,375,000 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
Stock compensation cost | - | - | - | - | 2,000,000 | 936,000 | - | - | - | - | 936,000 | |||||||||||||||||||||||||||||||||
Common stock issued for Services | - | - | - | - | 592,612 | 381,668 | - | - | - | - | 381,668 | |||||||||||||||||||||||||||||||||
Common Stock Issued - Subscriptions | - | - | - | - | 1,640,905 | 335,000 | - | - | - | - | 335,000 | |||||||||||||||||||||||||||||||||
Common Stock Issued upon conversion of debt and accrued interest | 174,243 | 43,909 | 43,909 | |||||||||||||||||||||||||||||||||||||||||
Subscription stock payable | 25,000 | 25,000 | ||||||||||||||||||||||||||||||||||||||||||
Net Income | - | - | - | - | - | - | - | - | - | (2,611,354 | ) | (2,611,354 | ) | |||||||||||||||||||||||||||||||
Balance at June 30, 2021 (Unaudited) | - | $ | - | 25,000 | $ | 250 | 13,511,252 | $ | 41,441,001 | $ | 5,360,398 | $ | 4,210,960 | $ | 5,088,324 | $ | (60,560,440 | ) | $ | (4,459,507 | ) | |||||||||||||||||||||||
For the Nine Months Ended | ||||||||
June 30, 2020 | June 30, 2019 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net Income | $ | 644,980 | $ | 1,428,011 | ||||
Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities | ||||||||
Gain on change in derivative liability | (1,197,395 | ) | (1,433,500 | ) | ||||
Amortization of debt discount recorded as interest expense | - | 36,309 | ||||||
Loss on conversion of debt | - | 33,829 | ||||||
Stock compensation expense | 399,259 | - | ||||||
Changes in Assets and Liabilities: | ||||||||
Prepaid expenses | 5,707 | 4,536 | ||||||
Accounts payable | (86,016 | ) | 17,001 | |||||
Other payable | (5,449 | ) | 1,721 | |||||
Accrued expenses | 2,477 | 26,628 | ||||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES –CONTINUED OPERATIONS | (236,437 | ) | 114,535 | |||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES –DISCONTINUED OPERATIONS | 167,515 | (68,723 | ) | |||||
NET CASH (USED IN) PROVIDED BY OPERATIONS | (68,922 | ) | 45,812 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of fixed asset – discontinued operations | - | (2,284 | ) | |||||
NET CASH USED IN INVESTING ACTIVITIES – DISCONTINUED OPERATIONS | - | (2,284 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Due to related party | 68,312 | - | ||||||
Payments on related party promissory notes | (7,200 | ) | (24,300 | ) | ||||
NET PROVIDED BY (CASH USED) IN FINANCING ACTIVITIES | 61,112 | (24,300 | ) | |||||
NET INCREASE (DECREASED) IN CASH | (7,810 | ) | 19,228 | |||||
CASH, BEGINNING OF PERIOD | 7,964 | 41,090 | ||||||
CASH, END OF PERIOD | $ | 154 | $ | 60,318 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Interest paid | $ | 6,955 | $ | 7,911 | ||||
Taxes paid | $ | - | $ | - | ||||
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS | ||||||||
Issuance of common stock upon conversion of debt and accrued interest | $ | - | $ | 91,579 | ||||
Accrued interest capitalized into convertible note | $ | 3,397 | $ | 4,846 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
XSUNX,NOVACCESS GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2021 AND 2020
(Unaudited)
For the Nine Months Ended | ||||||||
June 30, 2021 | June 30, 2020 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income (Loss) | $ | (2,611,354 | ) | $ | 644,980 | |||
Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities | ||||||||
Amortization of debt discount and debt issuance costs recorded as interest expense | 5,310 | 0 | ||||||
(Gain)/Loss on change in derivative liability | 405,002 | (1,197,395 | ) | |||||
Stock compensation expense | 936,000 | 399,259 | ||||||
Stock issued for services | 363,811 | 0 | ||||||
Changes in Assets and Liabilities: | ||||||||
Employee advances | (2,107 | ) | 0 | |||||
Prepaid expenses | (4,167 | ) | 5,707 | |||||
Accounts payable | 286,330 | (86,016 | ) | |||||
Other payable | 1,590 | (5,449 | ) | |||||
License fees payable | (10,000 | ) | 0 | |||||
Accrued expenses and interest on notes payable | 22,737 | 2,477 | ||||||
Accrued payroll | 14,429 | 0 | ||||||
Deferred Compensation | 174,663 | 0 | ||||||
| ||||||||
| NET CASH USED IN OPERATING ACTIVITIES - CONTINUING OPERATIONS | (417,756 | ) | (236,437 | ) | ||||
| ||||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES - DISCONTINUED OPERATIONS | 0 | 167,515 | ||||||
NET CASH USED IN BY OPERATIONS | (417,756 | ) | (68,922 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Stock subscriptions received | 360,000 | 0 | ||||||
Due to related party | 11,459 | 68,312 | ||||||
Payments on related party promissory notes | 0 | (7,200 | ) | |||||
Proceeds from a convertible note payable net of debt issuance costs | 52,000 | 0 | ||||||
Proceeds from related party loan | 25,000 | 0 | ||||||
Payments on related party loan payable | (29,287 | ) | 0 | |||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 419,172 | 61,112 | ||||||
NET INCREASE (DECREASE) IN CASH | 1,416 | (7,810 | ) | |||||
CASH, BEGINNING OF PERIOD | 178 | 7,964 | ||||||
CASH, END OF PERIOD | $ | 1,594 | $ | 154 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Interest paid | $ | 82 | $ | 6,955 | ||||
Taxes paid | $ | 0 | $ | 0 | ||||
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS | ||||||||
Debt discount on new issuances | $ | 55,500 | $ | 0 | ||||
Accrued interest capitalized into convertible note | $ | 1,248 | $ | 3,397 | ||||
Shares issued for StemVax Acquisition – from stock payable | $ | 6,375,000 | $ | 0 | ||||
Issuance of common stock upon conversion of debt and accrued interest | $ | 43,909 | $ | 0 | ||||
| Fair value of shares issued for prepaid services | $ | 150,000 | $ | 0 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NOVACCESS GLOBAL, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –- UNAUDITED
JUNE 30, 2021 AND 2020
1. ORGANIZATION AND LINE OF BUSINESS
Organization NovAccess Global, Inc. (“NovAccess,” the “Company”) is a Colorado corporation formerly known as Sun River Mining Inc. and XsunX, Inc. The Company was originally incorporated in Colorado on February 25, 1997. Effective September 24, 2003, the Company completed a plan of reorganization and name change to XsunX, Inc. In June 2020, the Company was acquired and changed its name to NovAccess Global, Inc. |
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Line of Business
During the year ended September 30, 2020, the Company discontinued its direct delivery method for its solar contracting operations. Also, during the year ended September 30, 2020 the Company began efforts to expand its operations to include the commercialization of developmental healthcare solutions in the biotechnology, medical, and health and wellness markets. These efforts are ongoing. There can be no assurance that the Company’s efforts to expand operations into healthcare solutions in the biotechnology, medical, and health and wellness markets will be successful, or that the Company will continue to generate revenues of significance similar to prior periods.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the nine months ended June 30, 20202021 are not necessarily indicative of the results that may be expected for the year ended September 30, 2020.2021. For further information refer to the financial statements and footnotes thereto included in the Company'sCompany’s Form 10-K for the year ended September 30, 2019.2020.
During the period ending June 30, 2020, the Company discontinued it’s direct delivery method for its solar contracting operations by outsourcing the completion of sold projects under a Transition Services Agreement with a licensed California contractor “the Service Provider”. The Company’s intent is to transition from providing contracting services directly to its customers to marketing solar services to potential customers and referring those customers to the Service Provider or engaging the Service Provider to provide the services to customers on behalf of the Company. The Company’s operations in future periods will be focused on generating a referral fee of 1% of any gross sales generated through these referrals. We anticipate that this change in operations, and delivery method, will have a negative impact on our gross sales and resulting revenues, if any. However, during the period ended June 30, 2020 the Company began efforts to expand its operations to include the commercialization of developmental healthcare solutions in the biotechnology, medical, and health and wellness markets which efforts are ongoing. There can be no assurance that the Company’s change to its contracting operations to focus on referral fee revenues, and its efforts to expand operations into healthcare solutions in the biotechnology, medical, and health and wellness markets will be successful, or that the Company will continue to generate revenues of significance similar to prior periods.
Going Concern
The accompanying unaudited condensed 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 unaudited condensed 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 nine monthsperiod ended June 30, 2020.2021. 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 development efforts. business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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This summary of significant accounting policies of XsunX, Inc.NovAccess 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.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary StemVax, LLC. All significant inter-company accounts and transactions between these entities have been eliminated in these condensed consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements. Significant estimates made in preparing these consolidated financial statements include the estimate of useful lives of property and equipment, revenue recognition, the deferred tax valuation allowance, the fair value of stock options, and derivative liabilities. Actual results could differ from those estimates.
