INTELLIGENT BIO SOLUTIONS INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS GBS Inc. Condensed Consolidated Balance Sheets (Unaudited) September 30, 2021 June 30, 2021 ASSETS Current assets: Cash and cash equivalents $ 12,608,468 $ 12,573,685 Grant receivable, current portion - 2,098,884 Research and development tax incentive receivable 982,898 1,025,455 Other current assets 2,268,771 2,509,017 Total current assets 15,860,137 18,207,041 Grant receivable, net of current portion 2,743,337 3,148,328 Other non-current assets 504,000 504,000 TOTAL ASSETS $ 19,107,474 $ 21,859,369 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 808,736 $ 1,467,968 Related party payables 68,808 13,323 Current portion of deferred grant income 1,828,891 2,098,884 Current employee benefit liabilities 126,139 102,475 Total current liabilities 2,832,574 3,682,650 Employee benefit liabilities 30,264 21,770 Long-term deferred grant income 2,743,337 3,148,328 Total liabilities 5,606,175 6,852,748 Commitments and contingencies (Note 9) Shareholders’ equity: Preferred stock, $ 0.01 par value, 10,000,000 shares authorized, 0 and 1,300,000 shares issued and outstanding at September 30, 2021 and June 30, 2020, respectively - 13,000 Common stock, $ 0.01 par value, 100,000,000 shares authorized, 14,882,522 and 13,582,122 shares issued and outstanding at September 30, 2021 and June 30, 2020, respectively 148,825 135,821 Additional paid-in capital 38,440,085 38,440,089 Accumulated deficit ( 24,302,455 ) ( 22,869,803 ) Accumulated other comprehensive loss ( 728,742 ) ( 661,260 ) Total consolidated Group equity 13,557,713 15,057,847 Non-controlling interest ( 56,414 ) ( 51,226 ) Total shareholders’ equity 13,501,299 15,006,621 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 19,107,474 $ 21,859,369 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 GBS Inc. Condensed Consolidated Statements of Operations and Other Comprehensive Loss (Unaudited) 2021 2020 Three Months Ended September 30, 2021 2020 Revenues: Other income: Government support income $ - $ 55,427 Total revenues - 55,427 Operating expenses: General and administrative expenses 1,332,520 521,003 Development and regulatory approval expenses 106,799 30,938 Prospectus and capital raising expenses - 166,481 Total operating expenses 1,439,319 718,422 Loss from operations ( 1,439,319 ) ( 662,995 ) Other income (expense): Interest expense - ( 85,828 ) Loss from unconsolidated equity method investment - ( 135,692 ) Realized foreign exchange loss ( 3,118 ) ( 192,470 ) Interest income 4,597 70 Total other income (expense) 1,479 ( 413,920 ) Loss before income taxes ( 1,437,840 ) ( 1,076,915 ) Income taxes - - Net loss ( 1,437,840 ) ( 1,076,915 ) Net loss attributable to non-controlling interest ( 5,188 ) ( 4,405 ) Net loss attributable to GBS, Inc. $ ( 1,432,652 ) $ ( 1,072,510 ) Other comprehensive loss, net of tax: Foreign currency translation loss $ ( 67,482 ) $ ( 50,568 ) Total other comprehensive loss ( 67,482 ) ( 50,568 ) Comprehensive loss ( 1,505,322 ) ( 1,127,483 ) Comprehensive loss attributable to non-controlling interest ( 5,188 ) ( 4,405 ) Comprehensive loss attributable to GBS, Inc $ ( 1,500,134 ) $ ( 1,123,078 ) Net loss per share, basic and diluted $ ( 0.10 ) $ ( 0.12 ) Weighted average shares outstanding, basic and diluted 14,006,127 8,630,000 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 GBS Inc. Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) Shares Amount Shares Amount capital deficit loss interest (deficit) Preferred stock Common stock Additional paid in Accumulated Other comprehensive Non- controlling Total shareholders’ equity Shares Amount Shares Amount capital deficit loss interest (deficit) Balance, June 30, 2021 1,300,000 $ 13,000 13,582,122 $ 135,821 $ 38,440,089 $ ( 22,869,803 ) $ ( 661,260 ) $ ( 51,226 ) $ 15,006,621 Series B warrants exercised to purchase common shares - - 400 4 ( 4 ) - - - - Conversion of convertible preferred shares into common shares ( 1,300,000 ) ( 13,000 ) 1,300,000 13,000 - - - - - Foreign currency translation loss - - - - - - ( 67,482 ) - ( 67,482 ) Issuance of convertible preferred shares Issuance of convertible preferred shares, shares Net loss - - - - - ( 1,432,652 ) - ( 5,188 ) ( 1,437,840 ) Balance, September 30, 2021 - $ - 14,882,522 $ 148,825 $ 38,440,085 $ ( 24,302,455 ) $ ( 728,742 ) $ ( 56,414 ) $ 13,501,299 Balance, June 30, 2020 2,370,891 $ 23,709 8,630,000 $ 86,300 $ 10,899,942 $ ( 15,832,517 ) $ ( 363,951 ) $ ( 28,311 ) $ ( 5,214,828 ) Issuance of convertible preferred shares 439,299 4,393 - - 3,290,352 - - - 3,294,745 Foreign currency translation loss - - - - - - ( 50,568 ) - ( 50,568 ) Net loss - - - - - ( 1,072,510 ) - ( 4,405 ) ( 1,076,915 ) Balance, September 30, 2020 2,810,190 $ 28,102 8,630,000 $ 86,300 $ 14,190,294 $ ( 16,905,027 ) $ ( 414,519 ) $ ( 32,716 ) $ ( 3,047,566 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 