Item 1A. Risk Factors 27
Item 1B. Unresolved Staff Comments 61
Item 2. Properties 61
Item 3. Legal Proceedings 61
Item 4. Mine Safety Disclosures 61
PART II
Item 6. Reserved 62
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 71
Item 8. Financial Statements and Supplementary Data 71
Item 9A. Controls and Procedures 71
Item 9B. Other Information 72
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspection 72
PART III
Item 10. Directors, Executive Officers and Corporate Governance 73
Item 11. Executive Compensation 81
Item 14. Principal Accounting Fees and Services 94
PART IV
Item 15. Exhibits, Financial Statement Schedules 95
ii
PART
I
Cautionary
Note Regarding Forward-Looking Statements
All
statements other than statements of historical fact or relating to present facts or current conditions included in this Annual Report
on Form 10-K 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
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 Annual Report on Form 10-K 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 “Risk Factors.” 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 form 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 Annual Report on Form 10-K or to confirm
these statements to actual results or revised expectations.
In
this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “Company,” or “INBS”
refer to Intelligent Bio Solutions Inc. together with its wholly owned subsidiaries.
ITEM
1. BUSINESS.
Intelligent
Bio Solutions Inc. (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”). Our headquarters are in New
York, New York.
We
are a medical technology company focused on developing and delivering non-invasive, rapid and pain free innovative testing and screening
solutions. We operate globally with the objective of providing intelligent, pain-free, and accessible solutions that improve the quality
of life.
Our
current product portfolio includes:
These
platform technologies have the potential to develop a range of POCT including the modalities of clinical chemistry, immunology, tumor
markers, allergens, and endocrinology.
Highlights
of Achievements and Developments
Our
major highlights of achievements for the fiscal year 2023:
Our major developments for the fiscal year 2023:
● IFP Acquisition – Issuance of Series C Preferred Stock
On October 4, 2022,
in connection with the IFP Acquisition, the Company entered into a Share Exchange Agreement with IFP (the “Share Exchange Agreement”),
the holders of all of the issued shares in the capital of IFP (collectively, the “IFP Sellers”) and the IFP Sellers’
representatives named therein.
Pursuant to
the terms of the Share Exchange Agreement, the Company, among other things, acquired from the IFP Sellers all of the issued shares
in the capital of IFP, and as consideration therefor the Company issued to the IFP Sellers upon the closing of the IFP Acquisition
(the “IFP Closing”) an aggregate of (i) 148,155 shares (148,183 shares after taking into effect of rounding due to
Reverse Stock Split) of the Company’s common stock (the “Common Stock Consideration”), 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”).
An additional 1,649,273
shares of Series C Preferred Stock were 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 (the “Closing Holdback Shares”) and
(ii) 1,149,273 shares of Series C Preferred Stock (the “Lender Preferred Shares”) underlying convertible debt (referred to
herein as the “Convertible Debt” and “convertible notes”) payable to certain lenders to IFP (the “IFP Lenders”).
When initially issued
in connection with the IFP Acquisition and prior to the Reverse Stock Split (defined below), each share of Series C Preferred Stock was
convertible into three shares of common stock, subject to adjustment upon the occurrence of specified events (such as Reverse Stock Split)
and contingent upon approval by the Company’s stockholders. As a result of the Reverse Stock Split, each share of Series C Preferred
Stock is currently convertible into 0.15 shares of common stock (subject to adjustment upon the occurrence of specified events).
The full conversion
of the Series C Preferred Stock was approved by the Company’s stockholders at the special meeting of the Company’s stockholders
on May 8, 2023 (the “Special Meeting”). As a result of the stockholder approval, all then-outstanding shares of Series C Preferred
Stock (other than the Lender Preferred Shares and shares held by the two shareholders referred to herein as the “RFA Sellers”)
were automatically converted into common stock effective May 10, 2023. The IFP Lenders and RFA Sellers subsequently elected to convert
the Lender Preferred Shares and all other shares Series C Preferred Stock they held into common stock effective May 10, 2023. For purposes
of this report, “RFA Seller” means The Ma-Ran Foundation and The Gary W. Rollins Foundation.
Concurrently with the
IFP Acquisition, the Company and the IFP Sellers entered into two registration rights agreements (the “IFP Registration Rights Agreements”)
granting the IFP Sellers customary registration rights with respect to the shares of common stock and the common stock underlying the
Series C Preferred Stock issued to the IFP Sellers by the Company in connection with the IFP Acquisition. On June 6, 2023, the Company
filed a registration statement on Form S-1, which was subsequently amended on June 21, 2023 (File No. 333-272463) (the “June Resale
Registration Statement”), in connection with fulfilling its obligations under the IFP Registration Rights Agreements. The June Resale
Registration Statement was declared effective on June 27, 2023.
● December Private Placement – Issuance of Series D Preferred Stock
On December 21, 2022,
the Company entered into a Securities Purchase Agreement (the “December 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 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 to purchase common stock (the “D Warrants”).