NOVACCESS GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 2021 AND 2020
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents include cash in banks and money markets with an original maturity of three months or less.
XSUNX, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED
JUNE 30, 2020
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Property and Equipment
Property and equipment are stated at cost, and are depreciated using straight line over its estimated useful lives:
Leasehold improvements | Length of the lease |
Computer software and equipment | 3 Years |
Furniture & fixtures | 5 Years |
Machinery & equipment | 5 Years |
The Company capitalizes property and equipment over $500. Property and equipment under $500 are expensed in the year purchased.
During The depreciation expense was $0 for the sixthree months ended June 30, 2020, the Company sold certain assets at net book value for $2,092.
2021, and 2020. The depreciation expense for the nine months ended June 30, 2021, and 2020, was $0 and 2019, were $478, and $342, respectively. Which areDepreciation expense is now included in on the discontinued operations.
Revenue Recognition
We recognize revenue from discontinued operations when services are performed, and at the time of shipment of products, ifprovided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.
Revenues and related costs on construction contracts arewere recognized as the performance obligations for work arewere satisfied over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will bewas recognized as the customer obtainsobtained control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs arewere charged to the periods as incurred. However, in the event a loss on a contract iswas foreseen, the Company willwould recognize the loss as it is determined.
Revisions in cost and profit estimates during the course of the contract arewere reflected in the accounting period in which the facts which requirefor the revision, becomerevisions became known. Provisions for estimated losses on uncompleted contracts arewere made in the period in which such losses arewere determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements, may resulthave resulted in revisions to costs and income, and arewhich were recognized in the period in which the revisions arewere determined.
Contract receivables areof discontinued operations were recorded on contracts for amounts currently due based upon progress billings, as well as any retentions, which arewere collectible upon completion of the contracts. Accounts payable to material suppliers and subcontractors arewere recorded for amounts currently due based upon work completed or materials received, as arewere retention due subcontractors, which arewere payable upon completion of the contract. General and administrative expenses arewere charged to operations as incurred and arewere not allocated to contract costs.
Contract Receivable
The Company billspreviously billed its customers in accordance with contractual agreements. The agreements generally require billingrequired billings to be on a progressive basis as work iswas completed. Credit iswas extended based on evaluation of clients’ financial condition and collateral iswas not required. The Company maintainsmaintained an allowance for doubtful accounts for estimated losses that may arisehave arose, if any customer iswas unable to make required payments. As of June 30, 2021 and September 30, 2020, there was no allowance for doubtful accounts.
Management performspreviously performed a quantitative and qualitative review of the receivables past due from customers monthly.on a monthly basis. The Company recordsrecorded an allowance against uncollectible items for each customer after all reasonable means of collection havehad been exhausted, and the potential for recovery iswas considered remote. The contract receivablereceivables of discontinued operations balance waswere $0 and $198,083 at June 30, 20202021 and September 30, 2019, respectively.2020.
NOVACCESS GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 2021 AND 2020
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Project Warranties
Customers in our target market of California who purchasepurchased solar energy systems are covered by a warranty of up to 10 years in duration for material defects and workmanship. In addition, we provideprovided a pass-through warranty of the major components such as module mounting, inverter and solar panel manufacturers’ warranties to our customers, which generally range from 10 to 25 years. The manufacturers of these major components provide the warranty directly to our customers. In the event of a component failure the manufacturers provide replacement of the major components such as inverters and solar modules at no charge to our customer, which is an industry standard. In the event of a component failure such as an inverter the standard warranty from the supplier we use, SolarEdge, provides a twelve (12) year no-charge replacement warranty to the customer, and would also provide NovAccess or our subcontractor, with $125 compensation for labor replacement costs, should we be requested to replace an inverter or other SolarEdge components. Additionally, we employed the use of licensed subcontractors for the bulk of our installation processes, who as licensed contractors are required to warrant their work for material defects and workmanship for ten (10) years. The Company has a limited history of project installations, and will accessin accessing the potential for warranty related costs and other allowances, basedwe believe that our reliance on our experience in servicingthe manufacturers and subcontractor warranties would leave a limited and inconsequential cost associated with warranty claims as they may arise in the future.claims. During the nine months ended June 30, 2021 and 2020, the Company did not experience costs related to warranty claims.
XSUNX, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED
JUNE 30, 2020
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Stock-Based Compensation
Share-based Payment applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are to follow a fair value of those equity instruments. We are required to follow a fair value approach using an option-pricing model, such as the Binomial lattice valuation model, at the date of a stock option grant. The Companydeferred compensation calculated under the fair value method would then be amortized over the respective vesting period of the stock option. This has 2,000,000,000 sharesnot had a material impact on our results of outstanding options as of June 30, 2020.operations.
Net Earnings Per(Loss) per Share Calculations
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Basic lossNet earnings (Loss) per share is calculateddictates the calculation of basic earnings (loss) per share and diluted earnings per share. Basic earnings (loss) per share are computed by dividing the net profit (loss) for the three months by the weighted average number of ordinarycommon shares outstanding during the financial periods held by the Company.
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
6/30/2020 | 6/30/2019 | 6/30/2020 | 6/30/2019 | |||||||||||||
Profit (Loss) from continuing operations to common shareholders (Numerator) | $ | 775,626 | $ | (562,336 | ) | $ | 423,728 | $ | 930,111 | |||||||
Profit (Loss) from discontinued operations to common shareholders (Numerator) | $ | (67,525 | ) | $ | 101,896 | $ | 221,252 | $ | 497,900 | |||||||
Profit (Loss) to common shareholders (Numerator) | $ | 708, 101 | $ | (460,440 | ) | $ | 644,980 | $ | 1,428,011 | |||||||
Weighted average number of common shares outstanding (Denominator) | 1,601,887,744 | 1,601,887,744 | 1,601,887,744 | 1,545,192,198 | ||||||||||||
Effect of convertible notes | - | - | - | - | ||||||||||||
Weighted average number of ordinary shares in issue | 1,601,887,744 | 1,601,887,744 | 1,601,887,744 | 1,545,192,198 | ||||||||||||
Basic earnings (loss) per share | $ | 0.00 | $ | (0.00 | ) | $ | 0.00 |
| $ | 0.00 | ||||||
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For the purpose of calculating diluted earnings per share, the profit attributable to equity holders and the weighted average number of ordinary shares outstanding during the financial period have been adjusted for the dilutive effects of all potential ordinary shares and shares issuable upon conversion of convertible notes. The dilutiveyear. Diluted net earnings per share is calculated by dividingcomputed similar to basic earnings per share except that the profit attributabledenominator is increased to equity holders byinclude the weighted average numbereffect of shares that would have been issued upon fullstock options and stock-based awards plus the assumed conversion of the remaining convertible debt (Note(Notes 4 and 5), adjusted by the number of such shares that would have been issued at fair value as follows:.
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
6/30/2020 | 6/30/2019 | 6/30/2020 | 6/30/2019 | |||||||||||||
Profit (Loss) from continuing operations to common shareholders (Numerator) | $ | 775,626 | $ | (562,336 | ) | $ | 423,728 | $ | 930,111 | |||||||
Profit (Loss) from discontinued operations to common shareholders (Numerator) | $ | (67,525 | ) | $ | 101,896 | $ | 221,252 | $ | 497,900 | |||||||
Profit (Loss) to common shareholders (Numerator) | $ | 708,101 | $ | (460,440 | ) | $ | 644,980 | $ | 1,428,011 | |||||||
Weighted average number of common shares outstanding (Denominator) | 1,601,887,744 | 1,601,887,744 | 1,601,887,744 | 1,545,192,198 | ||||||||||||
Effect of convertible notes | 4,476,978,032 | - | 4,476,978,032 | - | ||||||||||||
Weighted average number of ordinary shares in issue | 6,078,865,776 | 1,601,887,744 | 6,078,865,776 | 1,545,192,198 | ||||||||||||
Basic earnings (loss) per share | $ | 0.00 | $ | (0.00 | ) | $ | 0.00 | $ | 0.00 | |||||||
For the three months ended | For the nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Gain (Loss) to common shareholders (Numerator) | $ | (2,097,262 | ) | $ | 708,101 | $ | (2,611,354 | ) | $ | 644,980 | ||||||
Basic weighted average number of common shares outstanding (Denominator) | 13,085,646 | 1,601,888 | 10,397,784 | 1,601,888 | ||||||||||||
Diluted weighted average number of common shares outstanding (Denominator) | ||||||||||||||||
| 13,085,646 | 6,078,866 | 10,397,784 | 6,078,866 | |||||||||||||
XSUNX, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED
JUNE 30, 2020
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The Company has included shares issuable from convertible debt of $205,494 for the nine months ended June 30, 2020, because their impact on the loss per share is dilutive.
The Company has excluded shares issuable from convertible debt of $201,024$167,690 for the nine months ended June 30, 2021, because their impact on the loss per share is anti-dilutive.
