GBS(INBS) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Unaudited financial statements for March 31, 2025, show decreased assets and equity, a narrowed quarterly net loss, but a widened nine-month net loss, alongside significant liquidity and going concern issues Condensed Consolidated Balance Sheets As of March 31, 2025, total assets decreased to $9.58 million from $13.78 million, primarily due to reduced cash, while shareholders' equity fell to $4.94 million from $8.18 million Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,807,112 | $6,304,098 | | Total current assets | $5,107,331 | $8,534,243 | | Total assets | $9,584,527 | $13,778,863 | | Total current liabilities | $4,564,385 | $5,450,733 | | Total liabilities | $4,640,761 | $5,595,672 | | Total shareholders' equity | $4,943,766 | $8,183,191 | Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) For Q3 FY2025, revenue decreased, but gross profit and net loss improved, while the nine-month period saw a slight revenue decline and a widened net loss Statement of Operations Highlights (Unaudited) | Metric | Q3 FY2025 (3 months) | Q3 FY2024 (3 months) | YTD FY2025 (9 months) | YTD FY2024 (9 months) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $728,867 | $823,800 | $2,208,648 | $2,383,957 | | Gross Profit | $341,368 | $178,489 | $911,282 | $610,068 | | Loss from Operations | ($2,553,248) | ($2,953,735) | ($7,542,991) | ($7,471,457) | | Net Loss Attributable to INBS | ($2,543,526) | ($2,977,667) | ($7,478,629) | ($7,372,512) | | Net Loss Per Share | ($0.44) | ($1.43) | ($1.59) | ($6.64) | Condensed Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity decreased from $8.18 million to $4.94 million due to a $7.48 million net loss, partially offset by capital raised from stock issuances - Total shareholders' equity decreased from $8,183,191 on June 30, 2024, to $4,943,766 on March 31, 2025[14][15] - The decrease in equity was primarily due to a cumulative net loss of $7,478,629 for the nine months ended March 31, 2025, offset by proceeds from stock issuances[14][15][11] Condensed Consolidated Statements of Cash Flows For the nine months ended March 31, 2025, cash used in operations increased, financing cash decreased significantly, resulting in a $3.50 million net cash decrease and an ending balance of $2.81 million Cash Flow Highlights (Unaudited, Nine Months Ended March 31) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($7,467,356) | ($6,627,555) | | Net cash used in investing activities | ($23,321) | ($54,118) | | Net cash provided by financing activities | $3,995,808 | $14,555,243 | | Net (decrease) increase in cash | ($3,496,986) | $7,860,279 | | Cash and cash equivalents, end of period | $2,807,112 | $9,397,523 | Notes to Condensed Consolidated Financial Statements The notes detail the company's medical technology business, significant liquidity issues, and substantial doubt about its going concern ability, highlighting its two operating segments and recent capital raising efforts - The company is a medical technology firm focused on rapid, non-invasive testing solutions[23] - Management has concluded there is substantial doubt about the Company's ability to continue as a going concern due to insufficient cash to fund operations for the next 12 months. The company will need to raise additional funds[28][29] - The company operates through two segments: Intelligent Fingerprinting Products (IFPG), which accounted for 100% of revenue, and the development-stage Biosensor Platform Technology (BPT)[49][51] - Subsequent to March 31, 2025, the company raised an additional $135,351 through its ATM offering and issued 4,892 shares upon cashless warrant exercises[73] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses decreased quarterly revenue, significantly improved gross profit margin due to sales mix and efficiency, stable operating expenses, and increased nine-month development costs, while emphasizing ongoing liquidity challenges and going concern doubts despite recent capital raises Highlights of Achievements Key achievements include securing a sixth U.S. patent, expanding European and Middle Eastern market presence, integrating Arabic into the screening system, and adding 35 new customer accounts, totaling over 450 across 24 countries - Granted a new U.S. patent for its Intelligent Fingerprinting Drug Screening Cartridge, its sixth patent[83] - Expanded access to its drug testing in Spain and Andorra and strengthened its European and Middle Eastern foothold through new partnerships[83] - Secured 35 new customer accounts during the quarter, reaching