The Series D Preferred Stock and D Warrants were sold together as a unit (“Unit”), with each Unit consisting of one share
of Series D Preferred Stock and three D Warrants. An additional 26,469 warrants (the “Winx Warrants”) were issued to Winx
Capital Pty Ltd., the placement agent for the December Private Placement. The Company received aggregate gross proceeds from the December
Private Placement of $220,585 before deducting the placement agent’s fees and the Company’s transaction expenses. The December
Private Placement closed on December 22, 2022.
The purchase price
for the Units was $1.25 per Unit. The Unit offering price and the D Warrants exercise price were priced above the Nasdaq “Minimum
Price” as that term is defined in Nasdaq Rule 5635(d)(1).
When initially issued
in connection with the December Private Placement and prior to the Reverse Stock Split, the 176,462 outstanding shares of Series D Preferred
Stock were convertible into 529,386 shares of common stock. As a result of the Reverse Stock Split, the 176,462 outstanding shares of
Series D Preferred Stock were, at the time of conversion, convertible into an aggregate of 26,464 shares of common stock. The Company’s
stockholders approved the full conversion of the Series D Preferred Stock at the Special Meeting on May 8, 2023, and the conversion of
the Series D Preferred Stock was effective as of May 10, 2023.
As a result of the
Reverse Stock Split, (i) each share of Series D Preferred Stock was convertible into 0.15 shares of common stock at the time of conversion
(initially three shares of common stock pre-Reverse Stock Split, subject to adjustment upon the occurrence of specified events); (ii)
each D Warrant currently represents the right to purchase 0.05 shares of common stock with an exercise price of $5.80 per share (initially
exercisable for one share of common stock with an exercise price of $0.29 per share pre-Reverse Stock Split); and (iii) each Winx Warrant
currently represents the right to purchase 0.05 shares of common stock, with an exercise price of $10.40 per share (initially exercisable
for one share of common stock with an exercise price of $0.52 per share pre-Reverse Stock Split). The D Warrants expire June 22, 2028
and the Winx Warrants 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.
Concurrent with entry
into the December Purchase Agreement, the Company and the Series D Investors entered into a Registration Rights Agreement (the “December
Registration Rights Agreement”) granting the Series D Investors customary registration rights with respect to the shares of common
stock underlying the Series D Preferred Stock and the D Warrants acquired by the Series D Investors in the December Private Placement.
The June Resale Registration Statement, which was declared effective on June 27, 2023, was filed in connection with fulfilling the Company’s
obligations under the December Registration Rights Agreements.
● March 2023 Offering
On March 8, 2023, the
Company entered into an underwriting agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc., as representative
(the “Representative”) of the underwriters named therein (collectively, the “Underwriters”), relating to an underwritten
public offering of 569,560 shares (the “March Shares”) of the Company’s common stock and warrants (the “March
Warrants”) to purchase 170,868 shares of common stock (collectively, the “March 2023 Offering”). Each of the March Shares
was sold in combination with an accompanying one-third Warrant. The combined purchase price for each March Share and accompanying March
Warrant was $3.90 and the Underwriters agreed to purchase 569,560 March Shares and 170,868 March Warrants.
The Company granted
the Underwriters a 45-day option to purchase an additional 85,430 shares and/or warrants to purchase up to 25,629 shares of common stock,
in any combination, at the public offering price less the underwriting discounts and commissions. On March 9, 2023, the Representative
fully exercised the over-allotment option to purchase an additional 85,430 March Shares and additional March Warrants to purchase 25,629
shares of common stock. The March 2023 Offering closed on March 10, 2023. As a result of the Representative exercising the over-allotment
option in full, the gross proceeds, before deducting underwriting discounts and commissions and other March 2023 Offering expenses, was
approximately $2.55 million.
The March Warrants
have, (i) an exercise price of $3.90 per share of common stock, (ii) a cashless exercise option for a net number of shares of common stock
determined according to the formula set forth in the March Warrant or (iii) an alternate cashless exercise option (beginning on or after
the initial exercise date), to receive an aggregate number of shares of common stock equal to the product of (x) the aggregate number
of shares of common stock that would be issuable upon a cash exercise and (y)1.00. Each whole March Warrant entitles the holder thereof
to purchase 1 share of common stock. The March Warrants are exercisable upon issuance and will expire on March 10, 2028. The exercise
price and the number of shares of common stock issuable upon exercise of the March Warrants is subject to appropriate adjustments in the
event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the
common stock.
The March 2023 Offering
was made pursuant to an effective shelf registration statement on Form S-3, which was filed with the Securities and Exchange Commission
(the “SEC”) on April 8, 2022 and subsequently declared effective on April 20, 2022 (File No. 333-264218), and the base prospectus
contained therein. A prospectus supplement relating to the March 2023 Offering was filed with the SEC on March 9, 2023.
