Notes
to Condensed Consolidated Financial Statements
(Unaudited)
NOTE
1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS
GBS
Inc. and its wholly owned subsidiary, GBS Operations Inc. were formed on December 5, 2016 under the laws of the state of Delaware.
Glucose Biosensor Systems (Greater China) Pty Ltd (“GBSPL”) was formed on August 4, 2016 under the laws of New South
Wales, Australia and was renamed to GBS (APAC) Pty Ltd on October 14, 2020. Glucose Biosensor Systems (Japan) Pty Ltd and GBS
(APAC) Pty Ltd were formed under the laws of New South Wales, Australia on February 22, 2017 and February 23, 2017 respectively.
These companies (collectively, the “Company” or “Group”) were formed to provide a non-invasive, pain free
innovation to make it easier for people to manage diabetes using the Company’s Saliva Glucose Biosensor (“SGB”
and, together with the software app that interfaces the SGB with the Company’s digital information system, the “SGT”).
GBS
Inc. is a 48.7% owned (by voting rights) affiliate 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. LSBD has licensed to the Company that technology to introduce and launch the platform in the Asia-Pacific Region
(“APAC”). The Company will commence this process with the SGT.
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:
|
●
|
The
Company has the exclusive worldwide rights to a biosensor strip for antibodies against SARS-CoV-2 and associated application
for reading devices to:
|
|
|
○
|
act
as the authorized party for the purpose of processing the application of, and obtaining any, regulatory approval for the Licensed
Product, including being authorized to process the approval for an investigational device required for the purpose of carrying
out clinical studies;
|
|
|
○
|
manufacture,
promote, market, import, offer, sell, and distribute the Licensed Products;
|
|
|
○
|
provide
reasonable customer support services on the use of the Licensed Products to end users of, and health care practitioners referring
end users to, the Licensed Products;
|
|
|
○
|
use
the Licensed Products only for the purposes identified and permitted pursuant to regulatory approval; and
|
|
|
○
|
collect
data acquired from the Licensed Products
|
|
●
|
The
royalty rate is 13%, based upon mutually agreed sales projections on the net sales of the commercial units and dedicated reading
devices. This serves as the minimum royalty and falls to 3% at the expiry of the relevant patent(s)
|
|
●
|
Each additional year, the sales upon which the minimum
royalty is calculated on is increased by the mutually agreed Expected Market Growth rate plus an Additional Growth Percentage
rate up to 7% annually. The Additional Growth Percentage Rate is calculated and applied for 10 years
|
|
●
|
In
the event of a dispute, in relation to the expected market growth or additional percentage, the agreement provides for a dispute
resolution by an independent third party.
|
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, and $2,153,564 in offering costs. 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. If, and to the extent, the Over Allotment
Option was exercised, the underwriter may 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 allow 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.
The
Company is an emerging growth company and 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.
The
Company incurred a net loss of $6,209,971 for the nine months ended March 31, 2021 (Net loss $2,728,970 for the nine months
ended March 31, 2020). As at March 31, 2021, the Company has shareholders’ equity of $15,875,416, working
capital of $15,026,877, and an accumulated deficit of $(22,016,804).
On
January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization (the “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, LSBD executed an agreement on May 29, 2020 with the Wyss Institute for Biologically Inspired Engineering
at Harvard University 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 experience positive cash flows from
operating activities and may continue to incur operating losses until it completes the development of its products and seeks regulatory
approvals to market such products.
The
Company’s 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 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 Company 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 consolidated financial statements are prepared on the going
concern basis.
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 (“U.S. GAAP”) and pursuant 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, the condensed consolidated
financial statements reflect all adjustments and reclassifications that are necessary for the 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 indication of the results
for the entire year. The June 30, 2020 consolidated balance sheet has been derived from the audited financial statements as of
that date.
These
condensed consolidated financial statements have been derived from, and should be read in conjunction with, the Company’s
audited consolidated financial statements and notes thereto as of and for the year ended June 30, 2020 included in the Company’s
Registration Statement on Form S-1, File No. 333-252277 on file with the U.S. Securities and Exchange Commission (the “SEC”).