The Company also excluded shares issuable from 2,000,000 options issued to compensate our former directors for serving on the board without compensation in fiscal 2019, because their impact on the loss per share is anti-dilutive.
NOVACCESS GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 2021 AND 2020
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of June 30, 2020,2021, the balances reported for cash, prepaid expenses, accounts payable, and accrued expenses approximate the fair value because of their short maturities.
We adopted 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.
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. AssetsThe Company had no assets that are required to be valued on a recurring basis as of June 30, 2021 and September 30, 2020. The Company had liabilities that are required to be measured at fair value on a recurring basis are as follows at June 30, 2021 and September 30, 2020:
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Liabilities | ||||||||||||||||
Derivative Liability | $ | 748,255 | $ | - | $ | - | $ | 748,255 | ||||||||
Total Liabilities measured at fair value | $ | 748,255 | $ | - | $ | - | $ | 748,255 | ||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets: | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
Liabilities: | ||||||||||||||||
Derivative Liability at fair value as of June 30, 2021 | $ | 3,449,667 | $ | 0 | $ | 0 | $ | 3,449,667 | ||||||||
Derivative Liability at fair value as of September 30, 2020 | $ | 2,989,165 | $ | 0 | $ | 0 | $ | 2,989,165 | ||||||||
The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:
Balance as of September 30, 2019 | $ | 1,945,650 | ||
Net Gain on change in derivative liability | (1,197,395 | ) | ||
Ending balance as of June 30, 2020 | $ | 748,255 |
Balance as of September 30, 2020 | $ | 2,989,165 | ||
Net Loss on change in fair value of derivative liability | 405,002 | |||
Convertible debt discount | 55,500 | |||
Ending balance as of June 30, 2021 | $ | 3,449,667 |
NOVACCESS GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 2021 AND 2020
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements
In May 2021, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) 2021-04—Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2021, and interim periods with fiscal years beginning after December 15, 2021. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the effects of the adoption of ASU No. 2021-04 on its consolidated financial statements.
In August 2016, FASB issued accounting standards update ASU-2016-15,ASU 2016-15, “Statement of Cash Flows” (Topic 230) – Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2018, and interim periods with fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company has evaluated the impact of the adoption of ASU 2016-15, which had no effect on the Company’s financial statements, and there was no material impact on the financial statements.
XSUNX, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED
JUNE 30, 2020
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In August 2017, FASB issued accounting standards update ASU-2017-12, “D” (Topic 815) – “Targeted Improvements to Accounting for Hedging Activities”, to require an entity to present the earnings effect of the hedging instrument in the same statement line item in which the earnings effect of the hedged item is reported. The amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods with the fiscal years beginning after December 15, 2020. Early adoption is permitted in any interim period after issuance of the update. The Company has evaluated the impact of the adoption of ASU 2017-12, which had no effect on the Company’s financial statements, and there was no material impact on the financial statements.
In June 2018, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”)ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The new guidance is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2018,2017, with early adoption permitted. The Company has evaluated the impact of the adoption of ASU 2018-07, which had no effect on the Company’s financial statements, and there was no material impact on its financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this Update modify certain disclosure requirements of fair value measurements and are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company has evaluated the impact of the adoption of ASU 2018-13, which had no effect on the Company’s financial statements, and there was no material impact on the 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 condensed financial statements.
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NOVACCESS GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 2021 AND 2020
3. CAPITAL STOCK
At December 31, 2019,June 30, 2021, 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 of which 10,000 shares have been designated as Series A Preferred Stock.share. The rights, preferences and privileges of the holders of the preferred stock are determined by the Board of Directors prior to issuance of such shares.
Preferred Stock
As of
At June 30, 2020,2021 the Company had 5,00025,000 shares of issued and outstanding Series B Preferred Stock following the conversion of 5,000 shares of Series A Preferred Stock issued to the Company’s Chief Executive Officer and Director, Tom M. Djokovich.Stock. The Series A shares were originally issued in consideration for the contribution of services by Mr.Tom Djokovich, the Company’s then President and Chief Executive Officer, to the Company valued at fifty50 dollars, which the Board deemed full and fair consideration. Because of such issuance, Mr. Djokovich hashad the ability to influence and determine stockholder votes. On March 18, 2020, XsunX, Inc. (the “Company”), Tom Djokovich, the President and Chief Executive Officer of the Company, Mr. Djokovich, and TN3, LLC, a Wyoming limited liability company owned by Daniel G. Martin (“TN3”), entered into a Stock Purchase Agreement (the “Agreement”). Pursuant to the Agreement, Mr. Djokovich agreed to sell his 5,000 shares of Series A Preferred Stock (“Stock”) of the Company to TN3 in a private sale for cash. The holder of the Series A Preferred Stock may cast votes equal to not less than 60% of the total outstanding voting power of the Company on all matters voted on by the shareholders of the Company. CompletionOn September 4, 2020, the Company issued 25,000 shares of unregistered Series B Convertible Preferred stock, $0.01 par value per share, to TN3 in exchange for the saleredemption of the5,000 shares of Series A preferred stock. Each share of Series B Preferred Stock entitles the holder to cast 40,000 votes on any action presented to the shareholders. Each share of Series B Preferred Stock is conditioned uponconvertible 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. Dividends for Series B Preferred Stock shall be declared on an as converted basis.
Common Stock
Effective August 25, 2020, we filed articles of amendment to our articles of incorporation with the Colorado Secretary of State to effectuate a number1-for-1,000 reverse stock split of events, including the filing byCompany’s outstanding shares of common stock.
During the nine months ended June 30, 2021, the Company issued 11,907,760 shares of a Schedule 14Fcommon stock. 7,500,000 shares of common stock were issued from stock payable to disclose changesInnovest Global, Inc. for the September 8, 2020 acquisition of StemVax, LLC. For an expense of $381,668 based on the closing market value on grant date, 592,612 shares were issued to various vendors for services provided; 1,640,905 shares were issued in relation to stock subscriptions for net proceeds of $335,000 with additional 50,000 shares are to be issued from $25,000 stock payable; 174,243 shares were issued on conversion of debt and accrued interest; and 2,000,000 shares were issued to related parties for services and expense at $936,000 based upon the management of the Company that will occur in connection with the sale.
On May 13, 2020, the Company filed an information statement pursuant to Section 14(f) of the Securities exchange Act of 1934 and Rule 14f-1 thereunder providing further information related to the below proposed transaction, which the Company originally disclosed within its March 24, 2020 filingclosing market value on Form 8K.grant date.
XSUNX, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED
JUNE 30, 2020
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Common Stock
During the nine months ended June 30, 2020, the Company had no issuance of shares of common stock.
During the nine months ended June 30, 2019, the Company issued 133,780,925 shares of common stock upon conversion of principal in the amount of $55,000, plus accrued interest of $2,750, with an aggregate fair value loss on settlement of debt of $33,829.4. CONVERTIBLE PROMISSORY NOTES
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As of June 30, 2020,2021, the outstanding convertible promissory notes are summarized as follows:
Convertible Promissory Notes | $ | 205,494 | ||
Less current portion | 55,494 | |||
Total long-term liabilities | $ | 150,000 |
Convertible Promissory Notes, net of debt discount and debt issuance costs | $ | 167,690 | ||
Less current portion | 1,810 | |||
Total long-term liabilities | $ | 165,880 |
Maturities of long-term debt for the next threefour years are as follows:
Year Ending | ||||
September 30, | ||||
2021 | $ | - | ||
2022 | 1,810 | |||
2023 | 165,880 | |||
$ | 167,690 |
Period Ended | ||||
June 30, | ||||
2022 | $ | 55,494 | ||
2023 | 60,000 | |||
2024 | 90,000 | |||
| $ | 205,494 |
NOVACCESS GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 2021 AND 2020
4. CONVERTIBLE PROMISSORY NOTES (Continued)
At June 30, 2020,2021, the $205,494$221,380 in convertible promissory notes.notes has a remaining debt discount of $50,482 and remaining debt issuance costs of $3,208, leaving a net balance of $167,690.
On October 20, 2015, the Company entered into a third extension of the Note originally issued September 30, 2013. The extension terms included mandatory payments of $10,000 per month beginning November 1, 2015 until the note in the amount of $143,033 is paid in full. The Note bears interest at 12% annum and has a conversion price of 60% of the lowest volume weighted average price (“VWAP”) occurring during the twenty trading days preceding any conversion date by Holder. The balance of the provisions of the Note remained substantially the same. As of December 31, 2019, the remaining balance of the Note was $36,217. As of June 30, 2020, the balance of the Note was $39,614, which includes capitalized interest for the period of $3,397. As of JuneSeptember 30, 2020, the Note hashad matured and was in default. On May 11, 2021, the Companylender agreed to convert the outstanding principal and interest of $43,909 into 174,243 shares of our common stock pursuant to the Holder has entered into discussions for the repaymentterms of the Note.note. No gain or loss was recorded on the conversion.
