UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
FORM 10-Q
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended DecemberMarch 31, 20202023
ORor
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission File Number 001-39825
Intelligent Bio Solutions Inc.
GBS Inc.
(Exact name of Registrant as specified in its Charter)
| Delaware | 82-1512711 | |
(State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) |
Identification No.) |
| ||
| Intelligent Bio Solutions Inc., | ||
| 142 West, 57th Street, 11th Floor, New York, NY | 10019 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (646) (646) 828-8258
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, par value | The Nasdaq |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.YES ☒ NO ☐
YES [ ] NO [X]
Indicate by check mark whether the registrantRegistrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§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 ☐
YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange 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 Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] ☐ NO [X] ☒
The numberAs of May 8, 2023, there were of the registrant’s common stock outstanding as of February 11, 2021 was 11,875,222Common Stock issued and outstanding.
Table of Contents
| 2 |
Intelligent Bio Solutions Inc.
Item 1. Financial statements (Unaudited)
Condensed Consolidated Balance Sheets
(Unaudited)
| March 31, 2023 (Unaudited) | June 30, 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 2,280,544 | $ | 8,238,301 | ||||
| Accounts receivable, net | 296,049 | - | ||||||
| Inventories | 736,221 | - | ||||||
| Grant receivable, current portion | - | 1,529,882 | ||||||
| Research and development tax incentive receivable | 578,456 | 353,048 | ||||||
| Other current assets | 531,824 | 746,761 | ||||||
| Total current assets | 4,423,094 | 10,867,992 | ||||||
| Property and equipment, net | 478,120 | 391,408 | ||||||
| Finance lease right-of-use assets | 472,253 | - | ||||||
| Goodwill | - | - | ||||||
| Intangible assets, net | 5,295,234 | - | ||||||
| Long-term grant receivable | - | 1,092,773 | ||||||
| TOTAL ASSETS | $ | 10,668,701 | $ | 12,352,173 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 1,598,831 | $ | 1,625,089 | ||||
| Current portion of finance lease liabilities | 174,215 | - | ||||||
| Current portion of deferred grant income | 1,093,157 | 2,836,582 | ||||||
| Current employee benefit liabilities | 334,227 | 201,332 | ||||||
| Current portion of notes payable | 335,528 | - | ||||||
| Total current liabilities | 3,535,958 | 4,663,003 | ||||||
| Employee benefit liabilities | 24,939 | 50,626 | ||||||
| Finance lease liabilities | 320,725 | - | ||||||
| Long-term deferred grant income | - | 1,092,773 | ||||||
| Notes payable | 470,872 | - | ||||||
| Convertible notes payable | 389,361 | - | ||||||
| Total liabilities | 4,741,855 | 5,806,402 | ||||||
| Commitments and contingencies (Note 18) | - | - | ||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, $ par value, shares authorized: | ||||||||
| Series C preferred stock, shares designated, and shares issued and outstanding at March 31, 2023 and June 30, 2022, respectively | 23,630 | - | ||||||
| Series D preferred stock, shares designated, and shares issued and outstanding at March 31, 2023 and June 30, 2022, respectively | 1,765 | - | ||||||
| Preferred stock value | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding at March 31, 2023 and June 30, 2022, respectively | 16,855 | 7,445 | ||||||
| Treasury stock, at cost, and shares as of March 31, 2023 and June 30, 2022, respectively | (14 | ) | - | |||||
| Additional paid-in capital | 45,772,664 | 38,581,465 | ||||||
| Accumulated deficit | (39,148,652 | ) | (31,175,853 | ) | ||||
| Accumulated other comprehensive loss | (639,884 | ) | (788,135 | ) | ||||
| Total consolidated Intelligent Bio Solutions Inc. equity | 6,026,364 | 6,624,922 | ||||||
| Non-controlling interest | (99,518 | ) | (79,151 | ) | ||||
| Total shareholders’ equity | 5,926,846 | 6,545,771 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 10,668,701 | $ | 12,352,173 | ||||
(Amounts in $)
| December 31, 2020 | June 30, 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 19,877,860 | $ | 427,273 | ||||
| Deferred charges | - | 1,863,613 | ||||||
| Other current assets | 88,548 | 49,062 | ||||||
| Total current assets | 19,966,408 | 2,339,948 | ||||||
| Investment in affiliate | - | 135,692 | ||||||
| TOTAL ASSETS | $ | 19,966,408 | $ | 2,475,640 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 734,825 | $ | 787,469 | ||||
| Related party payables | 431,621 | 1,769,293 | ||||||
| Convertible notes payable | - | 5,133,706 | ||||||
| Total current liabilities | 1,166,446 | 7,690,468 | ||||||
| Employee benefit liabilities | 17,947 | - | ||||||
| Total liabilities | 1,184,393 | 7,690,468 | ||||||
| Commitments and contingencies - Note 10 | - | - | ||||||
| Shareholders’ equity (deficit): | ||||||||
| Preferred stock, $0.01 par value, 10,000,000 shares authorized, 3,000,000 and 2,370,891 shares issued and outstanding at December 31, 2020 and June 30, 2020, respectively | 30,000 | 23,709 | ||||||
| Common stock, $0.01 par value, 100,000,000 shares authorized, 10,422,527 and 8,630,000 shares issued and outstanding at December 31, 2020 and June 30, 2020, respectively | 104,225 | 86,300 | ||||||
| Additional paid-in capital | 37,956,585 | 10,899,942 | ||||||
| Accumulated deficit | (18,888,991 | ) | (15,832,517 | ) | ||||
| Accumulated other comprehensive loss | (380,663 | ) | (363,951 | ) | ||||
| Total consolidated group equity (deficit) | 18,821,156 | (5,186,517 | ) | |||||
| Non-controlling interests | (39,141 | ) | (28,311 | ) | ||||
| Total shareholders’ equity (deficit) | 18,782,015 | (5,214,828 | ) | |||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 19,966,408 | $ | 2,475,640 | ||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
| 3 |
GBSIntelligent Bio Solutions Inc.
Condensed Consolidated Statements of Operations and Other Comprehensive Loss
(Unaudited)
(Amounts in $)
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | 457,058 | $ | - | $ | 813,737 | $ | - | ||||||||
| Cost of revenue | (424,009 | ) | - | (536,644 | ) | - | ||||||||||
| Gross profit | 33,049 | - | 277,093 | - | ||||||||||||
| Other income: | ||||||||||||||||
| Government support income | 117,680 | 192,500 | 698,625 | 370,291 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | (1,898,754 | ) | (1,122,004 | ) | (5,594,461 | ) | (3,457,768 | ) | ||||||||
| Development and regulatory approval expenses | (299,898 | ) | (413,325 | ) | (380,363 | ) | (3,161,306 | ) | ||||||||
| Depreciation and amortization | (398,986 | ) | - | (797,142 | ) | - | ||||||||||
| Goodwill impairment | (4,096,490 | ) | - | (4,096,490 | ) | - | ||||||||||
| Total operating expenses | (6,694,128 | ) | (1,535,329 | ) | (10,868,456 | ) | (6,619,074 | ) | ||||||||
| Loss from operations | (6,543,399 | ) | (1,342,829 | ) | (9,892,738 | ) | (6,248,783 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (86,125 | ) | (4,217 | ) | (163,957 | ) | (4,892 | ) | ||||||||
| Realized foreign exchange income (loss) | 7,212 | 10 | (8,936 | ) | (3,094 | ) | ||||||||||
| Fair value movements through profit and loss | 269,787 | - | 2,062,878 | - | ||||||||||||
| Interest income | 508 | 2,903 | 9,587 | 10,973 | ||||||||||||
| Total other income (expense) | 191,382 | (1,304 | ) | 1,899,572 | 2,987 | |||||||||||
| Loss before income taxes | (6,352,017 | ) | (1,344,133 | ) | (7,993,166 | ) | (6,245,796 | ) | ||||||||
| Income taxes | - | - | - | - | ||||||||||||
| Net loss | (6,352,017 | ) | (1,344,133 | ) | (7,993,166 | ) | (6,245,796 | ) | ||||||||
| Net loss attributable to non-controlling interest | (8,111 | ) | (8,887 | ) | (20,367 | ) | (17,900 | ) | ||||||||
| Net loss attributable to Intelligent Bio Solutions Inc. | $ | (6,343,906 | ) | $ | (1,335,246 | ) | $ | (7,972,799 | ) | $ | (6,227,896 | ) | ||||
| Other comprehensive (loss) income, net of tax: | ||||||||||||||||
| Foreign currency translation (loss) income | $ | (77,787 | ) | $ | 2,793 | $ | 148,251 | $ | (57,334 | ) | ||||||
| Total other comprehensive (loss) income | (77,787 | ) | 2,793 | 148,251 | (57,334 | ) | ||||||||||
| Comprehensive loss | (6,429,804 | ) | (1,341,340 | ) | (7,844,915 | ) | (6,303,130 | ) | ||||||||
| Comprehensive loss attributable to non-controlling interest | (8,111 | ) | (8,887 | ) | (20,367 | ) | (17,900 | ) | ||||||||
| Comprehensive loss attributable to Intelligent Bio Solutions Inc. | $ | (6,421,693 | ) | $ | (1,332,453 | ) | $ | (7,824,548 | ) | $ | (6,285,230 | ) | ||||
| Net loss per share, basic and diluted | $ | (5.72 | ) | $ | (1.79 | ) | $ | (8.67 | ) | $ | (8.54 | ) | ||||
| Weighted average shares outstanding, basic and diluted | 1,108,672 | 744,495 | 919,545 | 729,533 | ||||||||||||
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenues | ||||||||||||||||
| Other income: | ||||||||||||||||
| Government support income | $ | 283,037 | - | $ | 338,464 | $ | - | |||||||||
| Shared services | - | (798 | ) | - | 121,277 | |||||||||||
| Total revenues | 283,037 | (798 | ) | 338,464 | 121,277 | |||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | 671,450 | 972,012 | 1,192,453 | 1,698,340 | ||||||||||||
| Development and regulatory approval expenses | 341,820 | 494,667 | 372,758 | 599,848 | ||||||||||||
| Prospectus and capital raising expenses | 187,093 | 236,438 | 353,574 | 142,365 | ||||||||||||
| Total operating expenses | 1,200,363 | 1,703,117 | 1,918,785 | 2,440,553 | ||||||||||||
| Loss from operations | (917,326 | ) | (1,703,915 | ) | (1,580,321 | ) | (2,319,276 | ) | ||||||||
| Other (expense) income: | ||||||||||||||||
| Interest expense | (986,860 | ) | (149,145 | ) | (1,072,688 | ) | (298,656 | ) | ||||||||
| Loss from unconsolidated equity method investment | - | - | (135,692 | ) | - | |||||||||||
| Realized foreign exchange loss | (86,637 | ) | - | (279,107 | ) | - | ||||||||||
| Interest income | 434 | 27 | 504 | 69 | ||||||||||||
| Total other expense | (1,073,063 | ) | (149,118 | ) | (1,486,983 | ) | (298,587 | ) | ||||||||
| Loss before income taxes | (1,990,389 | ) | (1,853,033 | ) | (3,067,304 | ) | (2,617,863 | ) | ||||||||
| Income tax (expense)/benefit | ||||||||||||||||
| Current | - | - | - | - | ||||||||||||
| Deferred | - | - | - | - | ||||||||||||
| Total income tax (expense)/benefit | - | - | - | - | ||||||||||||
| Net loss | (1,990,389 | ) | (1,853,033 | ) | (3,067,304 | ) | (2,617,863 | ) | ||||||||
| Net loss attributable to noncontrolling interest | (6,425 | ) | (16,715 | ) | (10,830 | ) | (23,695 | ) | ||||||||
| Net loss attributable to GBS, Inc. | $ | (1,983,964 | ) | $ | (1,836,318 | ) | $ | (3,056,474 | ) | $ | (2,594,168 | ) | ||||
| Other comprehensive income | ||||||||||||||||
| Foreign currency translation gain (loss) | 33,856 | (133,286 | ) | (16,712 | ) | (129,050 | ) | |||||||||
| Total other comprehensive income | 33,856 | (133,286 | ) | (16,712 | ) | (129,050 | ) | |||||||||
| Comprehensive net loss attributable to GBS, Inc | $ | (1,956,533 | ) | $ | (1,986,319 | ) | $ | (3,084,016 | ) | $ | (2,746,913 | ) | ||||
| Net loss per share, basic and diluted | $ | (0.23 | ) | $ | (0.22 | ) | $ | (0.35 | ) | $ | (0.30 | ) | ||||
| Weighted average shares outstanding, basic and diluted | 8,622,724 | 8,510,000 | 8,626,362 | 8,510,000 | ||||||||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
| 4 |
GBSIntelligent Bio Solutions Inc.
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
(Amounts in $)
| Convertible | Additional | Other | Non- | Total shareholders’ | ||||||||||||||||||||||||||||||||||||||||
| preferred stock | Common stock | Treasury stock | paid in | Accumulated | comprehensive | controlling | equity | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | capital | deficit | loss | interest | (deficit) | ||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022* | - | $ | - | 744,495 | $ | 7,445 | - | $ | - | $ | 38,581,465 | $ | (31,175,853 | ) | $ | (788,135 | ) | $ | (79,151 | ) | $ | 6,545,771 | ||||||||||||||||||||||
| Foreign currency translation loss | - | - | - | - | - | - | - | - | (135,559 | ) | - | (135,559 | ) | |||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (1,208,293 | ) | - | (5,785 | ) | (1,214,078 | ) | ||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | - | $ | - | 744,495 | $ | 7,445 | - | $ | - | $ | 38,581,465 | $ | (32,384,146 | ) | $ | (923,694 | ) | $ | (84,936 | ) | $ | 5,196,134 | ||||||||||||||||||||||
| Issuance of Series C preferred stock and common stock for acquisition, net of issuance costs | 2,363,003 | 23,630 | 148,155 | 1,482 | - | - | 4,699,158 | - | - | - | 4,724,270 | |||||||||||||||||||||||||||||||||
| Issuance of Series D preferred stock, net of issuance costs | 176,462 | 1,765 | - | - | - | - | 160,695 | - | - | - | 162,460 | |||||||||||||||||||||||||||||||||
| Stock awards issued to employees | - | - | 25,000 | 250 | - | - | 259,750 | - | - | - | 260,000 | |||||||||||||||||||||||||||||||||
| Payment of tax withholding for employee stock awards | - | - | - | (1,386 | ) | (14 | ) | (14,393 | ) | - | - | - | (14,407 | ) | ||||||||||||||||||||||||||||||
| Foreign currency translation income | - | - | - | - | - | - | - | - | 361,597 | - | 361,597 | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (420,600 | ) | - | (6,471 | ) | (427,071 | ) | ||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | 2,539,465 | $ | 25,395 | 917,650 | $ | 9,177 | (1,386 | ) | $ | (14 | ) | $ | 43,686,675 | $ | (32,804,746 | ) | $ | (562,097 | ) | $ | (91,407 | ) | $ | 10,262,983 | ||||||||||||||||||||
| Reverse stock split rounding adjustment | - | - | 11,250 | 112 | - | - | (112 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Issuance of common stock and warrants, net of issuance costs | - | - | 654,990 | 6,550 | - | - | 2,087,117 | - | - | - | 2,093,667 | |||||||||||||||||||||||||||||||||
| Issuanceof common stock upon cashless exercise of warrants | - | - | 101,577 | 1,016 | - | - | (1,016 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Foreign currency translation loss | - | - | - | - | - | - | - | - | (77,787 | ) | - | (77,787 | ) | |||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (6,343,906 | ) | - | (8,111 | ) | (6,352,017 | ) | ||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | 2,539,465 | $ | 25,395 | 1,685,467 | $ | 16,855 | (1,386 | ) | $ | (14 | ) | $ | 45,772,664 | $ | (39,148,652 | ) | $ | (639,884 | ) | $ | (99,518 | ) | $ | 5,926,846 | ||||||||||||||||||||
| Balance, June 30, 2021* | 1,300,000 | $ | 13,000 | 679,106 | $ | 6,791 | - | $ | - | $ | 38,569,119 | $ | (22,869,803 | ) | $ | (661,260 | ) | $ | (51,226 | ) | $ | 15,006,621 | ||||||||||||||||||||||
| Series B warrants exercised to purchase common shares | - | - | 20 | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Conversion of convertible preferred shares into common shares | (1,300,000 | ) | (13,000 | ) | 65,000 | 650 | - | - | 12,350 | - | - | - | - | |||||||||||||||||||||||||||||||
| Foreign currency translation loss | - | - | - | - | - | - | - | - | (67,482 | ) | - | (67,482 | ) | |||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (1,432,652 | ) | - | (5,188 | ) | (1,437,840 | ) | ||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | - | $ | - | 744,126 | $ | 7,441 | - | $ | - | $ | 38,581,469 | $ | (24,302,455 | ) | $ | (728,742 | ) | $ | (56,414 | ) | $ | 13,501,299 | ||||||||||||||||||||||
| Foreign currency translation income | - | - | - | - | - | - | - | - | 7,355 | - | 7,355 | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (3,459,998 | ) | - | (3,825 | ) | (3,463,823 | ) | ||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | - | $ | - | 744,126 | $ | 7,441 | - | $ | - | $ | 38,581,469 | $ | (27,762,453 | ) | $ | (721,387 | ) | $ | (60,239 | ) | $ | 10,044,831 | ||||||||||||||||||||||
| Balance | - | $ | - | 744,126 | $ | 7,441 | - | $ | - | $ | 38,581,469 | $ | (27,762,453 | ) | $ | (721,387 | ) | $ | (60,239 | ) | $ | 10,044,831 | ||||||||||||||||||||||
| Series B warrants exercised to purchase common shares | - | - | 369 | 4 | - | - | (4 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Foreign currency translation income | - | - | - | - | - | - | - | - | 2,793 | - | 2,793 | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (1,335,246 | ) | - | (8,887 | ) | (1,344,133 | ) | ||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | - | $ | - | 744,495 | $ | 7,445 | - | $ | - | $ | 38,581,465 | $ | (29,097,699 | ) | $ | (718,594 | ) | $ | (69,126 | ) | $ | 8,703,491 | ||||||||||||||||||||||
| Balance | - | $ | - | 744,495 | $ | 7,445 | - | $ | - | $ | 38,581,465 | $ | (29,097,699 | ) | $ | (718,594 | ) | $ | (69,126 | ) | $ | 8,703,491 | ||||||||||||||||||||||
| * | Include adjustments for effect of reverse stock split |
| Preferred stock | Common stock | Additional paid in | Accumulated | Other comprehensive | Non-controlling | Total stockholders’ equity | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | deficit | (loss) income | interest | (deficit) | ||||||||||||||||||||||||||||
| Balance, June 30, 2020 | 2,370,891 | $ | 23,709 | 8,630,000 | $ | 86,300 | $ | 10,899,942 | $ | (15,832,517 | ) | $ | (363,951 | ) | $ | (28,311 | ) | $ | (5,214,828 | ) | ||||||||||||||||
| Issuance of convertible preferred shares | 439,299 | 4,393 | - | - | 3,290,352 | - | - | - | 3,294,745 | |||||||||||||||||||||||||||
| Foreign currency translation loss | - | - | - | - | - | - | (50,568 | ) | - | (50,568 | ) | |||||||||||||||||||||||||
| Net loss | - | - | - | - | - | (1,072,510 | ) | - | (4,405 | ) | (1,076,915 | ) | ||||||||||||||||||||||||
| Balance, September 30, 2020 | 2,810,190 | 28,102 | 8,630,000 | 86,300 | 14,190,294 | (16,905,027 | ) | (414,519 | ) | (32,716 | ) | (3,047,566 | ) | |||||||||||||||||||||||
| Issuance of common stock at initial public offering | - | - | 1,270,589 | 12,706 | 21,587,307 | - | - | - | 21,600,013 | |||||||||||||||||||||||||||
| Issuance cost of common stock at initial public offering | - | - | - | - | (3,867,565 | ) | - | - | - | (3,867,565 | ) | |||||||||||||||||||||||||
| Cancellation of common stock in exchange for preferred shares | 3,000,000 | 30,000 | (3,000,000 | ) | (30,000 | ) | - | - | - | - | - | |||||||||||||||||||||||||
| Conversion of convertible notes into common stock at initial public offering | - | - | 710,548 | 7,105 | 5,126,601 | - | - | - | 5,133,706 | |||||||||||||||||||||||||||
| Conversion of convertible preferred shares into common stock at initial public offering | (2,810,190 | ) | (28,102 | ) | 2,810,190 | 28,102 | - | - | - | - | - | |||||||||||||||||||||||||
| Beneficial conversion feature | - | - | - | - | 905,948 | - | - | - | 905,948 | |||||||||||||||||||||||||||
| Series A warrants exercised to purchase common shares | - | - | 1,200 | 12 | 10,188 | - | - | - | 10,200 | |||||||||||||||||||||||||||
| Series A and B warrants acquired | - | - | - | - | 3,812 | - | - | - | 3,812 | |||||||||||||||||||||||||||
Foreign currency translation gain | - | - | - | - | - | - | 33,856 | - | 33,856 | |||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | (1,983,964 | ) | - | (6,425 | ) | (1,990,389 | ) | ||||||||||||||||||||||||
| Balance, December 31, 2020 | 3,000,000 | $ | 30,000 | 10,422,527 | $ | 104,225 | $ | 37,956,585 | $ | (18,888,991 | ) | $ | (380,663 | ) | $ | (39,141 | ) | $ | 18,782,015 | |||||||||||||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
| Preferred stock | Common stock | Additional paid in | Accumulated | Other comprehensive | Non-controlling | Total stockholders’ equity | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | deficit | (loss) income | interest | (deficit) | ||||||||||||||||||||||||||||
| Balance, June 30, 2019 | 2,064,884 | $ | 20,649 | 8,510,000 | $ | 85,100 | $ | 8,164,804 | (12,668,741 | ) | (216,870 | ) | 637,919 | $ | (3,977,139 | ) | ||||||||||||||||||||
| Reclassification of noncontrolling interest | - | - | - | - | (637,056 | ) | - | - | 637,056 | - | ||||||||||||||||||||||||||
| Balance, June 30, 2019 | 2,064,884 | 20,649 | 8,510,000 | 85,100 | 8,801,860 | (12,668,741 | ) | (216,870 | ) | 863 | (3,977,139 | ) | ||||||||||||||||||||||||
| Deemed dividend | - | - | - | - | (976,308 | ) | - | - | - | (976,308 | ) | |||||||||||||||||||||||||
| Issuance of convertible preferred shares | 259,007 | 2,590 | - | - | 1,939,964 | - | - | - | 1,942,554 | |||||||||||||||||||||||||||
| Issuance costs for common and preferred shares | - | - | - | - | (116,402 | ) | - | - | - | (116,402 | ) | |||||||||||||||||||||||||
| Foreign currency translation loss | - | - | - | - | - | - | 4,234 | - | 4,234 | |||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | (757,850 | ) | - | (6,980 | ) | (764,830 | ) | ||||||||||||||||||||||||
| Balance, September 30, 2019 | 2,323,891 | 23,239 | 8,510,000 | 85,100 | 9,649,114 | (13,426,591 | ) | (212,636 | ) | (6,117 | ) | (3,887,891 | ) | |||||||||||||||||||||||
| Foreign currency translation loss | - | - | - | - | - | - | (133,286 | ) | - | (133,286 | ) | |||||||||||||||||||||||||
| Net loss | - | - | - | - | - | (1,836,318 | ) | - | (16,715 | ) | (1,853,033 | ) | ||||||||||||||||||||||||
| Balance, December 31, 2019 | 2,323,891 | $ | 23,239 | 8,510,000 | $ | 85,100 | $ | 9,649,114 | $ | (15,262,909 | ) | $ | (345,922 | ) | $ | (22,832 | ) | $ | (5,874,210 | ) | ||||||||||||||||
| 5 |
Intelligent Bio Solutions Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (7,993,166 | ) | $ | (6,245,796 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 702,487 | - | ||||||
| Depreciation on leased assets | 94,171 | - | ||||||
| Non-cash loss on foreign currency translation, net | 8,936 | 3,094 | ||||||
| Provision for inventory write-off | 186,834 | - | ||||||
| Goodwill impairment | 4,096,490 | - | ||||||
| Share-based compensation | 260,000 | - | ||||||
| Non-cash research and development charge | - | 2,600,000 | ||||||
| Non-cash refund of R&D expenditure claims | (125,128 | ) | (177,035 | ) | ||||
| Fair value gain on revaluation of convertible notes | (1,455,078 | ) | - | |||||
| Fair value gain on revaluation of holdback Series C Preferred Stock | (607,800 | ) | - | |||||
| Non-cash other operating activities | - | (121,254 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (296,049 | ) | - | |||||
| Inventories | (74,866 | ) | - | |||||
| Grant receivable/deferred grant income | (213,543 | ) | 1,828,891 | |||||
| Research and development tax incentive receivable | (225,408 | ) | 843,857 | |||||
| Other current assets | (187,273 | ) | 146,854 | |||||
| Accounts and other payables | (937,960 | ) | (514,896 | ) | ||||
| Accounts payable - related party | - | (13,323 | ) | |||||
| Other long-term liabilities | (25,687 | ) | 14,779 | |||||
| Net cash used in operating activities | (6,793,040 | ) | (1,634,829 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash acquired from business acquisition | 174,481 | - | ||||||
| Cash payment for business acquisition | (181,750 | ) | - | |||||
