10-Q: NovAccess Global Inc. Reports Q3 2024 Results: Losses Narrow Amidst Financing Challenges

NovAccess Global Inc. reports a decreased net loss for the nine months ended June 30, 2024, despite ongoing concerns about liquidity and capital resources.

Summary

• NovAccess Global Inc. reported its financial results for the quarter and nine months ended June 30, 2024.
• The company is a biopharmaceutical company focused on developing immunotherapies for brain tumor patients.
• For the three months ended June 30, 2024, the company's net loss was $936,333, compared to a net loss of $779,639 for the same period in 2023.
• Selling, general, and administrative expenses decreased by $166,433 to $278,048, primarily due to lower warrant expenses.
• Research and development expenses marginally decreased by $2,863 to $37,301.
• For the nine months ended June 30, 2024, the company's net loss decreased to $125,334, compared to a net loss of $3,001,522 for the same period in 2023.
• Selling, general, and administrative expenses decreased by $1,258,410 to $682,177, mainly due to reduced stock-based compensation and warrant expenses.
• The company had a working capital deficit of $7,647,154 as of June 30, 2024, compared to $7,798,484 as of September 30, 2023.
• The company's cash flow used by operating activities was $159,975 for the nine months ended June 30, 2024, compared to $469,786 for the same period in 2023.
• The company needs to raise at least $3.0 million through December 31, 2025, to finance operations, complete its IND application to the FDA, and make payments under its loan agreements.
• A securities purchase agreement with Sumner Global LLC is subject to contingencies and may not be completed.
• The company is pursuing financing that would allow it to pay its debts when due, but there is no guarantee that it will be able to obtain the necessary financing in a timely manner, or at all.

Sentiment

Score: 4

Explanation: The sentiment is slightly negative due to the company's ongoing losses, working capital deficit, and need for additional funding, despite some improvements in reducing net losses and operating expenses. The uncertainty surrounding the Sumner Global LLC investment and the company's defaults on loan agreements further contribute to the negative sentiment.

Positives

• The net loss for the nine months ended June 30, 2024, decreased significantly compared to the same period in 2023, from $3,001,522 to $125,334.
• Selling, general, and administrative expenses decreased by $1,258,410 during the nine months ended June 30, 2024.
• Cash flow used by operating activities decreased to $159,975 for the nine months ended June 30, 2024, compared to $469,786 for the same period in 2023.

Negatives

• The company generated no revenue or cost of goods sold in the three and nine months ended June 30, 2024, and 2023.
• The company had a working capital deficit of $7,647,154 as of June 30, 2024.
• The company needs to raise at least $3.0 million through December 31, 2025, to finance operations, complete its IND application to the FDA, and make payments under its loan agreements.
• A securities purchase agreement with Sumner Global LLC is subject to contingencies and may not be completed.
• The company is pursuing financing that would allow it to pay its debts when due, but there is no guarantee that it will be able to obtain the necessary financing in a timely manner, or at all.

Risks

• The company's ability to continue as a going concern is dependent upon additional cash infusions.
• The company needs to raise at least $3.0 million through December 31, 2025, to finance operations, complete its IND application to the FDA, and make payments under its loan agreements.
• A securities purchase agreement with Sumner Global LLC is subject to contingencies and may not be completed.
• The company is pursuing financing that would allow it to pay its debts when due, but there is no guarantee that it will be able to obtain the necessary financing in a timely manner, or at all.
• The company has failed to make payments when required and to otherwise comply with the covenants of several of the company's debts.

Future Outlook

The company plans to submit an IND application in 2024 if funding is available and needs to raise at least $3.0 million through December 31, 2025, to finance operations, complete its IND application to the FDA, and make payments under its loan agreements.

Management Comments

• Management believes the existing shareholders, prospective new investors and lenders will provide the additional cash needed to meet the Company's obligations as they become due and will allow the development of its business.
• Based upon this evaluation, Dr. Irvin concluded that the Company's disclosure controls and procedures were effective as of June 30, 2024.

Industry Context

The company operates in the biopharmaceutical industry, focusing on developing novel immunotherapies for brain tumor patients, a field with significant unmet medical needs and potential for high-value therapeutics.

Comparison to Industry Standards

• It is difficult to compare NovAccess to industry standards due to its early stage and lack of revenue.
• Many comparable companies are private and do not release financial information.
• Other companies in the immunotherapy space include Bristol Myers Squibb, Merck, and Roche, but these are much larger, established companies with revenue-generating products.
• NovAccess's success depends on its ability to secure funding, advance its clinical trials, and ultimately commercialize its drug product.

Related Party Transactions

• During the nine months ended June 30, 2024, the Company issued 626,256 shares to various vendors for services provided for a value of $7,871 recorded at fair value of shares on the respective grant dates and including 326,250 shares issued to a related party for services provided amounting to $4,108 recorded at the fair value of shares on the respective grant dates.
• On May 31, 2024, the Company issued an interest free unsecured promissory note (the May 31, 2024, Note) for the principal sum of $9,000 to John A. Cassarini, our Chairman.
• On December 21, 2023, our Chairman, John A. Cassarini loaned the Company $10,000 to address short-term cash need.
• Our Chief Financial Officer, Neil J. Laird loaned the Company $1,000.
• For the nine months ended June 30, 2024, imputed interest of $4,448 on these related party loans was charged to interest expense and credited to additional paid-in capital.

Stakeholder Impact

• Shareholders face the risk of dilution if the company issues additional common stock to raise capital.
• Employees' job security is uncertain due to the company's financial difficulties and need for additional funding.
• Creditors face the risk of non-payment due to the company's defaults on loan agreements.
• The company's ability to advance its clinical trials and commercialize its drug product depends on securing funding, which impacts the potential benefits for patients with brain tumors.

Next Steps

• The company plans to submit an IND application to the FDA in 2024 if funding is available.
• The company needs to raise additional funds to finance its ongoing operations, complete its IND application to the FDA and to make payments under its loan agreements.
• The company is pursuing financing that would allow it to pay its debts when due.

Key Dates

Keywords

financial results, biopharmaceutical, immunotherapies, brain tumor, NovAccess Global, StemVax, TLR-AD1, glioblastoma, FDA, IND application, financing, convertible notes, warrants, liquidity, going concern