There have not been any significant changes to the Company’s significant accounting policies during the nine months ended
March 31, 2021.
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.
Reclassifications
Certain
reclassifications have been made to prior periods to conform to current period presentation as described below.
In
the comparative period (FY 2020), management determined that certain transactions involving 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 between the fair value of the consideration received
and the book value of NCI involving these changes in ownership. As a result, the Company increased its prior year APIC with an
offsetting reduction to NCI of $637,056. Management concluded that this reclassification was not meaningful to the Company’s
financial position for the prior year, and as such, this change was recorded in the consolidated balance sheets and statements
of shareholder’s equity in the first quarter of the comparative period (FY 2020) as an out-of-period adjustment.
For
the three months ended March 31, 2020, amounts presented in the income statement reflect the difference between the nine months
ended March 31, 2020 and the previously reported six months ended December 31, 2019 (Form 10Q for the quarter ended December 31,
2019). These quarterly balances was mainly impacted by a reclassification of $268,457 in overhead reimbursements that has
been reclassified from other income to general and administrative expenses for comparative reasons. The Company currently
does not generate any revenue. The foreign currency translation gain was also adjusted by $165,230 to total operating expenses
for the same reason.
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.
Foreign
currency translation
Assets
and liabilities of foreign subsidiaries are translated from local (functional) currency to reporting currency (U.S. dollar) at
the 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) of ($262,032) and ($278,744) for the three and nine months ended March 31, 2021, respectively
and $100,921 and ($28,129) for the three and nine months ended March 31, 2020, respectively.
Income
taxes
In
accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification (“FASB 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 March 31, 2021, the Company had no uncertain tax positions that qualified for either recognition or disclosure in the
consolidated financial statements. Additionally, the Company had no interest and penalties related to income taxes.
The
Company 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 fiscal year ended June 30 2020, the Company purchased the license right procurement assets from
LSBD for an amount of $976,308 (June 30, 2019: $ nil) in relation to the development and approval process for the Glucose Biosensor Technology.
The Company recorded the license at the historical carrying value in the books of LSBD which was $ 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, 2019, the Company entered into an amended and restated license agreement. 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 March 31, 2021 (March 31, 2020:
$ nil).
On
March 31, 2021, GBS entered into an agreement with LSBD to provide GBS 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
has a term of two years and the exercise price for the option is $5 million. The fee of $0.5 million incurred for the option has been
recognized as an expense and included within ‘Development and regulatory approval expenses in the consolidated statements of operations.
Research
and development costs
During
the quarter ended March 31, 2021, the Company contributed a total of $2,600,000 towards budgeted development and commercialization
costs to be incurred by BiosensX (North America) Inc. in which the Company has a 50% interest. This represents the
Company’s contribution towards budgeted development and commercialization costs included in total costs budgeted
in the Form S-1. This funding relates to the development and preparation for submission of the Saliva Glucose Biosensor
connected with regulatory approval for the U.S market by the U.S Food & Drug Administration. This amount is recognized as
a prepayment and will be expensed as incurred over an estimated 18 month period in which the costs are expected to be
incurred.
Net
loss per share attributable to common shareholders (“EPS”)
The
Company calculates earnings per share attributable to common shareholders in accordance with ASC Topic 260, Earning Per Share.
Basic net income (loss) per share attributable to common shareholders is calculated by dividing net income (loss) attributable
to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net income (loss)
per common share is calculated by dividing net income (loss) attributable to common shareholders by weighted-average common shares
outstanding during the period plus potentially dilutive common shares, such as share warrants.
Potentially
dilutive common shares shall be 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 has elected to defer the adoption of new accounting pronouncements until they would
apply to private companies.
In
August 2020, the FASB issued ASU 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. 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 does not intend to early adopt and continues to evaluate the impact of the provisions of ASU 2020-06 on its
consolidated 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 and continues to evaluate the impact.
