Intelligent Bio Solutions Inc.: Form 10-Q for the period ended Mar 31, 2025

You should read the following discussion in conjunction with our audited historical consolidated financial statements, which are included in our Annual Report on Form 10-K for fiscal 2024 and our unaudited condensed consolidated financial statements for the fiscal quarter ended March 31, 2025, included elsewhere in this Quarterly Report on Form 10-Q. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks, uncertainties, and other factors. Actual results could differ materially because of the factors discussed below or elsewhere in this Quarterly Report on Form 10-Q. See Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q and Part I, Item 1A. “Risk Factors” of the 2024 Form 10-K.

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP, we present “contribution margin” and “contribution margin %”, which are non-GAAP financial measures. Contribution margin and contribution margin % are presented in the section titled “Contribution Margin (non-GAAP)”. We have also included reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with US GAAP. These measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. Moreover, presentation of contribution and contribution margin is provided for year-over-year comparison purposes. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business.

Forward-Looking Information

All statements other than statements of historical fact or relating to present facts or current conditions included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding expectations, hopes, beliefs, intentions, or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “can have,” “likely” and the negative of such words and other words and terms of similar meaning, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Item 1A — Risk Factors” of this Quarterly Report on Form 10-Q and in our 2024 Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by the federal securities laws, we are under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations.

Overview

Intelligent Bio Solutions 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. The Company’s Australian subsidiary, Intelligent Bio Solutions (APAC) 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 Company’s headquarters are in New York, New York.

Intelligent Bio Solutions Inc. is a medical technology company focused on developing and delivering intelligent, rapid, non-invasive testing and screening solutions. The Company operates globally with the objective of providing innovative and accessible solutions that improve the quality of life.

The Company’s current product portfolio includes:

• Intelligent Fingerprinting Platform: A proprietary portable platform that analyzes fingerprint sweat using a one-time cartridge and portable handheld reader. The flagship product from this platform, which is commercially available in certain countries outside of the United States, is the Intelligent Fingerprinting Drug Screening System (the “IFP System” or “IFP Products”), a two-part system that consists of non-invasive, fingerprint sweat-based diagnostic testing products designed to detect drugs of abuse including opiates, cocaine, methamphetamines, benzodiazepines, cannabis, methadone, and buprenorphine. The system comprises a small, tamper-evident drug screening cartridge onto which ten fingerprint sweat samples are collected in under a minute before the portable analysis unit provides an on-screen result in under ten minutes. Samples collected with a confirmatory kit can also be sent to a third-party laboratory service provider for confirmation testing. Customers include safety-critical industries such as construction, transportation and logistics, manufacturing, engineering, drug treatment organizations in the rehabilitation sector, and judicial organizations.
• Biosensor Platform: Under the terms of an Amended and Restated License Agreement dated September 12, 2019 (the “BPT License Agreement”), between the Company and Life Science Biosensor Diagnostics Pty Ltd (“LSBD” or “Licensor”), the Company held an exclusive license in the Asia Pacific Region (“APAC Region”) to the Licensor’s proprietary rights to the biosensor technology (the “Biosensor IP”) used in the biosensor platform we refer to as the Biosensor Platform Technology (“BPT”), or simply the “Biosensor Platform”. This platform consists of a small, printable modified organic thin-film transistor strip designed to detect multiple biological analytes by substituting the top enzyme layer of the biosensor to suit each analyte. We refer to products that use the BPT as the “Licensed Products”. This platform technology has the potential to develop a range of Point of Care Tests. We understand that following the appointment of a liquidator to LSBD on July 21, 2023, the Biosensor IP we licensed from LSBD has reverted back to the University of Newcastle (the “University”). Following our ongoing discussions with the University, it is the Company’s understanding that the University cannot finalize licensing of the Biosensor IP until the liquidation of LSBD is complete. As the timeline for the completion of LSBD’s liquidation is unknown, the Company does not expect any updates or finalization of any license terms until this occurs. As a result, further development of the BPT has been postponed until we are able to finalize licensing arrangements related to the BPT.