| Amount invested on capital work in progress | (505,123 | ) | (177,208 | ) | ||||
| Net cash used in investing activities | (512,392 | ) | (177,208 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock and warrants | 2,554,463 | - | ||||||
| Proceeds from issuance of preferred stock | 220,578 | - | ||||||
| Payment of equity issuance costs - others | (464,727 | ) | - | |||||
Payment of equity issuance costs relating to acquisition of IFP | (806,397 | ) | ||||||
| Payment of tax withholding for employee stock awards | (14,407 | ) | - | |||||
| Payment of finance lease liabilities | (100,297 | ) | - | |||||
| Net cash provided by financing activities | 1,389,213 | - | ||||||
| Effect of foreign exchange rates on cash and cash equivalents | (41,538 | ) | (5,559 | ) | ||||
| Decrease in cash and cash equivalents | (5,957,757 | ) | (1,817,596 | ) | ||||
| Cash and cash equivalents, beginning of period | 8,238,301 | 12,573,685 | ||||||
| Cash and cash equivalents, end of period | $ | 2,280,544 | $ | 10,756,089 | ||||
| Non-cash investing and financing activities | ||||||||
| Shares issued for business acquisition | $ | 5,530,667 | $ | - | ||||
| Note receivable settled for business acquisition | 504,938 | - | ||||||
| Deferred consideration payable for business acquisition | 399,250 | - | ||||||
| Equity issuance costs in accounts payable and accrued expenses | 54,187 | |||||||
| Conversion of preferred shares into common shares | - | 13,000 | ||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amount in $)
| Six Months Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (3,067,304 | ) | $ | (2,617,863 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Loss on foreign currency translation | (16,712 | ) | (129,050 | ) | ||||
| Loss on investment in affiliate | 135,692 | - | ||||||
| Amortization of debt discount and issuance costs | - | 138,209 | ||||||
| Contingent beneficial conversion feature on convertible notes | 905,948 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Other receivables | - | 118,056 | ||||||
| Other current assets | (39,486 | ) | 72,939 | |||||
| Accounts payable | (52,644 | ) | (515,391 | ) | ||||
| Accounts payable - related party | (1,337,672 | ) | 2,458,158 | |||||
| Other long-term liabilities | 17,947 | - | ||||||
| Net cash used in operating activities | (3,454,231 | ) | (474,942 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Net cash used in investing activities | - | - | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of warrants | 3,812 | - | ||||||
| Proceeds from warrant holders for common shares | 10,200 | - | ||||||
| Proceeds from issuance of preferred stock | 3,294,745 | 648,750 | ||||||
| Proceeds from initial public offering | 21,600,013 | - | ||||||
| Payment of equity issuance costs | (2,003,952 | ) | (116,402 | ) | ||||
| Net cash provided by financing activities | 22,904,818 | 532,348 | ||||||
| Increase in cash and cash equivalents | 19,450,587 | 57,406 | ||||||
| Cash and cash equivalents, beginning of period | 427,273 | 197,940 | ||||||
| Cash and cash equivalents, end of period | $ | 19,877,860 | $ | 255,346 | ||||
| Non-cash investing and financing activities | ||||||||
| Reclassification of deferred charges to additional paid in capital upon completion of initial public offering | $ | 1,863,613 | $ | - | ||||
| Conversion of notes to common shares at initial public offering | 5,133,706 | - | ||||||
| Conversion of preferred shares into common shares | 28,102 | - | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Cash paid for interest | $ | 166,740 | $ | 170,198 | ||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
GBSIntelligent Bio Solutions Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Business
Intelligent Bio Solutions Inc. (“INBS”) (formerly known as GBS Inc.), and its wholly owned Delaware subsidiary, GBS Operations Inc. arewere each formed on December 5, 2016, under the laws of the state of Delaware, and were formed on December 5, 2016.Delaware. Our Australian subsidiary Intelligent Bio Solutions (APAC) Pty Ltd (formerly known as Glucose Biosensor Systems (Greater China) Pty Ltd (“GBSPL”)Ltd) was formed on August 4, 2016, under the laws of New South Wales, Australia and was renamed to GBSIntelligent Bio Solutions (APAC) Pty Ltd on January 6, 2023. On October 14, 2020.4, 2022, INBS acquired Intelligent Fingerprinting Limited (“IFP”), a company registered in England and Wales (the “IFP Acquisition”). The Glucose Biosensor SystemsSystem (Japan) Pty Ltd and Glucose Biosensor SystemsSystem (APAC) Pty Ltd, were formed underderegistered on January 6, 2023, and June 9, 2022, respectively. INBS and its subsidiaries (collectively, “we,” “us,” “our,” “INBS” or the laws of New South Wales, Australia on February 22, 2017 and February 23, 2017 respectively. These companies (collectively, the “Company”“Company,” unless context requires or “Group”)indicates otherwise) were formed to provide a non-invasive, pain free innovationinnovative medical devices and screening devices. Our headquarters are in New York, New York.
We are a medical technology company delivering intelligent, rapid, non-invasive testing solutions for patients and their primary health practitioners at point of care. We operate globally with an objective to make it easier for people to manage diabetesdeliver intelligent pain free diagnostic tests.
Our current product portfolio includes:
| ● | A proprietary portable drug screening system that works by analyzing fingerprint sweat using a one-time cartridge and portable handheld reader. The system comprises of commercially available non-invasive sweat-based fingerprint diagnostics testing products (the “IFP products”) that currently detect opioids, cocaine, methamphetamines, benzodiazepines, cannabis, methadone, buprenorphine, and amphetamine. Customers include safety-critical industries such as construction, transportation and logistics firms, along with drug treatment organizations in the rehabilitation sector, and judicial organizations. |
| ● | A development stage range of biosensor based biosensor based Point of Care diagnostic tests (“POCT”) that are developed in the modalities of clinical chemistry, immunology, tumor markers, allergens, and endocrinology. Our flagship product candidate is the Saliva Glucose Biosensor (“SGB”), a POCT expected to substitute the finger pricking invasive blood glucose monitoring for diabetic patients. These tests stem from the Biosensor Platform that we license, across the Asia Pacific Region from Life Science Biosensor Diagnostics Pty Ltd (“LSBD” or “the Licensor”). The Biosensor Platform is capable of detecting multiple biological analytes by substituting the GOX enzyme with a suitable alternative for each analyte. |
Reverse Stock Split
At the annual meeting of the Company’s Saliva Glucose Biosensor (“SGB”stockholders held on February 8, 2023 (the “Annual Meeting”), the stockholders of the Company approved an amendment to the Company’s amended and togetherrestated certificate of incorporation (the “Amendment”) to effect a reverse stock split at a ratio of not less than 1-for-2 and not more than 1-for-35 at any time within 12 months following the date of stockholder approval, with the software app that interfacesexact ratio to be set within this range by the SGBCompany’s Board of Directors (the “Board”) at its sole discretion without further approval or authorization of our stockholders. Pursuant to such authority granted by the Company’s stockholders, on February 8, 2023, the Board approved a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the Company’s common stock and the filing of the Amendment to effectuate the Reverse Stock Split.
On February 9, 2023, the Company filed the Amendment in order to effect 1-for-20 reverse stock split of the Company’s common stock. The Reverse Stock Split was effective at 4:05 p.m., Eastern Time, on February 9, 2023, at which time every twenty shares of the Company’s issued and outstanding common stock were automatically combined into one issued and outstanding share of common stock. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders of record who were otherwise entitled to receive a fractional share instead received one whole share in lieu of a fractional share. The par value of the Company’s common stock and the number of authorized shares of the common stock were not affected by the Reverse Stock Split. The Company’s common stock began trading on a Reverse Stock Split-adjusted basis on The Nasdaq Capital Market at the open of the markets on February 10, 2023. The Reverse Stock Split was implemented for the purpose of regaining compliance with the minimum bid price requirement for continued listing of the Company’s digital information system,common stock on the “SGT”Nasdaq Capital Market.
As a result of the Reverse Stock Split, the number of shares of common stock outstanding was reduced from approximately shares (excluding treasury shares) as of February 8, 2023, to approximately shares (excluding treasury shares, and subject to the rounding up of fractional shares), and the number of authorized shares of common stock remained at million shares. In order reflect the Reverse Stock Split, proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all outstanding stock options, restricted stock unit awards and warrants (including the Series D Warrants, Winx Warrants and March Warrants (each as defined below)), which resulted in a proportional decrease in the number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such stock options, restricted stock unit awards and warrants, and, in the case of stock options and warrants, a proportional increase in the exercise price of all such stock options and warrants. In addition, the number of shares of common stock issuable upon conversion of the Company’s Series C Preferred Stock and Series D Preferred Stock, as well as any applicable conversion ratios and terms, were also adjusted in proportion to the reverse split ratio of the Reverse Stock Split (subject to adjustment for fractional interests).
GBS Inc, has 54.4% of itsUnless otherwise indicated, all authorized, issued, and outstanding stock and per share amounts contained in the accompanying condensed consolidated financial statements have been adjusted to reflect the 1-for-20 Reverse Stock Split for all prior periods presented; and all amounts relating to our common stock owned of Life Science Biosensor Diagnostics Pty Ltd (“LSBD”), an Australian company that owns the worldwide intellectual property rights to the biosensor platform from University of Newcastle, Australia. LBSD has licensed to the Company that technology to introduce and launch the platform in the Asia-Pacific Region (“APAC”). We will commence this processconnection with the SGT.conversion or exercise of our preferred stock and warrants (including with regard to conversion prices and exercise prices) have been adjusted to reflect the 1-for-20 Reverse Stock Split.
On May 29, 2020, a research agreement was executed between LSBD and the Wyss Institute for Biologically Inspired Engineering at Harvard University (Wyss). The Company is not a legal party to the agreement but is expecting to derive a benefit through the Technology Transfer Agreement executed with LSBD and the Company on June 23, 2020, further details which are provided below. The Company has transferred biosensors (research materials) to the Wyss Institute where its research and development scientists have commenced a pilot research program. Since the biosensor architecture is complete and given the pre-existing plans to develop immunology diagnostic tests, it is therefore relatively straightforward and expeditious to develop the SARS-CoV-2 test.
SARS-CoV-2 antibody testing in saliva can play a critically important role in large-scale ‘sero’-surveillance to address key public health priorities and guide policy and decision-making for COVID-19. It is anticipated that FDA review will be under the Emergency Use Authorization program, which means expedited time to market.
On June 23, 2020, The Company entered into a Technology Transfer Agreement global license with LSBD. The significant terms of the license agreement are:
There are no milestone payments.
Initial public offering
On December 28, 2020, the Company closed its initial public offering (“IPO”) and sold 1,270,589 units, consisting of (a) one share of the Company’s common stock (or, at the purchaser’s election, one share of Series B Convertible Preferred Stock), (b) one Series A warrant (the “Series A Warrants”) to purchase one share of the Company’s common stock at an exercise price equal to $8.50 per share, exercisable until the fifth anniversary of the issuance date, and (c) one Series B warrant (the “Series B Warrants”) to purchase one share of the Company’s common stock at an exercise price equal to $17.00 per share, exercisable until the fifth anniversary of the issuance date and subject to certain adjustment and cashless exercise provisions. The public offering price of the shares sold in the IPO was $17.00 per unit. In aggregate, the units issued in the offering generated $17,732,448 in net proceeds, which amount is net of $1,714,001 in underwriters’ discount and commissions, $2,153,564 in offering costs (including deferred equity offering cost of $1,863,612). Offering costs include underwriters’ warrants to acquire up to 63,529 shares with an exercise price of $18.70 per share, exercisable until the fifth anniversary of the issuance date. The Company also issued to the underwriter an option, exercisable one or more times in whole or in part, to purchase up to 190,588 additional shares of common stock and/or Series A Warrants to purchase up to an aggregate of 190,588 shares of common stock and/or Series B Warrants to purchase up to an aggregate of 190,588 shares of common stock, in any combinations thereof, from us at the public offering price per security, less the underwriting discounts and commissions, for 45 days after the date of the IPO to cover over-allotments, if any (the “Over-Allotment Option”).
Upon the closing of the IPO, all shares of preferred stock then outstanding were automatically converted into 2,810,190 shares of common stock, and all convertible notes then outstanding were automatically converted into 710,548 shares of common stock.
Pre-IPO preferred shareholders were issued warrants following the Company’s completed IPO, that allows the holder to acquire 2,736,675 shares of common stock at the IPO price during year two through to year three following the completion of the IPO. At exercise date, the shareholder must hold, for each warrant to be exercised, the underlying common share to exercise the warrant. The warrants are not transferable and apply to the number of shares that were subscribed for.
NOTE 2. LIQUIDITY
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern (ASC 205-40) requires management to assess an entity’s ability to continue as a going concern within one year of the date of the financial statements are issued. In each reporting period, including interim periods, an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date. Substantial doubt about an entity’s ability to continue as a going concern exists when conditions and events, considered in the aggregate, indicate it is probable the entity will be unable to meet its financial obligations as they become due within one year after the date the financial statements are issued.
On March 8, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc., as representative (the “Representative”) of the underwriters named therein (collectively, the “Underwriters”), relating to an underwritten public offering (the “March 2023 Offering”) of shares of the Company’s Common Stock (the “March Shares”) and warrants to purchase shares of Common Stock (the “March Warrants”). Each of the March Shares was sold in combination with an accompanying one-third Warrant. The combined purchase price for each March Share and accompanying March Warrant was $ and the Underwriters agreed to purchase March Shares and March Warrants to purchase 170,868 shares of common stock. On March 9, 2023, the Representative fully exercised an over-allotment option under the Underwriting Agreement and purchased an additional March Shares and additional March Warrants to purchase shares of Common Stock. The March 2023 Offering closed on March 10, 2023.
The March 2023 Offering was made pursuant to an effective shelf registration statement on Form S-3, which was filed with the SEC on April 8, 2022. The gross proceeds, before deducting underwriting discounts and commissions and other March 2023 Offering expenses, was approximately $2.55 million. As part of the Representative’s compensation, the Company issued to the Representative unregistered warrants (the “Representative’s Warrants”) to purchase 32,750 shares of common stock, which warrants have an exercise price of $4.875 per share (125% of the public offering price per share and accompanying warrant) and will terminate on March 8, 2028. The March Warrants have, (i) an exercise price of $3.90 per share of Common Stock, (ii) a cashless exercise option for a net number of shares of Common Stock determined according to the formula set forth in the March Warrant or (iii) an alternate cashless exercise option (beginning on or after the initial exercise date), to receive an aggregate number of shares of Common Stock equal to the product of (x) the aggregate number of shares of Common Stock that would be issuable upon a cash exercise and (y)1.00. Each whole March Warrant entitles the holder thereof to purchase 1 share of Common Stock. The March Warrants are exercisable upon issuance and will expire on March 10, 2028. The exercise price and the number of shares of Common Stock issuable upon exercise of the March Warrants is subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Common Stock.
On December 21, 2022, the Company entered into a Securities Purchase Agreement (the “December 2022 Purchase Agreement”) with 14 investors (the “Series D Investors”), pursuant to which the Company agreed to issue and sell to the Series D Investors in a Regulation S private placement (the “December 2022 Private Placement”) (i) shares of the Company’s Series D Convertible Preferred Stock, par value $ per share (the “Series D Preferred Stock”), with each share of Series D Preferred Stock convertible into 0.15 shares of Common Stock (subject to adjustment upon the occurrence of specified events); and (ii) warrants (the “Series D Warrants”), with each Series D Warrants representing the right to purchase shares of common stock (subject to adjustment upon the occurrence of specified events). An additional 26,469 warrants to purchase shares of common stock were issued to Winx Capital Pty Ltd., the placement agent for the December 2022 Private Placement (the “Winx Warrants”), with each Winx Warrant representing the right to purchase shares of common stock (subject to adjustment upon the occurrence of specified events). The Series D Warrants have an exercise price of $5.80 per share (subject to adjustment) and expire June 22, 2028. The Winx Warrants have an exercise price of $10.40 per share (subject to adjustment) and expire five years following the effective date of a registration statement covering the resale of common stock underlying the Series D Preferred Stock acquired by the Series D Investors. The Series D Preferred Stock and Series D Warrants were sold together as a unit (“Unit”), with each Unit consisting of one share of Series D Preferred Stock and three Series D Warrants. The purchase price for the Units was $ per Unit. The Unit offering price and the Series D Warrants exercise price were priced above the Nasdaq “Minimum Price” as that term is defined in Nasdaq Rule 5635(d)(1). The shares of Series D Preferred Stock are convertible into an aggregate of shares of Common Stock following shareholder approval of such conversion and without the payment of additional consideration. The Series D Warrants are exercisable for an aggregate of 26,478 shares of Common Stock and the Winx Warrants are exercisable for an aggregate of 1,324 shares of Common Stock. The December 2022 Private Placement closed on December 22, 2022. See Note 21 for information and disclosures relating to the conversion of the Series D Preferred Stock.
The Company is an emerging growth company and has not generated anysufficient revenues to date. As such, the Company is generally subject to all of the risks associated with emerging growth companies. Since inception, the Company has incurred losses and negative cash flows from operating activities. The Company does not expect to generate positive cash flows from operating activities in the near future until such time, if at all, the Company completes the development process of its products, including regulatory approvals, and thereafter, begins to commercialize and achieve substantial acceptance in the marketplace for the first of a series of products in its medical device portfolio.
The Company incurred a net loss of $3,067,304$6,343,906 and $7,972,799 for the sixthree and nine months ended DecemberMarch 31, 2020 (Net2023, respectively (net loss $2,617,863of $1,335,246 and $6,227,896 for the sixthree and nine months ended DecemberMarch 31, 2019)2022). At DecemberAs of March 31, 2020,2023, the Company has shareholders’ equity of $18,782,015,$5,926,846, working capital of $18,799,962,$887,136, and an accumulated deficit of $(18,888,991)$39,148,652.
On January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization (WHO) declared the novel coronavirus disease 2019 (“COVID-19”) outbreak a public health emergency of international concern and on March 12, 2020 the WHO announced the outbreak was a pandemic. The COVID-19 pandemic is having a negative impact on global markets and business activity, which has had a limited impact on our core business operations. However, due to the nature of our platform technology we are able to quickly adapt to this rapidly evolving environment. As part of the immunology modality of the biosensor platform, the parent company, Life Science Biosensor Diagnostics Pty Ltd (LSBD) executed an agreement on May 29, 2020 with the Wyss Institute for Biologically Inspired Engineering at Harvard University (Wyss) to use the biosensor platform to develop a COVID-19 rapid diagnostic test. The Company has the rights to the technology from this agreement under a Technology Transfer Agreement global license with LSBD entered into on June 23, 2020.
GBS Inc. is the global licensee and intends to commercialize COVID-19 diagnostic tests across the US, Europe, APAC and the rest of the world through appropriately qualified distributors.
In the near future, the Company anticipates incurring operating losses and does not expect to experiencegenerate positive cash flows from operating activities and may continue to incur operating losses until it completes the development of its products and seeksseek regulatory approvals to market such products.