In
December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU
2019-12”), which is intended to simplify various aspects of the accounting for income taxes. 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 standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020.
Early adoption is permitted. The Company has not early adopted the 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 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 LSBD. See Notes 7 and 8.
Fair
value of financial instruments
The
carrying value of financial instruments classified as current assets and current liabilities approximate fair value due to their
liquidity and short-term nature.
NOTE
4. OTHER ASSETS
Other
current assets consist of the following:
|
|
March 31, 2021
|
|
|
June 30, 2020
|
|
Goods and services tax receivable
|
|
$
|
89,566
|
|
|
$
|
7,509
|
|
Prepayments
|
|
|
2,227,221
|
|
|
|
29,469
|
|
Other receivables
|
|
|
7,602
|
|
|
|
12,084
|
|
Total
|
|
$
|
2,324,389
|
|
|
$
|
49,062
|
|
During
the three months ended March 31, 2021, the Company made $2,600,000 in prepayments relating to research and development
contributions. Of the total prepayments, $866,667 was recorded as a non-current asset as of March 31, 2021 based
on the expected outflow of the budgeted research and development costs.
NOTE
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
|
|
March 31, 2021
|
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
Accounts and other payables
|
|
$
|
1,355,530
|
|
|
$
|
483,576
|
|
Accruals
|
|
|
41,810
|
|
|
|
56,894
|
|
Related party payables
|
|
|
37,235
|
|
|
|
1,769,293
|
|
Employee liabilities (current and non-current)
|
|
|
142,687
|
|
|
|
246,999
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,577,262
|
|
|
$
|
2,556,762
|
|
NOTE
6. CONVERTIBLE NOTES PAYABLE
The
Company’s previously outstanding notes mandatorily converted, at a conversion price equal to 85% of 50% of the unit offering
price of the IPO (or $7.23), for an aggregate of 710,548 shares based on $5,133,706 of principal and zero accrued interest outstanding
at the date of conversion.
The
convertible notes had a contingent Beneficial Conversion Features (BCF), with the contingency being the event 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 in relation to this contingent BCF during the nine months ended March 31, 2021.
NOTE
7. SHAREHOLDERS’ EQUITY
December
2020 Transactions
On
December 14, 2020, the Company agreed to issue to LSBD, in consideration 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 warrant to purchase 3,000,000 shares of the Company’s common stock at the exercise price of $17.00 per
share. As this was a transaction between entities under common control, the $2 million receivable due from LSBD has been recognized
as contra-equity.
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 (the “Exchange”).
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 effective 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. The common stock acquired in the Exchange was immediately retired.
Each share of Series B Convertible Preferred Stock is convertible into 1 share of the Company’s common stock, subject to
proportional adjustment and beneficial ownership limitations. In the event of the Company’s liquidation, dissolution or
winding up, holders of Series B Convertible Preferred Stock will participate pari passu with any distribution of proceeds to holders
of 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) to 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.
Initial
public offering
In
December 2020, the Company completed its initial public offering. For further details refer to Note 1.
March
2021 Transactions
During
the quarter ended March 31, 2021, Series A and Series B warrants held by certain shareholders were exercised. Each warrant is
convertible into 1 share of the Company’s common stock. A total of 58,600 Series A warrants and 1,400,195 Series B warrants
were exercised and converted into common stock.
NOTE
8. RELATED-PARTY TRANSACTIONS
The
Company completed certain financing transactions with 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 also occurred with LSBD during the period July 1, 2020 to March 31, 2021 (FY2020: July 1, 2019
to March 31, 2020):
The
Company incurred a total of $23,523 (FY2020: $541,023) towards the services in connection with development and regulatory approval
pathway for the technology, including payments made or expenses incurred on behalf of the Company.
The
Company incurred a total of $nil (FY2020: $447,440) 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: $119,744) in relation to shared labour reimbursement which includes salaries directly
attributable to the Company which are included in shared-services revenue.