Highlights of Achievements

Our major achievements through the three months ended March 31, 2025:

• On March 31, the Company announced it had integrated Arabic as the second international language to its Intelligent Fingerprinting Drug Screening System as part of the Company’s multilingual upgrade.
• On March 27, the Company announced it had expanded access to its fingerprint drug testing in Spain and Andorra through a strategic collaboration with Detecto, a division of Spanish distributor MTB Distribuciones Tecnologicas SL.
• On March 26, the Company announced it had been granted patent in the United States relating to its Intelligent Fingerprinting Drug Screening Cartridge, marking its sixth patent.
• On January 31, the Company announced plans for a major upgrade to its Intelligent Fingerprinting Drug Screening System. The system upgrade will support multiple languages spoken across North and South America, Europe, Asia Pacific, and the Middle East.
• On January 28, the Company announced the strengthening of its foothold throughout Europe and the Middle East through its partnership with IVY Diagnostics Srl.
• The Company secured 35 new accounts throughout the quarter ended March 31, 2025, bringing total active customer accounts to over 450 in 24 countries.

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Results of Operations

Comparison of the Three and Nine Months Ended March 31, 2025 and 2024

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Revenue

Sales of goods

Revenue from sales of goods decreased by $94,933 to $728,867 from $823,800 for the three months ended March 31, 2025, compared to same period in 2024. This decrease is mainly due to instability in the construction sector which resulted in the lower number of readers being sold during the period.

Revenue from sales of goods decreased by $175,309 to $2,208,648 from $2,383,957 for the nine months ended March 31, 2025, compared to same period in 2024. This decrease is mainly due to instability in the construction sector which resulted in the lower number of readers being sold during the period.

Despite a general decrease in sales due to lower readers sales, the Company managed to increase its gross profit margin as it concentrated its efforts on selling high margin cartridges. Cartridge sales, being consumable and recurring, offers a contribution margin of approximately 90.00% compared to 66.68% for readers. The increase in gross profit is discussed further in the following section.

Revenue from the IFPG segment relates to the sale of readers, cartridges and other sales which represents accessories and is summarized as follows:

Cost of revenue

Cost of revenue decreased by $257,812 to $387,499 from $645,311 for the three months ended March 31, 2025, compared to same period in 2024. The decrease in cost of revenue is mainly due to a decrease in revenue and enhanced production capacity, which has led to reduced direct labor, direct materials and direct overhead costs.

Cost of revenue decreased by $476,523 to $1,297,366 from $1,773,889 for the nine months ended March 31, 2025, compared to same period in 2024. The decrease in cost of revenue is mainly due to a decrease in revenue and enhanced production capacity, which has led to reduced direct labor, direct materials and direct overhead costs.

The following table shows the composition of cost of revenue:

Gross profit

Gross profit is solely attributable to the IFPG segment. Gross profit increased by $162,879 to $341,368 from $178,489 for the three months ended March 31, 2025, compared to same period in 2024.

Gross profit increased by $301,214 to $911,282 from $610,068 for the nine months ended March 31, 2025, compared to same period in 2024.

The growth in the gross profit margin is mainly due to larger share of our revenue coming from high margin cartridges sales, coupled with enhanced production capacity, which has led to reduced direct labor, direct materials and direct overhead costs. The company continues to improve on its strategic sales mix and operational streamlining thus driving the increased gross profit as noted above.

Contribution margin (non-GAAP)

Contribution margin (non-GAAP)

Contribution margin, which is a non-GAAP measure of our financial performance, decreased by $87,834 to $533,403 from $621,237 for the three months ended March 31, 2025, compared to same period in 2024. This decrease is primarily due to a decline in the revenue.

Contribution margin decreased by $103,365 to $1,530,044 from $1,633,409 for the nine months ended March 31, 2025, compared to same period in 2024. This decrease is primarily due to a decline in the revenue. However, the contribution margin improved by approximately 0.76%, driven by improved production efficiency and sales mix.

Reconciliation of contribution margin (non-GAAP)

Government support income

Government support income increased by $89,429 to $173,271 from $83,842 for the three months ended March 31, 2025, compared to same period in 2024. This increase was primarily attributable to the Company’s investment on qualifying research and development expenditures for research and development government subsidies.

Government support income increased by $86,122 to $433,039 from $346,917 for the nine months ended March 31, 2025, compared to same period in 2024. This increase was primarily attributable to the Company’s investment on qualifying research and development expenditures for research and development government subsidies.

The grant support income is primarily attributable to INBS’s subsidiary companies recognizing a research and development (“ R&D”) tax refund as the Company believes that it is probable that the amount will be recovered in full through a future claim (see Note 3 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for further information and disclosures relating to R&D tax refund).