The Group’sCompany has evaluated whether there are conditions and events, considered in the aggregate, that raise a substantial doubt about its ability to continue as going concern within one year after the date of release of the condensed consolidated financial statements. The Company expects that its cash and cash equivalents as of March 31, 2023, of $2,280,544, will be insufficient to allow the Company to fund its current operating plan through at least the next twelve months from the issuance of these financial statements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least one year from the date these financial statements are issued. Accordingly, the Company will be required to raise additional funds during the next 12 months. The Company is currently evaluating raising additional funds through private placements and/or public equity financing. However, there can be no assurance that, in the event that the Company requires additional financing, such financing will be available on terms which are favorable to the Company, or at all. If the Company is unable to raise additional funding to meet its working capital needs in the future, it will be forced to delay or reduce the scope of its research programs and/or limit or cease its operations. In addition, the entity may be unable to realize its assets and discharge its liabilities in the normal course of business. Accordingly, these factors raise substantial doubt about the Company’s ability to continue as a going concern unless it can successfully raise additional capital.
The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities should the GroupCompany be unable to continue as a going concern.
As a result of the Company’s initial public offering (see Note 1), the Company believes it has sufficient working capital to finance its operations for the next twelve months as such these financial statements are prepared on the going concern basis.
| 8 |
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuantthe instructions to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X and, therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with U.S. GAAP. In the opinion of management, theS-X. Accordingly, our unaudited condensed consolidated financial statements reflectdo not include all the information and footnotes required by GAAP for complete financial statements. Normal and recurring adjustments and reclassifications that areconsidered necessary for thea fair presentation of financial results as of and for the periods presented. The results of operations for an interim period may not give a true indicationstatement of the results for the entire year. Theinterim periods, in the opinion of the Company’s management, have been included. Operating results for the three and nine months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending June 30, 2020 consolidated balance sheet has been derived from the audited financial statements as of that date.
These2023. The accompanying unaudited condensed consolidated financial statements have been derived from, and related footnote disclosures should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as of andincluded in our Form 10-K for the year ended June 30, 2020 included in the Company’s Registration Statement on Form S-1, File No. 333-252277 on file2022, which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on September 22, 2022 and amended on Form 10-K/A filed with the SEC on October 7, 2022, and March 6, 2023 (as amended, the “2022 Form 10-K”). There
Principles of consolidation
These unaudited condensed consolidated financial statements include the accounts of the Company, all wholly owned and majority-owned subsidiaries in which the Company has a controlling voting interest and, when applicable, variable interest entities in which the Company has a controlling financial interest or is the primary beneficiary. Investments in affiliates where the Company does not exert a controlling financial interest are not consolidated.
All significant intercompany transactions and balances have not been any significant changes toeliminated upon consolidation.
Out-of-period Reclassification within Consolidated Statements of Operations and Other Comprehensive Loss
The Company previously included $123,800 of labor costs in selling and administrative expenses within the Company’s significant accounting policies duringcondensed consolidated statement of operations and other comprehensive loss for the six monthssix-month period ended December 31, 2020.2022. These costs have been reclassified as cost of revenue during the three-month period ended March 31, 2023, as an out of period adjustment. The Company evaluated this inconsistency and the impact to previously issued interim financial statements and concluded that the adjustments and the impact of this classification inconsistency is not material to any previously issued quarterly financial statements. To improve the consistency and comparability of the financial statements, management has recorded an out-of-period adjustment during the three months period ended March 31, 2023. This reclassification adjustment did not have any impact on loss from operations, net income, and earnings per common share.
Equity offering costs
The Company complies with the requirements of ASC 340, Other Assets and Deferred Costs, with regards to offering costs. Prior to the completion of an offering, offering costs are capitalized as deferred offering costs on the consolidated balance sheets. The deferred offering costs will be charged to shareholders’ equity upon the completion of the related offering.
Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates.
ReclassificationsBusiness combinations
Certain reclassifications have been madeThe results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of the acquisition. The Company uses the acquisition method of accounting and allocates the purchase price to prior periods to conform to current period presentation as described below.
In the comparative period (FY 2020), management determined that certain transactions involvingidentifiable assets and liabilities of the issuance of shares of its subsidiary that occurred during the prior year should have resulted in an adjustment to non-controlling interest (“NCI”) and Additional Paid-in-Capital (“APIC”) to reflect the difference betweenrelevant acquired business at their acquisition date fair values. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. The allocation of the consideration receivedpurchase price in a business combination requires the Company to perform valuations with significant judgment and estimates, including the bookselection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates and selection of comparable companies. The Company engages the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of NCI involving these changesassets acquired and liabilities assumed in ownership.a business combination. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company increased its prior year APIC with an offsetting reduction to NCI of $637,056. Management concluded that this reclassification was not meaningfulrecords adjustments to the Company’s financial position forassets acquired and liabilities assumed with the prior year,corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations. Transaction costs associated with business combinations are expensed as incurred and as such, this change was recordedare included in selling, general and administrative expense in the consolidated balance sheet and statementstatements of shareholder’s equity in the first quarter of the comparative period (FY 2020) as an out-of-period adjustment.operations.
Revenue recognition
Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by delivering the promised goods or service deliverables to the customers. A good or service deliverable is transferred to a customer when, or as, the customer obtains control of that good or service deliverable.
Financial information presented on a consolidated basis accompanied by disaggregated information about revenue and other income by product types for the purpose of allocating resources and evaluating financial performance. Currently, the Company has two products offerings. Accordingly, the Company has determined the following reporting segments (Refer to Note 4, Segment Information):
| 1) | Commercially available Intelligent Fingerprinting Products (IFPG) | |
| 2) | Development Stage Saliva Glucose Biosensor Platform (SGBP) |
Revenues are used to evaluate the performance of the Company’s segments, the progress of major initiatives and the allocation of resources. All of the Company’s revenues, are attributable to the IFPG segment during the three and nine months ended March 31, 2023. There were no revenues during the three and nine months ended March 31, 2022.
Revenue from the IFPG segment relates to the sale of readers, cartridges and accessories and is summarized as follows:
SCHEDULE OF REVENUE SALES OF READERS CARTRIDGES AND ACCESSORIES
| 2023 | 2022 | 2023 | 2022 | 2021 | ||||||||||||||||
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2021 | ||||||||||||||||
| Sales of goods - cartridges | $ | 252,682 | $ | — | $ | 467,043 | $ | — | $ | — | ||||||||||
| Sales of goods - readers | 134,366 | — | 237,554 | — | — | |||||||||||||||
| Other sales | 70,010 | — | 109,140 | — | — | |||||||||||||||
| Total revenue | $ | 457,058 | $ | — | $ | 813,737 | $ | — | $ | — | ||||||||||
| 9 |
Other income
The other income mainly comprised of grant income and R&D tax refund.
a) Grant income
On June 30, 2021, the Company executed a definitive grant agreement with the Australian Government to assist with building a manufacturing facility. The grant has a total value of up to $4.7 million upon the achievement of certain milestones until March 28, 2024. Proceeds from the grant will be used primarily to reimburse the Company for costs incurred in the construction of the manufacturing facility.
Accounting for the grant does not fall under ASC 606, Revenue from Contracts with Customers, as the Australian Government will not benefit directly from our manufacturing facility. As there is no authoritative guidance under U.S. GAAP on accounting for grants to for-profit business entities, we applied International Accounting Standards 20 (“IAS 20”), Accounting for Government Grants and Disclosure of Government Assistance by analogy when accounting for the Australian Government grant to the Company.
The Australian Government grant proceeds, which will be used to reimburse construction costs incurred, meet the definition of grants related to assets as the primary purpose for the payments is to fund the construction of a capital asset. Under IAS 20, government grants related to assets are presented in the statement of financial position either by setting up the grant as deferred income that is recognized in the statement of operation on a systematic basis over the useful life of the asset or by deducting the grant in arriving at the carrying amount of the asset. Either of these two methods of presentation of grants related to assets in financial statements are regarded as acceptable alternatives under IAS 20. The Company currently does not generate any revenue.has elected to record the grants received initially as deferred income and deducting the grant proceeds received from the gross costs of the assets or construction in progress (“CIP”) and the deferred grant income liability.
Under IAS 20, government grants are initially recognized when there is reasonable assurance the conditions of the grant will be met, and the grant will be received. As of June 30, 2021, management concluded that there was reasonable assurance the grant conditions will be met, and all milestone payment received. The total grant value of $4.7 million was recognized as both a grant receivable and deferred grant income on the grant effective date. The grant receivable was reduced by $2.1 million for payments received during the year ended June 30, 2022 (nopayments were received during the three or nine months ended March 31, 2023). The project has been delayed due to global shortages of semiconductors that are used in manufacturing equipment and global supply chain disruption due to covid in the preceding year. The Company has only completed 4 of the 8 milestones in the grant agreement. As of March 31, 2023, there is uncertainty regarding the potential extension of the grant agreement past its original end of March 28, 2024. Therefore, management concluded that there is no reasonable assurance that the grant receivable recognized will be received.
Accordingly, during the three months ended March 31, 2023, the Company reversed $2.5 million of the grant receivable and corresponding $2.5 million of the deferred income liability in accordance with IAS 20.
After initial recognition, under IAS 20, government grants are recognized in earnings on a systematic basis in a manner that mirrors the manner in which the Company recognizes the underlying costs for which the grant is intended to compensate. Further, IAS 20 permits for recognition in earnings either separately under a general heading such as other income, or as a reduction of the cost of the asset. The Company has elected to recognize government grant income separately within other income for operating expenditures. Similarly, for capital expenditures, the carrying amount of assets purchased or constructed out of the grant funds are presented net by deducting the grant proceeds received from the gross costs of the assets or CIP and deferred grant income liability. A total of $26,576 and $125,128 deferred grant income was recognized within other income during the three and nine months ended March 31, 2023, respectively. Deferred grant income recognized within other income during the three and nine months ended March 31, 2022, was $147,865 and $179,264, respectively.
b) R&D tax refund
The Company measures the R&D grant income and receivable by considering the time spent by employees on eligible R&D activities and R&D costs incurred to external service providers. The R&D tax refund receivable is recognized when it is probable that the amount will be recovered in full through a future claim. A total of $91,104 and $573,497 of R&D tax refund income was recognized in other income during the three and nine months ended March 31, 2023, respectively. R&D tax refund income was $35,206 and $181,598 during the three and nine months ended March 31, 2022, respectively.
Development and regulatory approval expenses
Expenditures relating to research and development (“R&D”) are expensed as incurred and recorded in development and regulatory approval in the condensed consolidated statements of operations and Other Comprehensive Loss. R&D expenses include external expenses incurred under arrangements with third parties; salaries and personnel-related costs; license fees to acquire in-process technology and other expenses. The Company recognizes the benefit of refundable R&D tax refunds as a R&D tax refund income when there is reasonable assurance that the amount claimed will be recovered (refer to the R&D tax refund discussion above).
Intellectual property acquired for a particular research and development project and that have no alternative future uses (in other research and development projects or otherwise) are expensed in research and development costs at the time the costs are incurred.
In certain circumstances, the Company may be required to make advance payments to vendors for goods or services that will be received in the future for use in R&D activities. In such circumstances, the non-refundable advance payments are deferred and capitalized, even when there is no alternative future use for the R&D, until the related goods or services are provided. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense.
Foreign currency translation
Assets and liabilities of foreign subsidiaries are translated from local (functional) currency to presentationreporting currency (U.S. dollar) at the spot rate of exchange in effect on the consolidated balance sheets date; income and expenses are translated at the average rate of exchange prevailing during the year. The functional currency of GBS Inc is the United States dollar. Foreign currency movements resulted in a gain/(loss)loss of $33,856$77,787 and ($16,712)a gain of $148,251 for the three and sixnine months ended DecemberMarch 31, 2020, respectively ($133,286)2023, respectively. Foreign currency movements resulted in a gain of $2,793 and ($129,050)a loss of $57,334 for the three and sixnine months ended DecemberMarch 31, 2019,2022, respectively.
| 10 |
Income taxes
In accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”)ASC 740, Income Taxes, tax positions initially need to be recognized in the consolidated financial statements when it is more likely than not that the positions will be sustained upon examination by taxing authorities. It also provides guidance for de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
As of DecemberMarch 31, 2020,2023, the GroupCompany had no uncertain tax positions that qualified for either recognition or disclosure in the consolidated financial statements. Additionally, the GroupCompany had no interest and penalties related to income taxes.
The Group accounts for current and deferred income taxes and, when appropriate, deferred tax assets and liabilities are recorded with respect to temporary differences in the accounting treatment of items for financial reporting purposes and for income tax purposes. Where, based on the weight of all available evidence, it is more likely than not that some amount of the recorded deferred tax assets will not be realized, a valuation allowance is established for that amount that, in management’s judgment, is sufficient to reduce the deferred tax asset to an amount that is more likely than not to be realized.
Debt issuance cost
Debt issuance costs are amortized using the effective interest rate method over the term of the loan and the amortization expense is recorded as part of interest expense of the consolidated statements of operations.
Licensing rights
During the first quarter of the FYfiscal year ended June 30, June 2020, the Company had purchased the license right procurement assets from Life Science Biosensor Diagnostics Pty LtdLSBD for an amount of $976,308 (June 30, 2019: $ nil)976,308 in relation to the development and approval process for the Glucose Biosensor Technology.Technology in the Asia-Pacific (APAC) region. The Company recorded the license at the historical carrying value in the books of LSBD which was $ nil$nil and recorded the amount paid as a deemed dividend. The Company has agreed to pay royalties of sales & milestones payments as defined.
On July 3,September 12, 2019, the Company entered into an amended and restated license agreement. Thereagreement for Saliva Biosensor Technology. On June 23, 2020, the Company entered into a license agreement with LSBD for the worldwide rights to SARS-CoV-2 application of the Saliva Glucose Biosensor.
In relation to these licenses, there is no set expiration date for the license. However, the exclusivity of the license granted under the license agreement runs until the expiration of the patent portfolio covered by the agreement which is currently until 2033. No royalties have been incurred through to DecemberMarch 31, 2020 (December2023.
On March 31, 2019:2021, the Company entered into an agreement with LSBD to provide the Company an option to acquire an exclusive license to use LSBD’s intellectual property in the Saliva Glucose Biosensor in North America (the “Option Agreement”). The Option Agreement had a term of two years ending March 31, 2023, and the exercise price for the option is $ nil)5,000,000. The fee of $500,000 incurred for the option was expensed in the period incurred. The option was not exercised and expired on March 31, 2023.
ResearchInventories
Inventories are stated at the lower of cost or net realizable value. Cost comprises direct materials and, developmentwhere applicable, other costs that have been incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. General market conditions, as well as the Company’s research activities, can cause certain of its products to become obsolete. The Company writes down excess and obsolete inventories based upon a regular analysis of inventory on hand compared to historical and projected demand. The determination of projected demand requires the use of estimates and assumptions related to projected sales for each product. These write downs can influence results from operations.
ResearchTrade, note and developmentother receivables
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Company, and a failure to make contractual payments for a period of greater than 90 days past due.
Based upon the assessment of these factors, the Company recorded a bad debt provision write-back of $22,918 and a provision of $nil during the three and nine months ended March 31, 2023. No bad debt provision was recognized during the three and nine months ended March 31, 2022. Trade receivables are recognized net of bad debt provision.
Property, Plant and Equipment (PPE) & Construction in Progress (CIP)
In accordance with the ASC 360, Property, Plant, and Equipment, the Company’s PPE, except land, is stated at cost net of accumulated depreciation and impairment losses, if any. Land is stated at cost less any impairment losses. Costs incurred to acquire, construct, or install PPE, before the assets is ready for use, are capitalized in CIP at historical cost. The carrying amount of assets purchased or constructed out of the grant funds are presented net by deducting the grant proceeds received from the gross costs of the assets or CIP. CIP is not depreciated until such time when the asset is substantially completed and ready for its intended use. Expenditures for maintenance and repairs are expensedcharged to operations in the period in which the expense is incurred. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset using the following terms:
| ● | Computers hardware and software – 3 years | |
| ● | Equipment, Furniture and fixtures – 2-4 years | |
| ● | Leasehold improvements – shorter of asset’s estimated useful life and the remaining term of the lease |
The assets’ residual values, useful lives and methods of depreciation are reviewed periodically and adjusted prospectively, if appropriate. Equipment is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising upon de-recognition of the asset (calculated as incurred.the difference between the net disposal proceeds, if any, and the carrying value of the asset) is included in gain or loss on sale of assets in the consolidated statements of operations in the period the asset is derecognized.
Impairment of Long-lived Assets and Goodwill
Long-lived assets consist of property and equipment, right-of-use assets and other intangible assets. We assess impairment of assets groups, including intangible assets at least annually or more frequently if there are any indicators for impairment.
Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in a business combination. We perform an annual impairment test on goodwill in the fourth quarter of each fiscal year or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its carrying value. We may first assess qualitative factors, such as general economic conditions, market capitalization, the Company’s outlook, market performance and forecasted financial performance to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, an impairment test is not necessary. If an impairment test is necessary, we estimate the fair value of a related reporting unit. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is determined to be impaired, and we will record an impairment charge equal to the excess of the carrying value over the related fair value of the reporting unit. If we determine it is more likely than not that goodwill is not impaired, a quantitative test is not necessary.
During the three months ended March 31, 2023, the Company’s market capitalization significantly declined. Furthermore, as a result of macroeconomic factors and recurring cash burn of the reporting unit and continuous cash support from the parent entity, the Company tested the recoverability of its goodwill as of March 31, 2023. Utilizing the income approach, the Company performed a quantitative impairment test on goodwill using a discounted cash flow analysis, which determined the carrying value of our reporting unit exceeded its fair value. As a result, we recognized goodwill impairment of $4.1 million. Significant assumptions inherent in the valuation methodologies include, but are not limited to, prospective financial information, growth rates, terminal value and discount rate.
| 11 |
Intangible assets
Intangible assets are considered long-lived assets and are recorded at cost, less accumulated amortization and impairment losses, if any. The intangible assets are amortized over their estimated useful lives, which do not exceed any contractual periods. Amortization is recorded on a straight-line basis over their estimated useful lives. Intangible assets acquired from a foreign operation are translated from the foreign entity’s functional currency to the presentational currency based on the exchange rate at the reporting date. The management plans to assess the recoverability of intangible assets through a detailed analysis of the asset’s useful life, market value, impairment indicators, and potential technological changes at the June 2023 year end.
During the three-month period ended March 31, 2023, in response to market and performance conditions, the Company tested the recoverability of its intangible assets. Utilizing the undiscounted cash flows, the Company performed a quantitative impairment test on amortizable intangible assets and concluded that the amortizable intangible assets were not impaired at March 31, 2023. Utilizing the discounted cash flows, the Company performed a quantitative impairment test on indefinite lived intangible assets and concluded that these intangible assets were not impaired at March 31, 2023.
Leases
The Company determines if an arrangement is a lease at its inception. Lease arrangements are comprised primarily of real estate for which the right-of-use (“ROU”) assets and the corresponding lease liabilities are presented separately on the consolidated balance sheet.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The lease term includes options to extend the lease when it is reasonably certain that the option will be exercised. Leases with a term of 12 months or less are not recorded on the consolidated balance sheet.
The Company uses its estimated incremental borrowing rate in determining the present value of lease payments considering the term of the lease, which is derived from information available at the lease commencement date, considering publicly available data for instruments with similar characteristics. The Company accounts for the lease and non-lease components as a single lease component.
Impairment of long-lived assets
Long-lived assets including defined lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. If events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable, the Company compares the carrying amount of an asset group to future undiscounted net cash flows, excluding interest costs, expected to be generated by the asset group and its ultimate disposition. If the sum of the undiscounted cash flows is less than the carrying value, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. The Company did not recognize any impairments of long-lived assets including defined lived intangible assets during the three and nine months ended March 31, 2023 and 2022.
The Company calculates earnings per share attributable to common shareholders in accordance with ASC Topic 260, “EarningEarning Per Share.”Share. Basic net income (loss)loss per share attributable to common shareholders is calculated by dividing net income (loss)loss attributable to common shareholders by the weighted-averageweighted average number of common shares outstanding during the period. Diluted net income (loss)loss per common share is calculated by dividing net income (loss)loss attributable to common shareholders by weighted-averageweighted average common shares outstanding during the period plus potentially dilutive common shares, such as share warrants.
Potentially dilutive common shares shall beare calculated in accordance with the treasury share method, which assumes that proceeds from the exercise of all warrants are used to repurchase common share at market value. The number of shares remaining after the proceeds are exhausted represents the potentially dilutive effect of the securities.
As the Company has incurred net losses in all periods, certain potentially dilutive securities, including convertible preferred stock, warrants to acquire common stock, and convertible notes payable have been excluded in the computation of diluted loss per share as the effects are antidilutive.
Recently issued but not yet effective accounting pronouncements
As the Company is an emerging growth company, it haswe have elected to defer the adoption of new accounting pronouncements until they would apply to private companies.
Adopted:
In August 2020, the FASBFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt – Debt with Conversion and Other Options (“ASU 2020-06,2020-06”), which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and treasury stock method will be no longer available. The Company adopted ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company doesas of July 1, 2022. Adoption did not intend to early adopt and continues to evaluatehave a material impact on the impact of the provisions of ASU 2020-06 on its consolidatedCompany’s financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). This update requires all leases with a term greater than 12 months to be recognized on the balance sheet through a right-of-use asset and a lease liability and the disclosure of key information pertaining to leasing arrangements. This new guidance is effective for fiscal years beginning after December 15, 2021, and interim period within fiscal years beginning after December 15, 2022, as amended by ASU 2020-05 with early adoption permitted. The Company has not early adopted the standard.standard on July 1, 2022. There was no impact on adoption of ASU 2016-02 as the Company did not have any material leases as of July 1, 2022, and, therefore, application of transitional practical expedients provided by the ASU is not applicable. Topic 842 was applied to the lease assumed as part of the acquisition of IFP on October 4, 2022. See Note 10 for further information and disclosures relating to ASC 842.
| 12 |
Pending adoption:
In December 2019,November 2021, the FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes2021-10, Government Assistance (“ASU 2019-12”2021-10”), which is intended to simplify various aspects. This update requires annual disclosures about transaction with a government that are accounted for by applying a grant or contribution accounting model by analogy. Required disclosures include (1) information about the nature of the transactions and the related accounting policy used to account for the transactions, (2) the line items on the balance sheet and income taxes.statement that are affected by the transactions, and the amounts applicable to each financial statement line item, and (3) significant terms and conditions of the transactions, including commitments and contingencies. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This standard2021-10 is effectiveapplicable for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. Early2021, with early adoption permitted. The Company is planning to complete the required ASU 2021-10 disclosures with the filing of its Annual Report on Form 10-K for the year ending on June 30, 2023. Based on the management’s assessment of ASU 2021-10, this standard is not expected to have a material impact on the Company’s financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, as if it had originated the contracts. Prior to this ASU, an acquirer generally recognized contract assets acquired and contract liabilities assumed that arose from contracts with customers at fair value on the acquisition date. The ASU is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The ASU is to be applied prospectively to business combinations occurring on or after the effective date of the amendment. The Company has not early adopted and continues to evaluate the impact of the provisions of ASU 2021-08 on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13 (Topic 326), Financial Instruments – Credit Losses (“ASU 2016-13”). This update (a) significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model which will be based on an estimate of current expected credit loss (“CECL”) (ASC 326-20); and (b) provides for recording credit losses on available-for-sale (“AFS”) debt securities through an allowance account (ASC 326-30). The standard also requires certain incremental disclosures. Subsequently, the FASB issued several ASUs to clarify, improve, or defer the adoption of ASU 2016-13. ASU 2016-13, as amended by ASU 2019-10, is applicable for Smaller Reporting Companies (“SRCs”) for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company has not early adopted the standard.standard and continues to evaluate the impact.
