Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE
1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Business
Intelligent
Bio Solutions Inc. (“INBS”) (formerly known as GBS Inc.), and its wholly owned Delaware subsidiary, GBS Operations Inc. were each formed on December 5, 2016, under the laws of the state
of Delaware. Our Australian subsidiary Intelligent Bio Solutions (APAC) Pty Ltd (formerly known as Glucose Biosensor Systems
(Greater China) Pty Ltd) was formed on August 4, 2016, under the laws of New South Wales, Australia and was renamed to Intelligent
Bio Solutions (APAC) Pty Ltd on January 6, 2023. On October 4, 2022, INBS acquired Intelligent Fingerprinting Limited
(“IFP”), a company registered in England and Wales (the “IFP Acquisition”). The Glucose Biosensor System
(Japan) Pty Ltd and Glucose Biosensor System (APAC) Pty Ltd, were deregistered on January 6, 2023, and June 9, 2022, respectively.
INBS and its subsidiaries (collectively, “we,” “us,” “our,” “INBS” or the
“Company,” unless context requires or indicates otherwise) were formed to provide a non-invasive, pain free innovative medical devices and screening devices. Our
headquarters are in New York, New York.
We
are a life sciences company marketing and developing non-invasive, real-time diagnostic testing for patients and their primary health
practitioners at point of care. We operate globally with an objective to deliver intelligent pain free diagnostic tests.
Our
current product portfolio includes:
|
● |
A
proprietary portable drug screening system that works by analyzing fingerprint sweat using a one-time cartridge and
portable handheld reader. The system comprises of commercially available non-invasive sweat-based fingerprint diagnostics testing products
(the “IFP products”) that currently detect opioids, cocaine, methamphetamines, benzodiazepines, cannabis, methadone,
buprenorphine, and amphetamine. Customers include safety-critical industries such as construction, transportation and logistics
firms, along with drug treatment organizations in the rehabilitation sector, and judicial organizations. |
|
● |
A
development stage range of biosensor based Point of Care diagnostic tests (“POCT”) that are developed
in the modalities of clinical chemistry, immunology, tumor markers, allergens, and endocrinology. Our flagship product candidate is
the Saliva Glucose Biosensor (“SGB”), a POCT expected to substitute the finger pricking invasive blood glucose
monitoring for diabetic patients. These tests stem from the Biosensor Platform that we license, across the Asia Pacific Region from
Life Science Biosensor Diagnostics Pty Ltd (“LSBD” or “the Licensor”). The Biosensor Platform is capable of
detecting multiple biological analytes by substituting the GOX enzyme with a suitable alternative for each analyte. |
Reverse
Stock Split
At
the annual meeting of the Company’s stockholders held on February 8, 2023 (the “Annual Meeting”), the stockholders
of the Company approved an amendment to the Company’s amended and restated certificate of incorporation (the “Amendment”)
to effect a reverse stock split at a ratio of not less than 1-for-2 and not more than 1-for-35 at any time within 12 months following
the date of stockholder approval, with the exact ratio to be set within this range by the Company’s Board of Directors (the “Board”)
at its sole discretion without further approval or authorization of our stockholders. Pursuant to such authority granted by the Company’s
stockholders, on February 8, 2023, the Board approved a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the Company’s
common stock and the filing of the Amendment to effectuate the Reverse Stock Split.
On
February 9, 2023, the Company filed the Amendment in order to effect 1-for-20 reverse stock split of the Company’s common stock.
The Reverse Stock Split was effective at 4:05 p.m., Eastern Time, on February 9, 2023, at which time every twenty shares of the Company’s
issued and outstanding common stock were automatically combined into one issued and outstanding share of common stock. No fractional
shares were issued as a result of the Reverse Stock Split. Stockholders of record who would otherwise be entitled to receive a fractional
share are entitled to the rounding up of the fractional share to the nearest whole number. The par value of the Company’s common
stock and the number of authorized shares of the common stock were not affected by the Reverse Stock Split. The Company’s common
stock began trading on a Reverse Stock Split-adjusted basis on The Nasdaq Capital Market at the open of the markets on February 10, 2023.
The Reverse Stock Split was implemented for the purpose of regaining compliance with the minimum bid price requirement for continued
listing of the Company’s common stock on the Nasdaq Capital Market.
As
a result of the Reverse Stock Split, the number of shares of common stock outstanding was reduced from approximately 18,325,289
shares (excluding treasury shares) as of February 8, 2023, to approximately 916,265
shares (excluding treasury shares, and subject to the rounding up of fractional shares), and the number of authorized shares of common stock remains 100
million shares. In order reflect the Reverse Stock Split, proportionate adjustments were made to the per share exercise price and/or
the number of shares issuable upon the exercise or vesting of all outstanding stock options, restricted stock unit awards and
warrants, which will result in a proportional decrease in the number of shares of the Company’s common stock reserved for
issuance upon exercise or vesting of such stock options, restricted stock unit awards and warrants, and, in the case of stock
options and warrants, a proportional increase in the exercise price of all such stock options and warrants. In addition, the number
of shares of common stock issuable upon conversion of the Company’s Series C Preferred Stock and Series D Preferred Stock, as
well as any applicable conversion prices, were also adjusted in proportion to the reverse split ratio of the Reverse Stock Split
(subject to adjustment for fractional interests).
Unless
otherwise indicated, all authorized, issued, and outstanding stock and per share amounts contained in the accompanying condensed consolidated
financial statements have been adjusted to reflect the 1-for-20 Reverse Stock Split for all prior periods presented. (See Note 21 for
information and disclosures relating to adjustments related to the Reverse Stock Split).
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.
On
December 21, 2022, the Company entered into a Securities Purchase Agreement (the “December 2022 Purchase Agreement”)
with 14 investors (the “Series D Investors”), pursuant to which the Company agreed to issue and sell to the Series D
Investors in a Regulation S private placement (the “December 2022 Private Placement”) (i) 176,462
shares of the Company’s Series D Convertible Preferred Stock, par value $0.01
per share (the “Series D Preferred Stock”), and (ii) 529,386
warrants (the “Series D Warrants”), with each warrant initially representing the right to purchase one share of common
stock (0.05 shares post-Reverse Stock Split). An additional 26,469
warrants were issued to Winx Capital Pty Ltd., the placement agent for the December 2022 Private Placement, with each warrant
initially representing the right to purchase one share of common stock (0.05 shares post-Reverse Stock Split) (the “Winx
Warrants”). The Series D Warrants have an initial exercise price of $0.29
per share ($5.80 per share post-Reverse Stock Split) (subject to adjustment) and expire June 22, 2028. The Winx Warrants
had an initial exercise price of $0.52
per share ($10.40 per share post-Reverse Stock Split) (subject to adjustment) and expire
five years following the effective date of a registration statement covering the resale of common stock underlying the Series D
Preferred Stock acquired by the Series D Investors. The Series D Preferred Stock and
Series D Warrants were sold together as a unit (“Unit”), with each Unit consisting of one share of Series D Preferred
Stock and three Series D Warrants. Each share of Series D Preferred Stock was initially convertible into three shares of Common
Stock (0.15 shares post-Reverse Stock Split) (subject to adjustment upon the occurrence of specified events). The purchase price for
the Units was $1.25
per Unit. The Units offering price and the Series D Warrants exercise price were priced above the Nasdaq “Minimum Price”
as that term is defined in Nasdaq Rule 5635(d)(1). The shares of Series D Preferred Stock were initially convertible into an
aggregate of 529,386
shares of Common Stock (26,470 shares post-Reverse Stock Split) following shareholder approval of such conversion and without the
payment of additional consideration. The December 2022 Private Placement closed on December 22, 2022. (See Note 21 for information
and disclosures relating to adjustments related to the Reverse Stock Split).
The
Company is an emerging growth company and has not generated sufficient revenues to date. As such, the Company is generally subject
to 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 $420,600 and $1,628,893 for the three and six months ended December 31, 2022, respectively (net
loss of $3,459,998 and $4,892,650 for the three and six months ended December 31, 2021). As of December 31, 2022, the Company has
shareholders’ equity of $10,354,391, working capital of $1,563,530, and an accumulated deficit of $32,804,746.
In
the near future, the Company anticipates incurring operating losses and does not expect to generate positive cash flows from operating
activities and may continue to incur operating losses until it completes the development of its products and seek regulatory approvals
to market such products.
