Intelligent Bio Solutions Inc. — Form 10-Q Summary
Business context and reporting period
Intelligent Bio Solutions Inc. is a medical technology company developing rapid, non-invasive testing and screening products. Its commercially available Intelligent Fingerprinting drug-screening platform generated all reported revenue; the saliva glucose biosensor platform remained in development. The filing covers the three and six months ended December 31, 2023, the second quarter and first half of fiscal 2024. The financial statements are unaudited.
Key financial metrics
| Metric | Three months ended Dec. 31, 2023 | Three months ended Dec. 31, 2022 | Six months ended Dec. 31, 2023 | Six months ended Dec. 31, 2022 |
|---|---|---|---|---|
| Revenue | $764,063 | $356,679 | $1,560,157 | $356,679 |
| Gross profit | $199,248 | $244,044 | $431,579 | $244,044 |
| Gross margin | 26.1% | 68.4% | 27.7% | 68.4% |
| Loss from operations | $(1,991,357) | $(2,130,967) | $(4,517,722) | $(3,349,339) |
| Net loss attributable to INBS | $(1,969,641) | $(420,600) | $(4,394,845) | $(1,628,893) |
| Basic and diluted loss per share | $(2.07) | $(5.56) | $(7.68) | $(23.65) |
- Quarterly revenue increased 114.2%; six-month revenue increased 337.5%, primarily reflecting customer expansion and the inclusion of Intelligent Fingerprinting Limited following its October 2022 acquisition.
- Quarterly gross profit declined 18.4% despite higher revenue, as direct costs of entering new markets and acquiring customers increased. Management expects gross margins to stabilize as the customer base expands.
- Operating expenses were $2.34 million for the quarter and $5.21 million for the six months. Six-month selling, general and administrative expense increased to $4.16 million, while development and regulatory expense increased to $452,399.
- Government support income was $153,204 for the quarter and $263,075 for the six months, down from $269,625 and $580,945, respectively, in the comparable periods. The decline primarily reflected the timing of qualifying research and development expenditures.
- Fair-value gains were $44,488 for the quarter and $175,738 for the six months, compared with $1.79 million in each comparable 2022 period. The prior-year gains primarily related to convertible instruments that were converted into common stock in May 2023.
- Net cash used in operating activities was $4.18 million for the six months, compared with $4.27 million in the prior-year period. Investing cash use was $56,669, and financing activities provided $3.79 million.
- Cash and cash equivalents were $1.12 million at December 31, 2023, down from $1.54 million at June 30, 2023. Working capital was negative $2.24 million.
- Total liabilities were $5.67 million, including $601,504 of notes payable and $479,461 of operating lease liabilities. Shareholders’ equity was $3.15 million, with an accumulated deficit of $46.20 million.
Material changes versus the prior comparable period
- Revenue growth was substantial, but profitability deteriorated because gross margin compressed and the company continued to incur significant operating and development costs.
- Quarterly net loss attributable to INBS increased by $1.55 million, and six-month net loss increased by $2.77 million. The comparison was affected by the $1.79 million fair-value gain recognized in the 2022 periods.
- Interest expense declined following conversion of convertible notes into common shares in May 2023.
- The October 2023 underwritten offering generated approximately $4.38 million of gross proceeds and approximately $3.79 million of net proceeds through common stock, Series E convertible preferred stock and warrants.
- Shares outstanding increased materially through equity issuance and conversions. The company subsequently completed a 1-for-12 reverse stock split effective January 26, 2024; all presented share and per-share data were retrospectively adjusted for the reverse splits.
Guidance, outlook, risks and unusual items
- The company expects operating losses and negative operating cash flow to continue while it develops products and pursues regulatory approvals. No quantified revenue, earnings or cash-flow guidance was provided.
- Management concluded that cash at December 31, 2023 would not fund the current operating plan for at least the next twelve months. The filing therefore states that substantial doubt exists about the company’s ability to continue as a going concern absent additional financing.
- The company expects to seek additional equity, debt, collaboration or other financing, but states that financing may be unavailable or available only on unfavorable terms and could materially dilute shareholders.
- The Australian government manufacturing grant has a total potential value of up to $4.7 million, but only four of eight milestones had been completed. The original grant end date was March 28, 2024, and extension remained uncertain; failure to meet milestones could create repayment exposure.
- The company reported ineffective disclosure controls and material weaknesses in internal control over financial reporting, citing limited accounting resources, insufficiently documented procedures and inadequate evidence of control performance. Remediation efforts include hiring personnel and using outside consultants.
- LSBD, the licensor of certain biosensor technologies, entered liquidation proceedings. The company believes related intellectual property may revert to the University of Newcastle and plans to discuss future licensing, creating a risk to its biosensor programs.
- Nasdaq notified the company in November 2023 that its share price had fallen below the minimum bid-price requirement. The January 2024 reverse split was intended to restore compliance, but continued compliance was not assured.
- Subsequent to quarter-end, the company received approximately $1.77 million of gross proceeds from the exercise of Series E warrants and issued 606,064 common shares. It also issued replacement Series G warrants in connection with that transaction.
- The company reported no material pending legal proceedings, no material purchase commitments and no off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether the company secures sufficient capital to address the going-concern uncertainty and fund operations beyond the next twelve months.
- Cash burn, working-capital deficit, debt and lease obligations, and the timing of additional financing.
- Whether revenue growth converts into improved gross margins and lower cash losses as new markets mature.
- The status and potential repayment consequences of the Australian government grant after its March 28, 2024 original end date.
- The effect of outstanding warrants, preferred-stock conversions, warrant inducements and future equity offerings on dilution.
- Progress in remediating material weaknesses in internal control over financial reporting.
- The company’s ability to preserve or replace its biosensor technology licenses following LSBD’s liquidation.
- Continued compliance with Nasdaq’s listing requirements after the 1-for-12 reverse stock split.