Operating expenses

Selling, general and administrative expenses

Selling, general and administrative expenses decreased by $18,272 to $2,407,558 from $2,425,830 for the three months ended March 31, 2025, compared to the same period in 2024. This decrease is primarily due to a decrease in legal, insurance, and general overhead costs offset by an increase in advertising, marketing and travel costs. We anticipate these costs will increase as we continue to expand in new regions.

Selling, general and administrative expenses decreased by $422,246 to $6,165,688 from $6,587,934 for the nine months ended March 31, 2025, compared to the same period in 2024. This decrease is primarily due to a decrease in legal, insurance, and general overhead costs offset by an increase in advertising, marketing and travel costs.

Development and regulatory approval expenses

Development and regulatory approval expenses decreased by $112,962 to $358,351 from $471,313 for the three months ended March 31, 2025, compared to the same period in 2024. This decrease is primarily driven by the timing of engagement of the research partner for R&D.

Development and regulatory approval expenses increased by $890,335 to $1,814,047 from $923,712 for the nine months ended March 31, 2025, compared to the same period in 2024. This increase is primarily driven by the amounts spent on in-house R&D staff and timing of R&D work performed by the research partners required for FDA 510(k) clinical study plan.

During the nine months ended March 31, 2025, the Company partnered with CenExel, a nationwide clinical research site network, and completed a method comparison clinical study on its Intelligent Fingerprinting Drug Screening System, confirming the sensitivity, specificity, accuracy, and usability of the System.

Depreciation and amortization

Depreciation and amortization decreased by $16,945 to $301,978 from $318,923 for the three months ended March 31, 2025, compared to same period in 2024. This decrease is mainly due to the fluctuation in the foreign exchange rate for conversion of the account balances.

Depreciation and amortization decreased by $9,219 to $907,577 from $916,796 for the nine months ended March 31, 2025, compared to same period in 2024. This decrease is mainly due to the fluctuation in the foreign exchange rate for conversion of the account balances.

Other income and expenses

Interest expense

Interest expense decreased by $27,674 to $15,000 from $42,674 for the three months ended March 31, 2025, as compared to the same period in 2024. This decrease was attributable to the reduction of the interest recorded for leased assets and notes payable as the leases are nearing its termination date.

Interest expense decreased by $61,761 to $50,829 from $112,590 for the nine months ended March 31, 2025, as compared to the same period in 2024. This decrease was attributable to the reduction of the interest expense recorded for leased assets and notes payable as the leases are nearing its termination date.

Fair value gain on revaluation of financial instruments

The fair value gain on revaluation of financial instruments decreased by $175,738 to $0 from $175,738 for the nine months ended March 31, 2025, as compared to the same period in 2024. This decrease is due to the revaluation gain on contingent consideration for holdback Series C Preferred Stock resulting from the acquisition of IFP. The holdback Series C Preferred Stock shares were converted into common stock in October 2023. There was no fair value revaluation gain or loss on financial instruments for the three months ended March 31, 2025 and 2024.

Interest income

Interest income increased by $7,047 to $17,687 from $10,640 for the three months ended March 31, 2025, as compared to the same period in 2024. This increase was attributable to funds received from capital raising activities, which contributed to the balance on which interest was earned.

Interest income increased by $78,176 to $92,464 from $14,288 for the nine months ended March 31, 2025, as compared to the same period in 2024. This increase was attributable to funds received from capital raising activities, which contributed to the balance on which interest was earned.

Income tax (expense) benefit

There was no income tax expense for both the three and nine months ended March 31, 2025, and 2024, respectively, as the Company has established a full valuation allowance for all its deferred tax assets.

Other comprehensive income (loss)

Foreign currency translation gain (loss)

Unrealized foreign currency translation gain increased by $260,033 to a gain of $116,007 from a loss of $144,026 for the three months ended March 31, 2025, compared to the same period in 2024. This is due to the favorable exchange rate calculated based on the Company’s unsettled transactions in currencies other than its functional currency and translation of assets and liabilities of foreign subsidiaries in reporting currency.

Unrealized foreign currency translation gain increased by $276,106 to a gain of $189,197 from a loss of $86,909 for the nine months ended March 31, 2025, compared to the same period in 2024. This is due to the favorable exchange rate calculated based on the Company’s unsettled transactions in currencies other than its functional currency and translation of assets and liabilities of foreign subsidiaries in reporting currency.