Concentration of credit risk
The Company places its cash and cash equivalents, which may at times be in excess of the Australia Financial Claims Scheme, Financial Services Compensation Scheme or the United States’ Federal Deposit Insurance Corporation insurance limits, with high credit quality financial institutions and attempts to limit the amount of credit exposure with any one institution.
Related parties
The Company has related party transactions with its parent LSBD. See Notes 7 and 8.
Fair value of financial instruments
The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1-Quoted prices in active markets for identical assets or liabilities.
Level 2-Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3-Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.
The carrying amounts of cash equivalents, prepaid and other assets, accounts payable and accrued liabilities are representative of their respective fair values because of the short-term nature of those instruments. The Company has elected to carry its convertible notes at fair value.
Fair value option (“FVO”) for convertible notes
The Company elected the FVO for recognition of its convertible notes payable upon issuance as permitted under ASC 825, Financial Instruments. Under the FVO, the Company recognizes the convertible notes payable at fair value with changes in fair value recognized in earnings. The FVO may be applied instrument by instrument, but it is irrevocable. As a result of applying the FVO, direct costs and fees related to the convertible notes are recognized in selling, general and administrative expense in the condensed consolidated statements of operations as incurred and not deferred. Changes in accrued interest for the notes are included in the change in fair value of financial instruments classified as current assets and current liabilities approximateconvertible notes. Changes in fair value due to their liquidity and short-term nature.of the convertible notes are recognized as part of interest expense in the condensed consolidated statements of operations.
| 13 |
NOTE 4. SEGMENT INFORMATION
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company has determined it operates in two operating segments and has two reportable segments, as the CODM reviews financial information presented on a consolidated basis accompanied by disaggregated information about revenue and other income by product types for the purpose of allocating resources and evaluating financial performance. Currently, the Company has two products offerings. Accordingly, the Company has determined the following reporting segments:
| 1) | Commercially available Intelligent Fingerprinting Products (“IFPG” or “IFPG segment”) | |
| 2) | Development Stage Saliva Glucose Biosensor Platform (“SGBP” or “SGBP segment”) |
The following table sets forth the Company’s revenue and other income by segment.
SCHEDULE OF REVENUE AND OTHER INCOME SEGMENT
| A) | Revenue |
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| IFPG | $ | 457,058 | $ | — | $ | 813,737 | $ | — | ||||||||
| SGBP | — | — | — | — | ||||||||||||
| Total Revenue | $ | 457,058 | $ | — | $ | 813,737 | $ | — | ||||||||
| B) | Other Income (Government Support Income) |
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| IFPG | $ | 49,267 | $ | — | $ | 156,824 | $ | — | ||||||||
| SGBP | 68,413 | 192,500 | 541,801 | 370,291 | ||||||||||||
| Total Government Support Income | $ | 117,680 | $ | 192,500 | $ | 698,625 | $ | 370,291 | ||||||||
NOTE 5. INTELLIGENT FINGERPRINTING LIMITED ACQUISITION
On October 4, 2022, INBS acquired 100% of the outstanding shares of Intelligent Fingerprinting Limited (IFP), a company registered in England and Wales, pursuant to a Share Exchange Agreement, dated October 4, 2022 (the “Share Exchange Agreement”) by and among IFP, the holders of all of the issued shares in the capital of IFP (the “IFP Sellers”) and a representative of the IFP Sellers. IFP owns a portfolio of intellectual property for diagnostic tests and associated technologies, including drug testing through the analysis of fingerprint sweat. The acquisition of IFP has expanded the Company’s platform of rapid, non-invasive diagnostic testing technologies.
The table below summarizes the fair value of the consideration transferred in the acquisition (pre-Reverse Stock Split basis):
SCHEDULE OF FAIR VALUE OF THE CONSIDERATION TRANSFERRED IN THE ACQUISITION
| Purchase consideration | Amount | |||
| Cash | $ | 868,438 | ||
| Common Stock - shares @ $ / share | 1,630,293 | |||
| Series C Preferred Stock (base) - shares @ 3 x $ / share | 3,900,373 | |||
| Series C Preferred Stock (holdback) - shares @ 3 x $ / share | 825,300 | |||
| Total purchase price | $ | 7,224,404 | ||
Pursuant to the Share Exchange Agreement, the Company acquired from the IFP Sellers all of the issued and outstanding shares in the capital stock of IFP, and as consideration therefor, the Company issued and sold to the IFP Sellers upon the closing of the IFP Acquisition (the “IFP Closing”) an aggregate number of shares of the Company’s common stock, and (ii) shares of the Company’s Series C Convertible Preferred Stock, par value $per share (the “Series C Preferred Stock”).
Up to an additional shares of Series C Preferred Stock have been reserved for potential future issuance by the Company, consisting of (i) shares of Series C Preferred Stock, that are being held back from the IFP Sellers for one year after the IFP Closing to secure potential indemnification claims by the Company against the IFP Sellers and (ii) shares of Series C Preferred Stock to certain lenders to IFP (the “IFP Lenders”). Each share of Series C Preferred Stock is convertible into shares of Common Stock (subject to adjustment upon the occurrence of specified events), contingent upon approval by the Company’s stockholders.
Effective contemporaneously with the IFP Closing, the Company entered into an amendment to the bridge facility agreement between the Company and IFP, dated as of June 16, 2022, pursuant to which, among other things, the $504,938 (including accrued interest) loan from the Company to IFP that will remain outstanding following the date of the IFP Closing until the second anniversary of the date of the IFP Closing (the “Company-IFP Loan Agreement”).
The loan receivable from IFP of $504,938 as of October 4, 2022, was treated as a cash consideration in accordance with ASC 805, Business Combinations.
The Company entered into various loan agreements in the aggregate amount of £1,254,270, including accrued interest, pursuant to which IFP is the borrower and the Company became a guarantor of IFP’s obligations thereunder (the “IFP Loan Agreements” and, together with the Company-IFP Loan Agreement, the “Loan Agreements”). Under the Loan Agreements, the loans thereunder remained outstanding following the IFP Closing and (x) the loans and certain accrued interest will convert into shares of IFP, which shares of IFP will be immediately transferred to the Company in exchange for shares of Series C Preferred Stock that are convertible into common stock (as set forth in the Share Exchange Agreement) following approval of the Company Stockholder Approval Matters (defined below) or (y) the loans and certain accrued interest will become repayable on the second anniversary of the date of the IFP Closing. The loans bear interest at 17% per annum on a compounded basis, increasing to 22% per annum on a compounded basis with effect from the date that falls 12 months following the date of the IFP Closing, if the Company Stockholder Approval Matters have not been approved by the Company’s stockholders by such date. The “Company Stockholder Approval Matters” means the approval by the Company’s stockholders of (i) the conversion of the Series C Preferred Stock into common stock and (ii) any amendments to, or adoption of, any option or warrant plans to give effect to the transactions contemplated under the Share Exchange Agreement.
| 14 |
Each share of Series C Preferred Stock (other than the IFP Lender Preferred Shares) would automatically convert into common stock upon approval of the Company’s stockholders of the conversion of Series C Preferred Stock into common stock, and each IFP Lender Preferred Share would convert into common stock at the option of the applicable holder of such IFP Lender Preferred Shares following approval of the Company’s stockholders of the conversion of Series C Preferred Stock into common stock. In the event Company stockholder approval is not received, the convertible notes and accrued interest would remain outstanding. The number of shares of common stock into which the Series C Preferred Stock is convertible is subject to adjustment in the case of any stock dividend, stock split, combinations, or other similar recapitalization with respect to the common stock.
The rights, preferences and privileges of the Series C Preferred Stock are set forth in the Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock that the Company filed with the Secretary of State of the State of Delaware on October 4, 2022, as further described below (the “Series C Certificate of Designation”).
The Series C Preferred Stock does not have any voting rights (other than as required by law) and does not carry dividends or a liquidation preference. Each share of Series C Preferred Stock was initial convertible into 3 shares of common stock, subject to adjustment as noted above. Following the effectiveness of the 1-for-20 Reverse Stock Split effective on February 9, 2023, each share of Series C Preferred Stock is convertible into 0.15 shares of common stock. The loan receivable from IFP of $504,938 as of October 4, 2022, was treated as a cash consideration in accordance with ASC 805 Business Combinations. See Note 21 for further information and disclosures relating to the conversion of the Series C Preferred Stock.
The cash purchase consideration includes $ (including accrued interest) of funds previously loaned to IFP by the Company, representing a note receivable from IFP and $363,500 for bonus payments made on behalf of the selling shareholders of IFP. The first installment of $181,750 was paid during the three months ended December 31, 2022. A second installment of $181,750 was paid in April 2023.
The Company incurred $806,397 of equity issuance costs in relation to issuing common and Series C Preferred Stock to acquire IFP. These costs were recognized as a reduction to additional paid-in capital on the condensed consolidated balance sheets.
The provisional allocation of the purchase price of IFP to the assets acquired and liabilities assumed, based on their relative fair values, is as follows:
SCHEDULE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED, BASED ON THEIR RELATIVE FAIR VALUES
| Allocation of purchase consideration | Amount | |||
| Assets: | ||||
| Cash and cash equivalents | $ | 174,481 | ||
| Inventory | 774,625 | |||
| Other current assets | 345,038 | |||
| Property and Equipment | 52,170 | |||
| Intangible assets | 5,463,000 | |||
| Goodwill | 3,803,293 | |||
| Total assets acquired | 10,612,607 | |||
| Liabilities: | ||||
| Accounts payable and accrued expenses | (1,027,302 | ) | ||
| Notes payable | (677,137 | ) | ||
| Convertible notes payable | (1,683,764 | ) | ||
| Total liabilities assumed | (3,388,203 | ) | ||
| Net assets | $ | 7,224,404 | ||
Acquired intangible assets of $5,463,000 include technology of $5,119,000 (which is estimated to have a useful life of 5 years), customer relationships of $252,000 (which are estimated to have a useful life of 3 years), and trade names and trademarks of $92,000 (which are estimated to have an indefinite useful life). The value assigned to technology was determined using the multi-period excess earnings methodology under the income approach, the customer relationships was valued using the distributor method under the income approach, and the trade name and trademarks was valued using the relief from royalty method.
The acquisition produced $3,803,293 of goodwill, which has been assigned to the IFPG reporting unit. The goodwill is attributable to a combination of IFP’s assembled workforce and other product and operating synergies. Goodwill arising from the IFP Acquisition is not deductible for tax purposes. As at March 31, 2023, the full amount of the goodwill has been impaired. Refer to note 3, summary of significant accounting policies, and note 10, goodwill and other intangible assets for further information.
The purchase price allocation is considered provisional as the Company finalizes its determination relating to the valuation of assets and liabilities and key assumptions, approaches and judgements with respect to intangible assets acquired and the related tax effects.
Transaction costs, except for the equity issuance costs discussed above, were not material.
Intangibles acquired from IFP were remeasured at March 31, 2023 using the applicable spot rate.
From the closing date of the IFP Acquisition through March 31, 2023, the Company recognized approximately $813,737 in revenue and $4,336,191 in net loss relating to IFP, which included goodwill impairment of $ 4,096,490, amortization of $697,684 for acquired intangibles and fair value gain on revaluation of convertible notes for $1,455,078. In addition, the Series C Preferred Stock holdback which has been treated as deferred consideration, was revalued as of March 31, 2023, and resulted in a revaluation gain of $607,800.
| 15 |
Pro-Forma Results of Operations
The following unaudited pro-forma consolidated results of operations for the three months ended March 31, 2022, nine months ended March 31, 2023, and March 31, 2022, respectively, have been prepared as if the acquisition of IFP had occurred on July 1, 2021, and includes adjustments for amortization related to the valuation of acquired intangibles:
SCHEDULE OF UNAUDITED PRO-FORMA CONSOLIDATED RESULTS OF OPERATIONS
| 2022 | 2022 | 2023 | 2023 | 2022 | 2022 | |||||||||||||||||||
| Three Months Ended March 31 | Nine Months Ended March 31 | |||||||||||||||||||||||
| 2022 | 2022 | 2023 | 2023 | 2022 | 2022 | |||||||||||||||||||
| As Reported | Pro Forma | As Reported | Pro Forma | As Reported | Pro Forma | |||||||||||||||||||
| Revenue | $ | - | $ | 370,687 | $ | 813,737 | $ | 1,161,223 | $ | - | $ | 996,937 | ||||||||||||
| Net loss | $ | (1,344,133 | ) | $ | (797,885 | ) | $ | (7,993,166 | ) | $ | (9,234,721 | ) | $ | (6,245,796 | ) | $ | (9,455,693 | ) | ||||||
| Net loss attributable to Intelligent Bio Solutions Inc. | $ | (1,335,246 | ) | $ | (797,885 | ) | $ | (7,972,799 | ) | $ | (9,214,354 | ) | $ | (6,227,896 | ) | $ | (9,437,795 | ) | ||||||
| Net loss per share, basic and diluted | $ | (1.80 | ) | $ | (0.89 | ) | $ | (8.67 | ) | $ | (8.67 | ) | $ | (8.60 | ) | $ | (10.75 | ) | ||||||
NOTE 6. INVENTORIES
Inventories consist of the following:
SCHEDULE OF INVENTORIES
| March 31, 2023 | June 30, 2022 | |||||||
| Work-in-progress | $ | 551,897 | $ | — | ||||
| Finished goods | 378,174 | — | ||||||
| Less: provision for inventory obsolescence | (193,850 | ) | — | |||||
| Inventory, net | $ | 736,221 | $ | — | ||||
NOTE 4. 7. OTHER CURRENT ASSETS
| December 31, 2020 | June 30, 2020 | |||||||
| Goods and services tax receivable | $ | 77,710 | $ | 7,509 | ||||
| Prepayments | 1,596 | 29,469 | ||||||
| Other receivables | 9,242 | 12,084 | ||||||
| Total | $ | 88,548 | $ | 49,062 | ||||
Other current assets consist of the following:
SCHEDULE OF OTHER CURRENT ASSETS
| March 31, 2023 | June 30, 2022 | |||||||
| Intelligent Fingerprinting Limited note receivable | $ | — | $ | 500,445 | ||||
| Prepayments | 390,527 | 116,525 | ||||||
| Goods and services tax receivable | 40,044 | 57,746 | ||||||
| Deposits | 101,253 | 46,602 | ||||||
| Other receivables | — | 25,443 | ||||||
| Total | $ | 531,824 | $ | 746,761 | ||||
On June 16, 2022, the Company entered into an agreement with IFP, providing the Company with the exclusive right, until December 31, 2022, to evaluate and negotiate a transaction to acquire IFP or its assets. In consideration for this exclusivity, on June 16, 2022, the Company provided IFP with an unsecured term loan facility in the amount of $500,000, which was payable by IFP on the earliest of the consummation of an acquisition, 30 days following the termination of exclusivity under the exclusivity agreement, an event of default under the term loan facility agreement, or December 31, 2022. This $500,000 term note receivable bore an interest rate of 2% per annum above the Sterling Barclays Bank Base Rate from time to time. The Company completed the acquisition of IFP on October 4, 2022, and, in connection therewith, the loan and accrued interest outstanding as at the date of acquisition, being $, was treated as a cash consideration in accordance with ASC 805 Business Combinations. See Note 5.
NOTE 8. PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
| March 31, 2023 | June 30, 2022 | |||||||
| Production equipment | $ | 29,788 | $ | — | ||||
| Leasehold improvements | 19,698 | — | ||||||
| Other equipment | 7,638 | — | ||||||
| Construction in progress (CIP) | 436,913 | 391,408 | ||||||
| Gross property and equipment | 494,037 | 391,408 | ||||||
| Less: accumulated depreciation | (15,917 | ) | ||||||
| Property and equipment, net | $ | 478,120 | $ | 391,408 | ||||
The Company recorded an expense of $6,406 and $15,917 in relation to the depreciation of property and equipment for the three and nine months ended March 31, 2023, respectively. There was no depreciation of property and equipment during the three and nine months ended March 31, 2022.
During the three and nine months ended March 31, 2023, the Company incurred a cost of $5,368 and $91,010, respectively, towards the construction of a building at the University of Newcastle. The Australian government reimbursed the Company for 50% of the incurred costs. Therefore, the Company has recorded the CIP as net of reimbursement received as of March 31, 2023.
| 16 |
The following table summarizes the amount of CIP recorded in property and equipment, net on the condensed consolidated balance sheets:
SUMMARY OF AMOUNT RECORDED IN THE CONSOLIDATED BALANCE SHEETS
| March 31, 2023 | June 30, 2022 | |||||||
| Investments in construction in progress | $ | 873,826 | $ | 782,816 | ||||
| Less: 50% contributed under government grant | (436,913 | ) | (391,408 | ) | ||||
| Gross property and equipment | $ | 436,913 | $ | 391,408 | ||||
NOTE 5. 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| December 31, 2020 | June 30, 2020 | |||||||
| Accounts and other payables | $ | 595,549 | $ | 483,576 | ||||
| Accruals | 29,051 | 56,894 | ||||||
| Employee liabilities (current and non-current) | 128,172 | 246,999 | ||||||
| Total | $ | 752,772 | $ | 787,469 | ||||
NOTE 6. CONVERTIBLE NOTES PAYABLE
The Company’s previously outstanding notes mandatorily converted, at a conversion price equal to 85% of 50%Accounts payable and accrued expenses consist of the unit offering pricefollowing:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| March 31, 2023 | June 30, 2022 | |||||||
| Accounts and other payables | $ | 458,410 | $ | 715,902 | ||||
| Accruals | 385,724 | 909,187 | ||||||
| Deferred consideration* | 399,250 | — | ||||||
| Other | 355,447 | — | ||||||
| Total | $ | 1,598,831 | $ | 1,625,089 | ||||
| * | The deferred consideration relates to: |
a) the second payment of $181,750 for bonus payments to be made on behalf of the IPO (or $7.23), for an aggregateselling shareholders of 710,548 shares basedIFP due on $5,133,706the six-month anniversary of principal and zero accrued interest outstanding at the closing date of conversion.the IFP Acquisition, being April 4, 2023, and
The convertible notes had a contingent Beneficial Conversion Features (BCF), withb) the contingency being the eventfair value of IPO. As such, a financing cost of $905,948 was recognized as interest expense in the consolidated statements of operations and other comprehensive loss$217,500 in relation to this contingent BCF Series C Preferred Stock that are being held back from the IFP Sellers for one year after the IFP Acquisition date to secure potential indemnification claims by the Company against the IFP Sellers. See Note 4 for further details of the IFP Acquisition.
NOTE 10. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
During the three months ended March 31, 2023, the Company’s market capitalization significantly declined and recurring cash burn of the reporting unit and continuous cash support from the parent entity led management to reassess whether an impairment had occurred considering these qualitative factors. Management’s evaluation indicated that the goodwill related to its IFPG reporting unit was potentially impaired. The Company then performed a quantitative impairment test by calculating the fair value of the reporting unit and comparing that amount to its carrying value. Significant assumptions inherent in the valuation methodologies include, but were not limited to prospective financial information, growth rates, terminal value and discount rate. The Company determined the fair value of the reporting unit utilizing the discounted cash flow model. The fair value of the reporting unit was determined to be less than its carrying value. The Company recognized an impairment charge of $4.1 million in the IFPG segment, which is related to the goodwill associated with the IFP Acquisition.
The changes in the carrying amount of goodwill were as follows:
SCHEDULE OF CARRYING AMOUNT OF GOODWILL
| Balance at June 30, 2022 | $ | — | ||
| Acquisition of IFP | 3,803,293 | |||
| Effect of foreign currency | 326,744 | |||
| Balance at December 31, 2022 | 4,130,037 | |||
| Impairment | (4,096,490 | ) | ||
| Effect of foreign currency | (33,547 | ) | ||
| Balance at March 31, 2023 | $ | — |
Goodwill resulting from the acquisition of IFP is allocated to the IFPG operating and reportable segment.
Other intangible assets
Other intangible assets consist of the following as of March 31, 2023:
SCHEDULE OF OTHER INTANGIBLE ASSETS
| Weighted average useful lives (years) | Acquisition cost | Effect of foreign currency | Accumulated amortization | Carrying value | ||||||||||||||||
| Technology | 5 years | $ | 5,119,000 | $ | 486,135 | $ | 634,510 | $ | 4,970,625 | |||||||||||
| Customer relationships | 3 years | 252,000 | 23,932 | 52,060 | 223,872 | |||||||||||||||
| Trade names and trademarks | Indefinite | 92,000 | 8,737 | — | 100,737 | |||||||||||||||
| Total intangible assets | $ | 5,463,000 | $ | 518,804 | $ | 686,570 | $ | 5,295,234 | ||||||||||||
Expense related to the amortization of other intangible assets for the three and nine months ended March 31, 2023, was $346,548 and $686,570, respectively. There was no amortization of other intangible assets during the three and sixnine months ended DecemberMarch 31, 2020.2022. Refer to note 3, summary of significant accounting policies for further information.
| 17 |
Amortization expense for the intangible assets is expected to be as follows over the next five years, and thereafter:
SCHEDULE OF EXPECTED AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS
| 2023 | $ | 895,599 | ||
| 2024 | 1,194,132 | |||
| 2025 | 1,171,745 | |||
| 2026 | 1,104,583 | |||
| 2027 | 828,438 | |||
| Total | $ | 5,194,497 |
There were no impairment charges related to other intangible assets incurred in the periods presented.