On
March 31, 2021, GBS entered into an Option Agreement with LSBD to provide GBS the option to acquire an exclusive license for LSBD’s
intellectual property. A fee of $500,000 was paid to acquire this option. For further details refer to Note 3.
During
the quarter ended March 31, 2021, the Company contributed a total of $2,600,000 towards budgeted development and
commercialization costs to be incurred by BiosensX (North America) Inc. relating to the development and preparation
for submission of the Saliva Glucose Biosensor connected with regulatory approval for the U.S market by the U.S Food & Drug
Administration. For further details refer to Note 3.
NOTE
9. INVESTMENT IN AFFILIATE
On
May 29, 2020 LSBD, issued 14,000,000 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% 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.
At
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. but in accordance with ASC 810 Consolidation LSBD is deemed to have control
over BiosensX (North America) Inc. due to its direct ownership of 50% in BiosensX (North America) Inc. and indirect ownership
of 50% in BiosensX (North America) Inc. through GBS Inc.
As
of March 31, 2021, LSBD holds 48.7% of common Stock of GBS Inc. and therefore still has control over BiosensX (North America)
Inc.
The
following table summarizes the amount recorded in the consolidated financial statements:
|
|
March 31, 2021
|
|
|
June 30, 2020
|
|
Investment value
|
|
$
|
135,692
|
|
|
$
|
14,000
|
|
(Loss) income from the affiliate
|
|
|
(135,692
|
)
|
|
|
121,692
|
|
Carrying amount
|
|
$
|
-
|
|
|
$
|
135,692
|
|
NOTE
10. COMMITMENTS AND CONTINGENCIES
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 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, 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 of which $304,686 remains payable as of March 31, 2021.
On
January 21, 2021, the Company entered into a sponsored research agreement with Johns Hopkins Bloomberg School of Public Health
to accelerate the development of next-generation saliva-based diagnostic tests. The Company is collaborating with the Bloomberg
School of Public Health to optimise the collection of saliva and monitoring of diverse biomarkers across a number of modalities
including clinical chemistry and infectious diseases. Johns Hopkins intend to utilise biosensor products to conduct in-field epidemiological
studies. The Company agreed to pay Johns Hopkins a total amount of $423,589 as a part of this sponsored research agreement of
which all remains payable as of March 31, 2021.
The
Company has no other material future minimum lease commitments or purchase commitments.
From
time to time, the Company may 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. LOSS PER SHARE
Basic
loss per common share is computed by dividing net loss allocable to common stockholders 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
|
|
|
Nine Months Ended
|
|
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to GBS, Inc.
|
|
$
|
(3,127,813
|
)
|
|
$
|
(112,592
|
)
|
|
$
|
(6,184,287
|
)
|
|
$
|
(2,706,760
|
)
|
Basic and diluted net loss per share attributed to common shareholders
|
|
$
|
(0.27
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.64
|
)
|
|
$
|
(0.32
|
)
|
Weighted-average number of ordinary shares
|
|
|
11,795,741
|
|
|
|
8,510,000
|
|
|
|
9,667,399
|
|
|
|
8,510,000
|
|
The
following outstanding warrants, options and preferred shares were excluded from the computation of diluted net loss per share
for the periods presented because their effect would have been anti-dilutive:
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
Warrants - Series A
|
|
|
1,401,377
|
|
|
|
-
|
|
|
|
1,401,377
|
|
|
|
-
|
|
Warrants - Series B
|
|
|
60,982
|
|
|
|
-
|
|
|
|
60,982
|
|
|
|
-
|
|
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
|
|
|
|
-
|
|
NOTE
12. SUBSEQUENT EVENTS
Subsequent
to March 31, 2021 and through to the date of this filing, a total of 500,000 Series B Convertible Preferred Stock was converted
into common stock. Each share of Series B Convertible Preferred Stock is convertible into 1 share of the Company’s common
stock.
Subsequent to March 31, 2021 and through
to the date of this filing, a total of 800 Series B Warrants were exercised to purchase one Common Stock per Warrant 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”).