Net loss attributable to INBS

Net loss attributable to the Company decreased by $434,141 to $2,543,526 from $2,977,667 for the three months ended March 31, 2025, compared to the same period in 2024. This decrease is primarily driven by an improved gross profit margin and increase in government support income due to the Company’s investment on qualifying research and development expenditure for research and development government subsidies.

Net loss attributable to the Company increased by $106,117 to $7,478,629 from $7,372,512 for the nine months ended March 31, 2025, compared to the same period in 2024. This increase is primarily driven by the Company’s investment in R & D work through the development and regulatory approval expenses which for the nine months increased by $890,335 to $1,814,047 required for its FDA 510(k) clinical study plan.

Liquidity and Capital Resources

We use working capital and cash measures to evaluate the performance of our operations and our ability to meet our financial obligations. We define Working Capital as current assets less current liabilities. This measure should not be considered in isolation or as a substitute for any standardized measure under US GAAP. This information is intended to provide investors with information about our liquidity. Other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

Since our inception, our operations have primarily been financed through the issuance of our common stock, redeemable convertible preferred stock, and the incurrence of debt. As of March 31, 2025, we had $2,807,112 in cash and cash equivalents and working capital of $542,946.

At the Market (ATM) Offering - On September 18, 2024, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with Ladenburg Thalmann & Co. Inc. (“Ladenburg”). Pursuant to the terms of the ATM Agreement, the Company may sell from time to time through Ladenburg, as sales agent and/or principal, shares of the Company’s common stock, with an aggregate sales price of up to $3.0 million. On March 11, 2025, the Company filed a prospectus supplement (the “2025 ATM Supplement”) to the ATM Prospectus (defined below) in connection with the offer, sale, and issuance of additional shares. During the period between September 18, 2024, through to March 31, 2025, the Company raised approximately $1,486,340 (net of commissions of approximately $45,971 paid to Ladenburg) through the sale and issuance of 920,363 shares of Company common stock pursuant to the ATM Agreement. During the three months ended March 31, 2025, the Company raised approximately $809,721 (net of commissions of approximately $25,044 paid to Ladenburg) through the sale and issuance of 481,996 shares of Company common stock pursuant to the ATM Agreement. Any sale of shares pursuant to the ATM Agreement are made under the Company’s effective “shelf” registration statement on Form S-3 (File No. 333-264218), which became effective on April 20, 2022, and included base prospectus, and under the related prospectus supplement (the “ATM Prospectus”) filed with the U.S. Securities and Exchange Commission (the “SEC”), dated September 18, 2024, as supplemented by the 2025 ATM Supplement filed with the SEC on March 11, 2025.

February Offering - On February 20, 2025, the Company entered into an underwriting agreement with Ladenburg, as representative (the “February Representative”) for the underwriters named in Schedule 1 thereto (collectively, the “February Underwriters”) relating to an underwritten public offering of 1,304,348 shares of the Company’s common stock. The public offering price for each share was $2.00 per share and the February Underwriters agreed to purchase 1,304,348 shares (the “February Offering”). The Company granted the February Underwriters a 45-day option to purchase an additional 195,652 shares of common stock at the public offering price of $2.00 per share, less the underwriting discounts and commissions. On February 20, 2025, the February Representative fully exercised the over-allotment option to purchase an additional 195,652 shares of common stock. All of the shares were sold by the Company. The February Offering closed on February 21, 2025. As a result of the over-allotment option being exercised in full, the Company raised approximately $2,645,000 (net of underwriting discounts and commissions of approximately $355,000).

The Company expects that its cash and cash equivalents as of March 31, 2024, may be insufficient to allow the Company to fund its current operating plan through at least the next twelve months from the issuance of these unaudited condensed consolidated 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 unaudited condensed consolidated financial statements are issued. There can be no assurance that, in the event that the Company requires additional financing, such financing may be available on terms which are favorable to us, or at all.

In the event we require additional capital, there can be no assurances that we will be able to raise such capital on acceptable terms, or at all. Failure to generate sufficient revenues or raise additional capital through debt or equity financings, or through collaboration agreements, strategic alliances or marketing and distribution arrangements, could have a material adverse effect on our ability to meet our long-term liquidity needs and achieve our intended long-term business plan. Our failure to obtain such funding when needed could create a negative impact on our stock price or could potentially lead to a reduction in our operations or the failure of our Company. Accordingly, these factors raise substantial doubt about the Company’s ability to continue as a going concern unless it can successfully raise additional capital.