On November 20, 2014, the Company issued a 10% unsecured convertible promissory note (the “November Note”) for the principal sum of up to $400,000 plus accrued interest on any advanced principal funds. The November Note matures eighteen months from each advance. The Note was extended for each tranche with maturity dates of June 30, 2021 and August 18, 2021. The November Note may be converted by the lender into shares of common stock of the Company at the lesser of $.0125$12.5 per share or (b) fifty percent (50%) of the lowest trade prices following issuance of the November 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 November Note at inception. On various dates from February 18, 2015 through September 30, 2016, the lender advanced an additional $350,000 under the November Note. Effective June 30, 2021 the Company and lender agreed to extend the maturity date for the outstanding balance to June 30, 2023. As of June 30, 2020,2021, there remains an aggregate outstanding principal balance of $50,880.
On May 10, 2017, the Company issued a 10% unsecured convertible promissory note (the “May Note”) for the principal sum of up to $150,000 plus accrued interest on any advanced principal funds. The Lenderlender may pay additional consideration at the Lenderslender’s discretion. The Company received a tranche in the amount of $25,000 upon execution of the May Note. On various dates, the Company received additional tranches in the aggregate sum of $90,000. The May Note matured twelve months from each tranche. Within thirty (30) days prior to the maturity date, the Lenderlender may extend the maturity date to sixty (60) months. Effective June 30, 2021 the Company and lender agreed to extend the maturity date for all tranches of the note to June 30, 2023. The May Note may be converted by the lender into shares of common stock of the Company at the lesser of $.01$10 per share or (b) fifty percent (50%) of the lowest trade 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 June 30, 2020,2021, the balance remaining on the May Note was $115,000.
XSUNX, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED
JUNE$55,500 plus accrued interest. The note matures on June 2, 2022. The June Note may be converted 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. The Company recorded amortization of debt discount of $5,018 and amortization of debt issuance costs of $292, both of which were recognized as interest expense during the three months ended June 30, 20202021. As of June 30, 2021, the balance of the June Note was $55,500, which is the total initial debt discount.
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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 note has 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 notenotes 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 notenotes in itstheir entirety at fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the imputed interest associated with the embedded derivative. The derivative liability is adjusted periodically according to the stock price fluctuations based upon the Binomial lattice model calculation.
The convertible notes issued and described in Note 4 above, do not have fixed settlement provisions because their conversion prices are not fixed. The conversion feature has been characterized as a derivative liability to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.
We record the full value of the derivative as a liability at issuance with an offset to valuation discount, which will be amortized over the life of the Notes.
NOVACCESS GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 2021 AND 2020
4. CONVERTIBLE PROMISSORY NOTES (Continued)
At June 30, 2020,2021, the fair value of the derivative liability was $748,255.$3,449,667.
For 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:
Risk free interest rate | Between | |
Stock volatility factor | Between | |
Months to Maturity | 0 - 5 years | |
Expected dividend yield |
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| 5. CONVERTIBLE PROMISSORY NOTES – RELATED PARTY |
Issuance of Convertible Promissory Notes for Services to Related Party
As of March 31, 2016, Company issued the remaining unsecured Convertible Promissory Notes (the “Notes”) in the amount of $12,000 to a 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 $0.0045$4.5 per share. The Note matured on October 1, 2015 and bore a one-time interest charge of $1,200, which was applied to the principal on October 1, 2014. So long as any shares issuable under a conversion are subject to transfer and sale restrictions imposed pursuant to SEC Rule 144 of the Rules promulgated under the Securities Act of 1933, the Company shall, upon written request by Holder, file Form S-8, if applicable, with the U.S. Securities and Exchange commission to register the issued. The convertible note has a fixed settlement provision and does not qualify as a derivative.
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On August 5, 2014 the Company issued a 10% unsecured promissory note (the “Note”) to a related party in the aggregate principal amount of up to $80,000, plus accrued interest on any advanced principal funds. The principal use of the proceeds from any advance under the Note are intended to assist in the purchase of materials, and services for the solar PV systems that we sell and install. Consideration advanced under the Note matures twenty-four (24) months from each advance. During the nine months ended June 30, 2020, the Company paid off the principal in the amount of $5,000, plus accrued interest of $7,903. The balance as of June 30, 2020 was $0.6. REVENUE FROM CONTRACTS WITH CUSTOMERS – DISCONTINUED OPERATIONS
XSUNX, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED
JUNE 30, 2020
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Revenues and related costs on construction contracts were recognized as the performance of obligations for work were satisfied over time in accordance with ASC 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will beare recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). The cost of uninstalled materials or equipment willwould generally be excluded from our recognition of profit, unless specifically produced or manufactured for a project, because such costs are not considered to be a measure of progress. As of June 2, 2020, the Company discontinued it’s direct delivery method for its solar contracting operations by outsourcing the completion of sold projects under a Transition Services Agreement with a licensed California contractor.
The following table represents a disaggregation of revenue by customer type of good or service from contracts with customers for the three and nine months ended June 30, 20202021 and 2019:2020.
Nine Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Commercial | $ | 998,373 | $ | 1,091,691 | ||||
Residential | 45,960 | 50,525 | ||||||
Management fees | - | 17,250 | ||||||
| $ | 1,044,333 | $ | 1,159,466 | |||||
Three Months Ended | Nine Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Commercial | $ | 0 | $ | 218,311 | $ | 0 | $ | 998,373 | ||||||||
Residential | 0 | 0 | 0 | 45,960 | ||||||||||||
| $ | 0 | $ | 218,311 | $ | 0 | $ | 1,044,333 | |||||||||
Contract assets represents revenues recognized in excess of amounts billed on contracts in progress. Contract liabilities represents billings in excess of revenues recognized on contracts in progress. Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying balance sheets, as they will be liquidated in the normal course of the contract completion. The contract asset for the nine months endingat June 30, 20202021 and the year ended September 30, 2019 was $0 and $0, respectively.2020 were $0. The contract liability for the nine months ended June 30, 2020 and the year ended September 30, 2019 was $0 and $33,138, respectively.
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Accounts payable and accrued liabilities consisted of the following at June 30, 20202021 and September 30, 2019:2020 were $0.
NOVACCESS GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 2021 AND 2020
7. OPTIONS
6/30/2020 | 9/30/2019 | |||||||
Trade accounts payable | $ | 93,409 | $ | 129,425 | ||||
Credit cards payable | 61,706 | 67,155 | ||||||
Accrued liabilities | 53,558 | 54,478 | ||||||
| $ | 208,673 | $ | 251,058 | |||||
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On June 2, 2020, the Company issued 2,000,000,000 options to purchase common stock. These options will be exercisable on a cashless basis for a period of ten years from the effective date of the Stock Splitone-for-1,000 reverse stock split at an exercise price of $0.00001 per share on a pre-Stock Splitpre-stock split basis. The number of options on the post stock split basis is 2,000,000, and the exercise price of $0.01 per share. The purpose of the options areis to compensate our directors for serving on the Boardboard without compensation in fiscal 2019. It is difficult to assess the value of the options given the highly limited trading in our Common Stock,common stock, the fact that the options shares have not been and are not expected to be registered for resale and will be restricted, and the speculative nature of the Company’s future business plans. However, we estimated the value of the services provided by each of our directors during 2019,and believe that the value of the options to be issued to each of our resigning directors approximates that amount.
XSUNX, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED
JUNE 30, 2020
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A summary of the Company’s options activity and related information follows for the nine months ended June 30, 2020:
June 30, 2020 | ||||||||
Weighted | ||||||||
Number | average | |||||||
of | exercise | |||||||
Options | price | |||||||
Outstanding - beginning of period | - | $ | - | |||||
Granted | 2,000,000,000 | $ | .00001 | |||||
Exercised | - | $ | - | |||||
Forfeited | - | $ | - | |||||
Outstanding - end of period | 2,000,000,000 | $ | .00001 | |||||
At June 30, 2020,2021, the weighted average remaining contractual life of options outstanding:
June 30, 2020 | ||||||||||||||
Weighted | ||||||||||||||
Average | ||||||||||||||
Remaining | ||||||||||||||
Exercisable | Options | Options | Contractual | |||||||||||
Prices | Outstanding | Exercisable | Life (years) | |||||||||||
| $ | .00001 | 2,000,000,000 | 2,000,000,000 | 9.93 | ||||||||||
June 30, 2021 | ||||||||||||||
Weighted | ||||||||||||||
Average | ||||||||||||||
Remaining | ||||||||||||||
Exercisable | Options | Options | Contractual | |||||||||||
Prices | Outstanding | Exercisable | Life (years) | |||||||||||
| $ | .01 | 2,000,000 | 2,000,000 | 8.76 | ||||||||||
For purpose of determining the fair market value8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the options,following at June 30, 2021 and September 30, 2020:
6/30/2021 | 9/30/2020 | |||||||
Trade accounts payable | $ | 374,849 | $ | 88,519 | ||||
Credit cards payable | 66,894 | 65,304 | ||||||
Accrued liabilities | 84,867 | 65,215 | ||||||
Accrued payroll | 14,429 | 0 | ||||||
Deferred compensation | 174,663 | 0 | ||||||
License Fees Payable | 40,402 | 50,402 | ||||||
| $ | 756,104 | $ | 269,440 | |||||
9. LOAN PAYABLE, RELATED PARTY
During the nine months ended September 30, 2020, the Company’s chairman and the CEO each advanced funds to the Company used the Black Scholes valuation model. The significant assumptions usedfor operating expenses in the Black Scholes valuation model for the warrants are as follows:total amount of $24,287. As of June 30, 2021, these balances have been reimbursed.