Under the terms of
the Underwriting Agreement, the Company also agreed to issue to the Representative unregistered warrants (the “March Representative’s
Warrants”) to purchase 32,750 shares of common stock, which warrants have an exercise price of $4.875 per share (125% of the public
offering price per Share and accompanying Warrant) and will terminate on March 8, 2028. The shares of common stock underlying the March
Representative’s Warrants were subsequently registered under the June Resale Registration Statement, which was declared effective
on June 27, 2023.
● Conversion of Convertible Debt and Preferred Stock
At the Special Meeting
of the Company’s stockholders held on May 8, 2023, the stockholders of the Company approved, among other things, (a) the full conversion
of the Series C Preferred Stock issued by the Company pursuant to the Share Exchange Agreement and the issuance of shares of common stock
in connection with such conversion (the “Series C Conversion Approval”), and (b) the full conversion of the Series D Preferred
Stock issued by the Company pursuant to the Securities Purchase Agreement and the issuance of shares of common stock in connection with
such conversion (the “Series D Conversion Approval”).
A result of the Series
C Conversion Approval, and in accordance with the terms of the Share Exchange Agreement, convertible debt for which IFP is the borrower
and the Company is a guarantor (the “Convertible Debt”), became eligible for conversion into shares of IFP that were then
to be immediately transferred to the Company in exchange for shares of Series C Preferred Stock. As of May 8, 2023, all eight holders
of the Convertible Debt (the IFP Lenders) committed to, or otherwise indicated that they were committed to, the above-described conversion
and exchange of the Convertible Debt (the “Loan Conversion”), which, in the aggregate, had an outstanding balance of £1,360,761
in principal and accrued interest as of May 8, 2023.
On May 12, 2023, the
Company entered into Convertible Loan Conversion Agreements (the “Conversion Agreements”) with the eight IFP Lenders relating
to the Convertible Debt in order to effect the above-described conversion and exchange of the Convertible Debt. Each of the Conversion
Agreements is dated and is effective as of May 9, 2023.
Upon the conversion
and exchange of the Convertible Debt in accordance with their respective terms and the terms of the Share Exchange Agreement and the Conversion
Agreements, the IFP Lenders received an aggregate of 1,149,273 shares of Series C Preferred Stock. The conversion and exchange of the
Convertible Debt into Series C Preferred Stock is deemed to be effective as of May 9, 2023. Effective as of May 10, 2023, the 1,149,273
shares of Series C Preferred Stock issued to the IFP Lenders pursuant to the Conversion Agreements were converted into an aggregate of
172,386 shares of common stock.
Effective as of May
10, 2023, all 3,512,277 shares of Series C Preferred Stock issued and outstanding on that date, including the 1,149,273 shares of Series
C Preferred Stock issued to the IFP Lenders, were converted into an aggregate of 526,818 shares of common stock. Such conversion of the
Series C Preferred Stock into common stock was effected in accordance with the Series C Conversion Approval, the terms of the Share Exchange
Agreement and the Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock. This conversion
of Series C Preferred Stock into common stock was deemed effective as of May 10, 2023.
As of May 10, 2023,
the holders of all 176,462 shares of the Company’s Series D Preferred Stock issued and outstanding on that date elected to convert
those shares of Series D Preferred Stock into shares of common stock, and the 176,462 shares of the Company’s Series D Preferred
Stock were then converted into an aggregate of 26,464 shares of common stock effective as of that date. The conversion of the Series D
Preferred Stock was effected in accordance with the Series D Conversion Approval, the terms of the Securities Purchase Agreement and the
Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock.
Upon effectiveness
of the above-described conversion of Series C Preferred Stock and Series D Preferred Stock into common stock, the Company had approximately
2,285,849 shares of common stock issued and outstanding, subject to adjustment for rounding of fractional shares, if any.
● 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 (the “Amendment”) to the Company’s Amended and Restated Certificate of Incorporation (the “Certificate
of Incorporation”) 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, 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.
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.
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 remained 100 million shares.
In order reflect the
Reverse Stock Split, proportionate adjustments were made to the number of shares of common stock issuable upon conversion of preferred
stock and the exercise of the warrants, as applicable; as well as to any applicable conversion and exercise prices, which were also adjusted
in proportion to the reverse stock 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 reflected herein have been adjusted to reflect the 1-for-20 Reverse
Stock Split.
Intelligent
Fingerprinting Drug Screening System
Our
wholly owned subsidiary, Intelligent Fingerprinting Limited (IFP), is the developer and owner of our proprietary and commercially available
portable drug screening system designed to detect common drugs of abuse through fingerprint sweat. The Intelligent Fingerprinting Drug
Screening System consists of a small, tamper-evident drug screening cartridge that collects ten fingerprint sweat samples, which are
then analyzed in a portable handheld reader for precise on-screen results in minutes. This system eliminates the need for invasive and
unpleasant urine, saliva, or blood collection to test for substance abuse. The ten samples are collected in under a minute before the
portable analysis unit provides an on-screen result in under ten minutes. The system is currently designed to detect opioids, cocaine,
methamphetamines, benzodiazepines, cannabis, methadone, and buprenorphine. In addition, samples collected via confirmatory kits can be
sent to a third-party laboratory service provider for confirmation testing.