NOTE 11. CONVERTIBLE NOTES
As a result of the IFP Acquisition, the Company became the guarantor to unsecured convertible notes (also referred to herein as the IFP Loan Agreements) for which IFP is the borrower. The convertible notes, plus certain accrued interest, will become due on October 4, 2024 (the second anniversary of the IFP Acquisition closing date), unless earlier converted. The convertible notes, if converted, will convert into shares of IFP, which shares of IFP will be immediately transferred to the Company in exchange for shares of Series C Preferred Stock that are convertible into common stock (as set forth in the Share Exchange Agreement) following approval by the Company’s stockholders of the Company Stockholder Approval Matters. See Note 21 for further information and disclosures relating to the conversion of the Series C Preferred Stock.
The convertible notes bear an interest rate of 17% per annum, on a compounded basis. The interest rate will increase to 22% per annum, on a compounded basis, on October 4, 2023 (the first anniversary of the IFP Acquisition closing date) if the Company’s shareholders have not yet approved the Company Stockholder Approval Matters have not been approved by the Company’s stockholders by such date.
Due to the Company’s election to apply the fair value option (FVO), the fair value of the convertible notes is subsequently re-measured at the end of each reporting period based on the changes in their estimated fair value. See Note 15 for additional information.
NOTE 12. NOTE PAYABLE
As a result of the acquisition of IFP, the Company assumed a note payable due to a distributor of IFP. The unpaid principal balance of the loan will accrue interest at a rate of 0.97% per annum. The balance is offset by
| ● | Payments of 10% of the Company’s monthly worldwide gross revenue received in the preceding month; | |
| ● | 50% of sales by the company to the distributor. |
The classification of the notes payables is based on sales forecast prepared by the management.
NOTE 13. LEASES
In relation to the IFP Acquisition, the Company assumed a non-cancelable finance lease agreement. The lease has an original lease period expiring in August 2025. The lease agreement does not contain any material residual value guarantees or material restrictive covenants.
The components of finance lease expense are as follows:
SCHEDULE OF FINANCE LEASE EXPENSES
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Depreciation of finance lease right-of-use assets | $ | 45,548 | $ | — | $ | 94,171 | $ | — | ||||||||
| Interest on finance lease liabilities | 23,712 | — | 46,160 | — | ||||||||||||
| Total finance lease costs | $ | 69,260 | $ | — | $ | 140,331 | $ | — | ||||||||
As of March 31, 2023, the remaining lease-term and discount rate on the Company’s lease was 2.4 years and 17%, respectively.
The reconciliation of the maturities of the finance lease to the finance lease liabilities recorded in the condensed consolidated balance sheet as of March 31, 2023, is as follows:
SCHEDULE OF MATURITIES OF THE FINANCE LEASE TO THE FINANCE LEASE LIABILITIES
| 2023 | $ | 245,322 | ||
| 2024 | 255,135 | |||
| 2025 | 108,457 | |||
| Total lease payments | 608,914 | |||
| Less: imputed interest | (113,974 | ) | ||
| Present value of lease liabilities | $ | 494,940 |
Lease payments in the table above exclude $137,780 of minimum lease payments for a lease signed, but not yet commenced, as of March 31, 2023.
| 18 |
NOTE 7. 14. SHAREHOLDERS’ EQUITY
December 2020 Transactions
On December 14, 2020, the Company agreed to issue to LSBD, in considerationAs of LSBD’s contribution towards the research and development of applications other than glucose and COVID-19 applications to a maximum of $2 million over a 5-year period, a 5-year non-transferable warrantMarch 31, 2023 there were March Warrants (defined below) to purchase 3,000,000 shares of common stock; Series A Warrants to purchase shares of common stock; Series B Warrants to purchase shares of common stock; IPO underwriter warrants to purchase shares of common stock; pre-IPO warrants to purchase shares of common stock; LSBD warrants to purchase shares of common stock; Series D Warrants (defined below) to purchase shares of common stock; Winx Warrants (defined below) to purchase shares of common stock; and Representative’s Warrants (defined below) to purchase shares of common stock, outstanding and held by certain shareholders. Each warrant initially represented the right to purchase one share of the Company’s common stock at(subject to adjustment upon the occurrence of specified events).
On March 8, 2023, the Company entered into the Underwriting Agreement with Ladenburg Thalmann & Co. Inc., as representative (the Representative) of the underwriters named therein, relating to the March 2023 Offering of shares of the Company’s Common Stock (the March Shares) and warrants to purchase shares of Common Stock (the March Warrants). Each of the March Shares was sold in combination with an accompanying one-third Warrant. The combined purchase price for each March Share and accompanying March Warrant was $ and the Underwriters agreed to purchase March Shares and 170,868 March Warrant. On March 9, 2023, the Representative fully exercised an over-allotment option under the Underwriting Agreement and purchased an additional March Shares and additional March Warrants to purchase shares of Common Stock. The March 2023 Offering closed on March 10, 2023.
The March 2023 Offering was made pursuant to an effective shelf registration statement on Form S-3, which was filed with the SEC on April 8, 2022. The gross proceeds, before deducting underwriting discounts and commissions and other March 2023 Offering expenses, was approximately $2.55 million. As part of the Representative’s compensation, the Company issued to the Representative unregistered warrants to purchase 32,750 shares of common stock, which warrants have an exercise price of $17.00$4.875 per share. As this wasshare (125% of the public offering price per share and accompanying warrant) and will terminate on March 8, 2028. The March Warrants have, (i) an exercise price of $3.90 per share of Common Stock, (ii) a transaction between entities under common control,cashless exercise option for a net number of shares of Common Stock determined according to the $2 million receivable due from LSBD has been recognized as contra-equity.formula set forth in the March Warrant or (iii) an alternate cashless exercise option (beginning on or after the initial exercise date), to receive an aggregate number of shares of Common Stock equal to the product of (x) the aggregate number of shares of Common Stock that would be issuable upon a cash exercise and (y)1.00. Each whole March Warrant entitles the holder thereof to purchase 1 share of Common Stock. The March Warrants are exercisable upon issuance and will expire on March 10, 2028. The exercise price and the number of shares of Common Stock issuable upon exercise of the March Warrants is subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Common Stock.
On December 18, 2020,21, 2022, the Company entered into an Exchangea December 2022 Purchase Agreement (the “EA”) with LSBD to exchange 3,000,000 shares of its common stock held by LSBD for 3,000,000 shares of the Company’s14 Series B Convertible Preferred Stock (“Exchange”). In addition, the parties to the Exchange Agreement entered into a Registration Rights Agreement (the “RRA”)D Investors, pursuant to which the Company agreed to prepareissue and file within 30 days followingsell to the closingSeries D Investors in the December 2022 Private Placement (i) 176,462 shares of the IPOSeries D Preferred Stock, with the Securities and Exchange Commission a registration statement to register for resale theeach share of Series D Preferred Stock convertible into 0.15 shares of Common Stock issuable(subject to adjustment upon the occurrence of specified events); and (ii) Series D Warrants, with each Series D Warrants representing the right to purchase shares of common stock (subject to adjustment upon the occurrence of specified events). In addition, 26,469 Winx Warrants were issued to Winx Capital Pty Ltd., the placement agent for the December 2022 Private Placement, with each Winx Warrant representing the right to purchase shares of common stock (subject to adjustment upon the occurrence of specified events). The Series D Warrants have an exercise price of $5.80 per share (subject to adjustment) and expire June 22, 2028. The Winx Warrants have an exercise price of $10.40 per share (subject to adjustment) and expire five years following the effective date of a registration statement covering the resale of common stock underlying the Series D Preferred Stock acquired by the Series D Investors. The Series D Preferred Stock and Series D Warrants were sold together as a unit, with each Unit consisting of one share of Series D Preferred Stock and three Series D Warrants. The purchase price for the Units was $ per Unit. The Unit offering price and the Series D Warrants exercise price were priced above the Nasdaq “Minimum Price” as that term is defined in Nasdaq Rule 5635(d)(1). The shares of Series D Preferred Stock are convertible into an aggregate of shares of Common Stock following shareholder approval of such conversion and without the payment of additional consideration. The Series D Warrants are exercisable for an aggregate of 26,478 shares of Common Stock and the Winx Warrants are exercisable for an aggregate of 1,324 shares of Common Stock. The December 2022 Private Placement closed on December 22, 2022. See Note 21 for information and disclosures relating to the conversion of the Series B ConvertibleD Preferred Stock. If and
On October 6, 2022, the Company granted its employees shares of Common Stock as compensation. The Company recorded stock compensation expense of $ in relation to the extentissuance during the three and six months ended December 31, 2022. The Company withheld shares for the payment of withholding taxes.
On October 4, 2022, the Company failsissued shares of common stock and shares of Series C Preferred Stock as partial consideration in connection with the IFP Acquisition. The Company recognized $806,397 of equity issuance costs in relation to among other things, filethis transaction and recorded them as reduction to additional paid-in capital on the Condensed Consolidated Balance Sheets. An additional shares of Series C Preferred Stock will be issued by the Company on the one-year anniversary of the IFP Acquisition, pending satisfaction of potential indemnification claims by the Company against the IFP Sellers. See Note 5 for further detail of the IFP Acquisition.
The Series C Preferred Stock and Series D Preferred Stock are convertible into the Company’s common stock following approval of the Company’s stockholders of such resale registration statement or have it declared effectiveconversion.
NOTE 15. FAIR VALUE MEASUREMENTS
Convertible notes
As detailed in Note 11, the Company assumed convertible notes as requireda result of the IFP Acquisition and elected to account for the convertible notes under the termsFVO. The Company estimated the fair value of the RRA,convertible notes based on the fair value of the maximum shares issuable upon conversion ( shares of Series C convertible preferred stock) less one year of estimated interest to be incurred until October 4, 2023, since the number of shares to be issued factors in the interest charges for one year. If the note converts earlier than one year less shares will be issued as a result of this. If the note converts between year 1 and year 2 the maximum amount of shares gets issued and the Company will be required to payincur 22% annual interests for the period up to the holderdate of such registration rights partial liquidated damages payable in cashconversion in the amount equalsecond year. The Company continues to estimate the fair value of the convertible notes using this method, reducing the estimated interest adjustment each quarter as the 1-year anniversary of the IFP Acquisition approaches. Accordingly, as of March 31, 2023, the fair value movement related to the productdecrease in the share price from the time of 1.0% multipliedacquisition to reporting date.
Increases or decreases in the fair value of the Company’s convertible notes carried at fair value are recognized as part of Other Income (expenses) in the Condensed Consolidated Statements of Operations. The interest incurred from the date of acquisition until March 31, 2023, are included as part of Interest expense in the condensed Consolidated Statements of Operations. None of the change in the value of the convertible notes was attributable to instrument specific credit risk.
| 19 |
The following table provides a reconciliation of the beginning and ending balance of the convertible note liabilities measured at fair value on a recurring basis during the period:
SCHEDULE OF CONVERTIBLE NOTE LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS
| Convertible notes carried at fair value (Level 3) | ||||
| Balance at June 30, 2022 | $ | — | ||
| Fair value of convertible notes at acquisition (Note 5) | 1,683,764 | |||
| Fair value gain on revaluation of convertible notes | (1,267,791 | ) | ||
| Effect of foreign currency | 107,730 | |||
| Balance at December 31, 2022 | 523,703 | |||
| Fair value gain on revaluation of convertible notes | (204,207 | ) | ||
| Effect of foreign currency | 69,865 | |||
| Balance at March 31, 2023 | $ | 389,361 | ||
| Balance | $ | 389,361 | ||
The Company has held back Series C Preferred Stock, from the IFP Sellers for one year after the IFP Closing to secure potential indemnification claims by the aggregate purchase price paid by such holder pursuantCompany against the IFP Sellers. Therefore, the final number of shares to be issued after the EA. The EAone year measurement period is contingent on any potential claims and the RRA contain customary representations, warranties, agreements and, indemnification rights and obligations of the parties. The common stock acquired in the Exchange was immediately retired.can be variable. Each share of Series B ConvertibleC Preferred Stock is convertible into 1 shares of Common Stock (subject to adjustment upon the occurrence of specified events), contingent upon approval by the Company’s common stock, subject to proportional adjustment and beneficial ownership limitations. In the eventstockholders of the Company’s liquidation, dissolution or winding up, holdersconversion of Series B ConvertibleC Preferred Stock. These shares are reserved, not issued, or held in Escrow account. As at March 31, 2023, the Company accounted for the fair value movement relates to the decrease in the share price from the time of acquisition to reporting date. See Note 21 for further information and disclosures relating to the conversion of the Series C Preferred Stock.
The following table provides a reconciliation of the beginning and ending balance of the holdback Preferred Stock will participate pari passu with any distribution of proceeds to holders ofmeasured at fair value on a recurring basis during the Company’s common stock. Holders of Series B Convertible Preferred Stock are entitled to receive dividends on shares of Series B Preferred equal (on an as converted to common stock basis) toperiod:
SCHEDULE OF PREFERRED STOCK AT FAIR VALUE ON RECURRING BASIS
| Preferred stock carried at fair value (Level 2) | ||||
| Balance at June 30, 2022 | $ | — | ||
| Fair value of holdback Series C Preferred Stock at acquisition (Note 5) | 825,300 | |||
| Fair value gain on revaluation of holdback Series C Preferred Stock | (525,300 | ) | ||
| Balance at December 31, 2022 | 300,000 | |||
| Fair value gain on revaluation of holdback Series C Preferred Stock | (82,500 | ) | ||
| Balance at March 31, 2023 | $ | 217,500 | ||
The Company did not have assets or liabilities carried at fair value using Level 1 inputs during the three and in the same form as dividends actually paid on the Company’s common stock. Shares of Series B Convertible Preferred Stock generally have no voting rights, except as required by law.nine months ended March 31, 2023 and 2022.
Initial public offering
In December 2020, the Company completed its initial public offering. See Note 1.
NOTE 8. RELATED-PARTY16. RELATED PARTY TRANSACTIONS
In December 2020, the Company completed certain financing transactions with its Parent, LSBD as described in Note 7.
Sales to and purchases from related parties are made in arm’s length transactions both at normal market prices and on normal commercial terms.
The following transactions occurred with LSBD and senior management personnel during the period July 1, 20202022, to March 31, 2023:
| ● | The Company incurred a total cost of $nil during the three and nine months ended March 31, 2023 (three and nine months ended March 31, 2022: $nil and $145,733), towards overhead cost reimbursement which includes salaries, rents and other related overheads directly attributable to the Company which are included in selling, general and administration expenses in the Condensed Consolidated Statements of Operations and Other Comprehensive Loss. |
| ● | As of March 31, 2023, $8,821 (March 31, 2022: $9,833) remains payable to LSBD in relation to overhead reimbursements detailed above. |
December 31, 2020 (FY2020: July 1, 2019 to2022 Private Placement
Approximately 15.10% of funds raised in the December 31, 2019):
The Company incurred a total2022 Private Placement were secured from Spiro Sakiris, our Chief Financial Officer (indirectly), and Manuel Kostandas, our Director of $nil (FY2020: $599,848) towardsGlobal Integration, respectively. Mr. Sakiris indirectly invested $19,991 in the servicesDecember 2022 Private Placement and Mr. Kostandas invested $13,327 in connection with development and regulatory approval pathway for the technology, including payments made or expenses incurred on behalf of the Company.December 2022 Private Placement.
The Company incurred a total of $nil (FY2020: $730,148) towards overhead cost reimbursement which includes salaries, rents and other related overheads directly attributable to the company which are included in general and administration expenses.
The Company recognized income of $nil (FY2020: $121,277) in relation to shared labor reimbursement which includes salaries directly attributable to the company which are included in shared-services revenue.
NOTE 9. 17. INVESTMENT IN AFFILIATE
On May 29, 2020, the parent Company, Life Science Biosensor Diagnostics Pty Ltd,LSBD, issued common shares of BiosensX (North America) Inc. to the Company at par value of $0.001$ per share. This transaction provided the Company with a 50%50% interest in BiosensX (North America) Inc., the holder of the technology license for the North America region.
The investment in BiosensX (North America) Inc. is accounted for by use of the equity method in accordance with ASC 323, Investments - Equity Method and Joint Ventures.Ventures.
Life Science Biosensor Diagnostics Pty Ltd isAt the date of this transaction, LSBD was the parent of both the Company and BiosensX (North America) Inc., the transfer of BiosensX shares to the Company was deemed to be a common control transaction. As a result of the share transfer, the Company has significant influence over BiosensX (North America) Inc.
| 20 |
During the year ended June 30, 2022, LSBD sold all the shares it held in the Company but in accordance with ASC 810 Consolidation Life Science Biosensor Diagnostics is deemed to have control over BiosensX (North America) Inc. due to its directretained ownership of 50%5-year non-transferrable warrants to purchase 150,000 common shares of the Company at an exercise price of $ per share, expiring December 31, 2025. The Company determined whether it has a controlling financial interest in BiosensX (North America) Inc. by first evaluating whether the entity is a voting interest entity or a VIE under GAAP. Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and indirect ownershipprovides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. The Company consolidates voting interest entities in which it has all, or at least a majority of, 50%the voting interests. As defined in applicable accounting standards, VIEs are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. The Company concluded that it does not have a controlling financial interest in BiosensX (North America) Inc. through GBS, hence it continues to recognize its investments in BiosensX (North America) Inc. using the equity method.
The following table summarizes thecarrying amount recordedof investments in the consolidated financial statements:BiosensX (North America) Inc. was $nil as of March 31, 2023, and June 30, 2022.
| December 31, 2020 | June 30, 2020 | |||||||
| Investment value | $ | 135,692 | $ | 14,000 | ||||
| (Loss) income from the affiliate | (135,692 | ) | 121,692 | |||||
| Carrying amount | $ | - | $ | 135,692 | ||||
NOTE 10. 18. COMMITMENTS AND CONTINGENCIES
During November 2022, the Company signed a deed of variation with the University of Newcastle for the research and development of the Saliva Glucose Biosensor. The Company agreed to pay the University of Newcastle $847,021 of which $847,021 remains payable as of March 31, 2023.
The Company has no material future minimum leasepurchase commitments. For commitments or purchase commitments.on leases, refer to Note 13.
From time to time, the Company ismay become a party to various legal proceedings arising in the ordinary course of business. Based on information currently available, the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition, results of operations or liquidity. However, legal matters are inherently uncertain, and the Company cannot guarantee that the outcome of any potential legal matter will be favorable to the Company.
NOTE 11. 19. INCOME TAX
The Company shall file its income tax returns with the Internal Revenue Service, Australian Taxation Office and His Majesty Revenue & Customs. The Company has operating losses carried forward of $41,464,331 which are derived from its operations in Australia, the UK and the US and are available to reduce future taxable income. Such loss carry forwards may be carried forward indefinitely, subject to compliance with tests of continuity and additional rules.
The net operating loss carried forward gives rise to a deferred tax asset of approximately $7,596,042 after offsetting associated deferred tax liabilities. However, the Company has determined that a valuation allowance of $7,596,042 against such deferred tax asset is necessary, as it cannot be determined that the losses carried forward will be utilized.
Basic loss per common share is computed by dividing net loss allocable to common stockholdersshareholders by the weighted average number of shares of common stock or common stock equivalents outstanding. Diluted loss per common share is computed similar to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
| Three Months Ended | Six Months Ended | |||||||||||||||
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||||||||
| Net loss attributable to GBS, Inc. | $ | (1,983,964 | ) | $ | (1,836,318 | ) | $ | (3,056,474 | ) | $ | (2,594,168 | ) | ||||
| Basic and diluted net loss per share attributed to common shareholders | $ | (0.23 | ) | $ | (0.22 | ) | $ | (0.35 | ) | $ | (0.30 | ) | ||||
| Weighted-average number of ordinary shares | 8,622,724 | 8,510,000 | 8,626,362 | 8,510,000 | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net loss attributable to Intelligent Bio Solutions Inc. | $ | (6,343,906 | ) | $ | (1,335,246 | ) | $ | (7,972,799 | ) | $ | (6,227,896 | ) | ||||
| Basic and diluted net loss per share attributed to common shareholders | $ | (5.72 | ) | $ | (1.79 | ) | $ | (8.67 | ) | $ | (8.54 | ) | ||||
| Weighted-average number of shares outstanding | 1,108,672 | 744,495 | 919,545 | 729,533 | ||||||||||||
Anti-dilutive warrants and preferred shares:shares - Common Stock Equivalent
| Three Months Ended | Six Months Ended | |||||||||||||||
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||||||||
| Warrants - Series A | 1,459,977 | - | 1,459,977 | - | ||||||||||||
| Warrants - Series B | 1,461,177 | - | 1,461,177 | - | ||||||||||||
| Warrants issued to underwriters | 63,529 | - | 63,529 | - | ||||||||||||
| Pre IPO warrants | 2,736,675 | 2,250,376 | 2,736,675 | 2,250,376 | ||||||||||||
| Warrants issued to parent entity | 3,000,000 | - | 3,000,000 | - | ||||||||||||
| Preferred stock - Series A | - | 2,323,891 | - | 2,323,891 | ||||||||||||
| Preferred stock - Series B | 3,000,000 | - | 3,000,000 | - | ||||||||||||
SCHEDULE OF ANTI-DILUTIVE WARRANTS
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Preferred Stock - Series C | 354,432 | - | 354,432 | - | ||||||||||||
| Preferred Stock - Series D | 26,464 | - | 26,464 | - | ||||||||||||
| Warrants - Common stock (March 23 public raise) | 69,291 | - | 69,291 | - | ||||||||||||
| Warrants - Series A | 70,068 | 70,068 | 70,068 | 70,068 | ||||||||||||
| Warrants - Series B | 2,620 | 2,620 | 2,620 | 2,620 | ||||||||||||
| Private placement warrants (Dec 2022) | 26,478 | - | 26,478 | - | ||||||||||||
| Warrants issued to Winx Capital Pty Ltd | 1,324 | - | 1,324 | - | ||||||||||||
| Warrants issued to underwriters (IPO) | 3,177 | 3,177 | 3,177 | 3,177 | ||||||||||||
| Warrants issued to underwriters (March 23 public raise) | 32,750 | - | 32,750 | - | ||||||||||||
| Pre IPO warrants | 136,834 | 136,834 | 136,834 | 136,834 | ||||||||||||
| Warrants issued to LSBD | 150,000 | 150,000 | 150,000 | 150,000 | ||||||||||||
| Anti-dilutive warrants and preferred shares | 150,000 | 150,000 | 150,000 | 150,000 | ||||||||||||
NOTE 12. 21. SUBSEQUENT EVENTS
Subsequent to December 31, 2020,The Company made the second payment of $ for bonus payments on behalf of the selling shareholders of IFP in April 2023.