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The stock-based compensation expense recognizedOn March 30, 2021 the Company issued an unsecured promissory note to Innovest Global, Inc. with a principal and waived interest in the statementamount of operations during$25,000. During the three months ended June 30, 2021, $5,000 was repaid. As of June 30, 2021, the balance is $20,000. Our Chairman Dan Martin is CEO of Innovest.
10. DUE TO RELATED PARTY
During the nine months ended June 30, 2020 related to the granting of these warrants was $399,259.
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During the period ended June 30, 2020, the2021, Innovest Global, Inc. (Innovest) advanced funds to the Company for operating expenses in the amount of $68,312.$79,771. As of June 30, 2020,2021, the amount has not been reimbursed to Innovest Global, Inc. Our Chairman Dan Martin is CEO of Innovest.
NOVACCESS GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 2021 AND 2020
11. BUSINESS TRANSITION
XSUNX, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS – UNAUDITED
JUNE 30, 2020
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On June 2, 2020, in connection with TN3’s acquisition of shares of NovAccess Series B preferred stock from Tom Djokovich, our former president and chief executive officer, the Seller (Mr. Tom Djokovich)Company entered into a transition serviceservices agreement (the “Services Agreement”) with the Buyer (Mr. Daniel G. Martin), sole owner, president and chairman of the board of TN3. Mr. Martin is also the chief executive officer of Innovest Global,Solar Energy Builders, Inc. (the “Service Provider”), a diversified industrial company.company controlled by Mr. Djokovich. The Buyer is inCompany has exited the process of ceasing the XsunX solar business to transition to the StemVaxbiotechnology business. XsunX willThe Company discontinued it’sits direct delivery method for its solar contracting operations by outsourcing the completion of sold projects under a Transitionthe Services Agreement with a licensed California contractor “thethe Service Provider”.Provider. The Company’s intent iswas to transition from providing contracting services directly to its customers to marketing solar services to potential customers and referring those customers to the Service Provider or engaging the Service Provider to provide the services to customers on behalf of the Company. The Company’s operations in future periods will be focused on generating a referral fee of 1% of any gross sales generated through these referrals.However, during the nine months ended June 30, 2021 the Company has exited the solar business completely. We anticipate that this change in operations, and delivery method, will have a negative impact on our gross sales and resulting revenues, if any. However, during the period ended JuneSeptember 30, 2020 the Company began efforts to expand its operations to include the commercialization of developmental healthcare solutions in the biotechnology, medical, and health and wellness markets which efforts are ongoing. There can be no assurance that the Company’s change to its contracting operations to focus on referral fee revenues, and its efforts to expand operations into healthcare solutions in the biotechnology, medical, and health and wellness markets will be successful, or that the Company will continue to generate revenues of significance similar to prior periods.
At the completion of the acquisition of the StemVax Business, Seller will withdrawMr. Djokovich withdrew his position as the qualifying individual for the XsunXCompany’s contractor license for the XsunX Business,solar business and upon completion ofterminated the withdrawal, XsunX and the Seller will terminate the Transition Services Agreement. Thereafter, the SellerMr. Djokovich may accept contracts initially marketed by XsunXthe Company with the SellerService Provider as the qualifying individual for the XsunXsolar license, without obligation to XsunXthe Company for any cash flows therefrom. The timing and procedures for the transition of the XsunX Business is governed by the Transition Services Agreement. In the event of any contradiction or discrepancy between this Agreement and the Transition Services Agreement, the terms and provisions of the Transition Services Agreement will govern.
In connection with preparing for the transition, the Company paid Solar Energy Builders, Inc, a related party, $185,300 to serve as the outside contractor for the assumption of the jobs that were started, and completed. The Company recognized the expense in cost of sales for the period, and also deducted the net book value of certain assets (computer and small equipment) in the amount of $2,092, leaving a net amount paid of $183,208. As of June 30, 2020, the transition has not been completed.
Also, purchase options were issued to the board of directors as mentioned in Note 9 for payment of services.
In connection with closing the Transaction and transition into a new business plan, the Company will enter into a transition services agreement (the “Services Agreement”) with Tom Djokovich, our current President and Chief Executive Officer, and Solar Energy Builders, Inc., a company controlled by Mr. Djokovich (“Solar Energy”). Pursuant to the Services Agreement, we will engage Solar Energy to service our solar business customers or refer those customers to Solar Energy on an exclusive basis. For referrals, Solar Energy will pay us a referral fee of 1% of the gross amount paid by the referred customer to Solar Energy. We intend to continue to market our solar services while preparing to transition into the new business plan. As of June 30, 2020, no referral fees have been paid to Solar Energy.
| 12. DISCONTINUED OPERATIONS |
On June 2, 2020, the Company entered into a transition agreement, and will change their focus to a new line of business. As a result the Company will discontinue XsunX, Inc., and all related operations. Pursuant to the reporting requirements of ASC 205-20, Presentation of Financial Statements – Discontinued Operations, the Company has determined that the business qualifies for presentation as a discontinued operation. Therefore, the Company has reclassified the business assets and liabilities as discontinued operations in the accompanying Balance Sheet and presented the operating results as discontinued operations in the accompanying statements of Operations and Statements of Cash Flows.
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Financial information for XsunX Inc,the Company for the three month and nine months ended June 30, 2021 and 2020, respectively, and as of June 30, 2021 and September 30, 2020 are presented in the following table:
Three Months Ended | Nine Months Ended | ||||||||||||||||
June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||||||
SALES | $ | 218,311 | $ | 296,237 | $ | 1,044,333 | $ | 1,159,466 | |||||||||
COST OF GOODS SOLD | 285,836 | 194,193 | 822,603 | 661,224 | |||||||||||||
GROSS PROFIT | (67,525 | ) | 102,044 | 221,730 | 498,242 | ||||||||||||
OPERATING EXPENSES | |||||||||||||||||
Depreciation and amortization expense | - | 148 | 478 | 342 | |||||||||||||
TOTAL OPERATING EXPENSES of DISCONTINUED OPERATIONS | - | 148 | 478 | 342 | |||||||||||||
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS | $ | (67,525 | ) | $ | 101,896 | $ | 221,252 | $ | 497,900 | ||||||||
June 30, 2020 | September 30, 2019 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Contract receivables of discontinued operations | - | 198,083 | ||||||
Total Current Assets of discontinued operations | - | 198,083 | ||||||
Net Property and Equipment of discontinued operations | - | 2,570 | ||||||
TOTAL ASSETS of DISCONTINUED OPERATIONS | $ | - | $ | 200,653 | ||||
LIABILITIES | ||||||||
CURRENT LIABILITIES | ||||||||
Contract liabilities of discontinued operations | - | 33,138 | ||||||
Total Current Liabilities of discontinued operations | - | 33,138 | ||||||
TOTAL CURRENT LIABILITIES of DISCONTINUED OPERATIONS | - | 33,138 | ||||||
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Management has evaluated subsequent events as of the financial statement date according to the requirements of ASC TOPIC 855 and has no events to report.
Three months ended June 30, | Nine months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
SALES | $ | 0 | $ | 218,311 | $ | 0 | $ | 1,044,333 | ||||||||
COST OF GOODS SOLD | 0 | 285,836 | 0 | 822,603 | ||||||||||||
GROSS PROFIT | 0 | (67,525 | ) | 0 | 221,730 | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Depreciation expense | 0 | 0 | 0 | 478 | ||||||||||||
TOTAL OPERATING EXPENSES OF DISCONTINUED OPERATIONS | 0 | 0 | 0 | 478 | ||||||||||||
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS | $ | 0 | $ | (67,525 | ) | $ | 0 | $ | 221,252 | |||||||
NOVACCESS GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 2021 AND 2020
12. DISCONTINUED OPERATIONS (Continued)
June 30, | September 30, | |||||||
2021 | 2020 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Contract receivables of discontinued operations | $ | 0 | $ | 0 | ||||
Total Current Assets of discontinued operations | 0 | 0 | ||||||
Net Property and Equipment of discontinued operations | 0 | 0 | ||||||
TOTAL ASSETS OF DISCONTINUED OPERATIONS | $ | 0 | $ | 0 | ||||
LIABILITIES | ||||||||
CURRENT LIABILITIES | ||||||||
Contract liabilities of discontinued operations | 0 | 0 | ||||||
Total Current Liabilities of discontinued operations | 0 | 0 | ||||||
TOTAL CURRENT LIABILITIES OF DISCONTINUED OPERATIONS | $ | 0 | $ | 0 | ||||
13. RELATED PARTY TRANSACTIONS
As of March 31, 2016, Company issued the remaining unsecured Convertible Promissory Notes (the “Notes”) in the amount of $12,000 to a 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 $4.5 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.