As of March 31, 2025, and June 30, 2024, we did not have any off-balance sheet arrangements.

Extended Transition Period for “Emerging Growth Companies”

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. Because our financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock.

Critical Accounting Estimates

The preparation of our consolidated financial statements in conformity with US GAAP requires management to make judgments, estimates and assumptions that impact the amounts reported in our consolidated financial statements and accompanying notes that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

A summary of our significant accounting policies is included in Note 3 “Summary of significant accounting policies” to the accompanying unaudited condensed consolidated financial statements. Certain of our accounting policies are considered critical, as these policies require significant, difficult or complex judgments by management, often requiring the use of estimates about the effects of matters that are inherently uncertain. Our critical policies are summarized in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Recently issued Accounting Pronouncements

For the impact of recently issued accounting pronouncements on the Company’s unaudited condensed consolidated financial statements, see Note 3 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and incorporated herein by reference.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial and Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of March 31, 2025, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were ineffective due to the material weakness in internal control over financial reporting discussed below.

Notwithstanding this conclusion, we believe that our consolidated financial statements and other information contained in this quarterly report on Form 10-Q present fairly, in all material respects, our business, financial condition and results of operations for the periods presented.

Material Weakness

In its assessment of the effectiveness of internal control over financial reporting as of March 31, 2025, management identified material weaknesses in control environment, risk assessment, control activities, information and communication and monitoring. Specifically, the material weaknesses identified relate to the fact that the Company has not yet designed and maintained an effective control environment commensurate with its financial reporting requirements, including (a) has not yet completed formally documenting policies and procedures with respect to review, supervision and monitoring of the Company’s accounting and reporting functions, (b) lack of evidence to support the performance of controls and the adequacy of review procedures, including the completeness and accuracy of information used in the performance of controls and (c) we have limited accounting personnel and other supervisory resources necessary to adequately execute the Company’s accounting processes and address its internal controls over financial reporting.

Ongoing Remediation Plan

Management is committed to continuing the steps necessary to remediate the control deficiencies that constituted the above material weaknesses. We made the following enhancements and continue to make progress to enhance our control environment:

• We added accounting and finance personnel to provide additional individuals to allow for segregation of duties in the preparation and review of schedules, calculations and journal entries that support financial reporting, to provide oversight, structure and reporting lines to provide additional review over our disclosures. We have also commenced the implementation of the new accounting system which aids in reducing these control deficiencies;
• We enhanced our controls to improve the preparation and review of complex accounting measurements, the application of US GAAP to significant accounts and transactions and our financial statement disclosures;
• We engage independent experts when complex transactions are entered into;
• We have recruited and plan to recruit additional financial reporting and accounting personnel with adequate knowledge of US GAAP and SEC rules; and
• We are in the process of engaging outside consultants to assist us in our evaluation of the design, implementation and documentation of internal controls that address the relevant risks, to provide appropriate evidence of performance of our internal controls (including completeness and accuracy procedures).
• We have commenced implementing new accounting system that will enhance our internal controls by improving efficiency, accuracy, and reliability in financial reporting and data management.

Under the direction of the Audit Committee of our board of directors, management will continue to take measures to remediate the material weaknesses. As such, we will continue to enhance corporate oversight over process-level controls and structures to ensure that there is an appropriate assignment of authority, responsibility and accountability to enable remediation of our material weakness.

As we continue to evaluate, and work to improve, our internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary.

Changes in Internal Control Over Financial Reporting

Other than the ongoing remediation effort, described above, there have been no changes to the Company’s internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d 15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitation on the Effectiveness of Internal Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on September 18, 2024, except for risks described below. Any of those risk factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

We will need to raise additional capital to fund our operations in the future. If we are unsuccessful in attracting new capital, we may not be able to continue operations or may be forced to sell assets to do so. Alternatively, capital may not be available to us on favorable terms, or at all. If available, financing terms may lead to significant dilution of our stockholders’ equity.