GBS Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) 2021 2020 Three Months Ended September 30, 2021 2020 Cash flows from operating activities: Net loss $ ( 1,437,840 ) $ ( 1,076,915 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Non-cash loss on foreign currency translation, net 3,118 - Loss on investment in affiliate - 135,692 Non-cash other operating activities 20,136 - Changes in operating assets and liabilities: Grant receivable 1,828,891 - Other current assets 240,246 705 Accounts payable ( 635,568 ) ( 312,038 ) Accounts payable - related party 55,485 ( 1,440,313 ) Other long-term liabilities 8,494 15,605 Net cash provided by (used in) operating activities 82,962 ( 2,677,264 ) Cash flows from financing activities: Proceeds from issuance of preferred stock - 3,294,745 Net cash provided by financing activities - 3,294,745 Effect of foreign exchange rates on cash and cash equivalents ( 48,179 ) ( 50,568 ) Increase in cash and cash equivalents 34,783 566,913 Cash and cash equivalents, beginning of period 12,573,685 427,273 Cash and cash equivalents, end of period $ 12,608,468 $ 994,186 Non-cash investing and financing activities Conversion of preferred shares into common shares $ 13,000 $ - Supplemental disclosure of cash flow information: Cash paid for income taxes $ - $ - Cash paid for interest - 85,076 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 GBS Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS GBS Inc. and its wholly owned subsidiary, GBS Operations Inc. formed on December 5, 2016 under the laws of the state of Delaware. Glucose Biosensor Systems (Greater China) Pty Ltd (“GBSPL”) was formed on August 4, 2016 under the laws of New South Wales, Australia and was renamed to GBS (APAC) Pty Ltd on October 14, 2020. Glucose Biosensor Systems (Japan) Pty Ltd and Glucose Biosensor Systems (APAC) Pty Ltd were formed under the laws of New South Wales, Australia on February 22, 2017 and February 23, 2017 respectively. These companies (collectively, “we,” “us,” “our,” or the “Company,”) were formed to provide a non-invasive, pain free innovation to make it easier for people to manage diabetes using the Company’s Saliva Glucose Biosensor (“SGB” and, together with the software app that interfaces the SGB with the Company’s digital information system, the “SGT”). Our headquarters are located in New York. We are a biosensor diagnostic technology company operating across the Asia-Pacific Region (“APAC Region”) and an interest in the USA Region with the biosensor platform comprising of biochemistry, immunology, tumor markers, hormones, and nucleic acid diagnostic modalities, and worldwide with our COV2 test. Our objective is to introduce and launch initially the SGB, the diagnostic test that stems from the Biosensor Platform that we license from Life Science Biosensor Diagnostics Pty Ltd (“LSBD” or “Licensor”), in our regions and the COV2 test globally. This will be followed by developing the platform to its full capacity testing across the diagnostic modalities of immunology, hormones, chemistry, tumor markers and nucleic acid tests. GBS Inc, is a 29.9 % (as of September 30, 2021) owned affiliate of LSBD, an Australian company that owns the worldwide intellectual property rights to the biosensor platform from University of Newcastle, Australia. LSBD has licensed to the Company that technology to introduce and launch the platform in the APAC Region. NOTE 2. LIQUIDITY The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern requires management to assess an entity’s ability to continue as a going concern within one year of the date of the financial statements are issued. In each reporting period, including interim periods, an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date. Substantial doubt about an entity’s ability to continue as a going concern exists when conditions and events, considered in the aggregate, indicate it is probable the entity will be unable to meet its financial obligations as they become due within one year after the date the financial statements are issued. The Company is an emerging growth company and has not generated any revenues to date. As such, the Company is subject to all of the risks associated with emerging growth companies. Since inception, the Company has incurred losses and negative cash flows from operating activities. The Company does not expect to generate positive cash flows from operating activities in the near future until such time, if at all, the Company completes the development process of its products, including regulatory approvals, and thereafter, begins to commercialize and achieve substantial acceptance in the marketplace for the first of a series of products in its medical device portfolio. The Company incurred a net loss of $ 1,432,652 for the three months ended September 30, 2021 (net loss of $ 1,072,510 for the three months ended September 30, 2020). At September 30, 2021, the Company has shareholders’ equity of $ 13,501,299 , working capital of $ 13,027,563 , and an accumulated deficit of $ 24,302,455 . In the near future, the Company anticipates incurring operating losses and does not expect to experience positive cash flows from operating activities and may continue to incur operating losses until it completes the development of its products and seeks regulatory approvals to market such products. 