The
Company has evaluated whether there are conditions and events, considered in the aggregate, that raise a substantial doubt about its
ability to continue as going concern within one year after the date of release of the condensed consolidated financial statements. The
Company expects that its cash and cash equivalents as of December 31, 2022, of $2,911,682, will be insufficient to allow the Company to
fund its current operating plan through at least the next twelve months from the issuance of these financial statements. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern for a period of at least one year from the date these financial statements are issued. Accordingly,
the Company will be required to raise additional funds during the next 12 months. The Company is currently evaluating
raising additional funds through private placements and/or public equity financing. However, there can be no assurance that, in the event
that the Company requires additional financing, such financing will be available on terms which are favorable to the Company, or at all.
If the Company is unable to raise additional funding to meet its working capital needs in the future, it will be forced to delay or reduce
the scope of its research programs and/or limit or cease its operations. In addition, the entity may be unable to realize its assets and discharge
its liabilities in the normal course of business. Accordingly, these factors raise substantial doubt about the
Company’s ability to continue as a going concern unless it can successfully raise additional capital.
The
Company’s unaudited condensed 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 unaudited condensed 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.
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 of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, our unaudited condensed consolidated financial statements do not include all the information
and footnotes required by GAAP for complete financial statements. Normal and recurring adjustments considered necessary for a fair statement
of the results for the interim periods, in the opinion of the Company’s management, have been included. Operating results for the
three and six months ended December 31, 2022, are not necessarily indicative of the results that may be expected for the year ending
June 30, 2023. The accompanying unaudited condensed consolidated financial statements and related footnote disclosures should be read
in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended June 30, 2022,
which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on September 22, 2022 and amended on Form
10-K/A filed with the SEC on October 7, 2022 (as amended, the “2022 Form 10-K”).
Principles
of consolidation
These
unaudited condensed consolidated financial statements include the accounts of the Company, all wholly owned and majority-owned subsidiaries
in which the Company has a controlling voting interest and, when applicable, variable interest entities in which the Company has a controlling
financial interest or is the primary beneficiary. Investments in affiliates where the Company does not exert a controlling financial
interest are not consolidated.
All
significant intercompany transactions and balances have been eliminated upon consolidation.
Equity
offering costs
The
Company complies with the requirements of ASC 340, Other Assets and Deferred Costs, with regards to offering costs. Prior to the
completion of an offering, offering costs are capitalized as deferred offering costs on the consolidated balance sheets. The deferred
offering costs will be charged to shareholders’ equity upon the completion of the related offering.
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.
Business
combinations
The
results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the
date of the acquisition. The Company uses the acquisition method of accounting and allocates the purchase price to the identifiable assets
and liabilities of the relevant acquired business at their acquisition date fair values. Any excess consideration over the fair value
of assets acquired and liabilities assumed is recognized as goodwill. The allocation of the purchase price in a business combination
requires the Company to perform valuations with significant judgment and estimates, including the selection of valuation methodologies,
estimates of future revenue, costs and cash flows, discount rates and selection of comparable companies. The Company engages the assistance
of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired and liabilities
assumed in a business combination. As a result, during the measurement period, which may be up to one year from the acquisition date,
the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion
of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any
subsequent adjustments are recorded to the consolidated statements of operations. Transaction costs associated with
business combinations are expensed as incurred and are included in general and administrative expense in the consolidated statements of
operations.
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.
Financial
information presented on a consolidated basis accompanied by disaggregated information about revenue and other income by product types
for the purpose of allocating resources and evaluating financial performance. Currently, the Company has two products offerings. Accordingly,
the Company has determined the following reporting segments (Refer to Note 4, Segment Information):
| 1) | Commercially
available Intelligent Fingerprinting Products (IFPG) |
| 2) | Development
Stage Saliva Glucose Biosensor Platform (SGBP) |
Revenues
are used to evaluate the performance of the Company’s segments, the progress of major initiatives and the allocation of resources.
All of the Company’s revenues, are attributable to the IFPG segment during the three and six months ended December
31, 2022. There was no revenues, during the three and six months ended December 31, 2021.
Revenue
from the IFPG segment relates to the sale of readers, cartridges and accessories and is summarized as follows:
SCHEDULE
OF REVENUE SALES OF READERS CARTRIDGES AND ACCESSORIES
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three Months Ended December 31, | | |
Six Months Ended December 31, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Sales of goods - cartridges | |
$ | 214,361 | | |
$ | — | | |
$ | 214,361 | | |
$ | — | |
Sales of goods - readers | |
| 103,188 | | |
| — | | |
| 103,188 | | |
| — | |
Other sales | |
| 39,130 | | |
| — | | |
| 39,130 | | |
| — | |
Total revenue | |
$ | 356,679 | | |
$ | — | | |
$ | 356,679 | | |
$ | — | |
Other income
The other income mainly comprised of deferred grant
income and R&D tax refund.
On
June 30, 2021, the Company executed a definitive grant agreement with the Australian Government to assist with building a manufacturing
facility. The grant has a total value of up to $4.7 million upon the achievement of certain milestones until March 28, 2024. Proceeds
from the grant will be used primarily to reimburse the Company for costs incurred in the construction of the manufacturing facility.
Accounting
for the grant does not fall under ASC 606, Revenue from Contracts with Customers, as the Australian Government will not benefit
directly from our manufacturing facility. As there is no authoritative guidance under U.S. GAAP on accounting for grants to for-profit
business entities, we applied International Accounting Standards 20 (“IAS 20”), Accounting for Government Grants and Disclosure
of Government Assistance by analogy when accounting for the Australian Government grant to the Company.
The
Australian Government grant proceeds, which will be used to reimburse construction costs incurred, meet the definition of grants related
to assets as the primary purpose for the payments is to fund the construction of a capital asset. Under IAS 20, government grants related
to assets are presented in the statement of financial position either by setting up the grant as deferred income that is recognized in
the statement of operation on a systematic basis over the useful life of the asset or by deducting the grant in arriving at the carrying
amount of the asset. Either of these two methods of presentation of grants related to assets in financial statements are regarded as
acceptable alternatives under IAS 20. The Company has elected to record the grants received initially as deferred income and deducting
the grant proceeds received from the gross costs of the assets or construction in progress (“CIP”) and the deferred grant
income liability.
Under
IAS 20, government grants are initially recognized when there is reasonable assurance the conditions of the grant will be met, and the
grant will be received. As of June 30, 2021, management concluded that there was reasonable assurance the grant conditions will be met,
and all milestone payment received. The total grant value of $4.7 million was recognized as both a grant receivable and deferred grant
income on the grant effective date. The grant receivable was reduced by $2.1 million for payments received during the twelve months ended
June 30, 2022 (no payments were received during the three or six months ended December 31, 2022) and $2.6 million remains in grant receivable
on the condensed consolidated balance sheets as of December 31, 2022. The receivable
balance as of December 31, 2022, is arrived at after considering the forex impact on the grant receivable by our foreign subsidiary.
After
initial recognition, under IAS 20, government grants are recognized in earnings on a systematic basis in a manner that mirrors the
manner in which the Company recognizes the underlying costs for which the grant is intended to compensate. Further, IAS 20 permits
for recognition in earnings either separately under a general heading such as other income, or as a reduction of the cost of the
asset. The Company has elected to recognize government grant income separately within other income for operating expenditures.
Similarly, for capital expenditures, the carrying amount of assets purchased or constructed out of the grant funds are presented net
by deducting the grant proceeds received from the gross costs of the assets or CIP and deferred grant income liability. A total of
$38,139 and
$98,552 deferred
grant income was recognized within other income during the three and six months ended December 31, 2022, respectively. Deferred
grant income recognized within other income during the three and six months ended December 31, 2021 was $31,399 and $31,399
respectively.
The current and the non-current classification of
the deferred grant income is based on anticipated spending as included in the cash flow forecast prepared by the management.
The Company measures the R&D grant income and
receivable by considering the time spent by employees on eligible R&D activities and R&D costs incurred to external service providers.
The R&D tax refund receivable is recognized when it is probable that the amount will be recovered in full
through a future claim. A total of $231,486 and $482,393 of R&D tax refund income was recognized in other income during the three
and six months ended December 31, 2022, respectively. R&D tax refund income was $146,392 and $146,392 during the three and six months
ended December 31, 2021, respectively.
Development
and regulatory approval expenses
Expenditures relating to research and development
(“R&D”) are expensed as incurred and recorded in development and regulatory approval in the condensed consolidated statements
of operations and Other Comprehensive Loss. R&D expenses include external expenses incurred under arrangements with third parties;
salaries and personnel-related costs; license fees to acquire in-process technology and other expenses. The Company recognizes the benefit
of refundable R&D tax refunds as a R&D tax refund income when there is reasonable assurance that the amount claimed will be recovered
(refer to the R&D tax refund discussion above).
Intellectual
property acquired for a particular research and development project and that have no alternative future uses (in other research and development
projects or otherwise) are expensed in research and development costs at the time the costs are incurred.