On September 4, 2020, the Company entered into a management services agreement (the “Agreement”) with TN3, LLC. Pursuant to the Agreement, TN3 will provide NovAccess with office space in Chesterland, Ohio and management, administrative, marketing, bookkeeping and IT services for a fee of $30,000 a month. The initial term of the Agreement is three years, with subsequent one-year renewals. TN3 holds all of our outstanding preferred stock and is owned by Daniel G. Martin, our chief executive officer at the time of this transaction, and the sole member of our board of directors.
On November 23, 2020 the Company issued 7,500,000 shares of common stock to Innovest Global, Inc. for the September 8, 2020 acquisition of StemVax, LLC. Our Chairman Dan Martin is CEO of Innovest.
On November 23, 2020 the Company issued 1,800,000 shares of common stock to Dwain K. Morris-Irvin to compensate him for serving as our chief executive officer. The stock-based compensation expense in the amount of $846,000 was reported on the Company’s financial statements for the nine months ended June 30, 2021.
On October 21, 2020, L. Michael Yukich joined the Company as chief financial officer. His offer letter provided for the issuance of 200,000 shares of common stock to compensate him for his services. These shares were issued by the Company’s transfer agent on January 19, 2021. The stock-based compensation expense in the amount of $90,000 was reported in the Company’s financial statements for the nine months ended June 30, 2021.
During the period ended September 30, 2020, the Company’s chairman and the CEO each advanced funds to the Company for operating expenses in the total amount of $24,287. As of June 30, 2021, these balances have been reimbursed.
NOVACCESS GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 2021 AND 2020
13. RELATED PARTY TRANSACTIONS (Continued)
On March 30, 2021 the Company issued an unsecured promissory note to Innovest Global, Inc. with a principal and waived interest in the amount of $25,000. During the three months ended June 30, 2021, $5,000 was repaid. As of June 30, 2021, the balance is $20,000. Our Chairman Dan Martin is CEO of Innovest.
During the periods ended June 30, 2021, Innovest Global, Inc. advanced funds to the Company for operating expenses in the amount of $79,771. As of June 30, 2021, the amount has not been reimbursed to Innovest Global, Inc.
During the three months ended June 30, 2021 the Company advanced $2,107 to our CEO Dwain K. Morris-Irvin for travel expenses.
14. SUBSEQUENT EVENTS
Management has evaluated subsequent events as of August 12, 2021, the date the consolidated financial statements were available to be issued according to the requirements of ASC topic 855.
On July 6, 2021, the Company issued a 12% unsecured convertible promissory note (the “July Note”) for the principal sum of $38,750 plus accrued interest which matures on July 6, 2022. The July Note may be converted 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.
Item 2. Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY AND FORWARD LOOKING STATEMENTSCautionary Statement Concerning Forward-Looking Statements
In addition toThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements of historical fact,and the related notes included elsewhere in this Quarterly Report on Form 10-Q10-Q. In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements. The presentation of future aspects of XsunX, Inc. (“XsunX”, the “Company” or “issuer”) found in these statements is subject to a number ofthat involve risks, uncertainties and uncertainties that could cause actual results to differ materially from those reflected in such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. Without limiting the generality of the foregoing, words such as “may”, “will”, “expect”, “believe”, “anticipate”, “intend”, or “could” or the negative variations thereof or comparable terminology are intended to identify forward-looking statements.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:Item 1A. Risk Factors” inFactors of our Form 10-K for the Company’s Annual Report on Form 10-K.fiscal year ended September 30, 2020.
These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause XsunX’s actual results to be materially different from any future results expressed or implied by XsunX in those statements. Important facts that could prevent XsunX from achieving any stated goals include, but are not limited to, the following:
Some of these risks might include, but are not limited to, the following:
(a) volatility or decline of the Company’s stock price;
(b) potential fluctuation in quarterly results;
(c) failure of the Company to earn revenues or profits;
(d) inadequate capital to continue or expand its business, inability to raise additional capital or financing to implement its business plans;
(e) failure to commercialize its technology or to make sales;
(f) rapid and significant changes in markets;
(g) litigation with or legal claims and allegations by outside parties;
(h) insufficient revenues to cover operating costs.
There is no assurance that the Company will be profitable, the Company may not be able to successfully develop, manage or market its products and services. The Company may not be able to attract or retain qualified executives and technology personnel, the Company’s products and services may become obsolete, government regulation may hinder the Company’s business, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, or the exercise of warrants and stock options, and other risks inherent in the Company’s businesses.
The Company undertakesWe undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readersof this report. You should carefully review the factors described in other documents the Companythat NovAccess files from time to time with the SecuritiesSEC.
Results of Operations for the Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
Revenue and Exchange Commission,Cost of Sales:
The Company generated no revenue for the third quarter of fiscal 2021 ended June 30, 2021 compared to $218,311 for the third quarter of fiscal 2020 ended June 30, 2020. The lack of revenue in the third quarter of 2021 was due to our change in focus from selling commercial solar systems and steel canopy construction services to investing in the biotechnology industry following our acquisition of StemVax, LLC, a biopharmaceutical company developing novel therapies for brain tumor patients, in September 2020. The costs of goods sold in the third quarter of 2021 and 2020 was $0 and $285,836, respectively.
Pursuant to the reporting requirements of ASC 205-20, Presentation of Financial Statements — Discontinued Operations, we have determined that the Company’s solar business qualifies for presentation as a discontinued operation. Therefore, we have reclassified and presented these operating results as discontinued operations in the accompanying statements of operations.
Selling, General and Administrative Expenses:
Selling, general and administrative (SG&A) expenses increased by $11,619 during the third quarter of fiscal 2021 to $501,492 as compared to $489,873 for the third quarter of fiscal 2020. The increase in SG&A expenses was related primarily to an increase of $149,317 in professional fees due to our fundraising and other investor related activities, $97,500 in outside services and $69,417 in payroll related expenses incurred in the third quarter of 2021 partially offset by a decrease of $304,259 in stock compensation expense.
Other Income/(Expenses):
Other expenses increased by $2,861,269 from $1,265,499 of other income for the third quarter of fiscal 2020 to $1,595,770 of other expense for third quarter of fiscal 2021. The increase in other expenses was primarily due to recognition of a loss on net change in fair market value of the derivative instruments of $1,585,069 in the third quarter of 2021 compared to a gain of $1,272,932 recognized in the third quarter of 2020.
Net Loss:
For the third quarter of fiscal 2021, our net loss was $2,097,262 as compared to net income of $708,011 (net of $67,525 loss from discontinued operations) for the third quarter of fiscal 2020. The majority of the increase in net loss of $2,805,363 was due to an increase in other expenses associated with the net change in derivative instruments estimated each period in 2021. The derivative instruments estimates are based on multiple inputs, including the Quarterly Reportsmarket price of our stock, interest rates, our stock price volatility, variable conversion prices based on Form 10-Qmarket prices defined in the respective agreements and Annual Reportsprobabilities of certain outcomes based on Form 10-K and Form 10-K/A filed bymanagements’ estimates. These inputs are subject to significant changes from period to period. As a result, the Company and any Current Reports on Form 8-K filed by the Company.
Management believes the summary data presented herein is aestimated fair presentationvalue of the Company’s results of operations forderivative liabilities will fluctuate from period to period, and the periods presented. Due to the Company’s change in primary business focus and new business opportunities these historical resultsfluctuation may not necessarily be indicative of results to be expected for any future period. As such, future results of the Company may differ significantly from previous periods.material.
Organization
XsunX, Inc. (“XsunX,” the “Company” or the “issuer”) is a Colorado corporation formerly known as Sun River Mining Inc. “Sun River”). 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.
Business Overview/SummaryResults of Operations for the Nine Months ended June 30, 2021 Compared to the Nine Months Ended June 30, 2020
New Business PlanRevenue and Cost of Sales:
OnThe Company generated no revenue for the nine months ended June 2, 2020, TN3,30, 2021 compared to $1,044,333 for the nine months ended June 30, 2020. The lack of revenue in 2021 was due to our change in focus from selling commercial solar systems and steel canopy construction services to investing in the biotechnology industry following our acquisition of StemVax, LLC, a limited liabilitybiopharmaceutical company owneddeveloping novel therapies for brain tumor patients, in September 2020. The costs of goods sold for the nine months ended June 30, 2021 and 2020 was $0 and $822,603, respectively.
Pursuant to the reporting requirements of ASC 205-20, Presentation of Financial Statements — Discontinued Operations, we have determined that the Company’s solar business qualifies for presentation as a discontinued operation. Therefore, we have reclassified and presented these operating results as discontinued operations in the accompanying statements of operations.