At the special meeting of the Company’s stockholders held on May 8, 2023 (the “Special Meeting”), the stockholders of the Company received $502,350 in relationapproved, (a) for purposes of complying with Nasdaq Listing Rule 5635, the full conversion of Series C Preferred Stock issued by the Company pursuant to the exerciseterms of 59,100 Series A Warrants to purchase one sharea Share Exchange Agreement, dated as of October 4, 2022, and the issuance of shares of Common Stock per Warrant at an exercise price $ 8.50. As of February 11, 2021, a total of 1,402,077 Series A warrants remain outstanding.
Subsequent to December 31, 2020 a total of 1,364,495 Series B Warrants were exercised to purchase one Common Stock per Warrants in a cashless exercise provision as described in Company’s Registration Statement on Form S-1, File No. 333-252277 on file with the U.S. Securities and Exchange Commission (the “SEC”). As of February 11, 2021, a total of 66,382 Series B remain outstanding.
On January 5, 2021, the Company entered into a certain Research Collaboration Agreement with Harvard College for the purposes of facilitating mutual collaboration in scientific research in connection with such conversion (the “Series C Conversion Approval”); and (b) the Company’s non-exclusive royalty free license to combat COVID-19 coronavirus. The contemplated collaboration includes research teams fromfull conversion of Series D Preferred Stock, issued by the Company pursuant to the terms of a Securities Purchase Agreement, dated as of December 21, 2022, and Harvardthe issuance of shares of Common Stock in connection with such conversion (the “Series D Conversion Approval”).
As of May 9, 2023, pursuant to the Series C Conversion Approval and will include, among others, exchange of materials and research data, to now progress with the milestone of integrating the Harvard technology with the Company’s biosensor with applications for SARS-Cov-2 antibody test for COVID-19. The Company agreed to pay Harvard a total amount of $609,375 payable in 3 instalments, with $304,687.50 payable upon receiptterms of the initial invoice,Share Exchange Agreement, the convertible notes to which the Company is a guarantor as a result of the IFP Acquisition, with an outstanding balance of £1,360,761 in principal and two additional paymentsaccrued interest as of $152,343.75 each, upon 90 and 180 day anniversary followingMay 8, 2023, were convertible into shares of IFP, which shares are immediately exchangeable for an aggregate of shares of Series C Preferred Stock. The outstanding balance of the convertible notes as at the closing date of the agreement. For additional details refer to form 8-k on January 8, 2021.IFP Acquisition was £1,254,270.
Upon conversion of the convertible notes into shares of Series C Preferred Stock, there will be shares of Series C Preferred Stock outstanding and convertible into an aggregate of shares of Common Stock. As of May 10, 2023, there were shares of Series D Preferred Stock outstanding and convertible into an aggregate of shares of Common Stock.
| 21 |
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Result of OperationsMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations togetherin conjunction with our audited historical consolidated financial statements, which are included in the 2022 Form 10-K and our unaudited condensed consolidated financial statements andfor the related notes and other financial informationfiscal quarter ended March 31, 2023, included elsewhere in this Quarterly Report on Form 10-Q. This discussionManagement’s Discussion and other partsAnalysis of this report contain forward-lookingFinancial Condition and Results of Operations contains statements that involve risks and uncertainties, such asare forward-looking. These statements of our plans, objectives, expectations and intentions, that are based on current expectations and assumptions that are subject to risks, uncertainties, and other factors. Actual results could differ materially because of the factors discussed below or elsewhere in this Quarterly Report on Form 10-Q. See Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q and Part I, Item 1A. “Risk Factors” of the 2022 Form 10-K.
Forward-Looking Information
All statements other than statements of historical fact or relating to present facts or current conditions included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding expectations, hopes, beliefs, intentions, or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “can have,” “likely” and the negative of such words and other words and terms of similar meaning, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Item 1A — Risk Factors” of this Quarterly Report on Form 10-Q and in our 2022 Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management as well asto predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, made by,the future events and information currently available to, our management. Ourtrends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those discussedanticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by the federal securities laws, we are under no duty to update any of these forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as ofafter the date of this report,Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations.
Overview
Intelligent Bio Solutions Inc. (“INBS”) (formerly known as GBS Inc.), and while we believe such information forms a reasonable basis for such.
Overview
We are a biosensor diagnostic technology company developing our COV2 test and across the Asia-Pacific region (“APAC”) and a biosensor platform comprising of biochemistry, immunology, tumour markers, hormones, and nucleic acid diagnostic modalities. Weits wholly owned Delaware subsidiary, GBS Operations Inc. were incorporatedeach formed on December 5, 2016, under the laws of Delawarethe state of Delaware. Our Australian subsidiary Intelligent Bio Solutions (APAC) Pty Ltd (formerly known as Glucose Biosensor Systems (Greater China) Pty Ltd) was formed on December 5, 2016. Our headquarter isAugust 4, 2016, under the laws of New South Wales, Australia and was renamed to Intelligent Bio Solutions (APAC) Pty Ltd on January 6, 2023. On October 4, 2022, INBS acquired Intelligent Fingerprinting Limited (“IFP”), a company registered in New York. WeEngland and Wales (the “IFP Acquisition”). The Glucose Biosensor System (Japan) Pty Ltd and Glucose Biosensor System (APAC) Pty Ltd, were deregistered on January 6, 2023, and June 9, 2022, respectively. INBS and its subsidiaries (collectively, “we,” “us,” “our,” “INBS” or the “Company,” unless context requires or indicates otherwise) were formed to provide a non-invasive, pain free innovationinnovative medical devices and screening devices. Our headquarters are in New York, New York.
We are a medical technology company delivering intelligent, rapid, non-invasive testing solutions for patients and their primary health practitioners at point of care. We operate globally with an objective to deliver intelligent pain free diagnostic tests.
Our current product portfolio includes:
| ● | A proprietary portable drug screening system that works by analyzing fingerprint sweat using a one-time cartridge and portable handheld reader. The system comprises of commercially available non-invasive sweat-based fingerprint diagnostics testing products (the “IFP products”) that currently detect opioids, cocaine, methamphetamines, benzodiazepines, cannabis, methadone, buprenorphine, and amphetamine. Customers include safety-critical industries such as construction, transportation and logistics firms, along with drug treatment organizations in the rehabilitation sector, and judicial organizations. | |
| ● | A development stage range of biosensor based biosensor based Point of Care diagnostic tests (“POCT”) that are developed in the modalities of clinical chemistry, immunology, tumor markers, allergens, and endocrinology. Our flagship product candidate is the Saliva Glucose Biosensor (“SGB”), a POCT expected to substitute the finger pricking invasive blood glucose monitoring for diabetic patients. These tests stem from the Biosensor Platform that we license, across the Asia Pacific Region from Life Science Biosensor Diagnostics Pty Ltd (“LSBD” or “the Licensor”). The Biosensor Platform is capable of detecting multiple biological analytes by substituting the GOX enzyme with a suitable alternative for each analyte. |
Our objectives:
| ● | To expand the IFP product line in drug testing markets concentrating on: |
| ○ | increasing market share in current markets, which have been the UK and West Europe. | |
| ○ | commence distribution into the Asia region and | |
| ○ | commence the regulatory approval process with the United States Food and Drug Administration (the “FDA”) for the purpose of expanding into the sectors of the USA markets where such approval is required. |
| ● | To complete development and commercialize the SGB the diagnostic test that stems from the Biosensor Platform that we license from LSBD, in the regions covered by the license. This will be followed by developing the platform further to testing across the diagnostic modalities of immunology, hormones, chemistry, tumor markers and nucleic acid tests. |
| 22 |
Recent Developments
Highlights of our major achievements for the nine months ended March 31, 2023, are:
| ● | On March 15, 2023, the Company announced that it has selected Human and Supplement Testing Australia (“HASTA”), Australia’s largest independent sports drug testing laboratory, as its preferred drug testing specialist in Australia to complete lab-based confirmation testing | |
| ● | On March 8, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc., as representative (the “Representative”) of the underwriters named therein (collectively, the “Underwriters”), relating to an underwritten public offering of 569,560 shares (the “March Shares”) of the Company’s Common Stock and warrants (the “March Warrants”) to purchase 170,868 shares of Common Stock (collectively, the “March 2023 Offering”). Each of the March Shares was sold in combination with an accompanying one-third Warrant. The combined purchase price for each March Share and accompanying March Warrant was $3.90 and the Underwriters agreed to purchase 569,560 March Shares and 170,868 March Warrants. The March 2023 Offering was made pursuant to an effective shelf registration statement on Form S-3, which was filed with the SEC on April 8, 2022. On March 9, 2023, the Representative fully exercised the over-allotment option to purchase an additional 85,430 March Shares and additional March Warrants to purchase 25,629 shares of Common Stock. The March 2023 Offering closed on March 10, 2023. The gross proceeds, before deducting underwriting discounts and commissions and other March 2023 Offering expenses, was approximately $2.55 million. As part of the Representative’s compensation, the Company issue to the Representative unregistered warrants (the “Representative’s Warrants”) to purchase 32,750 shares of common stock, which warrants have an exercise price of $4.875 per share (125% of the public offering price per share and accompanying warrant) and will terminate on March 8, 2028. The March Warrants have, (i) an exercise price of $3.90 per share of Common Stock, (ii) a cashless exercise option for a net number of shares of Common Stock determined according to the formula set forth in the March Warrant or (iii) an alternate cashless exercise option (beginning on or after the initial exercise date), to receive an aggregate number of shares of Common Stock equal to the product of (x) the aggregate number of shares of Common Stock that would be issuable upon a cash exercise and (y)1.00. Each whole March Warrant entitles the holder thereof to purchase 1 share of Common Stock. The March Warrants are exercisable upon issuance and will expire on March 10, 2028. | |
| ● | On February 16, 2023, the Company announced that it has filed a 513(g) submission with the United States Food and Drug Administration (FDA) for its Intelligent Fingerprinting Drug Screening Cartridge. The submission will allow Intelligent Bio Solutions to determine the most suitable FDA regulatory pathway as part of the Company’s strategy for expansion into the U.S. market. | |
| ● | At the annual meeting of the Company’s stockholders held on February 8, 2023 (the “Annual Meeting”), the stockholders of the Company approved an amendment to the Company’s amended and restated certificate of incorporation (the “Amendment”) to effect a reverse stock split at a ratio of not less than 1-for-2 and not more than 1-for-35 at any time within 12 months following the date of stockholder approval, with the exact ratio to be set within this range by the Company’s Board of Directors (the “Board”) at its sole discretion without further approval or authorization of our stockholders. Pursuant to such authority granted by the Company’s stockholders, on February 8, 2023, the Board approved a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the Company’s common stock and the filing of the Amendment to effectuate the Reverse Stock Split. On February 9, 2023, the Company filed the Amendment in order to effect 1-for-20 reverse stock split of the Company’s common stock. The Reverse Stock Split was effective at 4:05 p.m., Eastern Time, on February 9, 2023, at which time every twenty shares of the Company’s issued and outstanding common stock were automatically combined into one issued and outstanding share of common stock. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders of record who were otherwise entitled to receive a fractional share instead received one whole share in lieu of a fractional share. The par value of the Company’s common stock and the number of authorized shares of the common stock were not affected by the Reverse Stock Split. The Company’s common stock began trading on a Reverse Stock Split-adjusted basis on The Nasdaq Capital Market at the open of the markets on February 10, 2023. The Reverse Stock Split was implemented for the purpose of regaining compliance with the minimum bid price requirement for continued listing of the Company’s common stock on the Nasdaq Capital Market. As a result of the Reverse Stock Split, the number of shares of common stock outstanding was reduced from approximately 18,325,289 shares (excluding treasury shares) as of February 8, 2023, to approximately 916,265 shares (excluding treasury shares, and subject to the rounding up of fractional shares), and the number of authorized shares of common stock remained at 100 million shares. In order reflect the Reverse Stock Split, proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all outstanding stock options, restricted stock unit awards and warrants (including the Series D Warrants, Winx Warrants and March Warrants (each as defined below)), which resulted in a proportional decrease in the number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such stock options, restricted stock unit awards and warrants, and, in the case of stock options and warrants, a proportional increase in the exercise price of all such stock options and warrants. In addition, the number of shares of common stock issuable upon conversion of the Company’s Series C Preferred Stock and Series D Preferred Stock, as well as any applicable conversion ratios and terms, were also adjusted in proportion to the reverse split ratio of the Reverse Stock Split (subject to adjustment for fractional interests). | |
| ● | On January 23, 2023, the Company published the results of Milestone 7, a phase of its biosensor platform development at the University of Newcastle, Australia, that included testing time-to-result (TTR), sensitivity, and reproducibility. The results showed a record 4x improvement in TTR, enabling the biosensor to return test results in under one minute. | |
| ● | During the period, IFP continued to expand its customer base by entering sales contract with Boughey Distribution, and A&F Sprinklers, a global garden equipment manufacturer. | |
| ● | The Company completed the acquisition of Intelligent Fingerprinting Limited (“IFP”), a company registered in England and Wales and on October 4, 2022 (the “IFP Acquisition”). IFP owns a portfolio of intellectual property for diagnostic tests and associated technologies including drug testing through the analysis of fingerprint sweat. The acquisition of IFP has expanded the Company’s platform of rapid, non-invasive diagnostic testing technologies. |
In connection with the IFP Acquisition, on October 4, 2022, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with IFP, the holders of all of the issued shares in the capital of IFP (collectively, the “IFP Sellers”) and the IFP Sellers’ representative” named therein.
Pursuant to the Share Exchange Agreement, among other things, the Company acquired from the IFP Sellers all of the issued shares in the capital of IFP, and as consideration therefor the Company issued and sold to the IFP Sellers upon the closing of the IFP Acquisition (the “IFP Closing”) an aggregate number of (i) 148,183 shares of the Company’s common stock, and (ii) 2,363,003 shares of the Company’s Series C Convertible Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”).
Up to an additional 1,649,273 shares of Series C Preferred Stock have been reserved for potential future issuance by the Company, consisting of 500,000 shares of Series C Preferred Stock, that are being held back from the IFP Sellers for one year after the IFP Closing to secure potential indemnification claims by the Company against the IFP Sellers and (ii) 1,149,273 shares of Series C Preferred Stock to certain lenders to IFP (the “IFP Lenders”). Each share of Series C Preferred Stock is convertible into 0.15 shares of Common Stock (subject to adjustment upon the occurrence of specified events), contingent upon approval by the Company’s stockholders.
| 23 |
Also pursuant to the Share Exchange Agreement, the Company had an obligation to provide IFP with cash in an amount such that IFP is able to pay cash payments to certain current and former United Kingdom and United States-based employees and directors (the “IFP Bonus Recipients”), in aggregate amounts of £239,707 and $83,043, respectively (the “Cash Bonuses”), plus any applicable employer’s National Insurance contributions. The Cash Bonuses are being paid to the IFP Bonus Recipients in two equal instalments, with the first payment made immediately following the Closing and the second payment to be made on the six-month anniversary of such date.
Also pursuant to the Share Exchange Agreement, the Company had agreed to make it easieravailable to the employees of IFP (the “IFP Employees”) a Company stock option plan in form and substance satisfactory to the Company in relation to up to 50,000 shares Common Stock following the Closing on the basis that an equal number of Company stock options will be granted to the IFP Employees and Company employees up to an aggregate amount of 100,000 Company stock options.
Each of the Company, IFP and the IFP Sellers made certain customary representations and warranties and agreed to certain covenants in the Share Exchange Agreement.
| ● | On December 21, 2022, the Company entered into a Securities Purchase Agreement (the “December 2022 Purchase Agreement”) with 14 investors (the “Series D Investors”), pursuant to which the Company agreed to issue and sell to the Series D Investors in a Regulation S private placement (the “December 2022 Private Placement”) (i) 176,462 shares of the Company’s Series D Convertible Preferred Stock, par value $0.01 per share (the “Series D Preferred Stock”), with each share of Series D Preferred Stock convertible into 0.15 shares of Common Stock (subject to adjustment upon the occurrence of specified events); and (ii) 529,386 warrants (the “Series D Warrants”), with each Series D Warrants representing the right to purchase 0.05 shares of common stock (subject to adjustment upon the occurrence of specified events). An additional 26,469 warrants to purchase shares of common stock were issued to Winx Capital Pty Ltd., the placement agent for the December 2022 Private Placement (the “Winx Warrants”), with each Winx Warrant representing the right to purchase 0.05 shares of common stock (subject to adjustment upon the occurrence of specified events). The Series D Warrants have an exercise price of $5.80 per share (subject to adjustment) and expire June 22, 2028. The Winx Warrants have an exercise price of $10.40 per share (subject to adjustment) and expire five years following the effective date of a registration statement covering the resale of common stock underlying the Series D Preferred Stock acquired by the Series D Investors. The Series D Preferred Stock and Series D Warrants were sold together as a unit (“Unit”), with each Unit consisting of one share of Series D Preferred Stock and three Series D Warrants. The purchase price for the Units was $1.25 per Unit. The Unit offering price and the Series D Warrants exercise price were priced above the Nasdaq “Minimum Price” as that term is defined in Nasdaq Rule 5635(d)(1). The shares of Series D Preferred Stock are convertible into an aggregate of 26,464 shares of Common Stock following shareholder approval of such conversion and without the payment of additional consideration. The Series D Warrants are exercisable for an aggregate of 26,478 shares of Common Stock and the Winx Warrants are exercisable for an aggregate of 1,324 shares of Common Stock. The December 2022 Private Placement closed on December 22, 2022. See Note 21 for information and disclosures relating to the conversion of the Series D Preferred Stock. |
| ● | On July 13, 2022, INBS completed Institutional Review Board (IRB) approved clinical studies at the Diabetes Research Institute of Sutter Health’s Mills-Peninsula Medical Center (MPMC) in San Mateo, California. The study design was intended to support the clinical development of its next-generation Saliva Glucose Biosensor. A total of 40 adult subjects with type 2 diabetes were recruited for the study. Nearly 1,400 samples of blood and oral fluids were collected and analyzed. The subsequent statistical analysis of the correlation of glucose levels among these sample types will act as foundation for building a robust portfolio of prospective clinical evidence, forming the backbone for future regulatory submissions. |
| 24 |
Our Products
Fingerprinting Drug Screening System (IFP)
Our recently acquired subsidiary, Intelligent Fingerprinting Limited, Intelligent (IFP), is the developer and owner of a unique and proprietary portable drug screening system. The system works by analyzing fingerprint sweat using a one-time (recyclable) cartridge and portable handheld reader. The system is non-invasive, fast, and cost-effective, with sample collection taking seconds with simultaneous screening for peoplemultiple drug groups in ten minutes. A laboratory confirmation service is also available giving evidential levels of analysis should this be required. The system has applications within many sectors, and customers include safety-critical industries such as construction, transportation, and logistics firms, along with drug treatment organizations in the rehabilitation sector, as well as the United Kingdom (UK) coroners. The Intelligent Fingerprinting Drug Screening System consists of a small, tamper-evident Drug Screening Cartridge (for sample collection) and the portable DSR-Plus, which reads the Cartridge to manage diabetes usingprovide the Company’sdrug screening results.
Intelligent Fingerprinting offers several fingerprint-based drug screening tests including:
| ● | DSC2 – testing for Methamphetamine, Methadone, Benzodiazepines, Buprenorphine | |
| ● | DSC 5 – testing for Opiates, Cocaine, Cannabis and Methamphetamines | |
| ● | DSC 8 – testing for Opiates, Methadone, Buprenorphine and Benzodiazepines | |
| ● | DSC 10 – testing for Amphetamine, Opiates, Cannabis and Cocaine |
IFP has developed both a Point of Care drug screening test system (“POCT”) and a drug laboratory-based confirmation testing service. Both of these involve the collection of fingerprints sweat samples for analysis. For many years, competitor POCT systems and confirmation tests needed to rely on the collection of either urine or oral fluid (saliva) body fluid samples. There are several significant benefits of IFP analysis of fingerprint sweat over urine and oral fluid drug testing:
| 1. | Non-Invasive sample collection – Fingerprint sweat can be collected within seconds in any location without the need for specialist trained, gender-specific collectors or prepared collection areas. The sweat from fingerprints is collected simply by pressing each finger one by one for five seconds onto a disposable sample collection cartridge. In contrast, the collection of urine and oral fluid samples can take many hours, requires trained collectors, and to avoid cheating of the tests, the collection areas need to be specially prepared, and the collection of the sample directly observed, which is clearly extremely invasive and undignified in the case of urine. | |
| 2. | Hygienic and non-biohazardous – Fingerprint sweat samples are non-biohazardous and so the screening and collection kit material can be disposed of in routine waste or recycled. Kits used to collect urine and saliva are a potential biohazard and must be treated as such – either incinerated or into landfill. | |
| 3. | Accurate Results – The results of conventional urine and oral fluid POCT drug screening tests require reading of the test results through interpreting the presence or absence of coloured test lines using the naked eye. Often these test lines are weak and difficult to see, leading to inaccuracy in reading the test result. In contrast the results of the IFP screening test is provided automatically by the DSR-Plus reader unit. This provides an unambiguous test result that does not require any user interpretation, increasing the accuracy of the test. |
The combination of these benefits mean that fingerprint drug testing provides a more cost-effective, less invasive and more dignified method when compared to urine and oral fluid-based tests.
