Business Context and Reporting Period
The filing identifies the registrant as GBS Inc., not Intelligent Bio Solutions Inc. It is an unaudited Form 10-Q for the three and six months ended December 31, 2021, within the fiscal year ending June 30, 2022. GBS is an emerging-growth biosensor diagnostic company developing saliva-based glucose and SARS-CoV-2 antibody tests, with licensed technology from Life Science Biosensor Diagnostics and a 50% interest in BiosensX North America.
Key Financial Metrics
| Metric | Three Months Ended Dec. 31, 2021 | Six Months Ended Dec. 31, 2021 |
|---|---|---|
| Government support income | $177,791 | $177,791 |
| Operating expenses | $3,644,426 | $5,083,745 |
| Loss from operations | $(3,466,635) | $(4,905,954) |
| Net loss | $(3,463,823) | $(4,901,663) |
| Net loss attributable to GBS Inc. | $(3,459,998) | $(4,892,650) |
| Loss per share, basic and diluted | $(0.23) | $(0.34) |
| Operating cash flow | Not separately provided | $(1,342,605) |
- The company states that it has generated no product or customer revenue to date; reported income consisted of government support.
- Cash and cash equivalents were $11.19 million at December 31, 2021, compared with $12.57 million at June 30, 2021.
- Working capital was $10.08 million, total assets were $15.24 million, and total liabilities were $5.19 million at December 31, 2021.
- Shareholders’ equity was $10.04 million and accumulated deficit was $27.76 million.
- No material debt balance was reported; interest expense was $675 for the six months, compared with $1.07 million in the prior-year period following conversion of convertible notes into common stock.
- Margins are not meaningful because the company has no operating product revenue and remains in the development stage.
Material Changes Versus the Prior Comparable Period
- Six-month government support income declined to $177,791 from $338,464, primarily because COVID-19-related government support received in the prior year ended in April 2021.
- Six-month general and administrative expense increased to $2.34 million from $1.19 million as post-IPO operating activity expanded.
- Six-month development and regulatory expense increased to $2.75 million from $373,000. The increase included a $2.60 million non-cash charge for a prepaid research and development contribution that management determined was more likely to be applied to license-option or future royalty obligations.
- Six-month net loss increased to $4.90 million from $3.07 million, despite the substantial reduction in interest expense and elimination of prospectus and capital-raising expenses.
- Common shares outstanding increased to 14,882,522 from 13,582,122 at June 30, 2021. All 1.3 million Series B convertible preferred shares were converted into common stock in August 2021.
- Cash decreased by $1.38 million during the six months, primarily reflecting $1.34 million of operating cash usage and $40,458 of foreign-exchange effects.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management expects continued operating losses and negative operating cash flow until products are developed, receive regulatory approvals, and achieve commercial acceptance. It does not anticipate near-term product revenue.
- Management believes available capital can fund operations through at least the first half of 2023, although the filing states that additional funding may be required earlier than expected and may not be available on acceptable terms.
- Planned uses of capital include regulatory approvals, manufacturing capacity, APAC marketing and distribution, working capital, and general corporate purposes.
- The company reported preliminary SARS-CoV-2 antibody-biosensor study results of 100% sensitivity and 100% specificity in positive and negative plasma samples, with results in less than 10 minutes. These preliminary results do not establish regulatory approval or commercial viability.
- An FDA Breakthrough Device Designation application was filed by the licensor, but the FDA indicated that additional data would be advisable. A 40-subject clinical trial protocol was submitted for institutional review board approval, with first-stage completion anticipated by July 2022.
- The company is sourcing equipment and planning a high-tech manufacturing facility. An Australian government grant has a total potential value of up to $4.7 million subject to milestones; $2.8 million remained as a grant receivable at December 31, 2021.
- Commitments included $119,072 payable under a Johns Hopkins sponsored research agreement and $841,913 payable to the University of Newcastle under a research and development agreement.
- The company disclosed a material weakness in internal control over financial reporting, involving insufficiently documented policies and procedures, inadequate evidence of control performance and review, and limited accounting and supervisory personnel. Remediation is in progress.
- The filing states that there were no material legal proceedings, no material changes to previously disclosed risk factors, and no material off-balance-sheet arrangements.
Important Facts for Investors to Verify
- Confirm the issuer’s identity and whether this filing corresponds to the requested company, because the provided filing names GBS Inc.
- Verify the timing and milestones for clinical studies, FDA submissions, regulatory approvals, and manufacturing-facility development.
- Assess cash runway against the company’s continued losses, $1.34 million six-month operating cash burn, and potential need for additional financing.
- Review the conditions, milestone requirements, and collectability of the $4.7 million Australian government grant.
- Evaluate dilution from outstanding warrants, including approximately 1.40 million Series A warrants, 59,782 Series B warrants, 2.74 million pre-IPO warrants, and 3.0 million warrants to LSBD, as disclosed.
- Monitor remediation of the material weakness and future auditor or management conclusions regarding disclosure controls.