In
certain circumstances, the Company may be required to make advance payments to vendors for goods or services that will be received in
the future for use in R&D activities. In such circumstances, the non-refundable advance payments are deferred and capitalized, even
when there is no alternative future use for the R&D, until the related goods or services are provided. In circumstances where amounts
have been paid in excess of costs incurred, the Company records a prepaid expense.
Foreign
currency translation
Assets
and liabilities of foreign subsidiaries are translated from local (functional) currency to reporting currency (U.S. dollar) at the spot rate on the consolidated balance sheets date; income and expenses are translated at the average rate of exchange prevailing
during the year. Foreign currency movements resulted in a gain of $361,597
and $226,038 for the three and six months ended December 31, 2022, respectively. Foreign currency movements resulted in a gain
of $7,355 and a loss of $60,127 for the three and six months ended December 31, 2021, respectively.
Income
taxes
In
accordance with the provisions of 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 December 31, 2022, 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.
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 in relation to the development and approval process for the Glucose Biosensor Technology in the APAC region. 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
September 12, 2019, the Company entered into an amended and restated license agreement for Saliva Biosensor Technology. On June 23, 2020,
the Company entered into a license agreement with LSBD for the worldwide rights to SARS-CoV-2 application of the Saliva Glucose Biosensor.
In
relation to these licenses, 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 December 31, 2022.
On
March 31, 2021, the Company entered into an agreement with LSBD to provide the Company 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 ending March 31, 2023, and the exercise price for the option is $5,000,000. The fee of $500,000 incurred
for the option was expensed in the period incurred. The option has not been exercised to date.
Inventories
Inventories
are stated at the lower of cost or net realizable value. Cost comprises direct materials and, where applicable, other costs that have
been incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price
less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. General market conditions, as
well as the Company’s research activities, can cause certain of its products to become obsolete. The Company writes down excess
and obsolete inventories based upon a regular analysis of inventory on hand compared to historical and projected demand. The determination
of projected demand requires the use of estimates and assumptions related to projected sales for each product. These write downs can
influence results from operations.
Trade,
note and other receivables
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation
of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Company, and a failure to make contractual
payments for a period of greater than 90 days past due.
Based upon the assessment
of these factors, the Company recorded a bad debt provision of $22,918
during the three and six months ended December 31, 2022. No
bad debt provision was recognized during the three and six months ended December 31, 2021. Trade receivables are recognized net
of bad debt provision.
Property,
Plant and Equipment (PPE) & Construction in Progress (CIP)
In
accordance with the ASC 360, Property, Plant, and Equipment, the Company’s PPE, except land, is stated at cost net of accumulated
depreciation and impairment losses, if any. Land is stated at cost less any impairment losses. Costs incurred to acquire, construct,
or install PPE, before the assets is ready for use, are capitalized in CIP at historical cost. The carrying amount of assets purchased
or constructed out of the grant funds are presented net by deducting the grant proceeds received from the gross costs of the assets or
CIP. CIP is not depreciated until such time when the asset is substantially completed and ready for its intended use. Expenditures for
maintenance and repairs are charged to operations in the period in which the expense is incurred. Depreciation is calculated on a straight-line
basis over the estimated useful life of the asset using the following terms:
|
● |
Computers
hardware and software – 3 years |
|
● |
Equipment,
Furniture and fixtures – 2-4
years |
|
● |
Leasehold
improvements – shorter of asset’s estimated useful life and the remaining term of the lease |
The
assets’ residual values, useful lives and methods of depreciation are reviewed periodically and adjusted prospectively, if appropriate.
Equipment is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising upon
de-recognition of the asset (calculated as the difference between the net disposal proceeds, if any, and the carrying value of the asset)
is included in gain or loss on sale of assets in the consolidated statements of operations in the period the asset is derecognized.
Goodwill
Goodwill represents the excess
of the purchase price over the estimated fair value of the net assets acquired in a business combination. The Company evaluates its goodwill
for potential impairment annually during the fourth quarter and whenever events or changes in circumstances indicate the carrying value
of a reporting unit may not be recoverable. The Company’s divisions are at the operating segment level, which is the level the Company’s
management conducts regular reviews of the operating results. Goodwill created by acquiring a foreign operation is converted from foreign entity’s functional currency to Company’s reporting currency using the spot
rate prevailing at the reporting date.
Intangible
assets
Intangible
assets are considered long-lived assets and are recorded at cost, less accumulated amortization and impairment losses, if any. The intangible
assets are amortized over their estimated useful lives, which do not exceed any contractual periods. Amortization is recorded on a straight-line
basis over their estimated useful lives. Intangible assets acquired from a foreign operation are translated from the foreign entity’s
functional currency to the presentational currency based on the exchange rate at the reporting date.
Leases
The
Company determines if an arrangement is a lease at its inception. Lease arrangements are comprised primarily of real estate for which
the right-of-use (“ROU”) assets and the corresponding lease liabilities are presented separately on the consolidated balance
sheet.
ROU
assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease
payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated
present value of lease payments over the lease term. The lease term includes options to extend the lease when it is reasonably certain
that the option will be exercised. Leases with a term of 12 months or less are not recorded on the consolidated balance sheet.
The
Company uses its estimated incremental borrowing rate in determining the present value of lease payments considering the term of the
lease, which is derived from information available at the lease commencement date, considering publicly available data for instruments
with similar characteristics. The Company accounts for the lease and non-lease components as a single lease component.
Impairment
of long-lived assets
Long-lived
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may
not be recoverable. If events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable,
the Company compares the carrying amount of an asset group to future undiscounted net cash flows, excluding interest costs, expected
to be generated by the asset group and its ultimate disposition. If the sum of the undiscounted cash flows is less than the carrying
value, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value
of the asset group. The Company did not recognize any impairments of long-lived assets during the three and six months ended December
31, 2022 and 2021.
Net
loss per share attributable to common shareholders (“EPS”)
The
Company calculates earnings per share attributable to common shareholders in accordance with ASC 260, Earning Per Share. Basic
net loss per share attributable to common shareholders is calculated by dividing net loss attributable to common shareholders by the
weighted average number of common shares outstanding during the period. Diluted net loss per common share is calculated by dividing net
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 is 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 accounting pronouncements
As
the Company is an emerging growth company, we have elected to defer the adoption of new accounting pronouncements until they would apply
to private companies.
Adopted:
In
August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2020-06, Debt – Debt with Conversion and Other Options (“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. The Company adopted ASU 2020-06
as of July 1, 2022. Adoption did not have a material impact on the Company’s 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 adopted the standard on July 1, 2022. There was no impact on adoption of ASU 2016-02 as the Company did not have any material
leases as of July 1, 2022, and, therefore, application of transitional practical expedients provided by the ASU is not applicable. Topic
842 was applied to the lease assumed as part of the acquisition of IFP on October 4, 2022. See Note 10 for further information and disclosures
relating to ASC 842.
Pending
adoption:
In
November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2021-10, Government Assistance (“ASU 2021-10”). This update requires annual disclosures about transaction with a government
that are accounted for by applying a grant or contribution accounting model by analogy. Required disclosures include (1) information
about the nature of the transactions and the related accounting policy used to account for the transactions, (2) the line items on the
balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line
item, and (3) significant terms and conditions of the transactions, including commitments and contingencies. ASU 2021-10 is applicable
for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is planning to complete the required ASU
2021-10 disclosures with the filing of its Annual Report on Form 10-K for the year ending on June 30, 2023. Based on the management’s
assessment of ASU 2021-10, this standard is not expected to have a material impact on the Company’s financial statements.
In
October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract
Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires that an acquirer recognize and measure
contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, as if it had originated the
contracts. Prior to this ASU, an acquirer generally recognized contract assets acquired and contract liabilities assumed that arose from
contracts with customers at fair value on the acquisition date. The ASU is effective for fiscal years beginning after December 15, 2023,
with early adoption permitted. The ASU is to be applied prospectively to business combinations occurring on or after the effective date
of the amendment. The Company has not early adopted and continues to evaluate the impact of the provisions of ASU 2021-08 on its consolidated
financial statements.
In
June 2016, the FASB issued ASU No. 2016-13 (Topic 326), Financial Instruments – Credit Losses (“ASU 2016-13”).
This update (a) significantly changes the impairment model for most financial assets that are measured at amortized cost and certain
other instruments from an incurred loss model to an expected loss model which will be based on an estimate of current expected credit
loss (“CECL”) (ASC 326-20); and (b) provides for recording credit losses on available-for-sale (“AFS”) debt
securities through an allowance account (ASC 326-30). The standard also requires certain incremental disclosures. Subsequently, the FASB
issued several ASUs to clarify, improve, or defer the adoption of ASU 2016-13. ASU 2016-13, as amended by ASU 2019-10, is applicable
for Smaller Reporting Companies (“SRCs”) for fiscal years beginning after December 15, 2022, with early adoption 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, Financial Services
Compensation 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.