Intelligent
Fingerprinting Drug Screening System Functionality
The
Intelligent Fingerprinting Drug Screening System consists of single-use, tamper-evident Intelligent Fingerprinting Cartridges (for sample
collection) and the portable Intelligent Fingerprinting DSR-Plus portable analysis unit. The process of collecting and analyzing samples
is as follows:
4. The Cartridge is inserted into the DSR-Plus Reader.
5. The tester follows the simple touch-screen instructions, and analysis begins.
Results
can also be downloaded to a computer for and be used for, among other things, and to the extent legally permissible, integration with
employee medical records or for general statistical analysis.
History
and Background of the Intelligent Fingerprinting Drug Screening System
Founded
in 2007, IFP is a spin-out company from the University of East Anglia (UEA) and is based in Cambridge, England. IFP developed and commercialized
the patented Intelligent Fingerprinting DSR-Plus Reader and Cartridge system, which has been predominantly sold in the United Kingdom,
mainland Europe and the Middle East. IFP continues to manufacture the cartridges for the Fingerprinting Drug Screening System in its
factory in Cambridge, England.
Research
and Development
Our
research and development (R&D) team collaborates with external specialist organizations across jurisdictions to conduct comprehensive
R&D initiatives. These collaborative efforts are currently driven by the following primary objectives:
To
facilitate the expansion of point-of-care testing into additional areas of interest, such as tumor markers, hormones, and allergies,
the core team will collaborate with external research specialists. This joint exploration aims to unlock the untapped potential applications
of our existing lateral flow assay technology on which the Intelligent Fingerprinting Platform has been developed and the organic thin
film transistor on which the Biosensor Platform has been developed. By expanding the capabilities of these platforms, we will be better
equipped to address diverse diagnostic needs and contribute to improved patient outcomes.
Regulatory
Matters
Our
R&D, manufacturing facilities and operations for drug screening products adhere to stringent quality criteria, complying with ISO
13485 for In Vitro Diagnostic Devices and Medical Devices, as well as ISO 9001. We have quality and regulatory oversight of our sub-contracted
reference laboratories, where our methodology is accredited by the United Kingdom Accreditation Service (UKAS), ensuring that the laboratory
operates according to the ISO 17025 standard.
Australia:
While we are already permitted to sell the Intelligent Fingerprinting Drug Screening System as a drug screening device in Australia,
we are in the process of obtaining accreditation from NATA (National Association of Testing Authorities, Australia).
We
have partnered with Racing Analytical Services Limited (RASL), one of Australia’s largest independent drug testing laboratories,
to provide confirmation tests for our drug screening solutions and assist in obtaining NATA accreditation.
United
States of America: We are currently navigating our regulatory pathway in the United States as we seek approval to sell the Intelligent
Fingerprinting Drug Screening System in the United States. We have completed a 513(g) submission and received a response from the United
States Food and Drug Administration (“FDA”) that allows us to pursue the submission of a 510(k) premarket notification. Additionally,
we must identify potential laboratory partners for further certifications and studies that may be necessary. We anticipate that obtaining
FDA approval will benefit entry into other regions of the world.
Other
Regions: Distributors in other countries and jurisdictions will be responsible for obtaining all necessary approvals within their
respective territories.
Manufacturing
The
facilities required to produce the Intelligent Fingerprinting Drug Screening Cartridge and DSR-Pus Reader are in place at our manufacturing
facility in Cambridge, UK, which is used for fabrication and quality control. The facility operates a Quality Management System that
complies with the requirements of ISO 13486 for the design, development, manufacture, distribution, servicing and supply of devices and
readers designed to screen for drugs of abuse using fingerprint diagnostic technology; design, development, manufacture, distribution,
servicing and supply of devices for collection of fingerprint samples used to detect drugs of abuse; and the design, development, manufacture,
distribution, servicing and supply of in vitro diagnostic kits for the detection of viral infection antigens in human saliva and anterior
nares samples. The facility further operates a quality management system that complies with the requirements of ISO 9001 for the design,
development, manufacture, distribution, servicing and supply of devices and readers designed to screen for drugs of abuse using fingerprint
diagnostic technology and the design, development, manufacture, distribution, servicing, and supply of devices for collection of fingerprint
samples used to detect drugs of abuse.
Distribution
and Sales
We
currently serve over 350 small to medium-sized businesses, primarily located throughout the United Kingdom, with additional customers
coming from various global locations. We intend to expand our customer base by strengthening our presence in existing markets and, subject
to receiving necessary regulatory approvals and clearances, venture into new regions. We will tailor our strategy to the targeted region,
establishing direct sales and marketing teams or utilizing distribution networks. In some cases, a combination of these strategies may
be appropriate.
Distributors:
Through the use of buy-sell agreements, distributors will purchase the IFP Products and resell them to customers. These distributors
can be exclusive or non-exclusive, depending on our arrangements. We focus on distributors with existing customer networks in the drug
screening segment and who have a proven track record in their respective territories. We also plan to utilize exclusive distributors who
will be the sole providers within certain defined territories and will need to satisfy certain minimum quarterly purchase requirements.
