Intelligent Bio Solutions Inc. (NASDAQ:INBS) reported first quarter fiscal year 2024 financial and operational results on November 9, 2023 and simultaneously filed its Form 10-Q. Revenues continued their ascent and were ahead of our expectations. Several new clients have been announced over the last few months and are now being recognized on the revenue line. The company also reached a milestone with Auctus Management Group, which has now performed 25,000 IFP tests.
South American, Australia, New Zealand and the Asia Pacific Rim have become emerging growth areas for IBS. Recent launches in these geographies have yielded early successes and sales. The team is supported by a new distribution hub, office facility and lab-based confirmation testing specialist for expansion throughout these regions. In the Northern hemisphere, enhanced marketing efforts are being made for expanding IFP’s product set more broadly throughout the UK and Europe with over 350 small and medium sized business clients. Before the end of the year, we expect to see accreditation from the National Association of Testing Authorities (NATA) in Australia which should more broadly open up government and large business clients to the IFP product in Oceania.
1Q:24 Financial Results
In its fiscal first quarter ending September 30, 2023, IBS generated total revenues of $906,000 compared to $311,000 in the same prior year period. 1Q:24 revenues included contributions from both Intelligent Fingerprinting (IFP) product and government support revenue while 2022 revenues only included contributions from government support. Operating expense in 1Q:24 totaled $2.9 million producing a net loss of ($2.4) million or ($1.04) per share.
For the fiscal first quarter 2024 ending September 30, 2023 and versus the same prior year period:
➢ Revenues from sales of goods were $796,000 vs. $0 due to the acquisition of the product revenue generating IFP on October 4, 2022. Government support revenues were $110,000, down 65% compared with $311,000 due to timing of the amount spent on research and development;
➢ Gross margin for product sales was 29%, ahead of the gross margin of 26% in FY:23 for the trailing nine-month duration of IFP ownership;
➢ Selling, General & Administrative expenses rose 69% to $2.5 million from $1.5 million driven primarily by the addition of IFP activities and expenses related to the 32 additional personnel added to the rolls of the organization;
➢ Development & Regulatory Approval rose 31% to $104,000 from $79,000 due to the timing of invoicing and research and development activities carried out by University of New Castle;
➢ Depreciation and amortization expenses were $308,000 vs. $0 related to the acquisition of IFP and the amortization of acquired intangibles;
➢ Loss from operations was ($2.5) million compared to ($1.2) million;
➢ Net other income was $87,000 vs. ($1,000) related to fair value movements of derivatives embedded in the convertible notes, realized foreign exchange income and interest income partially offset by interest expense;
➢ Net loss including non-controlling interests was ($2.4) million vs. ($1.2) million producing a loss per share of ($1.04) and ($1.62).
As of September 30, 2023, cash and equivalents totaled $186,000. This amount compares to $1.5 million held as of June 30, 2023, the end of the company’s prior fiscal year. IBS held $0.6 million of notes payable on its balance sheet. Cash burn for 1Q:24 totaled ($1.3) million and there were no financing cash flows. Following the end of the reporting period, IBS raised a gross $4.4 million in a transaction that was closed October 4th. Additional funds may be recognized through warrant exercises.
➢ IFP Drug Screening introduction at the Health & Safety Show, Sydney, Australia – September 2023
➢ ISO Recertification granted for IFP drug screening – September 2023
➢ Close of $4.4 million public offering – October 2023
➢ New Zealand IFP drug test launch – November 2023
New Analyte Tests in the Works
On September 8th, IBS announced that it had completed important milestones related to adding ketamine and tramadol tests to the fingerprint drug test library. The IFP offering now tests for opiates, methamphetamine, cocaine and cannabis. IBS goal is to expand to other important analytes to service a larger proportion of the market. Ketamine and tramadol are two emerging drugs that are abused. The US, UK and Australia have identified increased usage and seizures of these products highlighting the importance of implementing a related drug testing program.