Fair
value of financial instruments
The
accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major
asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price,
representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants
would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier
fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level
1-Quoted prices in active markets for identical assets or liabilities.
Level
2-Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets
that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities.
Level
3-Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets
or liabilities.
Assets
and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the
fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its
entirety requires management to make judgments and consider factors specific to the asset or liability.
The
carrying amounts of cash equivalents, prepaid and other assets, accounts payable and accrued liabilities are representative of their
respective fair values because of the short-term nature of those instruments. The Company has elected to carry its convertible notes
at fair value.
Fair
value option (“FVO”) for convertible notes
The Company elected the FVO for recognition of
its convertible notes payable upon issuance as permitted under ASC 825, Financial Instruments. Under the FVO, the Company recognizes the
convertible notes payable at fair value with changes in fair value recognized in earnings. The FVO may be applied instrument by instrument,
but it is irrevocable. As a result of applying the FVO, direct costs and fees related to the convertible notes are recognized in general
and administrative expense in the condensed consolidated statements of operations as incurred and not deferred. Changes in accrued interest
for the notes are included in the change in fair value of convertible notes. Changes in fair value of the convertible notes are recognized
as part of interest expense in the condensed consolidated statements of operations.
NOTE
4. SEGMENT INFORMATION
Operating
segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed
by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing
performance. The Company’s CODM is its Chief Executive Officer. The Company has determined it operates in two operating segments and
has two reportable segments, as the CODM reviews financial information presented on a consolidated basis accompanied by disaggregated
information about revenue and other income by product types for the purpose of allocating resources and evaluating financial performance.
Currently, the Company has two products offerings. Accordingly, the Company has determined the following reporting segments:
| 1) | Commercially
available Intelligent Fingerprinting Products (“IFPG” or “IFPG segment”) |
| 2) | Development
Stage Saliva Glucose Biosensor Platform (“SGBP” or “SGBP segment”) |
The
following table sets forth the Company’s revenue and other income by segment.
SCHEDULE
OF REVENUE AND OTHER INCOME SEGMENT
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three Months Ended December 31, | | |
Six Months Ended December 31, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
IFPG | |
$ | 356,679 | | |
$ | - | | |
$ | 356,679 | | |
$ | - | |
SGBP | |
$ | - | | |
| - | | |
| - | | |
| - | |
Total Revenue | |
| 356,679 | | |
| - | | |
| 356,679 | | |
| - | |
| B) | Other
Income (Government Support Income) |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three Months Ended December 31, | | |
Six Months Ended December 31, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
IFPG | |
$ | 107,557 | | |
$ | - | | |
$ | 107,557 | | |
$ | - | |
SGBP | |
$ | 162,068 | | |
| 177,791 | | |
| 473,388 | | |
| 177,791 | |
Total Government Support Income | |
| 269,625 | | |
| 177,791 | | |
| 580,945 | | |
| 177,791 | |
NOTE
5. INTELLIGENT FINGERPRINTING LIMITED ACQUISITION
On October 4, 2022, INBS acquired 100% of the outstanding
shares of Intelligent Fingerprinting Limited (IFP), a company registered in England and Wales, pursuant to a Share Exchange Agreement, dated October 4, 2022 (the “Share
Exchange Agreement”) by and among IFP, the holders of all of the issued shares in the capital of IFP (the “IFP Sellers”)
and a representative of the Sellers. IFP owns a
portfolio of intellectual property for diagnostic tests and associated technologies, including drug testing through the analysis of fingerprint
sweat. The acquisition of IFP has expanded the Company’s platform of rapid, non-invasive diagnostic testing technologies.
The
table below summarizes the fair value of the consideration transferred in the acquisition:
SCHEDULE
OF FAIR VALUE OF THE CONSIDERATION TRANSFERRED IN THE ACQUISITION
Purchase consideration (pre Reverse Stock Split basis) | |
Amount | |
Cash | |
$ | 868,438 | |
Common Stock - 2,963,091 shares @ $0.5502 / share | |
| 1,630,293 | |
Series C Preferred Stock (base) - 2,363,003 shares @ 3 x $0.5502 / share | |
| 3,900,373 | |
Series C Preferred Stock (holdback) - 500,000 shares @ 3 x $0.5502 / share | |
| 825,300 | |
Total purchase price | |
$ | 7,224,404 | |
Pursuant
to the Share Exchange Agreement, the Company acquired from the Sellers all of the issued and outstanding shares in the capital stock
of IFP, and as consideration therefor, the Company issued and sold to the Sellers upon the closing of the IFP Acquisition (the
“IFP Closing”) an aggregate number of (i) 2,963,091
shares (148,155 shares post-Reverse Stock Split) of the Company’s common stock, and (ii) 2,363,003
shares of the Company’s Series C Convertible Preferred Stock, par value $0.01
per share (the “Series C Preferred Stock”).
Up to an
additional 1,649,273
shares of Series C Preferred Stock have been reserved for potential future issuance by the Company, consisting of (i) 500,000
shares of Series C Preferred Stock, that are being held back from the IFP Sellers for one year
after the IFP Closing to secure potential indemnification claims by the Company against the IFP Sellers and (ii) 1,149,273
shares of Series C Preferred Stock to certain lenders to IFP (the “IFP Lenders”). Each share
of Series C Preferred Stock was initially convertible into three shares of
Common Stock (0.15
shares post-Reverse Stock Split) (subject to adjustment upon the occurrence of specified events), contingent upon approval by the
Company’s stockholders.
Effective contemporaneously
with the IFP Closing, the Company entered into an amendment to the bridge facility agreement between the Company and IFP, dated as of
June 16, 2022, pursuant to which, among other things, the $504,938 (including accrued interest) loan from the Company to IFP that will
remain outstanding following the date of the IFP Closing until the second anniversary of the date of the IFP Closing (the “Company-IFP
Loan Agreement”).
The loan receivable from
IFP of $504,938 as of October 4, 2022, was treated as a cash consideration in accordance with ASC 805 Business Combinations.
The Company
entered into various loan agreements in the aggregate amount of £1,254,270.26, including accrued interest, pursuant to which IFP
is the borrower and the Company became a guarantor of IFP’s obligations thereunder (the “IFP Loan Agreements” and, together
with the Company-IFP Loan Agreement, the “Loan Agreements”). Under the Loan Agreements, the loans thereunder remained outstanding
following the IFP Closing and (x) the loans and certain accrued interest will convert into shares of IFP, which shares of IFP will be immediately
transferred to the Company in exchange for shares of common stock and Series C Preferred Stock (as set forth in the Share Exchange Agreement)
following approval of the Company Stockholder Approval Matters (defined below) or (y) the loans and certain accrued interest will become
repayable on the second anniversary of the date of the IFP Closing. The loans bear interest at 17% per annum on a compounded basis, increasing
to 22% per annum on a compounded basis with effect from the date that falls 12 months following the date of the IFP Closing, if the Company
Stockholder Approval Matters have not been approved by the Company’s stockholders by such date. The “Company
Stockholder Approval Matters” means the approval by the Company’s stockholders of (i)
the conversion of the Series C Preferred Stock into common stock and (ii) any amendments to, or adoption of, any option or warrant
plans to give effect to the transactions contemplated under the Share Exchange Agreement.
Each
share of Series C Preferred Stock (other than the IFP Lender Preferred Shares) would automatically
convert into common stock upon approval of the Company’s stockholders of the conversion of Series C Preferred Stock into common
stock, and each IFP Lender Preferred Share would convert into common stock at the option of the applicable holder of such IFP Lender
Preferred Shares following approval of the Company’s stockholders of the conversion of Series C Preferred Stock into common stock.
In the event Company stockholder approval is not received, the convertible notes and accrued interest would remain outstanding. The number of shares of common stock into which the Series C Preferred Stock is convertible is subject to adjustment in
the case of any stock dividend, stock split, combinations, or other similar recapitalization with respect to the common stock.
The rights, preferences and
privileges of the Series C Preferred Stock are set forth in the Certificate of Designation of Preferences, Rights and Limitations of Series
C Convertible Preferred Stock that the Company filed with the Secretary of State of the State of Delaware on October 4, 2022, as further
described below (the “Series C Certificate of Designation”).
The Series C Preferred
Stock does not have any voting rights (other than as required by law) and does not carry dividends or a liquidation preference. Each
share of Series C Preferred Stock was initial convertible into 3 shares of common stock, subject to adjustment as noted above.