a total of over 450 active accounts in 24 countries[83] Results of Operations Q3 2025 revenue decreased, but gross profit margin significantly improved due to sales mix and lower production costs, while nine-month development expenses increased due to FDA clinical study costs, leading to a narrowed quarterly net loss Revenue by Product (IFPG Segment) | Product | Q3 2025 (3 months) | Q3 2024 (3 months) | YTD 2025 (9 months) | YTD 2024 (9 months) | | :--- | :--- | :--- | :--- | :--- | | Cartridges | $442,029 | $448,868 | $1,278,840 | $1,159,876 | | Readers | $165,801 | $227,361 | $520,374 | $752,052 | | Other sales | $121,037 | $147,571 | $409,434 | $472,029 | | Total Revenue | $728,867 | $823,800 | $2,208,648 | $2,383,957 | Gross Profit Margin Analysis | Metric | Q3 2025 (3 months) | Q3 2024 (3 months) | YTD 2025 (9 months) | YTD 2024 (9 months) | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $341,368 | $178,489 | $911,282 | $610,068 | | Gross Profit Margin | 46.84% | 21.67% | 41.26% | 25.59% | - The increase in gross profit margin is attributed to a higher proportion of revenue from high-margin cartridges and enhanced production capacity leading to reduced direct labor and overhead costs[93] - Development and regulatory approval expenses increased by $890,335 for the nine months ended March 31, 2025, primarily due to costs associated with the FDA 510(k) clinical study plan[104] Liquidity and Capital Resources As of March 31, 2025, the company's cash and working capital are insufficient to fund operations for the next twelve months, raising substantial doubt about its going concern ability, despite recent capital raises of approximately $1.49 million from an ATM offering and $2.65 million from a public offering - As of March 31, 2025, the company had $2,807,112 in cash and cash equivalents and $542,946 in working capital[121] - The company raised approximately $1.49 million (net) through its ATM Agreement between September 2024 and March 2025[122] - A February 2025 public offering raised approximately $2.65 million (net)[123] - Management believes there is a material risk that current cash is insufficient to fund operations for the next twelve months, raising substantial doubt about the company's ability to continue as a going concern[124][148] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, due to a material weakness in internal control over financial reporting, with an ongoing remediation plan to address deficiencies - Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025[135] - A material weakness was identified relating to the control environment, risk assessment, control activities, and monitoring, including limited accounting personnel and a lack of formally documented procedures[137] - The ongoing remediation plan includes adding accounting personnel, enhancing controls for complex accounting, engaging experts, and implementing a new accounting system[138][139] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently engaged in any material legal proceedings[146] Item 1A. Risk Factors The company faces material risks including the need for additional capital, a $2.28 million grant refund liability due to unmet milestones, and development delays for its Biosensor Platform Technology (BPT) due to intellectual property licensing issues - The company needs to raise additional capital to continue operations, and there is substantial doubt about its ability to continue as a going concern. Failure to secure funding could force it to cease or scale back operations[148][149] - The company failed to meet milestones for an Australian government grant and will be required to refund a portion of the funds. The liability for this refund is recorded as $2,278,681 as of March 31, 2025[150] - Development of the Biosensor Platform Technology (BPT) is postponed due to the liquidation of the licensor, LSBD. The company faces risks of extended delays or unfavorable terms in renegotiating the IP license with the University of Newcastle[151][153][154] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not sell any unregistered securities during the period, other than those previously disclosed in Form 8-K filings - No unregistered securities were sold during the period, other than those previously reported on Form 8-K[155] Item 6. Exhibits This section lists exhibits filed with the quarterly report, including the Underwriting Agreement, officer certifications, and Inline XBRL data files - Exhibits filed include the Underwriting Agreement dated February 20, 2025, certifications by the CEO and CFO, and XBRL financial data[159]