United
Kingdom: Our direct sales team consists of four sales representatives, one sales leader and one National Sales Manager. The team
utilizes telemarketing leads to schedule on-site demonstrations. The team manages customer relationships and oversees the sales cycle.
Customers are assigned to sales representatives based on geographic territories.
Australia:
Our direct sales team consists of four sales representatives and the vice president of sales. Their primary area of focus is the
east coast of Australia, which comprises approximately 72% of the country’s population. The team utilizes their extensive network
of existing contacts and relationships to introduce the IFP product through in-person demonstrations. We also intend to utilize distributor
partnerships to supplement our direct team and cover regions such as Western Australia, South Australia and more remote areas.
United
States: During our 510(k) premarket submission and subject to receiving appropriate approvals from the FDA, we plan to appoint a
dedicated distribution leader to spearhead market entry strategies by identifying and selecting distributors and partners. Our focus
will be identifying distributors and partners already operating within the U.S. drug screening market.
European
Expansion: We will appoint a dedicated European representative to identify, negotiate, and sign distributor agreements and maximize
sales in targeted territories.
Expanding
into the Middle East and Africa (MEA): A representative from our European operations will initially manage M.E.A operations. Depending
on market opportunities and sales volume, we may appoint a dedicated distribution leader for M.E.A. operations at a later stage.
Market
Analysis and Opportunity
The
Drug Screening Market
The
drug screening market encompasses various sectors, including workplaces, drug testing labs, criminal justice, law enforcement, schools
and colleges, pain management centers, the military, medical examiners, individual users, and sporting organizations.
Drug
misuse is a global concern, and while the approach to this problem varies depending on the legal and regulatory landscape of each country,
what remains constant is the need for regular testing, particularly in areas and industries of concern. Even in regions where certain
drugs, such as cannabis, have been decriminalized (such as in various states across the United States, Canada, and Europe), social and
workplace challenges persist relating to impairment, drug dependency and associated criminal activity, which in turn will increase the
need for testing.
The
market can be separated into four segments:
There
is an increasing demand to introduce more effective drug monitoring systems in the above segments. We intend to aggressively market IFP
Products to different geographical regions outside the U.K., with a focus on the following industries and workplaces: airports, transportation
& logistics, mining, construction, drug testing labs, criminal justice, law enforcement, education facilities, pain management centers,
drug rehabilitation centers, military, medical examiners, individual users and sporting organizations.
The
Recreational Drug Monitoring Industry
There
are four principal categories of recreational drugs - analgesics, depressants, stimulants, and hallucinogens. Analgesics include narcotics
like heroin, morphine, fentanyl, and codeine. Depressants include alcohol, barbiturates, tranquilizers, and nicotine. Stimulants include
cocaine, methamphetamine, and ecstasy (MDMA).
According
to the World Drug Report 2022 published by the United Nations Office on Drugs & Crime, around 284 million people aged 15-64
years old used drugs worldwide in 2020, a 26% increase over the previous decade. Cannabis remains the world’s most used drug,
with 209 million past-year users in 2020, a 23% increase on the previous decade. Opioid use remains a major concern due to
potentially severe health consequences, with 61 million past-year users for non-medical reasons in 2020. Additionally, according to
such report, there were 34 million past-year users of amphetamines and 21 million past-year users of cocaine or similar substances
in 2020. Young people are using more drugs, with use levels today in many countries higher than with the previous
generation. In Africa and Latin America, people under 35 represent the majority of people being treated for drug use disorders. In
the United States and Canada, overdose deaths, predominantly driven by an epidemic of the non-medical use of fentanyl, continue to
break records.
According
to the White House’s 2022 National Drug Control Strategy, the 2020 National Survey on Drug Use and Health, published October 2021
by the Substance Abuse and Mental Health Services Administration, showed that among the 41.1 million people who needed treatment for
substance abuse, only 2.7 million (6.5%) received treatment at a specialty treatment facility in the past year.
Point
of Care/Rapid Diagnostics Market
According to the MarketsandMarkets, Inc.’s
study, Point of Care/Rapid Diagnostics Market by Product, Platform, Purchase, Sample, User - Global Forecast to 2027, published in December
2022, the global market for Point of Care medical diagnostics was estimated to be $45.36bn in 2022, rising to $75.46bn in 2027 with a
compounded annual growth rate (CAGR) of 10.7% from 2022 to 2027. The Company intends to develop pathways into areas of medical diagnostics
utilizing existing technology and techniques to exploit a competitive advantage against traditional testing methodologies.
Intellectual
Property
The
following patents are owned by IFP.
Patent Families
Patent Numbers and Geographical Coverage Description Expiry
Secondary / Tertiary Patent Families
The
patents listed above cover virtually all aspects of fingerprint diagnostics including: chemistry, screening cartridge technology, collection
cartridge technology, fingerprint quantitation, fingerprint controlled medication dispenser, lab testing of fingerprints, accessories,
and lateral flow test strip reader.