Following the effectiveness of the 1-for-20
Reverse Stock Split effective on February 9, 2023 (the “Reverse Stock Split”), each share of Series C Preferred
Stock is convertible into 0.15 shares
of common stock. See Note 21 for further information and disclosures relating to Reverse Stock Split. The loan receivable from IFP
of $504,938 as
of October 4, 2022, was treated as a cash consideration in accordance with ASC 805 Business Combinations.
The cash purchase consideration includes $504,938
(including accrued interest) of funds previously loaned to IFP by the Company, representing a note receivable from IFP and $363,500 for
bonus payments made on behalf of the selling shareholders of IFP. The first installment of $181,750 was paid during the three months ended
December 31, 2022. A second installment of $181,750 will be made on six-month anniversary of closing date of the acquisition and is recognized
as consideration payable included in accounts payable and accrued expenses on the condensed consolidated balance sheets.
The Company incurred $806,397
of equity issuance costs in relation to issuing common and Series C Preferred Stock
to acquire IFP. These costs were recognized as a reduction to additional paid-in capital on the condensed consolidated balance sheets.
The
provisional allocation of the purchase price of IFP to the assets acquired and liabilities assumed, based on their relative fair values,
is as follows:
SCHEDULE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED, BASED ON THEIR RELATIVE FAIR VALUES
| |
| | |
Allocation of purchase consideration | |
Amount | |
Assets: | |
| | |
Cash and cash equivalents | |
$ | 174,481 | |
Inventory | |
| 774,625 | |
Other current assets | |
| 345,038 | |
Property and Equipment | |
| 52,170 | |
Intangible assets | |
| 5,463,000 | |
Goodwill | |
| 3,803,293 | |
Total assets acquired | |
| 10,612,607 | |
Liabilities: | |
| | |
Accounts payable and accrued expenses | |
| (1,027,302 | ) |
Notes payable | |
| (677,137 | ) |
Convertible notes payable | |
| (1,683,764 | ) |
Total liabilities assumed | |
| (3,388,203 | ) |
Net assets | |
$ | 7,224,404 | |
Acquired
intangible assets of $5,463,00 include technology of $5,119,000 (which is estimated to have a useful life of 5 years), customer
relationships of $252,000 (which are estimated to have a useful life of 3 years), and trade names and trademarks of $92,000 (which are
estimated to have an indefinite useful life). The value assigned to technology was determined using the multi-period excess earnings
methodology under the income approach, the customer relationships was valued using the distributor method under the income approach,
and the trade name and trademarks was valued using the relief from royalty method.
The
acquisition produced $3,803,293 of goodwill, which has been assigned to the IFPG reporting unit. The goodwill is attributable to
a combination of IFP’s assembled workforce and other product and operating synergies. Goodwill arising from the IFP Acquisition
is not deductible for tax purposes.
The
purchase price allocation is considered provisional as the Company finalizes its determination relating to the valuation of assets and
liabilities and key assumptions, approaches and judgements with respect to intangible assets acquired and the related tax effects.
Transaction
costs, except for the equity issuance costs discussed above, were not material.
Intangibles acquired were remeasured at December 31, 2022 using the
applicable spot rate.
From
the closing date of the IFP Acquisition through December 31, 2022, the Company recognized approximately $356,679
in revenue and $315,753
in net gain relating to IFP, which included the amortization of $340,022 acquired intangibles and fair value gain on revaluation of
convertible notes for $1,267,791. In addition, the Series C Preferred holdback stocks which has been treated as deferred considerations,
were revalued as of December 31, 2022, and resulted in the revaluation gain of $525,300.
Pro-Forma
Results of Operations
The
following unaudited pro-forma consolidated results of operations for the years ended June 30, 2022, and 2021, respectively, have been
prepared as if the acquisition of IFP had occurred on July 1, 2020, and includes adjustments for amortization related to the valuation
of acquired intangibles:
SCHEDULE OF UNAUDITED PRO-FORMA CONSOLIDATED RESULTS OF OPERATIONS
| |
|
|
|
|
| | | |
|
|
|
|
| | |
| |
Year Ended June 30, | | |
Year Ended June 30, | |
| |
2022 |
|
|
2022 | | |
2021 |
|
|
2021 | |
| |
Reported |
|
|
Pro forma | | |
Reported |
|
|
Pro forma | |
Revenue | |
$ |
— |
|
|
$ | 1,564,224 | | |
$ |
— |
|
|
$ | 795,547 | |
Net loss | |
|
(8,333,976 |
) |
|
| (12,248,340 | ) | |
|
(7,060,201 |
) |
|
| (9,473,952 | ) |
Net loss attributable to Intelligent Bio Solutions Inc. | |
|
(8,306,051 |
) |
|
| (12,220,415 | ) | |
|
(7,037,286 |
) |
|
| (9,451,037 | ) |
Net loss per share, basic and diluted (post Reverse Stock Split) | |
|
(11.33 |
) |
|
| (13.51 | ) | |
|
(13.51 |
) |
|
| (14.13 | ) |
NOTE
6. INVENTORIES
Inventories
consist of the following:
SCHEDULE OF INVENTORIES
| |
December 31, 2022 | | |
June 30, 2022 | |
Work-in-progress | |
$ | 643,730 | | |
$ | — | |
Finished goods | |
| 215,602 | | |
| — | |
Less: Provision for inventory obsolescence | |
| (188,364 | ) | |
| — | |
Inventory, net | |
$ | 670,968 | | |
$ | — | |
NOTE
7. OTHER CURRENT ASSETS
Other
current assets consist of the following:
SCHEDULE OF OTHER CURRENT ASSETS
| |
December 31, 2022 | | |
June 30, 2022 | |
Intelligent Fingerprinting Limited note receivable | |
$ | — | | |
$ | 500,445 | |
Prepayments | |
| 329,840 | | |
| 116,525 | |
Goods and services tax receivable | |
| 29,752 | | |
| 57,746 | |
Deposits | |
| 99,120 | | |
| 46,602 | |
Other receivables | |
| 63,182 | | |
| 25,443 | |
Total | |
$ | 521,894 | | |
$ | 746,761 | |
On
June 16, 2022, the Company entered into an agreement with IFP, providing the Company with the exclusive right, until December 31,
2022, to evaluate and negotiate a transaction to acquire IFP or its assets. In consideration for this exclusivity, on June 16, 2022,
the Company provided IFP with an unsecured term loan facility in the amount of $500,000,
which was payable by IFP on the earliest of the consummation of an acquisition, 30 days following the termination of exclusivity
under the exclusivity agreement, an event of default under the term loan facility agreement, or December 31, 2022. This $500,000 term
note receivable bore an interest rate of 2%
per annum above the Sterling Barclays Bank Base Rate from time to time. The Company completed the acquisition of IFP on October 4,
2022, and, in connection therewith, the loan and accrued interest outstanding as at the date of acquisition being $ 504,938 was
treated as a cash consideration in accordance with ASC 805 Business Combinations. See Note 5.
NOTE
8. PROPERTY AND EQUIPMENT, NET
Property
and equipment consist of the following:
SCHEDULE OF
PROPERTY AND EQUIPMENT
| |
December 31, 2022 | | |
June 30, 2022 | |
Production equipment | |
$ | 28,945 | | |
$ | — | |
Leasehold improvements | |
| 19,141 | | |
| — | |
Other equipment | |
| 7,422 | | |
| — | |
Construction in progress (CIP) | |
| 438,304 | | |
| 391,408 | |
Gross property and equipment | |
| 493,812 | | |
| 391,408 | |
Less: accumulated depreciation | |
| (9,511 | ) | |
| — | |
Property and equipment, net | |
$ | 484,301 | | |
$ | 391,408 | |
The
Company recorded an expense of $9,511 in relation to the depreciation of property and equipment for the three and six months ended December 31,
2022. There was no depreciation
of property and equipment during the three and six months ended December 31, 2021.
During
the three and six months ended December 31, 2022, the Company incurred costs of $49,242 and $93,792, respectively, towards the construction
of a building at the University of Newcastle. The Australian government reimbursed the Company for 50% of the incurred costs. Therefore,
the Company has recorded the CIP as net of reimbursement received as of December
31, 2022.