Biosensor Platform Technology
The “Biosensor Platform” on which the SGB is based is a modified Organic Thin Film Transistor (OTFT). The OTFT structure consists of a source and drain electrode, a semiconducting layer, a gate electrode, an optional separation (or dielectric) layer, all printed on a substrate material and superimposed by a polyelectrolyte membrane/enzyme layer onto which the analyte is placed. The Biosensor Platform is capable of detecting multiple biological analytes by substituting the GOX enzyme with a suitable alternative for each analyte. The substitute enzyme will generate an electrical current signal that is detected in a manner identical to the SGB. Our flagship product candidate from Biosensor Platform Technology is the Saliva Glucose Biosensor (“SGB” and, together withTest (SGT), a POCT expected to substitute the software app that interfaces the SGB with the Company’s digital information system, the “SGT”)
We currently have 54.4% of our common stock owned byfinger pricking invasive blood glucose monitoring for diabetic patient. Life Science Biosensor Diagnostics Pty Ltd (“LSBD”). or Licensor) is an Australian company that owns the worldwide intellectual property rights to the biosensor platform from University of Newcastle, Australia. LSBD has licensed to us that technology for us to introduce and launch the platform in the APAC Region. We will commence this process with
Our flagship product candidate from Biosensor Platform Technology is the SGT.Saliva Glucose Test (SGT), a POCT expected to substitute the finger pricking invasive blood glucose monitoring for diabetic patients.
Our objective isThe Saliva Glucose Test (SGT)
The SGB uses saliva to introduce and launch a COV2 test globally and thenmeasure glucose non-invasively. When the SGB interacts with saliva, an electrochemical reaction is initiated that produces an electrical signal directly correlated to the secondamount of our diagnostic tests that stem from the Biosensor Platform that we license,glucose present in the APAC Region. In the next four years we intendsaliva. This measurement is then converted into a real-time saliva glucose reading by a software app on developing the platform to its full capacity testing across the following diagnostic modalities: immunology, hormones, chemistry, tumour markersa smart device or a dedicated smart reader for those that do not possess a compliant and nucleic acid tests.compatible smart device. The reading may then be stored in our proprietary cloud-based digital information system.
We believe that the COVID-19 pandemic is likely to remain with us for many decades. Development of an improved antibody assays to detect prior infection with SARS-CoV-2 has been identified as one of the top unmet needs in the ongoing COVID-19 pandemic response. Precise knowledge of SARS-CoV-2 infection at the individual level can potentially inform clinical decision-making, whereas at the population level, precise knowledge of prior infection, immunity, and attack rates (particularly asymptomatic infection) is needed to prioritize risk management decision-making about social distancing, treatments, and vaccination. If saliva can support measurements of both the presence of SARS-CoV-2 RNA26-28 as well as antibodies against SARS-CoV-2, this sample type could provide an important opportunity to monitor individual and population-level SARS-CoV-2 transmission, infection, and immunity dynamics over place and time.The SGT consists of:
We anticipate there to be 3 different applications for the foreseeable future:
| The SGB – a single use disposable saliva biosensor, and | ||
| Software app on a | ||
Based on a recent paper publicly available and authored by the team at Johns Hopkins Department of Environmental Health and Engineering, Bloomberg School of Public Health, results indicate it is feasible to accurately measure the salivary IgG response to identify individuals with a prior SARS-CoV-2 infection. A saliva-based approach could serve as a non-invasive approach for accurate and large-scale SARS-CoV-2 “sero”-surveillance.
A saliva antibody test can greatly increase the scale of testing—particularly among susceptible populations—compared to blood and could clarify population immunity and susceptibility to SARS-CoV-2. The team at John Hopkins further demonstrated in the laboratory that when saliva was collected ≥10 days post symptom onset, the anti-SARS-CoV-2 IgG assay detects SARS-CoV-2 infection with 100% sensitivity and 99% specificity. In addition, the team demonstrated that the temporal kinetics of SARS CoV-2-specific IgG responses in saliva are consistent with those observed in serum and indicate that most individuals seroconvert approximately 10 days after COVID-19 symptom onset or approximately two weeks post-presumed infection.
By utilizing the biosensor platform for detecting COV2 we expect to have lower detection limits, improve on sensitivity and specificity characteristics of current diagnostic methods, be able to provide real time results at the point of care and provide quantitative results as opposed to negative or positive which is how other POCT report the results.
Accurate and scalable point-of-care (POC) tests for the diagnosis of COVID-19 would increase the scope for diagnosis to be made in the community and outside the laboratory setting They would have the potential to reduce the time to obtaining an actionable result, could support early identification of those with COVID-19 and could also support appropriate use of isolation resources, infection control measures, and recruitment into clinical trials of treatments.
We are progressing with the milestone of integrating Harvard University’s technology with our biosensor applications for SARS-Cov-2 antibody test for COVID-19 by entering on January 5, into a Research Collaboration Agreement with Harvard College for the purposes of facilitating mutual collaboration in scientific research in connection with the Company’s non-exclusive royalty free license to combat COVID-19 coronavirus. The contemplated collaboration includes research teams from the Company and Harvard and will include, among others, exchange of materials and research data.
Our Company has not generated any revenues to date. As such, the Company is subject to all of the risks associated with emerging growth companies. Since inception, the Company has incurred losses and negative cash flows from operating activities. The Company does not expect to generate positive cash flows from operating activities in the near future until such time, if at all, the Company completes the development process of its products, including regulatory approvals, and thereafter, begins to commercialize and achieve substantial acceptance in the marketplace for the first of a series of products in its medical device portfolio.
Recent DevelopmentsThe Saliva Glucose Biosensor (SGB)
December 2020 TransactionsThe SGB was invented at the Centre for Organic Electronics (COE) at the University of Newcastle, Australia. Patents for the SGB technology have been granted in the United States (9,766,199) and China (ZL201380022888.2). The core innovative characteristic of the SGB is the sensitivity of the glucose biosensor that enables it to detect glucose in saliva at concentrations between 8 and 200 µM and exhibits linear glucose sensing characteristics at these concentrations, sensing glucose at levels 100 times lower than in blood. In addition to the patent disclosures, details of the SGB design have been published in Applied Physical Letters, a peer-reviewed physics journal. The Licensor owns patents in Australia, China and the United States protecting the following technological claims of the SGB: the architecture of a biofunctional organic thin film transistor device comprising a gate electrode, a dielectric layer, a partially-organic semiconducting layer, a source electrode, a drain electrode, a substrate and an enzyme; the method for producing the organic thin film transistor device; and the method for determining the concentration of a compound in a sample by interpreting the amperometric signals generated by the device. The Chinese and the United States patent belong to the same patent family, originating from the Australian patent. As such, all of the patents relate to identical technology claims.
On December 14, 2020,The basic OTFT structure consists of a source and drain electrode on a semiconducting material which is itself separated from a third gate electrode by a thin insulating layer. The COE has pioneered the Company agreedfabrication of these novel biosensors based on integrating biomolecules, such as enzymes, directly into the architecture of organic transistors; producing electronic devices with both high sensitivity and high specificity for the target analyte. In these biosensors, a molecular recognition element can simply be integrated directly into the device structure, and in the case of the SGB, the recognition element is GOX.
The SGB interacts with the glucose in the saliva and initiates an enzymatic reaction whereby GOX enzyme produces hydrogen peroxide from glucose, which modifies the properties of the OTFT gate material, producing an electrical signal directly correlated to issuethe amount of glucose present in the saliva. This measurement is then converted into a real-time saliva glucose reading, through the software app installed on a smart device or a dedicated smart reader. The data may then be transferred to LSBD,our digital information system coupled with an artificial intelligence system, which will provide the patient with personalized healthcare advice enabling a practical understanding of lifestyle factors that may affect their glucose levels.
High quality OTFTs have been routinely fabricated at the materials node of the Australian National Fabrication Facility. The COE has pioneered the fabrication of novel biosensors based on integrating biomolecules, such as enzymes, directly into the architecture of organic transistors, producing electronic devices with both high sensitivity and high specificity for the target analyte and in consideration of LSBD’s contribution towards the research andthis case, glucose.
The development of applicationsan intermediate device that communicates to the smart device has been completed. The intermediate device emulates a glucometer, providing the mechanical and electrical interfaces to receive and power the SGB as well as the required circuitry for accurately reading the amperometric signals. We intend to transfer the responsibilities of the intermediate device to the SGB.
The use of saliva as a meaningful proxy for estimating blood glucose level has been reported in scientific literature, including articles published in independent journals such as the Journal of Obesity, the Journal of International Oral Health, the Journal of Clinical and Experimental Dentistry, the Journal of Oral Biology and Craniofacial Research, Diabetes & Metabolic Syndrome, the Journal of Biological Regulators and Homeostatic Agents and Diabetologia, among others. However, a few articles have reported finding little or no significant correlation, including articles in the Journal of Clinical and Diagnostic Research and the Journal of Oral Science. Consequently, the company is performing clinical research with the objective to collect and provide the data necessary to support that saliva can be utilized as a non-invasive alternative to blood to monitor glycemic status in diabetes patients.
Other Tests Based on the Biosensor Platform
As discussed above, the architecture of the Biosensor Platform allows the recognition element of the biosensor to be exchanged. Accordingly, the GOX element used to detect glucose in the case of the SGB can be substituted for a different enzyme, cancer biomarkers, immunological tests, hormones and other biomarkers. The substitute recognition element will catalyze a reaction leading to a signal that is proportional to the amount of analyte, or participate in a binding reaction of labelled antibodies that will lead to a signal proportional to the amount of analyte of interest. Given the underlying sensing mechanism is unaltered, we believe the technical risk associated with the development and manufacturing scale-up of other tests for biomarkers other than glucose and COVID-19 applications to a maximum of $2 million over a 5-year period, a 5-year non-transferable warrant to purchase 3,000,000 shares of the Company’s common stock at the exercise price of $17.00 per share.
On December 18, 2020, the Company entered into an Exchange Agreement (the “EA”) with LSBD to exchange 3,000,000 shares of its common stock held by LSBD for 3,000,000 shares of the Company’s Series B Convertible Preferred Stock. In addition, the parties to the Exchange Agreement entered into a Registration Rights Agreement (the “RRA”) pursuant to which the Company agreed to prepare and file within 30 days following the closing of the IPO with the Securities and Exchange Commission a registration statement to register for resale the shares of Common Stock issuable upon conversion of the Series B Convertible Preferred Stock. If and to the extent the Company fails to, among other things, file such resale registration statement or have it declared as required under the terms of the RRA, the Company will be required to pay to the holder of such registration rights partial liquidated damages payable in cash in the amount equal to the product of 1.0% multiplied by the aggregate purchase price paid by such holder pursuant to the EA. The EA and the RRA contain customary representations, warranties, agreements and, indemnification rights and obligations of the parties.
On December 18, 2020, LSBD entered into a certain Purchase and Assignment Agreement (the “PAA”) with an institutional accredited investor (the “Purchaser”) pursuant to which LSBD sold and assigned to the Purchaser 3,000,000 shares of the Series B Convertible Preferred Stock and assigned to the Purchaser its rights under the EA and the RRA with respect to the such preferred shares for a total purchase price of $2,000,000. The investor’s Series B Convertible Preferred Stock is convertible into 3,000,000 shares of the Company’s common stock, subject to beneficial ownership limitation.
On January 21, 2021, we filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission to register the resale of the shares issuable upon conversion of the Series B Convertible Preferred Stock.
Initial public offering
On December 28, 2020, the Company closed its initial public offering (“IPO”) and sold 1,270,589 units, consisting of (a) one share of the Company’s common stock (or, at the purchaser’s election, one share of Series B Convertible Preferred Stock), (b) one Series A warrant (the “Series A Warrants”) to purchase one share of the Company’s common stock at an exercise price equal to $8.50 per share, exercisable until the fifth anniversary of the issuance date, and (c) one Series B warrant (the “Series B Warrants”) to purchase one share of the Company’s common stock at an exercise price equal to $17.00 per share, exercisable until the fifth anniversary of the issuance date and subject to certain adjustment and cashless exercise provisions. The public offering price of the shares sold in the IPO was $17.00 per unit. In aggregate, the units issued in the offering generated $17,732,448 in net proceeds, which amount is net of $1,714,001 in underwriters’ discount and commissions, and $2,153,564 in offering costs (including deferred equity offering cost of $1,863,612). The Company also issued to the underwriter an option, exercisable one or more times in whole or in part, to purchase up to 190,588 additional shares of common stock and/or Series A Warrants to purchase up to an aggregate of 190,588 shares of common stock and/or Series B Warrants to purchase up to an aggregate of 190,588 shares of common stock, in any combinations thereof, from us at the public offering price per security, less the underwriting discounts and commissions, for 45 days after the date of the IPO to cover over-allotments, if any (the “Over-Allotment Option”).
Upon the closing of the IPO, all shares of preferred stock then outstanding were automatically converted into 2,810,190 shares of common stock, and all convertible notes then outstanding were automatically converted into 710,548 shares of common stock.
Certain of the preferred shareholders were issued warrants that, following the Company’s completed IPO, allow the holder to acquire 2,736,675 shares of common stock at the IPO price during years two through three following the IPO. At exercise date, the shareholder must hold for each warrantconsidered to be exercised, one underlying common share to exercise the option. The warrants are not transferable and apply to the number of shares that were subscribed for.relatively low.
Results of Operations:Operations
Comparison of the Three and SixNine Months Ended DecemberMarch 31, 20202023 and 20192022
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | 457,058 | $ | - | $ | 813,737 | $ | - | ||||||||
| Cost of revenue | (424,009 | ) | - | (536,644 | ) | - | ||||||||||
| Gross profit | 33,049 | - | 277,093 | - | ||||||||||||
| Other income: | ||||||||||||||||
| Government support income | 117,680 | 192,500 | 698,625 | 370,291 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | (1,898,754 | ) | (1,122,004 | ) | (5,594,461 | ) | (3,457,768 | ) | ||||||||
| Development and regulatory approval expenses | (299,898 | ) | (413,325 | ) | (380,363 | ) | (3,161,306 | ) | ||||||||
| Depreciation and amortization | (398,986 | ) | - | (797,142 | ) | - | ||||||||||
| Goodwill impairment | (4,096,490 | ) | - | (4,096,490 | ) | - | ||||||||||
| Total operating expenses | (6,694,128 | ) | (1,535,329 | ) | (10,868,456 | ) | (6,619,074 | ) | ||||||||
| Loss from operations | (6,543,399 | ) | (1,342,829 | ) | (9,892,738 | ) | (6,248,783 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (86,125 | ) | (4,217 | ) | (163,957 | ) | (4,892 | ) | ||||||||
| Realized foreign exchange income (loss) | 7,212 | 10 | (8,936 | ) | (3,094 | ) | ||||||||||
| Fair value movements through profit and loss | 269,787 | - | 2,062,878 | - | ||||||||||||
| Interest income | 508 | 2,903 | 9,587 | 10,973 | ||||||||||||
| Total other income (expense) | 191,382 | (1,304 | ) | 1,899,572 | 2,987 | |||||||||||
| Loss before income taxes | (6,352,017 | ) | (1,344,133 | ) | (7,993,166 | ) | (6,245,796 | ) | ||||||||
| Income taxes | - | - | - | - | ||||||||||||
| Net loss | (6,352,017 | ) | (1,344,133 | ) | (7,993,166 | ) | (6,245,796 | ) | ||||||||
| Net loss attributable to non-controlling interest | (8,111 | ) | (8,887 | ) | (20,367 | ) | (17,900 | ) | ||||||||
| Net loss attributable to Intelligent Bio Solutions Inc. | $ | (6,343,906 | ) | $ | (1,335,246 | ) | $ | (7,972,799 | ) | $ | (6,227,896 | ) | ||||
| Other comprehensive (loss) income, net of tax: | ||||||||||||||||
| Foreign currency translation (loss) income | $ | (77,787 | ) | $ | 2,793 | $ | 148,251 | $ | (57,334 | ) | ||||||
| Total other comprehensive (loss) income | (77,787 | ) | 2,793 | 148,251 | (57,334 | ) | ||||||||||
| Comprehensive loss | (6,429,804 | ) | (1,341,340 | ) | (7,844,915 | ) | (6,303,130 | ) | ||||||||
| Comprehensive loss attributable to non-controlling interest | (8,111 | ) | (8,887 | ) | (20,367 | ) | (17,900 | ) | ||||||||
| Comprehensive loss attributable to Intelligent Bio Solutions Inc. | $ | (6,421,693 | ) | $ | (1,332,453 | ) | $ | (7,824,548 | ) | $ | (6,285,230 | ) | ||||
| Net loss per share, basic and diluted | $ | (5.72 | ) | $ | (1.79 | ) | $ | (8.67 | ) | $ | (8.54 | ) | ||||
| Weighted average shares outstanding, basic and diluted | 1,108,672 | 744,495 | 919,545 | 729,533 | ||||||||||||
Revenue
Revenue
Government support income
Sales of goods
Government support income
Revenue from sales of good increased by $283,037 to $283,037 from $0 to $457,058 for the three monthsquarter ended DecemberMarch 31, 20202023, compared to same period in 2019.2022. This is due to acquisition of IFP in October 2022.
Revenue from sales of good increased from $0 to $813,737 for the nine months ended March 31, 2023, compared to same period in 2022. This is due to acquisition of IFP during the current period.
Revenue from the IFPG segment relates to the sale of readers, cartridges and accessories and is summarized as follows:
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2021 | ||||||||||||||||
| Sales of goods – cartridges | $ | 252,682 | $ | — | $ | 467,043 | $ | — | $ | — | ||||||||||
| Sales of goods – readers | 134,366 | — | 237,554 | — | — | |||||||||||||||
| Other sales | 70,010 | — | 109,140 | — | — | |||||||||||||||
| Total revenue | $ | 457,058 | $ | — | $ | 813,737 | $ | — | $ | — | ||||||||||
Gross profit
Gross profit in the IFPG segment increased from $0 to $33,049 for the quarter ended March 31, 2023, compared to same period in 2022. This is due to the acquisition of IFP in October 2022.
Gross profit in the IFPG segment increased from $0 to $277,093 for the nine months ended March 31, 2023, compared to same period in 2022. This is due to the acquisition of IFP during the current period.
| 27 |
Government support income
Government support income in the IFPG and SGBP segments decreased by $74,820 from $192,500 to $117,680 for the quarter ended March 31, 2023, compared to same period in 2022. This decrease was primarily attributable to timing of amount spent on qualifying research and development expenditure.
Government support income in the IFPG and SGBP segment increased by $328,334 from $370,291 to $698,625 for the nine months ended March 31, 2023, compared to same period in 2022. This increase was primarily attributable to GBS Incqualifying research and its subsidiary companies receiving Research and Development tax incentives and other COVID-19 related government support indevelopment expenditures incurred during the current period whereincluding the companies are located. completion of Milestone 7, a phase of its biosensor platform development at the University of Newcastle, Australia.
The purpose of the grant is to support companies in managing its business and payroll costs.
Government support income increased by $338,464 to $338,464 from $0 for the six months ended December 31, 2020 compared to same period in 2019. This increase wasis primarily attributable to GBS Inc and itsINBS’s subsidiary companies receiving Researchrecognizing an R&D tax refund as the Company believes that it is probable that the certain amount will be recovered in full through a future claim (see Note 3 for further information and Developmentdisclosures relating R&D tax incentives and other COVID-19 related government support in the current period where the companies are located. The purpose of the grant is to support companies in managing its business and payroll costs.refund).
Shared service
Shared service revenue was $0 and ($798) for the three months ended December 31, 2020 and 2019, respectively, and $0 and $121,277 for the six months ended December 31, 2020 and 2019, respectively. Shared service revenue is mainly attributable to the recovery of costs from entities owned by its parent. There were no shared services in the current period.
Operating expenses
GeneralSelling, general and administrative expenses
GeneralSelling, general and administrative expenses decreasedincreased by $300,562$776,750 to $671,450$1,898,754 from $972,012$1,122,004 for the three monthsquarter ended DecemberMarch 31, 20202023, compared to the same period in 2019.2022. This decrease was attributableis largely due to reductionthe effects of expenditures whilst completingacquisition of IFP, as results of operations of IFP is consolidated in current period from the IPO and planning for the milestones to be achieved after the IPO.date of acquisition.
GeneralSelling, general and administrative expenses decreasedincreased by $505,887$2,136,693 to $1,192,453$5,594,461 from $1,698,340$3,457,768 for the sixnine months ended DecemberMarch 31, 20202023, compared to the same period in 2019.2022. This decrease was also attributableis largely due to the limitationeffects of expenditures whilst completingacquisition of IFP, as results of operations of IFP is consolidated in current period from the IPO and planning for the milestones to be achieved after the IPO.date of acquisition.
As the Company’s operating activities increase, we expect its selling, general and administrative costs will include additional costcosts in overhead contribution, consultancy, and travel expenses.as well as an increase in employee-related costs associated with a higher headcount.
Development and regulatory expenses
Development and regulatory expenses decreased by $152,847$113,427 to $341,820$299,898 from $494,667$413,325 for the three monthsquarter ended DecemberMarch 31, 20202023, compared to the same period in 2019.2022. This decrease was attributable to limitation of expenditure on such activities until the funding had been securedis primarily driven by the IPO. The Company is now in a position to progress on its milestones.timing of invoicing and research and development activities carried out by University of New Castle.
Development and regulatory expenses decreased by $227,090$2,780,943 to $372,758$380,363 from $599,848$3,161,306 for the sixnine months ended DecemberMarch 31, 20202023, compared to the same period in 2019.2022. This decrease was again attributable to limitationis primarily driven by expensing of expenditure on such activities until the funding had been secured byprepaid R&D contribution of $2,600,000 during the IPO. The Company is nowsame period in a position to progress on its milestones.2021.
As the Company’s operating activities increase, we expect its development and regulatory expenses to increase in future periods.
Depreciation and amortization
Depreciation and amortization increased from $0 to $797,142 for the quarter ended March 31, 2023, compared to same period in 2022. This is due to the acquisition of IFP and primarily related to the amortization of acquired Intangibles during the current quarter.
Depreciation and amortization increased from $0 to $398,986 for the nine months ended March 31, 2023, compared to same period in 2022. This is due to the acquisition of IFP and primarily related to the amortization of acquired intangibles during the current period.
Goodwill Impairment
Prospectus and capital raisingThe goodwill impairment expenses
Prospectus and capital raising expenses decreased increased by $49,345$4,096,490 to $187,093$4,096,490 from $236,438$0 for the threequarter ended March 31, 2023, compared to the same period in 2022. Refer to note 3, summary of significant accounting policies, and note 10, goodwill and other intangible assets for further information.
The goodwill impairment expenses increased by $4,096,490 to $4,096,490 from $0 for the nine months ended DecemberMarch 31, 20202023, compared to the same period in 2022. Refer to note 3, summary of significant accounting policies, and note 10, goodwill and other intangible assets for further information.