In May, IBS announced that it will expand into testing for fentanyl to help address the global opioid crisis. In addition to providing a rapid test for employers, the product can also provide law enforcement and forensic pathologists with an early read on cause of death in the field. This is a next step into testing for additional analytes that have applications in a variety of areas where urine or blood testing is not feasible. Expansion into sports testing, probation and legal compliance, parental and child welfare and public health among many other areas is dramatically simplified with a fingerprint test. We expect to see additional drug tests added to the panels in coming periods.
ISO Recertification
IBS has been working on recertification of the ISO 13485: 2016 Harmonized Quality Management System standard for the medical device industry for some time and announced in late September that it had been granted. ISO 13485 is a quality management system standard specific to the medical device industry. It outlines requirements for a comprehensive quality management system for the design and manufacture of medical devices. Key processes addressed include risk management, design control, document control, purchasing, production, calibration, corrective actions, and internal auditing.
The recertification is effective on October 14th, 2023 and is valid for three years. The certification is a standard that indicates research and development, manufacturing facilities and operations for drug screening products conform with strict requirements in the industry. It indicates to prospects and clients that the company is a legitimate provider of testing devices. It is also a requirement for medical device manufacturers in the US, Canada, Europe, Japan, Singapore, Malaysia and Saudi Arabia. The FDA recently published a proposed rule to harmonize its medical device quality management system with ISO 13485.
The certification will be an asset as IBS expands its commercialization plan across Europe, Australia and other locations in the Asia-Pacific.
Capital Raise
On October 4, 2023, IBS closed its $4.378 million underwritten public offering. A total of 2,232,221 shares of common stock, 5,728,723 shares of IBS’ Series E Convertible Preferred Stock, 7,960,944 five and a half year warrants (Series E) and 7,960,944 one and a half year warrants (Series F) were issued. Units consisted of one share of common or preferred stock along with one Series E Warrant and one Series F Warrant. The units were priced at $0.55 generating gross proceeds of approximately $4.378 million. Net proceeds were approximately $3.35 million. Between the capital raise and November 7th, a total of 4,571,761 Series E Convertible Preferred shares were converted to common stock.
Ladenburg Thalmann & Co. Inc. acted as the sole bookrunning manager for the offering.
Client and Geography Additions
VKVP Haulage
Specialist container logistics firm VKVP Haulage selected the IFP Screening System to monitor employees and augment its existing alcohol testing program. The client manages a fleet of 80 trucks and requires that its drivers are compliant with substance abuse policies. An October press release provided details on the arrangement.
New Zealand
IBS announced an expansion into the New Zealand market. Under the Health and Safety in Employment Act of 1992, requirements were put into place for employers to take precautions against employees who may be under the influence of alcohol or drugs. The IFP device offers a new and efficient method to satisfy these obligations as opposed to other common options. Expansion into New Zealand builds on the launch in Australia that has been underway for the last six months. Future growth regions include Asia-Pacific, the United States and Canada.
Australia
On August 1st, months after the May 2023 launch of marketing activities in Australia, IBS announced the signing of eight new customers throughout the country. The entities contribute to the mining, aviation, construction, manufacturing and agriculture industries and together employ over 10,000 individuals.
South America
IBS signed an agreement with TSCOM SPA granting distribution rights to the Chilean company as described in a July 6th press release. TSCOM provides telecare to seniors, devices that prevent the use of vehicles for those under the influence of alcohol, radar devices, as well as drug, alcohol and fatigue detection products. The IFP cartridge and reader will fall into the Drug and Alcohol Detection division.
The agreement will expand IFP’s drug screening device availability across South America and TSCOM plans to offer it to workplaces, government operations and healthcare providers across Chile. An order has already been signed with a Chilean electrical distribution company for several reader devices. TSCOM is in the process of training test administrators to use the monitors and is helping the client introduce the Intelligent Fingerprinting device to the workplace.
IFP Regulatory Pathway in United States
The FDA provided guidance to IBS with respect to the regulatory pathway recommended for the Intelligent Fingerprinting Drug Screening Cartridge. The agency determined that the cartridge falls under regulations pertaining to an Opiate Test System, a Class II device that requires the submission of a pre-market notification related to section 510(k). Based on this feedback, IBS plans to submit a 510(k) pre-market notification for the cartridge.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.