The
following table summarizes the amount of CIP recorded in property and equipment, net on the condensed consolidated balance sheets:
SUMMARY
OF AMOUNT RECORDED IN THE CONSOLIDATED BALANCE SHEETS
| |
December 31, 2022 | | |
June 30, 2022 | |
Investments in construction in progress | |
$ | 876,608 | | |
$ | 782,816 | |
Less: 50% contributed under government grant | |
| (438,304 | ) | |
| (391,408 | ) |
Carrying amount | |
$ | 438,304 | | |
$ | 391,408 | |
NOTE
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses consist of the following:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| |
December 31, 2022 | | |
June 30, 2022 | |
Accounts and other payables | |
$ | 989,423 | | |
$ | 715,902 | |
Accruals | |
| 309,469 | | |
| 909,187 | |
Deferred consideration* | |
| 481,750 | | |
| — | |
Others | |
| 74,823 | | |
| — | |
Total | |
$ | 1,855,465 | | |
$ | 1,625,089 | |
* | The deferred consideration
relates to: |
| a) the second payment of $181,750 for bonus payments to be made on behalf
of the selling shareholders of IFP due on the six-month anniversary of closing date of the acquisition, being April 4, 2023. and |
| b) the fair value of $ 300,000 in relation to 500,000
Series C Preferred Stock that are being held back from the IFP Sellers for one year after the IFP Acquisition date to secure potential
indemnification claims by the Company against the IFP Sellers. See Note 5 for further detail of the IFP Acquisition.
|
NOTE
10. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The
changes in the carrying amount of goodwill were as follows:
SCHEDULE OF
CARRYING AMOUNT OF GOODWILL
| |
| - | |
Balance at June 30, 2022 | |
$ | — | |
Acquisition of IFP | |
| 3,803,293 | |
Effect of foreign currency | |
| 326,744 | |
Balance at December 31, 2022 | |
$ | 4,130,037 | |
Goodwill
resulting from the acquisition of IFP is allocated to the IFPG operating and reportable segment.
Other
intangible assets
Other
intangible assets consist of the following as of December 31, 2022:
SCHEDULE OF
OTHER INTANGIBLE ASSETS
| |
Weighted average useful lives (years) | |
Acquisition cost |
|
|
Effect of foreign currency | | |
Accumulated amortization | | |
Carrying value | |
Technology | |
5 years | |
$ | 5,119,000 |
|
$ |
327,523 | | |
$ | 314,729 | | |
$ | 5,131,794 | |
Customer relationships | |
3 years | |
| 252,000 |
|
$ |
16,123 | | |
| 25,293 | | |
$ | 242,830 | |
Trade names and trademarks | |
Indefinite | |
| 92,000 |
|
$ |
5,886 | | |
| — | | |
$ | 97,886 | |
Total intangible assets | |
| |
$ | 5,463,000 |
|
$ |
349,532 | | |
$ | 340,022 | | |
$ | 5,472,510 | |
Expense
related to the amortization of other intangible assets for the three and six months ended December 31, 2022, was $340,022.
There was no
amortization of other intangible assets during the three and six months ended December 31, 2021.
Amortization
expense for the intangible assets is expected to be as follows over the next five years, and thereafter:
SCHEDULE OF
EXPECTED AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS
| |
| - | |
2023 | |
$ | 1,178,679 | |
2024 | |
| 1,178,679 | |
2025 | |
| 1,156,335 | |
2026 | |
| 1,089,305 | |
2027 | |
| 771,626 | |
Total | |
$ | 5,374,624 | |
There
were no impairment charges related to goodwill or other intangible assets incurred in the periods presented.
NOTE
11. CONVERTIBLE NOTES
As a result of the IFP Acquisition, the Company became the guarantor to
unsecured convertible notes (also referred to herein as the IFP Loan Agreements) for which IFP is the borrower. The convertible notes,
plus certain accrued interest, will become due on October 4, 2024 (the second anniversary of the IFP Acquisition closing date), unless
earlier converted. The convertible notes, if converted, will convert into shares of IFP, which shares of IFP will be immediately transferred
to the Company in exchange for shares of the Company’s common stock and Series C Preferred Stock (as set forth in the Share Exchange
Agreement) following approval by the Company’s stockholders of the Company Stockholder Approval Matters.
The
convertible notes bear an interest rate of 17% per annum, on a compounded basis. The interest rate will increase to 22% per annum, on
a compounded basis, on October 4, 2023 (the first anniversary of the IFP Acquisition closing date) if the Company’s shareholders
have not yet approved the Company Stockholder Approval Matters have not been approved by the Company’s stockholders by such date.
Due
to the Company’s election to apply the fair value option (FVO), the fair value of the convertible notes is subsequently re-measured at the end of
each reporting period based on the changes in their estimated fair value. See Note 15 for additional information.
NOTE
12. NOTE PAYABLE
As
a result of the acquisition of IFP, the Company assumed a note payable due to a distributor of IFP. The unpaid principal balance of
the loan will accrue interest at a rate of 0.97% per annum. The balance is offset by
|
● |
Payments
of 10%
of the Company’s monthly worldwide gross revenue received in the preceding month; |
|
● |
50%
of any subsequent sales by the company to the distributor. |
The classification of the notes payables is based
on sales forecast prepared by the management.
NOTE
13. LEASES
In
relation to the IFP Acquisition, the Company assumed a non-cancelable finance lease agreement. The lease has an original lease
period expiring in August 2025. The lease agreement does not contain any material residual value guarantees or material restrictive
covenants.
Finance
lease right-of-use asset amortization and finance lease interest expenses were $48,623 and $22,448 for the three months ended
December 31, 2022, respectively.
Finance
lease right-of-use asset amortization and finance lease interest expenses were $48,623 and $22,448 for the six months ended
December 31, 2022, respectively.
As
of December 31, 2022, the remaining lease-term and discount rate on the Company’s lease was 2.7 years and 17%, respectively.
The reconciliation of the maturities
of the finance lease to the finance lease liabilities recorded in the condensed consolidated balance sheet as of December 31, 2022,
is as follows:
SCHEDULE OF MATURITIES OF THE FINANCE LEASE TO THE FINANCE LEASE LIABILITIES
| |
| | |
2023 | |
$ | 236,874 | |
2024 | |
| 244,904 | |
2025 | |
| 168,622 | |
Total lease payments | |
| 650,400 | |
Less: Imputed interest | |
| (132,248 | ) |
Present value of lease liabilities | |
$ | 518,152 | |
NOTE
14. SHAREHOLDERS’ EQUITY
As
of December 31, 2022 there were 1,401,377 Series
A Warrants; 52,400
Series B Warrants, 529,386 Series
D Warrants (defined below) and 26,469
Winx Warrants (defined below) outstanding and held by certain shareholders. Each warrant was initially represented the right to
purchase one share of the Company’s common stock (subject to adjustment upon the occurrence of specified events). See Note 21
for information and disclosures relating to adjustments related to the Reverse Stock Split.
On
December 21, 2022, the Company entered into a Securities Purchase Agreement (the “December 2022 Purchase Agreement”)
with 14 investors (the “Series D Investors”), pursuant to which the Company agreed to issue and sell to the Series D
Investors in a Regulation S private placement (the “December 2022 Private Placement”) (i) 176,462
shares of the Company’s Series D Convertible Preferred Stock, par value $0.01
per share (the “Series D Preferred Stock”), and (ii) 529,386
warrants (the “Series D Warrants”), with each warrant initially representing the right to purchase one share of common
stock (0.05 shares post-Reverse Stock Split) (subject to adjustment upon the occurrence of specified events). An additional 26,469
warrants were issued to Winx Capital Pty Ltd. (the “Winx Warrants”), the placement agent for the December 2022 Private
Placement, with each warrant initially representing the right to purchase one share of common stock (0.05 shares post-Reverse Stock
Split) (subject to adjustment upon the occurrence of specified events). The Series D Warrants had an initial exercise price of
$0.29
per share ($5.80 per share
post-Reverse Stock Split) (subject to adjustment) and expire June 22, 2028. The Winx Warrants had an initial exercise price of
$0.52
per share ($10.40 per share post-Reverse Stock Split) (subject to adjustment) and expire five years following the effective date of
a registration statement covering the resale of common stock underlying the Series D Preferred Stock acquired by the Series D
Investors. The Series D Preferred Stock and Series D Warrants were sold together as a unit (“Unit”), with each Unit
consisting of one share of Series D Preferred Stock and three Series D Warrants. Each share of Series D Preferred Stock was
initially convertible into three shares of Common Stock (0.15 shares post-Reverse Stock Split) (subject to adjustment upon the
occurrence of specified events). The purchase price for the Units was $1.25
per Unit. The Units offering price and the Series D Warrants exercise price were priced above the Nasdaq “Minimum Price”
as that term is defined in Nasdaq Rule 5635(d)(1). The shares of Series D Preferred Stock were initially convertible into an
aggregate of 529,386
shares (26,470 shares post-Reverse Stock Split) of Common Stock following shareholder approval of such conversion and without the
payment of additional consideration. The December 2022 Private Placement closed on December 22, 2022. See Note 21 for information
and disclosures relating to adjustments related to the Reverse Stock Split.