Other income and expenses
Interest expense
Interest expense increased by $81,908 to $86,125 from $4,217 for the quarter ended March 31, 2023, as compared to the same period in 2019.2022. This decreaseincrease was attributable to fewer expenditures required by us in the current period being ininterest expense recorded for convertible notes after the final stagesacquisition of completing our IPO.IFP.
Prospectus and capital raising expensesInterest expense increased by $211,209$159,065 to $353,574$163,957 from $142,365$4,892 for the sixnine months ended DecemberMarch 31, 20202023, as compared to the same period in 2019, respectively.2022. This increase was attributable to creditthe interest expense recorded for convertible notes receivedafter the acquisition of IFP.
Fair value movements through profit and loss
The fair value gain increased by $269,787 to $269,787 from some suppliers in the first quarter of the previous period.
Other income and expenses
Interest expense
Interest expense increased $837,715 to $986,860 from $149,145$0 for the three monthsquarter ended DecemberMarch 31, 20202023, as compared to the same period in 2019.2022. This increase was attributableis due to the non-cash recognitionrevaluation gains on the convertible notes and contingent consideration for holdback shares resulting from the acquisition of a beneficial conversion feature associated with convertible notes.IFP.
Interest expenseThe fair value gain increased $774,032by $2,062,878 to $1,072,688$2,062,878 from $298,656$0 for the sixnine months ended DecemberMarch 31, 20202023, as compared to the same period in 2019.2022. This increase was also attributableis due to the non-cash recognitionrevaluation gains on the convertible notes and contingent consideration for holdback shares resulting from the acquisition of IFP.
Realized foreign exchange (loss) /gain
Realized foreign exchange gain increased by $7,202 to a beneficial conversion feature associated with convertible notes.
Lossgain of $7,212 from unconsolidated equity method investment
Loss from unconsolidated equity method investment was $0a gain of $10 for the three monthsquarter ended DecemberMarch 31, 2020 and 2019, respectively.
Loss from unconsolidated equity method investment increased $135,692 from $0 for the six months ended December 31, 20202023, compared to the same period in 2019.2022. This increase in gain was largely attributable to the reductionfavorable exchange rates while settling transactions in the carrying amount ofcurrencies other than its investment in BiosensX (North America) Inc.functional currencies.
Realized foreign exchange loss
Realized foreign exchange loss increased $86,637by $5,842 to a loss of $8,936 from $0a loss of $3,094 for the threenine months ended DecemberMarch 31, 20202023, compared to the same period in 2019.2022. This increase in loss was largely attributable to the unfavourableunfavorable foreign exchange translations on capital raisingsraising from AUD to USD.USD during the current period.
Realized foreign exchange loss increased $279,107 from $0 for the six months ended December 31, 2020 compared to the same period in 2019. This increase was attributable to the unfavourable foreign exchange translations on capital raisings from AUD to USD.
| 28 |
Income tax (expense) benefit
IncomeThere was no income tax expense was $0 for both the three and sixnine months ended DecemberMarch 31, 20202023, and 20192022, respectively, as the Company has established a full valuation allowance for all of its deferred tax assetsassets.
Other comprehensive income
Foreign currency translation gain/(loss)
Unrealized foreign currency translation gain/(loss)loss increased by $167,142$80,580 to $33,856a loss of $77,787 from ($133,286)a gain of $2,793 for the three monthsquarter ended DecemberMarch 31, 2020 as2023, compared to the same period in 2019.2022. It is calculated based on the Company’s unsettled transactions in currencies other than its functional currency and translation of Assets and liabilities of foreign subsidiaries in reporting currency.
Unrealized foreign currency translation gain/(loss)gain increased by $112,338$205,585 to ($16,712)a gain of $148,251 from ($129,050)a loss of $57,334 for the sixnine months ended DecemberMarch 31, 2020 and 2019, respectively.2023, compared to the same period in 2022. It is calculated based on the Company’s unsettled transactions in currencies other than its functional currency and translation of Assets and liabilities of foreign subsidiaries in reporting currency.
Net loss
Net loss attributable to INBS increased by $137,356$5,008,660 to $1,990,389$6,343,906 from $1,853,033$1,335,246 for the three monthsquarter ended DecemberMarch 31, 20202023, compared to the same period in 2019.2022. This overall increase was largelyis primarily driven by impairment of goodwill $4,096,490 offset by a recognition of fair value gain on revaluation of convertible notes and holdback Series C Preferred Stock during the current quarter of $269,787.
Net loss attributable to the non-cash recognition of a beneficial conversion feature, partially offset by government support income and the limitation of expenditure on general and administrative expenses until funding had been secured by the IPO, and the company was in a position to progress on its regulatory and development milestones.
Net lossINBS increased by $449,441$1,744,903 to $3,067,304$7,972,799 from $2,617,863$6,227,896 for the sixnine months ended DecemberMarch 31, 20202023, compared to the same period in 2019.2022. This overall increase was largely attributable to the non-cashdecrease is primarily driven by impairment of goodwill $4,096,490 offset by recognition of a beneficial conversion feature, partially offset by government support incomefair value gain on revaluation of convertible notes and holdback Series C Preferred Stock during the limitationcurrent quarter of expenditure on general and administrative expenses until funding had been secured by the IPO, and the company was in a position to progress on its regulatory and development milestones.$2,062,878.
Liquidity and Capital Resources
We use working capital and cash measures to evaluate the performance of our operations and our ability to meet our financial obligations. We define Working Capital as current assets less current liabilities. This measure should not be considered in isolation or as a substitute for any standardized measure under GAAP. This information is intended to provide investors with information about our liquidity. Other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.
Since our inception, our operations have primarily been financed through the issuance of our common stock, redeemable convertible preferred stock, and the incurrence of debt. As of DecemberMarch 31, 2020,2023, we had $19,877,860$2,280,544 in cash and cash equivalents and $18,799,962$887,136 in working capital.
See “Initial public offering” herein for detailsThe Company expects that its cash and cash equivalents as of March 31, 2023, will be insufficient to allow the Company to fund its current operating plan through at least the next twelve months from the issuance of these financial statements. These conditions raise substantial doubt about our IPO.
According to our management’s estimates, based on our budget and proposed schedules of development, approvals and organization, we believe, although there can be no assurances, that after our IPO we will have sufficient capital resources to enable usthe Company’s ability to continue to implement our business plan and remain in operationas a going concern for a period of at least 30 months. During this time, we expect to use the net proceeds available to us for the following purposes:
We do not anticipate generating any revenue until after 6-10 months followingone year from the date of this filing, if at all,these financial statements are issued. The Company is currently evaluating raising additional funds through private placements and our revenues will not immediately be sufficient to finance our ongoing operations. In addition, available resources may be consumed more rapidly than currently anticipated, andor public equity financing. However, there can be no assurance that, wein the event that the Company requires additional financing, such financing will be successful in developing the SGT and generating sufficient revenue in the timeframe set forth above,available on terms which are favorable to us, or at all. We may be unableAccordingly, these factors raise substantial doubt about the Company’s ability to meet our targets for regulatory approvalcontinue as a going concern.
The Company received aggregate gross proceeds of $2,775,041 (before deducting the placement agent’s fees and market launch, or we may be unable to generate anticipated amounts of revenue from salesthe Company’s transaction expenses) in connection with the closing of the system. We may also need additional funding for developing new productsMarch 2023 Offering on March 10, 2023, and services and for additional sales, marketing and promotional activities. Should this occur, we may need to seek additional capital earlier than anticipated.
the December 2022 Private Placement on December 22, 2022. In the event we require additional capital, there can be no assurances that we will be able to raise such capital on acceptable terms, or at all. Failure to generate sufficient revenues or raise additional capital through debt or equity financings, or through collaboration agreements, strategic alliances or marketing and distribution arrangements, could have a material adverse effect on our ability to meet our long-term liquidity needs and achieve our intended long-term business plan. Our failure to obtain such funding when needed could create a negative impact on our stock price or could potentially lead to a reduction in our operations or the failure of our company. Accordingly, these factors raise substantial doubt about the Company’s ability to continue as a going concern.
Contractual Obligations
We areAs a smaller reporting company as defined by Rule 12b-2result of the IFP Acquisition, the Company became the guarantor to unsecured convertible notes (also referred to herein as the IFP Loan Agreements) for which IFP is the borrower. The outstanding fair value of the convertible notes as of March 31, 2023, was $389,361. The convertible notes, plus certain accrued interest, will become due on October 4, 2024 (the second anniversary of the IFP Acquisition closing date), unless earlier converted. The convertible notes bear an interest rate of 17% per annum, on a compounded basis. The interest rate will increase to 22% per annum, on a compounded basis, on October 4, 2023 (the first anniversary of the IFP Acquisition closing date) if the Company’s shareholders have not yet approved (i) the conversion of the Series C Preferred Stock into common stock and (ii) any amendments to, or adoption of, any option or warrant plans to give effect to the transactions contemplated under the Share Exchange ActAgreement.
In the event we require additional capital, there can be no assurances that we will be able to raise such capital on acceptable terms, or at all. Failure to generate sufficient revenues or raise additional capital through debt or equity financings, or through collaboration agreements, strategic alliances or marketing and are not requireddistribution arrangements, could have a material adverse effect on our ability to providemeet our long-term liquidity needs and achieve our intended long-term business plan. Our failure to obtain such funding when needed could create a negative impact on our stock price or could potentially lead to a reduction in our operations or the information otherwise required under this item.failure of our company. Accordingly, these factors raise substantial doubt about the Company’s ability to continue as a going concern.
| 29 |
Extended Transition Period for “Emerging Growth Companies”
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. Because our financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance, or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock.
Off-Balance Sheet Arrangements
Through December 31, 2020, we have not entered into any off-balance sheet arrangements as defined by applicable SEC regulations.
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of theseour interim condensed consolidated financial statements in conformity with GAAP requires usmanagement to make judgments, estimates and assumptions that affectimpact the amounts reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of thein our consolidated financial statements and accompanying notes that are not readily apparent from other sources. Estimates and judgments used in the reported expenses incurred during the reporting periods.preparation of our interim condensed consolidated financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our control, such as demand for our products, inflation, foreign currency exchange rates, economic conditions and other current and future events. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that
Goodwill Impairment
During the quarter ended March 31, 2023, utilizing the income approach, the Company performed a quantitative impairment test on goodwill using a discounted cash flow analysis, which determined the carrying value of our reporting unit. Significant assumptions inherent in the valuation methodologies include, but are not limited to, prospective financial information, growth rates, terminal value and discount rate. Refer to note 3, summary of significant accounting policies, discussed belowand note 10, goodwill and other intangible assets for further information.
Business Combinations
Assets acquired and liabilities assumed as part of a business acquisition are criticalgenerally recorded at their fair value at the date of acquisition. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining fair value of identifiable assets, particularly intangibles, and liabilities acquired also requires management to understanding our historicalutilize assumptions and future performance, as these policies relateestimates, which are based upon available information that may be subject to further refinement over the more significant areas involving management’s judgments and estimates.purchase accounting period of one year.
Our critical accounting policies are described underin our Annual Report on Form 10-K filed with the SEC on September 22, 2022, and the notes to the unaudited condensed consolidated financial statements included in “Part I, Item 1 — Financial Statements” of this Quarterly Report on Form 10-Q.
During the sixnine months ended DecemberMarch 31, 2020, except as described in Note 3 to the unaudited interim condensed financial statements appearing elsewhere in this Quarterly Report on Form 10-Q,2023, there were no material changes to our critical accounting policies and estimates from those discussed in our final prospectusJune 30, 2022, Annual Report on Form 10-K filed with the SEC on December 18, 2020.September 22, 2022.
RecentRecently issued Accounting Pronouncements
See “Recent Accounting Pronouncements” inFor the impact of recently issued accounting pronouncements on the Company’s consolidated financial statements, see Note 3 to ourthe unaudited condensed consolidated financial statements included elsewhere in “Part I, Item 1 — Financial Statements” of this Quarterly Report on Form 10-Q for additional information.and incorporated herein by reference.
ItemITEM 3. Quantitative and Qualitative Disclosures about Market RiskQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
ItemITEM 4. Controls and ProceduresCONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Control Procedures
Our management, with the participation of our ChiefPrincipal Executive Officer and ChiefPrincipal Financial and Accounting Officer, evaluated the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q, and have concluded that, based on such evaluation, our disclosure controls and procedures were not effective as of December 31, 2020due to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Controls over Financial Reporting
There were no changesmaterial weaknesses in our internal control over financial reporting as of March 31, 2023 as described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that occurredthere is a reasonable possibility that a material misstatement of a company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
Notwithstanding the conclusion that our disclosure controls and procedures were not effective as of the end of the period covered by this report, we believe that our unaudited condensed financial statements and other information contained in this Quarterly Report on Form 10-Q present fairly, in all material respects, our business, financial condition and results of operations for the interim periods presented.
Material Weaknesses
As a result of the assessment, management concluded that the Company’s internal control over financial reporting was ineffective as of the evaluation date due to the following material weaknesses in control environment, risk assessment, control activities, information and communication and monitoring.
The material weaknesses identified relate to the fact that the Company has not yet designed and maintained an effective control environment commensurate with its financial reporting requirements, including a) has not yet completed the formally documented policies and procedures with respect to the review, supervision and monitoring of the Company’s accounting and reporting functions, b) lack of evidence to support the performance of controls and the adequacy of review procedures, including the completeness and accuracy of information used in the performance of controls and c) as an emerging growth company we currently have limited accounting personnel and other supervisory resources necessary to adequately execute the Company’s accounting processes and address its internal controls over financial reporting.
| 30 |
Remediation Plan
Management is committed to continuing with the steps necessary to remediate the control deficiencies that constituted the above material weaknesses. Since the closing of initial public offering (“IPO”) on December 28, 2020, we made the following enhancements to our control environment:
| ● | We added accounting and finance personnel to provide additional individuals to allow for segregation of duties in the preparation and review of schedules, calculations, and journal entries that support financial reporting, to provide oversight, structure, and reporting lines, and to provide additional review over our disclosures; | |
| ● | We enhanced our controls to improve the preparation and review over complex accounting measurements, and the application of GAAP to significant accounts and transactions, and our financial statement disclosures; | |
| ● | We engage independent experts when complex transactions are entered into; | |
| ● | We plan to recruit additional financial reporting and accounting personnel with adequate knowledge of US GAAP and SEC rules; and | |
| ● | We are in the process of engaging outside consultants to assist us in our evaluation of the design, implementation, and documentation of internal controls that address the relevant risks, and that provide for appropriate evidence of performance of our internal controls (including completeness and accuracy procedures). |
Under the direction of the audit committee of our board of directors, management will continue to take measures to remediate the material weakness in the fiscal year 2023. As such, we will continue to enhance corporate oversight over process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility, and accountability to enable remediation of our material weakness.
As we continue to evaluate, and work to improve, our internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary.
Changes in Internal Control Over Financial Reporting
Other than the ongoing remediation effort, described above, there have been no changes to the Company’s internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d 15(f) under the Exchange Act) during the three months ended December 31, 2020most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. On October 4, 2022, the Company completed the acquisition of IFP. In accordance with the guidance issued by the SEC, recently acquired businesses may be excluded from management’s assessment of the effectiveness of the Company’s internal control over financial reporting in the year of acquisition. Accordingly, management excluded the IFP Acquisition from the management’s assessment of the effectiveness of the Company’s internal control over financial reporting from October 4, 2022 (the acquisition date), which excluded total assets and total net revenue representing approximately 74% and 100% respectively, of the Company’s related consolidated financial statement amounts as of and for quarter ended March 31, 2023.
Inherent Limitation on the Effectiveness of Internal Controls
The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.
| 31 |
PART II—II. OTHER INFORMATION
ItemITEM 1. Legal Proceedings.LEGAL PROCEEDINGS.
From time to time, we may be subject to legal proceedings and claims arising in the ordinary course of business. We are not currently engaged in any material legal proceedings.
ITEM 1A. RISK FACTORS.
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on September 22, 2022, as amended, except for risks described below. Any of those risk factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Our Licensor is undergoing equity recapitalization the outcome with which could materially and adversely affect the Company’s ability to use IP rights for the Licensed Products, as well as our business, financial condition and operating results.
We are party to a Technology License Agreement (the “Technology License Agreement”) with Life Science Biosensor Diagnostics Pty Ltd. (“LSBD”), pursuant to which, among other things, the Company licenses certain products from LSBD (the “Licensed Products”), and have a 50% interest in BiosensX (North America) Inc which has exclusive license to use, make, sell and offer to sell products under the intellectual property rights in connection with the Biosensor technology the glucose/diabetes management field in the United States, Mexico and Canada. According to the Australian Securities and Investment Commission’s (ASIC’s), Companies and Organizations Register, on May 10, 2022, LSBD filed a Notice of Appointment of External Administrator, followed by a filing of a Deed of Company Arrangement on the August 2, 2022. We understand that LSBD is proposing to undergo a recapitalization of its equity structure on or before May 30, 2023. We understand, the deed administrators granted a further extension from April 30, 2023, to May 30, 2023, to the Deed Proponents to complete their due diligence. The terms of such recapitalization or other outcome of such administration of LSBD could result in, among other things, change in control of the Licensor or more parties other than LSBD becoming the owner of the Intellectual Property (IP) rights. Accordingly, this has an inherent risk of the possibility of modifications to, or the Company’s ability to use, the Licensed Products, which could materially and adversely affect the Company’s business, financial condition and operating results.
Item 1a. Risk FactorsIf we are unable to achieve certain agreed milestones, we may become liable to refund the grant we received from the Australian government.
We are a smaller reporting company as defined by Rule 12b-2The Company has only completed 4 of the Exchange Act and8 agreed milestones set forth in the Company’s grant agreement with the Australian Government. As of March 31, 2023, there is uncertainty regarding the potential extension of the grant agreement past its original end date of March 28, 2024. If we are not requiredgiven an extension beyond the original end date, or if we are unable achieve the agreed milestones on time, we may become liable to providerefund the information otherwise required under this item.grant we received.
We may have difficulties integrating acquired business and as result, our business, results of operations and/or financial condition may be materially adversely affected.
On October 4, 2022, INBS acquired Intelligent Fingerprinting Limited (IFP), a company registered in England and Wales. The Company believes that the acquisition of IFP will result in several benefits, including synergy in operations, drive product innovations, and operational efficiencies. However, to realize these anticipated benefits, the business of INBS and IFP must be successfully integrated. The success of the IFP acquisition will depend on, among other things, the combined Company’s ability to realize these anticipated benefits from combining the businesses of INBS and IFP. The combined company may fail to realize the anticipated benefits of the acquisition for a variety of reasons, including the following:
| ● | inability to efficiently operate new businesses or to integrate acquired products. |
| ● | failure to successfully manage relationships with customers, distributors, and suppliers. |
| ● | failure of customers to accept new products or to continue as customers of the combined company. |
| ● | potential incompatibility of technologies and systems. |
| ● | failure to leverage the increased scale of the combined company quickly and effectively. |
| ● | potential difficulties integrating and harmonizing financial reporting systems. |
| ● | difficulties in retaining key employees of the acquired business. |
| ● | failure of the acquired business to produce the expected value. |
| ● | failure to effectively coordinate sales and marketing efforts to communicate the capabilities of the combined company. |
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
(b) On December 28, 2020,Other than any sales previously reported in the Company’s Current Reports on Form 8-K, the Company closed its initial public offering (“IPO”) and sold 1,270,589 units, consisting of (a) one share ofdid not sell any unregistered securities during the Company’s common stock (or, at the purchaser’s election, one share of Series B Convertible Preferred Stock), (b) one Series A warrant (the “Series A Warrants”) to purchase one share of the Company’s common stock at an exercise price equal to $8.50 per share, exercisable until the fifth anniversary of the issuance date, and (c) one Series B warrant (the “Series B Warrants”) to purchase one share of the Company’s common stock at an exercise price equal to $17.00 per share, exercisable until the fifth anniversary of the issuance date and subject to certain adjustment and cashless exercise provisions. The public offering price of the shares sold in the IPO was $17.00 per unit. In aggregate, the units issued in the offering generated $17,732,448 in net proceeds, which amount is net of $1,714,001 in underwriters’ discount and commissions, and $2,153,564 in offering costs (including deferred equity offering cost of $1,863,612). The Company also issued to the underwriter an option, exercisable one or more times in whole or in part, to purchase up to 190,588 additional shares of common stock and/or Series A Warrants to purchase up to an aggregate of 190,588 shares of common stock and/or Series B Warrants to purchase up to an aggregate of 190,588 shares of common stock, in any combinations thereof, from us at the public offering price per security, less the underwriting discounts and commissions, for 45 days after the date of the IPO to cover over-allotments, if any (the “Over-Allotment Option”).
Upon the closing of the IPO, all shares of preferred stock then outstanding were automatically converted into 2,810,190 shares of common stock, and all convertible notes then outstanding were automatically converted into 710,548 shares of common stock. Certain of the preferred shareholders were issued warrants that, following the Company’s completed IPO, allow the holder to acquire 2,736,675 shares of common stock at the IPO price during years two through three following the IPO. At exercise date, the shareholder must hold for each warrant to be exercised, one underlying common share to exercise the option. The warrants are not transferable and apply to the number of shares that were subscribed for.
There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on December 28, 2020 pursuant to Rule 424(b). No direct or indirect payments were madeperiod covered by us to any of our directors or officers or their associates, to persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries. Pending the uses described, we intend to invest the net proceeds in short-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.this report.
ItemITEM 3. Defaults Upon Senior Securities.DEFAULTS UPON SENIOR SECURITIES.
Not applicable.None.
ITEM 4. Mine Safety Disclosures.MINE SAFETY DISCLOSURES.
Not applicable.
ItemITEM 5. Other Information.OTHER INFORMATION.
Not applicable.None.
| 32 |
# Filed herewith.
| 33 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Intelligent Bio Solutions Inc. | |||
| Date: | May 11, | By: | /s/ |
| HARRY SIMEONIDIS | |||
| CHIEF EXECUTIVE OFFICER AND PRESIDENT | |||
| (Principal Executive Officer) | |||
| Date: | May 11, | By: | /s/ |
| SPIRO SAKIRIS | |||
| CHIEF FINANCIAL OFFICER | |||
| (Principal Financial Officer) | |||