Intelligent Bio Solutions Inc. — Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2023. The request references “2022 Q4,” but the supplied filing is an annual report for fiscal 2023, with fiscal 2022 comparative information.
Business Context
Intelligent Bio Solutions Inc. is a medical technology company developing non-invasive diagnostic and screening products. Following its October 2022 acquisition of Intelligent Fingerprinting Limited, the Company operates two reportable segments:
- IFPG: Commercially available fingerprint-sweat drug screening products, including readers, cartridges and accessories. Products are sold primarily in the United Kingdom and selected international markets.
- SGBP: Development-stage saliva glucose and other biosensor products based on licensed organic thin-film transistor technology. The Saliva Glucose Test has not yet launched or received regulatory approval.
The Company had 15 full-time employees in Australia, 2 in the United States and 34 in the United Kingdom at filing. Common stock trades on Nasdaq under the symbol INBS.
Financial Results and Key Metrics
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $1,256,872 | $0 |
| Gross profit | $326,668 | $0 |
| Gross margin | Approximately 26.0% | Not applicable |
| Government support income | $737,628 | $437,146 |
| Loss from operations | $(12,595,233) | $(8,336,876) |
| Net loss attributable to INBS | $(10,631,720) | $(8,306,051) |
| Basic and diluted loss per share | $(10.58) | $(11.33) |
| Net cash used in operating activities | $(7,377,378) | $(3,358,034) |
| Cash and cash equivalents at year-end | $1,537,244 | $8,238,301 |
| Working capital | Deficit of $2,021,124 | Not clearly provided in the filing text |
All FY2023 revenue was generated by the IFPG segment: $724,304 from cartridges, $335,863 from readers and $196,705 from other sales. Geographic revenue was $1,061,191 in the United Kingdom, $6,491 in Australia and $189,190 in other markets.
Operating expenses increased to $13,659,529, including $8,026,703 of selling, general and administrative expense, $507,424 of development and regulatory expense, $966,732 of depreciation and amortization, and a $4,158,670 goodwill impairment charge. A $2,154,365 fair-value gain on financial instruments partially offset operating losses.
Investing cash use was $694,142, including $505,123 invested in construction in progress. Financing activities provided $1,435,323, including approximately $2.55 million of gross proceeds from the March 2023 offering and $220,578 from the December 2022 preferred-stock private placement, partly offset by issuance costs.
At June 30, 2023, total liabilities were $6,667,614, including $756,073 of notes payable, $579,612 of operating lease liabilities and $2,610,028 of accounts payable and accrued expenses. The Company reported total shareholders’ equity of $3,686,998 and an accumulated deficit of $41,807,573.
Material Changes Versus FY2022
- Revenue began following the October 2022 IFP acquisition; FY2022 had no product revenue.
- SG&A increased by $3,106,600 due primarily to the acquired IFP workforce and consolidated operations.
- Development and regulatory expense declined by $3,346,495, primarily because FY2022 included a $2.6 million non-cash research and development charge and because COVID-19 development activity was reduced.
- FY2023 included $966,732 of depreciation and amortization and a $4,158,670 goodwill impairment charge related to the IFP acquisition.
- Net loss attributable to INBS increased by $2,325,669, while operating cash use increased by $4,019,344.
- Cash declined by $6,701,057 during the year, from $8,238,301 to $1,537,244.
- The Company completed a 1-for-20 reverse stock split in February 2023. Series C and Series D preferred stock were converted into common stock in May 2023. Common shares outstanding were 2,330,399 at June 30, 2023 and 2,330,399 as of August 22, 2023.
Guidance, Outlook, Risks and Unusual Items
- Management expects continued operating losses and negative operating cash flow and states that year-end cash is insufficient to fund the current operating plan for the following twelve months.
- The auditors included an explanatory paragraph expressing substantial doubt about the Company’s ability to continue as a going concern. Management expects to seek additional capital through private placements and/or public equity financing, but availability and terms are uncertain.
- The FDA provisionally classified the fingerprint drug screening cartridge as a Class II device requiring a 510(k) premarket notification and FDA clearance before U.S. marketing. The Company had not yet submitted the 510(k) filing as of the report.
- The SGBP remains development-stage. A 100-subject saliva and blood study reported a Pearson correlation of 0.48 between salivary and blood glucose and an ROC area under the curve of 0.71 for screening for type 2 diabetes. These results do not establish regulatory approval or commercial viability.
- Milestone 7 reduced biosensor time to result from 120 seconds to 30 seconds and reduced the stated limit of detection from 0.05 mM to 0.02 mM.
- The Australian Government grant has a potential value of $4.7 million; $3.25 million had been received by June 30, 2023. Only four of eight milestones had been completed, and an extension beyond March 2024 was uncertain. Failure to meet milestones could require repayment of grant funds.
- After year-end, LSBD, the licensor of core biosensor technology, entered liquidation proceedings. The Company believes the related intellectual property may revert to the University of Newcastle and plans to discuss future licensing. The effect on the Company’s rights remains uncertain.
- The Company identified material weaknesses in internal control over financial reporting, including insufficiently formalized review procedures, limited accounting resources and inadequate evidence of control performance. Disclosure controls were ineffective as of June 30, 2023.
- The Company relies on single-source suppliers, third-party confirmation laboratories, international distributors and licensed intellectual property. Regulatory approval, reimbursement, manufacturing scale-up, foreign exchange, cybersecurity, product liability and competition remain significant risks.
Important Facts for Investors to Verify
- Availability, timing, dilution and terms of required additional financing, and the Company’s ability to address the going-concern uncertainty.
- Current cash burn, quarterly liquidity, accounts payable, notes payable and other near-term commitments, including approximately $422,625 owed for a printing machine and $847,021 owed to the University of Newcastle.
- Status and evidentiary requirements for the planned FDA 510(k) submission and any regulatory approvals in the United States, Australia and other markets.
- Resolution of LSBD’s liquidation and the Company’s continuing rights to the SGBP technology and related intellectual property.
- Progress toward the Australian Government grant milestones and any potential repayment exposure.
- Integration of IFP, sustainability of IFPG revenue and the basis for the $4.2 million goodwill impairment.
- Remediation and auditor evaluation of the disclosed material weaknesses in internal control over financial reporting.
- Potential dilution from outstanding warrants, preferred-stock conversions, equity compensation and future capital raises.