Selling, General and Administrative Expenses:
Selling, general and administrative (SG&A) expenses increased by Daniel G. Martin, purchased all$1,432,020 during the nine months ended June 30, 2021 to $2,182,702 as compared to $750,682 for the nine months ended June 30, 2020. The increase in SG&A expenses was related primarily to an increase of $536,741 in stock compensation expense in connection with the outstanding sharesissuance of preferred stock of XsunX from Tom Djokovich,to our former president and chief executive officer for $50,000. In addition, TN3 agreed to pay for certain expenses of the transaction incurred by Mr. Djokovich and XsunX totaling more than $50,000. Upon acquiring the preferred shares, Mr. Martin became the sole director and chief executivefinancial officer for services rendered; an increase of the company. For more information about Mr. Martin’s acquisition of the preferred stock and his appointment$450,383 in professional fees due to our board, please see our Schedule 14F-1/A filed with the Securitiesfundraising and Exchange Commission (SEC) on May 13, 2020 and Form 8-K filed with the SEC on June 8, 2020.
During the period ending June 30, 2020 the Company changed the delivery methodother investors related activities, of which $381,668 represented non-cash cost of stock issuance for its solar contracting operations by outsourcing the completion of sold projects under a Transition Services Agreement with a licensed California contractor “the Service Provider”. The Company’s intent is to transition from providing contracting services directly to its customers to marketing solarreceived; $287,500 in outside services to potential customers and referring those customers to the Service Provider or engaging the Service Provider to provide the services to customers on behalf of the Company. The Company’s operations in future periods will be focused on generating a referral fee of 1% of any gross sales generated through these referrals. We anticipate that this change in operations, and delivery method, will have a negative impact on our gross sales and resulting revenues, if any. However,expense incurred during the periodfirst nine months of 2021; as well as a $147,888 increase in payroll related expenses.
Other Income/(Expenses):
Other income/(expenses) decreased by $1,603,062 from other income of 1,174,410 for the nine months ended June 30, 2020 to other expense of $428,652 for first nine months of 2021. The increase in net total other expense was primarily due to recognition of a loss on net change in fair market value of the Company beganderivative instruments of $405,002 in the nine months of 2021 compared to a gain of $1,197,395 recognized in 2020.
Net Loss:
For the nine months ended June 30, 2021, our net loss was $2,611,354 as compared to net income of $644,980 (net of $221,252 income from discontinued operations) for the first nine months of 2020. The majority of the increase in net loss of $3,256,334 was due to an increase in SG&A expenses in 2021 combined with an increase in other expense associated with the net change in derivative instruments estimated each period. These estimates 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. As a result, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
Liquidity and Capital Resources
We have incurred losses since exiting the solar business to transition to biotechnology and have funded our operations since then primarily through debt and the sale of capital stock. We expect to continue to fund our operations in this way until we are able to generate revenue through the successful commercialization of our biopharmaceutical solutions. We had a working capital deficit as of June 30, 2021 of $4,293,627, compared to a working capital deficit of $3,454,730 as of September 30, 2020. The increase of $838,897 in working capital deficit was primarily the result of an increase in derivative liability, accounts payable, accrued expenses, and deferred compensation, partially offset by an increase in prepaid expenses and extension of a due date on November note.
For the nine months ended June 30, 2021, our cash flow used in operating activities was $417,756, compared to cash flow used in operating activities of $68,922 for first nine months of 2020. Out of these amounts, $417,756 and $236,437 was used by continuing operating activities in the first nine months of 2021 and 2020, respectively. The balance of $167,515 was provided by discontinued operating activities in 2020. The net increase of $348,834 in cash flow used in operating activities was primarily due to changes in assets and liabilities and lack of revenue in 2021.
There was no cash flow provided by/(used in) investing activities for the nine months ended June 30, 2021 or 2020.
Cash flow provided by financing activities was $419,172 for the nine months ended June 30, 2021, compared to cash provided by financing activities of $61,112 during the first nine months of 2020. The increase in cash flow provided by financing activities was primarily the result of stock subscriptions sold to investors and issuance of convertible debt.
Our ability to generate revenue and achieve profitability depends on our ability to raise additional capital to fund continuing efforts to expand its operations to include the commercialization of developmental healthcare solutions in the biotechnology, medical, and health and wellness markets which efforts are ongoing. There can be no assurance that the Company’s change to its contracting operations to focus on referral fee revenues, and its efforts to expand operations into healthcare solutions in the biotechnology, medical, and health and wellness markets will be successful, or that the Company will continue to generate revenues of significance similar to prior periods.”
On June 2, 2020, we entered into a membership interest purchase agreement with Innovest to acquire StemVax for 7.5 million shares of our unregistered common stock (after giving effect to the 1-for-1,000 reverse stock split described in this information statement). We expect to complete the acquisition in the third calendar quarter of 2020 but cannot guarantee that the transaction will be completed when expected, or at all.
We believe that investing in the biotechnology industry will significantly increase value for our shareholders. However, we cannot guaranty that we will be successful in this endeavor or that we can locate, acquire and finance the acquisition of biotechnology companies. Currently, we continue to engage in the marketing of solar photovoltaic power generation and storage solutions.
Critical Accounting Policies
The Securities and Exchange Commission (“SEC”) defines “critical accounting policies” as those that require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Not all of the accounting policies require management to make difficult, subjective or complex judgments or estimates. However, the following policies could be deemed to be critical within the SEC definition.
Revenue Recognition
We recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.
Revenues and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, valuation of non-cash capital stock issuances and the valuation allowance on deferred tax assets.markets. The Company baseshas obtained funds from its estimates on historical experience and on various other assumptions that are believed to be reasonable inshareholders since its inception through the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Fair Value of Financial Instruments
Fair value of financial instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of June 30, 2020, the amounts reported for cash, prepaid expenses, accounts payable and accrued expenses approximate the fair value because of their short maturities.
Recently Issued Accounting Pronouncements
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 condensed financial statements.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2020 COMPARED TO THREE MONTHS ENDED JUNE 30, 2019.
Selling, General and Administrative Expenses:
Selling, General and Administrative (SG&A) expenses increased by $369,991 during the three months ended June 30, 2020 to $489,873 as compared to $119,882 for the prior three months ended June 30, 2019. The increase in SG&A expenses was primarily due to an increase in labor wages, and other administrative expenses, which include non-cash stock compensation expense of $399,259. Management expects SG&A expenses may increase in future periods as the Company continues to expand its marketing, sales, and service efforts.
Change in Derivative Liability
The change in derivative liability for the three months ended June 30, 2020 and 2019, was a gain of $1,272,932, compared to a loss of $434,387 in the prior period, as a result of an increase in the fair value of the derivative liability.
Interest
Interest expense during the three months ended June 30, 2020 was $7,432 compared to $8,067 for the prior three months ended June 30, 2019. The decrease was the result of less convertible notes and no debt discount.
Net Loss from Continuing Operations
Net Income (Loss) from continuing operations was $775,626 and $(562,336) for the three months ended June 30, 2020 and 2019, respectively, as result of gains discussed above.
Income ( Loss) from Discontinued Operations
Income (Loss) on discontinued operations was a loss of ($67,525) and income of $101,896 for the three months ended June 30, 2020 and 2019, respectively, as a result of reclassifying XsunX, Inc. business as discontinued operations.
Net Income (Loss)
Net Income for the three months ended June 30, 2020, was $708,101, compared to a Net Loss of $(460,440) for the prior period ended June 30, 2019. The increase in Net Income was caused by2021. Management believes the change in incomeexisting shareholders and expense discussed above.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.
Off-Balance Sheet Arrangements
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2020 COMPARED TO NINE MONTHS ENDED JUNE 30, 2019.
Selling, General and Administrative Expenses:
Selling, General and Administrative (SG&A) expenses $750,682 as compared to $405,464 for the nine months ended June 30, 2019. The increase in SG&A expenses was related primarily due to a increase in non-cash stock compensation expense of $399,259 and other administrative expenses.
Change in Derivative Liability
The change in derivative liability for the nine months ended June 30, 2020 and 2019, was a gain on change in derivative of $1,197,395 compared to a gain of $1,433,500, and a gain on conversion of debt of $33,829 in the prior period. The decrease in the current period was the result of a decrease in the fair value of the derivative liability and gain on conversion of debt.
Interest
Interest expense during the nine months ended June 30, 2020 was $22,985 compared to $64,094 for the prior nine months ended June 30, 2019. The decrease was the result of less convertible notes and no debt discount.
Net Loss from Continuing Operations
Net Income from continuing operations was $423,728 and $930,113 for the nine months ended June 30, 2020 and 2019, respectively, as result of gains discussed above.
Income (Loss) from Discontinued Operations
Income (Loss) on discontinued operations was income of $221,252 and income of $497,900 for the nine months ended June 30, 2020 and 2019, respectively, as a result of reclassifying XsunX, Inc. business as discontinued operations.
Net Income (Loss)
Net Income for the nine months ended June 30, 2020, was $644,980, compared to a Net Loss of $1,428,013 for the prior period ended June 30, 2019. The increase in Net Income was caused by the change in income and expense discussed above.