Competition
IFP
has developed a Point of Care (POC) drug screening test system and a drug laboratory-based confirmation testing service. Both of these
involve the collection of fingerprint sweat samples for analysis. For many years, competitor POC and confirmation tests have needed to
rely on collecting either urine or oral fluid (saliva) body fluid samples. There are several competitive advantages of analyzing fingerprint
sweat over urine and oral fluid drug testing:
The
combination of these benefits shows that fingerprint drug testing provides a more cost-effective, less invasive and more dignified method
when compared to urine and oral fluid-based tests. The recyclability of IFP Product test kits is of specific benefit to organizations
with environmental policies to reduce single-use plastics.
The
below table compares the IFP System to other drug testing systems:
The
IFP System eliminates the need for highly trained technicians or personal protective equipment, providing a non-invasive and objective
testing experience. Its unique 16-hour detection window makes it ideal for assessing an individual’s fitness for work at the time
of testing. Based on research commissioned by the Company, the system has the ability to achieve sensitivity and accuracy levels as demonstrated
by the performance characteristics in the table below.
We
believe that the lateral flow assay technology used in IFP Products has the potential to also deliver significant benefits in other areas
of medical diagnostics. For example, the potential exists use the technology to detect biomarkers of health and disease and provide non-invasive
monitoring of therapeutic drug levels via fingerprint analysis. IFP is also researching a pipeline of development projects with the vision
that fingerprint-based diagnostic tests could provide rapid health/disease triage and wellness tests, meeting the requirements of a post-covid
medical diagnostics world. The Company seeks to broaden development pathways into other areas of medical diagnostics utilizing existing
technology and techniques to exploit a competitive advantage against traditional testing methodologies. Some examples of potential target
assays are: fentanyl and other opiate pain medications, epilepsy management medications, anti-psychotic medications, cortisol (stress
marker for wellbeing determination), protein targets, diabetes markers (c-peptide, fructosamine, insulin and proinsulin), infectious
diseases (methicillin-resistant staphylococcus aureus (mrsa), Lyme disease, dengue, measles and German measles) and food contamination
/ infection from animals (brucella, salmonella, proteus).
Biosensor
Platform Technology
The
“Biosensor Platform” on which the “Saliva Glucose Biosensor” (SGB) is based is a modified Organic Thin Film Transistor
(“OTFT”). The OTFT structure consists of a source and drain electrode, a semiconducting layer, a gate electrode, an optional
separation (or dielectric) layer, all printed on a substrate material and superimposed by a polyelectrolyte membrane/enzyme layer onto
which the analyte is placed. The Biosensor Platform is designed to detect multiple biological analytes by substituting the GOX enzyme
with a suitable alternative for each analyte. The substitute enzyme will generate an electrical current signal that is detected in a
manner similar to the SGB. Given that the underlying sensing mechanism is unaltered, we believe the technical risk associated with the
development of other tests for biomarkers other than glucose is low. Development efforts for biomarkers other than glucose, including
the development of the Prostate Specific Antigen test, the Peanut Kernel Allergen test and the Luteinizing Hormone test are currently
in the early stages of development.
History
and Background of the Biosensor Platform
The
Biosensor was invented at the Priority Research Centre for Organic Electronics at The University of Newcastle, Australia. The Centre
for Organic Electronics is the first of its kind in Australia. It is an exciting new initiative focusing on the development of new electronic
devices at the intersection between semiconductors and plastics. The Centre focuses on the scientific challenges in the development of
organic electronics, with massive potential for the next generation of environmentally friendly energy sources, photonics and biosensors.
The
Saliva Glucose Test (SGT)
The
SGB uses saliva to measure glucose non-invasively. When the SGB interacts with saliva, an electrochemical reaction is initiated that
produces an electrical signal directly correlated to the amount of glucose present in the saliva. This measurement is then converted
into a real-time saliva glucose reading through a dedicated reader and a software application installed on a smart device. The reading
would then be stored in a proprietary cloud-based digital information system.
The
SGT consists of (i) the SGB, which is a single use disposable saliva biosensor, (ii) a dedicated reader that will display the result
once the biosensor has been inserted, and (iii) a software application for smart devices that interfaces with the dedicated reader.
The
Saliva Glucose Biosensor (SGB)
The
SGB was invented at the Centre for Organic Electronics at the University of Newcastle, Australia. Patents for the SGB technology have
been granted in the United States (9,766,199) and China (104412101). The core innovative characteristic of the SGB is the sensitivity
of the glucose biosensor that is designed to detect glucose in saliva at concentrations between 8-200 μM and exhibits linear glucose
sensing characteristics at these concentrations, sensing glucose at levels 100 times lower than in blood. In addition to the patent disclosures,
details of the SGB design have been published in Applied Physical Letters, a peer-reviewed physics journal. The Licensor (LSBD) owns
patents in China and the United States protecting the following technological claims of the SGB: the architecture of a biofunctional
organic thin film transistor device comprising a gate electrode, a dielectric layer, a partially-organic semiconducting layer, a source
electrode, a drain electrode, a substrate and an enzyme; the method for producing the organic thin film transistor device; and the method
for determining the concentration of a compound in a sample by interpreting the amperometric signals generated by the device. The Chinese
and the United States patent belong to the same patent family.