On
October 6, 2022, the Company granted its employees 500,000
(25,000
shares post-Reverse
Stock Split) shares of common stock as compensation. The Company recorded stock compensation expense of $260,000,
based on a pre-Reverse Stock Split share price of $0.52
per share, in relation to the issuance
during the three and six months ended December 31, 2022. The Company withheld 27,706
shares (1,386
shares post-Reverse
Stock Split) for the payment of withholding taxes.
On
October 4, 2022, the Company issued 2,963,091 shares
(148,155 shares post-Reverse Stock Split) of common stock and 2,363,003 shares
of Series C Preferred Stock as partial consideration in connection with the IFP Acquisition. The Company recognized $806,397 of
equity issuance costs in relation to this transaction and recorded them as reduction to additional paid-in capital on the Condensed
Consolidated Balance Sheets. An additional 500,000
shares of Series C Preferred Stock will be issued by the Company on the one-year anniversary of the IFP Acquisition, pending
satisfaction of potential indemnification claims by the Company against the IFP Sellers. See
Note 5 for further detail of the IFP Acquisition.
The Series C
Preferred Stock and Series D Preferred Stock are convertible into the Company’s common stock following approval of the Company’s
stockholders of such conversion.
NOTE
15. FAIR VALUE MEASUREMENTS
Convertible
notes
As
detailed in Note 11, the Company assumed convertible notes as a result of the IFP Acquisition and elected to account for the convertible
notes under the FVO. The Company estimated the fair value of the convertible notes based on the
fair value of the maximum shares issuable upon conversion (1,149,273 shares of Series C convertible preferred stock) less one year of
estimated interest to be incurred until October 4, 2023, since the number of shares
to be issued factors in the interest charges for one year. If the note converts earlier than one year less shares will be issued as a
result of this. If the note converts between year 1 and year 2 the maximum amount of shares gets issued and the Company will incur 22%
annual interests for the period up to the date of conversion in the second year. The Company continues to estimate the fair value of the convertible
notes using this method, reducing the estimated interest adjustment each quarter as the 1-year anniversary of the IFP Acquisition approaches.
Accordingly, as of December 31, 2022, the fair value movement relates to
the decrease in the share price from the time of acquisition to reporting date.
Increases
or decreases in the fair value of the Company’s convertible notes carried at fair value are recognized as part of Other Income
(expenses) in the Condensed Consolidated Statements of Operations. The interests incurred from the date of acquisition until
December 31, 2022, are included as part of the Interest expense in the condensed
Consolidated Statements of Operations. None of the change in the value of the convertible notes was attributable to instrument
specific credit risk.
The
following table provides a reconciliation of the beginning and ending balance of the convertible note liabilities measured at fair value
on a recurring basis during the period:
SCHEDULE OF CONVERTIBLE NOTE LIABILITIES MEASURED AT FAIR VALUE
ON A RECURRING BASIS
| |
| | |
| |
Convertible notes carried at fair value (Level 3) | |
Balance at June 30, 2022 | |
$ | — | |
Fair value of convertible notes at acquisition (Note 5) | |
| 1,683,764 | |
Fair value gain on revaluation of convertible notes | |
| (1,267,791 | ) |
Effect of foreign currency | |
| 107,730 | |
Balance at December 31, 2022 | |
$ | 523,703 | |
Series
C Preferred Stock (holdback)
The
Company has holdback 500,000
Series C Preferred Stock, from the IFP Sellers for one year after the IFP Closing to secure potential indemnification claims by the
Company against the IFP Sellers. Therefore, the
final number of shares to be issued after the one year measurement period is contingent on any potential claims and can be variable.
Each share of Series C Preferred Stock was initially
convertible into three shares of Common Stock (0.15
shares post-Reverse Stock Split) (subject to adjustment upon the occurrence of specified
events), contingent upon approval by the Company’s stockholders. These shares are reserved, not issued, or held in Escrow
account. As at December 31, 2022, the Company accounted for the fair value movement relates to the decrease in the share price from the
time of acquisition to reporting date.
The
following table provides a reconciliation of the beginning and ending balance of the holdback Preferred Stock measured at fair value
on a recurring basis during the period:
SCHEDULE OF PREFERRED STOCK AT FAIR VALUE ON RECURRING BASIS
| |
| |
| |
Preferred Stock carried at fair value (Level 2) | |
Balance at June 30, 2022 | |
$ | — | |
Fair value of holdback Series C Preferred Stock at acquisition (Note 5) | |
| 825,300 | |
Fair value gain on revaluation of hold back Series C Preferred Stock | |
| (525,300 | ) |
Balance at December 31, 2022 | |
$ | 300,000 | |
The
Company did not have assets or liabilities carried at fair value using Level 1 inputs during the three and six months ended
December 31, 2022 and 2021.
NOTE
16. RELATED PARTY TRANSACTIONS
LSBD
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 occurred with LSBD and senior management
personnel during the period July 1, 2022, to December 31,
2022.
The Company incurred a total cost of $nil during the
three and six months ended December 31, 2022 (three and six months ended December 31, 2021: $26,081 and $145,733), 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 in the Condensed Consolidated Statements of Operations and Other Comprehensive Loss.
As
of December 31, 2022, $8,545 (December 30, 2021: $9,536) remains payable to LSBD in relation to overhead reimbursements detailed above.
December 2022 Private Placement
Approximately
15.10% of funds raised in the December 2022 Private Placement were secured from Spiro Sakiris, our Chief Financial Officer (indirectly),
and Manuel Kostandas, our Director of Global Integration, respectively. Mr. Sakiris indirectly invested $19,991 in the December 2022 Private
Placement and Mr. Kostandas invested $13,327 in the December 2022 Private Placement.
NOTE
17. 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.
During
the year ended June 30, 2022, LSBD sold all the shares it held in the Company but retained ownership of 5-year non-transferrable
warrants to purchase 3,000,000
common shares (150,000 shares post-Reverse Stock Split) of the Company at an exercise price of $17
per share ($340.00 per share post-Reverse Stock Split), expiring December 31, 2025. The Company determined whether it has a controlling
financial interest in BiosensX (North America) Inc. by first evaluating whether the entity is a voting interest entity or a VIE
under GAAP. Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to
finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual
returns and the right to make decisions about the entity’s activities. The Company consolidates voting interest entities in
which it has all, or at least a majority of, the voting interests. As defined in applicable accounting standards, VIEs are entities
that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when
an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic
performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. The Company concluded
that it does not have a controlling financial interest in BiosensX (North America) Inc., hence it continues to recognize its
investments in BiosensX (North America) Inc. using the equity method.
The
carrying amount of investments in BiosensX (North America) Inc. was $nil as of December 31, 2022, and June 30, 2022.
NOTE
18. COMMITMENTS AND CONTINGENCIES
During
November 2022, the Company signed a deed of variation with the University of Newcastle for the research and development of the Saliva
Glucose Biosensor. The Company agreed to pay the University of Newcastle $847,021 of which $847,021 remains payable as of December 31,
2022.
The
Company has no
material purchase commitments. For commitments on leases, refer to Note 13.
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
19. INCOME TAX
The
Company shall file its income tax returns with the Internal Revenue Service, Australian Taxation Office and His Majesty Revenue
& Customs. The Company has operating losses carried forward of $30,023,714 which are derived from its operations in Australia,
the UK and the US and are available to reduce future taxable income. Such loss carry forwards may be carried forward indefinitely,
subject to compliance with tests of continuity and additional rules.
The
net operating loss carried forward gives rise to a deferred tax asset of approximately $8,149,550 after offsetting associated
deferred tax liabilities. However, the Company has determined that a valuation allowance of $8,149,550 against such deferred tax
asset is necessary, as it cannot be determined that the losses carried forward will be utilized.
NOTE
20. LOSS PER SHARE
Basic
loss per common share is computed by dividing net loss allocable to common shareholders by the weighted average number of shares of
common stock or common stock equivalents outstanding after adjusting for the Reverse Stock Split on February 8, 2023. 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.