Liquidity and Capital Resources
We had a working capital deficit at June 30, 2020 of $1,041,712, as compared to a working capital deficit of $2,072,641 as of September 30, 2019. The decrease in working capital deficit was primarily the result of an decrease in derivative liability.
Cash Flows
Nine months ended June 30, | ||||||||
2020 | 2019 | |||||||
Net cash (used in) provided by operating activities - continuing operations | $ | (236,437 | ) | $ | 114,535 | |||
Net cash provided by investing activities - continuing operations | $ | - | $ | - | ||||
Net cash provided by (used in) financing activities | $ | 61,112 | $ | (24,300 | ) | |||
Cash flows used in operating activities – continuing operations was $236,437 for the nine months ended June 30, 2020, as compared to cash flows provided by operating activities of $114,535 for the prior nine months ended June 30, 2019. The increase in cash flow used in operating activities was due primarily to a decrease of cash flow from accounts receivable.
Cash flows provided by investing activities – continuing operations for the nine months ended June 30, 2020 was $0, as compared to cash flows used in investing activities of $0 for the prior nine months ended June 30, 2019. The Company purchased certain assets in the prior period.
Cash flows provided by financing activities for the nine months ended June 30, 2020 was $61,112, compared to cash flows used in financing activities of $24,300. Our capital needs have primarily been met from the proceeds of private placements, convertible notes, and initial revenues resulting from our change in business operations focused on the sale, design, and installation of Solar Photovoltaic (PV), and managed Energy Storage Systems (ESS) for commercial and industrial real-estate in in the period.
Our financial statements as of June 30, 2020 have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm has issued their report dated December 20, 2019, that included an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern ultimately is dependent on our ability to generate a profit which is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Capital Resources
We have only common and preferred stock as our capital resources. We have no material commitments for capital expenditures within the next year, however as we work to market and make sales of our commercial solar PV system services, substantial capital may be needed to expand and pay for these activities.
Need for Additional Financing
We do not have capital sufficient to meet our cash needs. We will have to seek loans or equity placements to cover such cash needs. No commitments to provide additional funds have been made by our management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to us to allow it to cover our expenses as they may be incurred.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheetrelationships 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 are reasonably likely to have a current or future effect on our financial condition, revenues, result of operations, liquidity or capital expenditures.could arise if we had engaged in such relationships.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We doBecause NovAccess is a “smaller reporting company” as defined by the Securities and Exchange Commission (the “SEC”) we are not have anyrequired to provide quantitative and qualitative disclosures about market risk sensitive instruments. Since all operations are in U.S. dollar denominated accounts, we do not have foreign currency risk. Our operating costs are reported in U.S. dollars.
The Company does not invest in term financial products or instruments or derivatives involving risk other than money market accounts, which fluctuate with interest rates at market.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation, under the supervision andOur management team, with the participation of our chief executive officer, Dwain K. Morris-Irvin, and chief financial officer, L. Michael Yukich, evaluated the effectiveness of ourthe design and operation of NovAccess’ disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e)under the Securities Exchange Act) as of the Exchange Act).June 30, 2021. Based upon this evaluation, our chief executive officerMessrs. Morris-Irvin and chief financial officerYukich concluded that ourthe Company’s disclosure controls and procedures arewere not effective as of June 30, 2021 due to ensure that information requiredthe existence of a material weakness in internal control over financial reporting primarily as a result of an audit adjustment relating to be disclosed bystock issuance as compensation for services rendered. To remediate the issue, we have retained an external accounting consulting firm to assist us with the review and reporting of complex and unusual transactions.
Changes in the reports that we file or submitInternal 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 is: (i) recorded, processed, summarizedas a process designed by, or under the supervision of, our principal executive and reported, within the time periods specified in the Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chiefprincipal financial officer,officers, or personpersons performing similar functions, as appropriateand effected by our board, senior management and other personnel, to allow timely decisionsprovide reasonable assurance regarding required disclosure. the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles.
ChangesBecause 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 Internal Control over Financial Reporting
There was no changeconditions, 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.
Other than as reported above under Evaluation of Disclosure Controls and Procedures, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by the Securities Exchange Act that occurred during our second fiscal quarter that hashave materially affected, or isare reasonably likely to materially affect, our internal controlscontrol over financial reporting.
PARTPart II - OTHER INFORMATION— Other Information
NoneWe are not involved in any legal proceedings.
Item 1A. Risk Factors.
Please refer to the risk factors listed under Item 1A. Risk Factors
There are no material changes from of our Form 10-K for the fiscal year ended September 30, 2020 for information relating to certain risk factors previously disclosed in the Registrant’s Form 10-K filed with the Securities and Exchange Commission dated December 20, 2019. applicable to NovAccess.
Item 2. Unregistered Sales of Equity Securities and Use of ProceedsProceeds.
NoneDuring the quarter end of June 30, 2021, we issued 654,910 unregistered shares of our common stock that were not previously reported on Form 8-K for capital raising and compensatory purposes as described in more detail below.
Effective May 11, 2021, we issued 174,243 unregistered shares of common stock to Gemini Master Fund, Ltd. at a per share price of $0.252 in full satisfaction of the outstanding principal and interest of $43,909 due under a promissory note dated September 30, 2013. The note was in default and was convertible by Gemini pursuant to its terms. The issuance of shares to Gemini was exempt from registration under Section 4(a)(2) of the Securities Act.
In April 2021, we issued 1,000 unregistered shares of our common stock to each of four individuals for services provided to NovAccess, including accounting and staffing assistance. On each of April 9, May 5 and June 2, 2021, we issued 8,889 of our unregistered shares to Satya Chillara, an employee of Darrow Associates, for investor relations services provided to NovAccess for the months of April, May and June 2021. On May 5, 2021, we issued 250,000 unregistered shares to the Chesapeake Group Inc. for investor relations services provided to NovAccess. The issuances of shares to our service providers were exempt from registration under Section 4(a)(2) of the Securities Act.
During the quarter ended June 30, 2021, we offered unregistered shares of our common stock in a private placement to accredited investors to fund our working capital needs. We sold 200,000 shares to two investors during the quarter for $0.20 a share for a total of $40,000. The issuance of shares in the private placement was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506(b) under the Securities Act.
Item 3. Defaults Upon Senior SecuritiesSecurities.
None.On October 20, 2015, we entered into a third extension of a promissory note issued to Gemini Master Fund, Ltd. on September 30, 2013. The extension terms included mandatory payments of $10,000 per month beginning November 1, 2015 until the note in the amount of $143,033 was paid in full by March 30, 2017. The note bore interest at 12% per year and was convertible by Gemini into shares of our common stock at a per share conversion price of 60% of the lowest volume weighted average price of our stock occurring during the twenty trading days preceding the conversion date. Effective May 11, 2021, we issued 174,243 unregistered shares of common stock to Gemini at a per share price of $0.252 in full satisfaction of the outstanding principal and interest due under the note pursuant to its terms.
On November 20, 2014, we issued convertible promissory note to Bountiful Capital, LLC for the principal sum of up to $400,000 plus accrued interest on any advanced principal funds. The Bountiful note matures eighteen months from each advance. The note bears interest at 10% per year and may be converted by the Bountiful into shares of our common stock at the lesser of: $12.5 per share; (b) 50% of the lowest trade prices following issuance of the note; or (c) the lowest effective price per share granted to any person or entity. At issuance, Bountiful loaned $50,000 to the Company under the note. On various dates from February 18, 2015 through September 30, 2016, Bountiful loaned the Company an additional $350,000 under the note. A portion of these loans was subsequently converted into shares of common stock and Bountiful agreed to extend the due date of the remainder of the loans. A tranche of the note matured on June 30, 2021. Another tranche matures on August 18, 2021. As of June 30, 2021, there was an aggregate outstanding principal balance of $50,880 under the Bountiful note. On August 9, 2021 effective June 30, 2021, Bountiful extend the due date of both payments to June 30, 2023..
Item 4. Mining andMine Safety DisclosuresDisclosures.
None.We are not engaged in mining operations.
Item 5. Other informationInformation.
None.
We have disclosed on Form 8-K all reportable events that occurred in the quarter ended June 30, 2021.
The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.
Exhibit | Description | |
31.1 | ||
31.2 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — L. Michael Yukich | |
32.1 | ||
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(i) the Condensed Consolidated Balance Sheets at June 30, 2021 and September 30, 2020, (ii) the Condensed Consolidated Statements of Operations for the Three and Six months Ended June 30, 2021 and June 30, 2020, (iii) the Condensed Consolidated Statements of Shareholders’ Deficit for the nine months ended June 30, 2021 and 2020, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2021 and June 30, 2020, and (v) related notes to the Consolidated Financial Statements. | |
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NovAccess Global Inc. |
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Dwain K. Morris-Irvin, Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: August 13, 2021 |
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L. Michael Yukich, Chief Financial Officer | |||
(Principal |