The
basic OTFT structure consists of a source and drain electrode on a semiconducting material that is itself separated from a gate electrode
by a thin insulating layer. The Centre for Organic Electronics has pioneered the fabrication of these novel biosensors based on integrating
biomolecules, such as enzymes, directly into the architecture of organic transistors; producing electronic devices with both high sensitivity
and high specificity for the target analyte. In these biosensors, a molecular recognition element can simply be integrated directly into
the device structure, and in the case of the SGB, the recognition element is GOX.
The
SGB interacts with the glucose in the saliva and initiates an enzymatic reaction whereby GOX enzyme produces hydrogen peroxide from glucose,
which modifies the properties of the OTFT gate material, producing an electrical signal directly correlated to the amount of glucose
present in the saliva. This measurement is then converted into a real-time saliva glucose reading through a dedicated reader and software
application that can be installed on a smart device. The data has the potential to be transferable to a digital information system, which
can potentially provide the patient with personalized healthcare advice enabling a practical understanding of lifestyle factors that
may affect their glucose levels. The SGB, along with the above-described software and analysis capabilities, are still currently in the
planning phase.
High
quality OTFTs have been routinely fabricated at the materials node of the Australian National Fabrication Facility. The Centre for Organic
Electronics has pioneered the fabrication of novel biosensors based on integrating biomolecules, such as enzymes, directly into the architecture
of organic transistors, producing electronic devices with both high sensitivity and high specificity for the target analyte and in this
case, glucose.
The
development of a dedicated reader that communicates to the smart device is in prototype phase and needs to be validated after clinical
trials of the SGB. The dedicated reader emulates a glucometer, providing the mechanical and electrical interfaces to receive and power
the SGB as well as the required circuitry for accurately reading the amperometric signals.
The
use of saliva as a meaningful proxy for estimating blood glucose level has been reported in scientific literature, including articles
published in independent journals such as the International Journal of Environmental Research and Public Health1, the Journal
of Oral and Maxillofacial Pathology2, and the Journal of Diabetes and Metabolism3, among others. However, a
few articles have reported finding little or no significant correlation, such as articles in Heliyon4 and the Journal of
the Royal Society of Medicine5. Consequently, The Company is performing clinical research to collect and provide the data
necessary to support that saliva can be utilized as a non-invasive alternative to blood to monitor glycemic status in diabetes patients.
History
and Background of the Saliva Glucose Biosensor
The
SGB is based on a modified OTFT architecture incorporating GOX as the recognition element. It has been demonstrated that the SGB exhibits
linear glucose sensing at concentrations of 8-200 μM (micro molar), offering a saliva-based test for diabetes diagnosis and monitoring.
Since
their invention in 1947, transistors have dominated the mainstream microelectronics industry. Field Effect Transistors, or “FETs,”
are a class of transistor in which the current between a pair of source and drain electrodes separated by a semiconductor is controlled
by a voltage applied to a third electrode known as the gate. The gate electrode is separated from the source-drain region by a thin (~100
nm) insulating dielectric region and thus is coupled to the semiconductor. By altering the bias voltage applied to the gate region, the
source-drain region can be altered from conducting to insulating and therefore; the device can be turned on or off. Importantly, the
presence of a relatively small number of charges on the gate electrode alters the flow of a great many charges between the source and
drain electrodes. Accordingly, the FET acts as a switch as well as an amplifier.
The
SGB integrates another scientific discovery known as organic conductive polymers. Organic conductive polymers have several advantages
over other conductors with regard to their cost and processability. The polymers that show the most promise in this area are based on
the polythiophene structure. The flexible nature of these polymers allows them to be processed into almost any desired shape or form,
making them attractive for the low-cost production of flexible electronic circuits, such as FETs.
The
first all-polymer printed OTFT was reported in 1994. OTFTs can be fabricated at low temperatures using low-energy techniques. Low-temperature
solution-based processes, such as ink-jet printing, allow for compatibility with flexible substrates, upon which it would be impossible
to fabricate conventional electronics. In addition, conducting polymers can be synthesized in a laboratory without using rare or expensive
materials.
1Cui,
Y., Zhang, H., Zhu, J., Liao, Z., Wang, S., Liu, W. (2022)’Correlations of salivary and blood glucose levels among six saliva collection
methods’, International Journal of Environmental Research and Public Health, 19(7), p. 4122.
2
Gupta, S., Nayak, M., Sunitha, JD., Dawar, G., Sinha, N., Rallan, N.S. (2017) ‘Correlation of salivary glucose level with
blood glucose level in diabetes mellitus’, Journal of Oral and Maxillofacial Pathology, 21(3), p. 334.