SCHEDULE OF BASIC LOSS PER COMMON SHARE POTENTIAL DILUTIVE SECURITIES
| |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended December 31, | | |
Six Months Ended December 31, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Net loss attributable to Intelligent Bio Solutions Inc. | |
$ | (420,600 | ) | |
$ | (3,459,998 | ) | |
$ | (1,628,893 | ) | |
$ | (4,892,650 | ) |
Basic and diluted net loss per share attributed to common shareholders | |
$ | (0.46 | ) | |
$ | (4.65 | ) | |
$ | (1.97 | ) | |
$ | (6.77 | ) |
Weighted-average number of shares outstanding | |
| 908,283 | | |
| 744,126 | | |
| 826,389 | | |
| 722,216 | |
The following outstanding warrants and options were
excluded from the computation of diluted net loss per share for the periods presented because their effect would have been anti-dilutive:
Pre reverse stock split: Anti-dilutive warrants and preferred shares
SCHEDULE OF ANTI-DILUTIVE WARRANTS
| |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended December 31, | | |
Six Months Ended December 31, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Warrants - Series A | |
| 1,401,377 | | |
| 1,401,377 | | |
| 1,401,377 | | |
| 1,401,377 | |
Warrants - Series B | |
| 52,400 | | |
| 59,782 | | |
| 52,400 | | |
| 59,782 | |
Private placement warrants (Dec 2022) | |
| 529,386 | | |
| - | | |
| 529,386 | | |
| - | |
Warrants issued to Winx Capital Pty Ltd | |
| 26,469 | | |
| - | | |
| 26,469 | | |
| - | |
Warrants issued to underwriters | |
| 63,529 | | |
| 63,529 | | |
| 63,529 | | |
| 63,529 | |
Pre IPO warrants | |
| 2,736,675 | | |
| 2,736,675 | | |
| 2,736,675 | | |
| 2,736,675 | |
Preferred Stock (Series C) | |
| 2,363,003 | | |
| - | | |
| 2,363,003 | | |
| - | |
Preferred Stock (Series D) | |
| 176,462 | | |
| - | | |
| 176,462 | | |
| - | |
Warrants issued to LSBD | |
| 3,000,000 | | |
| 3,000,000 | | |
| 3,000,000 | | |
| 3,000,000 | |
NOTE
21. SUBSEQUENT EVENTS
At
the annual meeting of stockholders held on February 8, 2023 (the “Annual Meeting”), the stockholders of the Company
approved an amendment to the Company’s amended and restated certificate of incorporation (the “Amendment”) to
effect the
reverse stock split at a ratio of not less than 1-for-2 and not more than 1-for-35 at any time within 12 months following the date
of stockholder approval, with the exact ratio to be set within this range by the Company’s Board of Directors (the
“Board”) at its sole discretion without further approval or authorization of our stockholders. Pursuant to such
authority granted by the Company’s stockholders, the Board approved a 1-for-20 reverse stock split (the “Reverse Stock
Split”) of the Company’s common stock and the filing of the Amendment to effectuate the Reverse Stock Split. The
Amendment was filed with the Secretary of State of the State of Delaware and the Reverse Stock Split became effective in accordance
with the terms of the Amendment at 4:05 p.m. Eastern Time on February 9, 2023 (the “Effective Time”). The
Amendment provided that, at the Effective Time, every 20 shares of the Company’s issued and outstanding common stock automatically combined into one issued and outstanding share of common stock, without any change in par value per share, which
remains $0.01 per share.
As
a result of the Reverse Stock Split, the number of shares of common stock outstanding was reduced from approximately 18,325,289 shares
(excluding treasury shares) as of February 8, 2023, to approximately 916,265
shares (excluding treasury shares, and subject to the rounding up of fractional shares), and the number of authorized shares of common stock remains 100 million
shares. As a result of the Reverse Stock Split, proportionate adjustments were made to the per share exercise price and/or the
number of shares issuable upon the exercise or vesting of all outstanding stock options, restricted stock unit awards and warrants
(including the Series A Warrants, the Series B Warrants, the Series D Warrants and the Winx Warrants), which will result in a
proportional decrease in the number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of
such stock options, restricted stock unit awards and warrants, and, in the case of stock options and warrants, a proportional
increase in the exercise price of all such stock options and warrants. In addition, the number of shares reserved for issuance under
the Company’s 2019 Long Term Incentive Plan immediately prior to the Effective Time was reduced proportionately. The number of
shares of common stock issuable upon conversion of the Company’s Series C Preferred Stock and Series D Preferred Stock, as
well as any applicable conversion prices, were also adjusted in proportion to the reverse split ratio of the Reverse Stock Split
(subject to adjustment for fractional interests).
No
fractional shares were issued as a result of the Reverse Stock Split. Stockholders of record who would otherwise be entitled to receive
a fractional share are entitled to the rounding up of the fractional share to the nearest whole number. The Reverse Stock Split was
effective at 4:05 p.m., Eastern Time, on February 9, 2023, and the Company’s common stock began trading on a Reverse Stock Split-adjusted
basis on The Nasdaq Capital Market at the open of the markets on February 10, 2023. The Company’s post-Reverse Stock Split common
stock has a new CUSIP number (CUSIP No. 36151G402), but the par value and other terms of the common stock were not affected by the Reverse
Stock Split.
The
table below sets forth the impact of the pre- and post- reverse stock split on the Company’s net loss per common share - basic
and diluted; weighted average common shares outstanding - basic and diluted; and shares issued and outstanding, for the years ended
June 30, 2022, and June 30, 2021; the six months ended December 31, 2022 and
2021; and the three months ended December 31, 2022 and 2021:
SCHEDULE OF NET
LOSS PER COMMON SHARE AND WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED FOR IMPACT OF REVERSE STOCK SPLIT
| |
| | | |
| | | |
| | | |
| | |
| |
PRE-SPLIT | | |
POST-SPLIT | |
| |
12 Months Ended | | |
12 Months Ended | |
| |
June 30, 2022 | | |
June 30, 2021 | | |
June 30, 2022 | | |
June 30, 2021 | |
Net Loss | |
$ | (8,306,051 | ) | |
$ | (7,037,286 | ) | |
$ | (8,306,051 | ) | |
$ | (7,037,286 | ) |
| |
| | | |
| | | |
| | | |
| | |
Shares Outstanding | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 14,665,263 | | |
| 10,414,886 | | |
| 733,263 | | |
| 520,744 | |
Diluted | |
| 14,665,263 | | |
| 10,414,886 | | |
| 733,263 | | |
| 520,744 | |
| |
| | | |
| | | |
| | | |
| | |
Loss per Share | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.57 | ) | |
$ | (0.68 | ) | |
$ | (11.33 | ) | |
$ | (13.51 | ) |
Diluted | |
$ | (0.57 | ) | |
$ | (0.68 | ) | |
$ | (11.33 | ) | |
$ | (13.51 | ) |
| |
| | | |
| | | |
| | | |
| | |
| |
PRE-SPLIT | | |
POST-SPLIT | |
| |
6 Months Ended | | |
6 Months Ended | |
| |
Dec 31, 2022 | | |
Dec 31, 2021 | | |
Dec 31, 2022 | | |
Dec 31, 2021 | |
Net Loss | |
$ | (1,628,893 | ) | |
$ | (4,892,650 | ) | |
$ | (1,628,893 | ) | |
$ | (4,892,650 | ) |
| |
| | | |
| | | |
| | | |
| | |
Shares Outstanding | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 16,527,780 | | |
| 14,444,324 | | |
| 826,389 | | |
| 722,216 | |
Diluted | |
| 16,527,780 | | |
| 14,444,324 | | |
| 826,389 | | |
| 722,216 | |
| |
| | | |
| | | |
| | | |
| | |
Loss per Share | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.10 | ) | |
$ | (0.34 | ) | |
$ | (1.97 | ) | |
$ | (6.77 | ) |
Diluted | |
$ | (0.10 | ) | |
$ | (0.34 | ) | |
$ | (1.97 | ) | |
$ | (6.77 | ) |
| |
| | | |
| | | |
| | | |
| | |
| |
PRE-SPLIT | | |
POST-SPLIT | |
| |
3 Months Ended | | |
3 Months Ended | |
| |
Dec 31, 2022 | | |
Dec 31, 2021 | | |
Dec 31, 2022 | | |
Dec 31, 2021 | |
Net Loss | |
$ | (420,600 | ) | |
$ | (3,459,998 | ) | |
$ | (420,600 | ) | |
$ | (3,459,998 | ) |
| |
| | | |
| | | |
| | | |
| | |
Shares Outstanding | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 18,165,656 | | |
| 14,882,522 | | |
| 908,283 | | |
| 744,126 | |
Diluted | |
| 18,165,656 | | |
| 14,882,522 | | |
| 908,283 | | |
| 744,126 | |
| |
| | | |
| | | |
| | | |
| | |
Loss per Share | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.02 | ) | |
$ | (0.23 | ) | |
$ | (0.46 | ) | |
$ | (4.65 | ) |
Diluted | |
$ | (0.02 | ) | |
$ | (0.23 | ) | |
$ | (0.46 | ) | |
$ | (4.65 | ) |