We are not profitable and have had negative cash flow from operations since our inception. To fund our operations and to develop and commercialize our products (including the BPT and planned applications of Intelligent Fingerprinting Drug Screening System), we have relied primarily on equity and some debt financing and government support income. The Company believes there is material risk that its cash and cash equivalents as of March 31, 2025, of $2,807,112 may be insufficient to allow the Company to fund its current operating plan through at least the next twelve months from the issuance of its unaudited condensed consolidated financial statements for the fiscal quarter ended March 31, 2025. 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 unaudited condensed consolidated financial statements were issued. Accordingly, the Company will be required to raise additional funds during the next 12 months. However, there can be no assurance that when 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 Company may be unable to realize its assets and discharge its liabilities in the normal course of business.

To obtain the additional capital necessary to fund our operations, we expect to finance our cash needs through public or private equity offerings, debt financing and/or other capital sources. Even if capital is available, it might be available only on unfavorable terms. Any additional equity or convertible debt financing into which we enter could be dilutive to our existing stockholders. Any future debt financing into which we enter may impose covenants upon us that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, we may need to relinquish rights to our technologies or our products or grant licenses on terms that are not favorable to us. If access to sufficient capital is not available as and when needed, our business will be materially impaired and we may be required to cease operations, curtail one or more product development or commercialization programs, scale back or eliminate the development of business opportunities, or significantly reduce expenses, sell assets, seek a merger or joint venture partner, file for protection from creditors or liquidate all of our assets. Any of these factors could harm our operating results.

The Company has only completed 4 of the 8 agreed-upon milestones set forth in the Company’s grant agreement with the Australian government related to the construction of a manufacturing facility in Australia. Because we were unable to achieve certain agreed-upon milestones for the grant by the prescribed deadline of March 28, 2025, we will be required to refund certain amounts from the grant.

We received Medical Products Priority Grant funding from the Australian government in June 2021 as contributions towards establishing a high-tech manufacturing facility in Australia. Amounts under this grant were paid to the Company based upon timelines and updates. On April 16, 2024, the Australian government extended the deadline to complete the project to March 28, 2025, with certain modifications in project costs. Since we were unable to achieve the balance of the agreed-upon milestones for the grant by the prescribed deadline of March 28, 2025, we will be required to refund certain amounts from the grant after agreed upon adjustments and terms to be finalized after the prescribed deadline. The accounting policy for the treatment of these grants is to treat the proceeds received as a liability and deduct qualifying expenditure from this liability. Accordingly, the maximum to be refunded to the Australian government is disclosed under liabilities in the balance sheet as “Current portion of deferred grant income”. The balance of this liability in the balance sheet as of March 31, 2025, is $2,278,681.

As a result of the liquidation of Life Science Biosensor Diagnostics Pty Ltd (LSBD) and the intellectual property rights licensed by the Company from LSBD (the Biosensor IP) reverting back to the University of Newcastle, there is a risk of extended delays in negotiating the terms of licensing the Biosensor IP with the University, or that such negotiations may result in less favorable licensing terms for the Company, or that such negotiations may not be successful, which, in any event, would negatively impact the Company’s ability to develop and commercialize the BPT or Licensed Products.

We are party to the BPT License Agreement with LSBD, pursuant to which, among other things, the Company licenses from LSBD certain intellectual property related to the biosensor technology used in the Biosensor Platform, which we refer to as the Biosensor IP. The Company also holds a 50% interest in BiosensX (North America) Inc., which has exclusive license to use, make, sell and offer to sell products under the intellectual property rights in connection with the biosensor technology and the glucose/diabetes management field in the United States, Mexico and Canada.

We understand that following the appointment of a liquidator to LSBD on July 21, 2023, the Biosensor IP has reverted back to the University of Newcastle. Following our ongoing discussions with the University, it is the Company’s understanding that the University cannot finalize licensing of the Biosensor IP until the liquidation of LSBD is complete. As the timeline for the completion of LSBD’s liquidation is unknown, the Company does not expect any updates or finalization of any license terms until this occurs. As a result, further development of the BPT has been postponed until we are able to finalize licensing arrangements related to the BPT.

Accordingly, there is an inherent risk of extended delays in negotiating the terms of licensing the Biosensor IP with the University, or that such negotiations may result in less favorable licensing terms for the Company, or that such negotiations may not be successful, which, in any event, would negatively impact the Company’s ability to develop and commercialize the BPT or Licensed Products.