3 Ismail,
M.M., Ahmed Ibrahim, A.S., Gamal, A.M. (2018) ‘Salivary glucose monitoring versus interstitial glucose monitoring in patients
with type 1 diabetes mellitus’, Journal of Diabetes & Metabolism, 09(08).
4
Ephraim, R., Anto, E.O., Acheampong, E., Fondjo, L.A., Barnie, R.B., Sakyi S.A., Asare, A. (2019) ‘Fasting salivary glucose
levels is not a better measure for identifying diabetes mellitus than serum or capillary blood glucose levels: Comparison in a Ghanaian
population’, Heliyon, 5(3).
5 Forbat, L.N., Collins, R.E., Maskell,
G.K., Sönksen, P.H. (1981) ‘Glucose concentrations in parotid fluid and venous blood of patients attending a diabetic clinic1’,
Journal of the Royal Society of Medicine, 74(10), pp. 725–728.
Other
Tests Based on the Biosensor Platform
As
discussed above, the Biosensor Platform’s architecture allows the biosensor’s recognition element to be exchanged. Accordingly,
the GOX element designed to detect glucose in the case of the SGB can, we believe, potentially be substituted for a different enzyme,
cancer biomarkers, immunological tests, hormones, and other biomarkers. The substitute recognition element will catalyze a reaction leading
to a signal that is proportional to the amount of analyte or participate in a binding reaction of labelled antibodies that will lead
to a signal proportional to the amount of analyte of interest. Given the underlying sensing mechanism is unaltered, we believe the technical
risk associated with the development and manufacturing scale-up of other tests for biomarkers other than glucose is relatively low.
Performance
Testing, Current State of Development and Next Steps
The
SGB has been under continuous development for over nine years, first by the University of Newcastle, Australia, then by Licensor and
the Company. The SGB is currently in the advanced stages of development.
In
2022, the Company concluded the in-clinic portion of a clinical study collecting coincident samples of oral fluids and blood to evaluate
the time-course of glucose in those samples. The study consisted of 40 subjects with type 2 diabetes, and collected saliva, gingival
crevicular fluid, venous blood and fingerstick capillary blood over the course of a two-hour oral glucose tolerance test.
In
January 2023, the Company’s research partner, the Centre for Organic Electronics at the University of Newcastle, which focuses
on the development of new electronic devices, completed a key milestone, Milestone 7, a phase of the Company’s biosensor platform
development at the University of Newcastle, Australia that included testing time-to-result (TTR), sensitivity, and reproducibility. New
inks and device architectures have been developed and show improved performance. These new inks will significantly reduce manufacturing
time when printing on the biosensor.
In
relation to the error grid target, significant improvements are only expected following the implementation of the new printing and quality
control equipment currently being procured.
In
June 2023, the Company concluded its study on the Correlation of Glucose and Cortisol between Oral Fluid and Blood Compartments. The
study aimed to determine the degree of correlation between saliva and blood glucose and cortisol levels in subjects with and without
diabetes. Additionally, the research aimed to evaluate whether salivary glucose can potentially be used as a tool to discriminate between
populations with and without diabetes. One hundred adult subjects were recruited and consented for the study, including 40 with Type
2 diabetes (“T2D”). Saliva specimens were collected following two rinses with bottled water, while whole blood specimens
were collected through venipuncture and fingerstick methods. The glucose and cortisol levels in saliva were measured using isotope liquid
chromatography/mass spectrometry (LC-MS) by Johns Hopkins Hospital and Quest.
Thirty
correlations were analyzed among 6 parameters, with 6 correlations determined to be statistically significant, particularly for glucose
and cortisol levels between saliva and blood. The correlation between salivary glucose and hemoglobin A1c was also statistically significant.
Specifically, the correlation analysis between salivary cortisol and free cortisol shows a Pearson correlation coefficient of 0.75, and
between salivary glucose and blood glucose a Pearson correlation coefficient of 0.48. The mean salivary cortisol is approximately 30%
of that of free cortisol in blood. Furthermore, the data showed a statistically significant difference in the median salivary glucose
for the T2D cohort relative to the control group: 2.92 versus 1.38 mg/dL. Receiver operating characteristic (ROC) curve analysis yielded
an area-under-curve of 0.71 for the use of salivary glucose as a tool to screen for T2D.
The
results of the study indicate that saliva sampling and analysis has potential use in various applications, including as an aid in screening
for diabetes in unhygienic environments where blood sampling is risky, and in point-of-care or at-home cortisol tests where characterizing
early morning levels and daily variation is important. The Company intends to compile a white paper summarizing the findings as it determines
the next phase of development.
Commercialization
The
Company intends to introduce and launch the SGB within its licensed regions by assigning a sublicense and/or distributor agreements.
The SGB has been designed and developed to meet the ISO 15197:2013 standard, and we intend to seek regulatory approval under the specifications
of this standard. The research team at the University of Newcastle, in order to benchmark the performance of the biosensor prototype