7 The Company’s consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities should the Company be unable to continue as a going concern. The Company believes it has sufficient working capital to finance its operations for at least the next twelve months, as such, these financial statements are prepared on the going concern basis. NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, our condensed consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements. Normal and recurring adjustments considered necessary for a fair statement of the results for the interim periods, in the opinion of the Company’s management, have been included. Operating results for the three months ended September 30, 2021, are not necessarily indicative of the results that may be expected for the year ending June 30, 2022. The accompanying condensed consolidated financial statements and related footnote disclosures should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended June 30, 2021, which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on September 16, 2021 and amended on Form 10-K/A filed with the SEC on September 30, 2021 (as amended, the “2021 Form 10-K”). Principles of consolidation These accompanying condensed consolidated financial statements include the accounts of the Company, all wholly owned and majority-owned subsidiaries in which the Company has a controlling voting interest and, when applicable, variable interest entities in which the Company has a controlling financial interest or is the primary beneficiary. Investments in affiliates where the Company does not exert a controlling financial interest are not consolidated. All significant intercompany transactions and balances have been eliminated upon consolidation. Use of estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. Reclassifications Certain reclassifications have been made to prior periods to conform to current period presentation within the consolidated statements of operations and other comprehensive loss. Revenue recognition Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by delivering the promised goods or service deliverables to the customers. A good or service deliverable is transferred to a customer when, or as, the customer obtains control of that good or service deliverable. Research and Development (R & D) tax refund The Company measures the research and development grant income and receivable by considering the time spent by employees on eligible research and development activities and research and development costs incurred to external service providers. The research and development tax refund receivable is recognized as the Company believes that it probable that the amount will be recovered in full through a future claim. No research and development tax refund income is recognized in current and comparative period. 8 Foreign currency translation Assets and liabilities of foreign subsidiaries are translated from local (functional) currency to reporting currency (U.S. dollar) at the rate of exchange in effect on the consolidated balance sheets date; income and expenses are translated at the average rate of exchange prevailing during the year. The functional currency of GBS Inc. is the United States dollar. Foreign currency movements resulted in a loss of $ 67,482 and $ 50,568 for the three months ended September 30, 2021 and 2020, respectively. Income taxes In accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 740, Income Taxes , tax positions initially need to be recognized in the consolidated financial statements when it is more likely than not that the positions will be sustained upon examination by taxing authorities. It also provides guidance for de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. As of September 30, 2021, the Company had no uncertain tax positions that qualified for either recognition or disclosure in the consolidated financial statements. Additionally, the Company had no interest and penalties related to income taxes. Licensing rights During the first quarter of the fiscal year ended June 30 2020, the Company purchased the license right procurement assets from LSBD for an amount of $ 976,308 in relation to the development and approval process for the Glucose Biosensor Technology. The Company recorded the license at the historical carrying value in the books of LSBD which was $ nil and recorded the amount paid as a deemed dividend. The Company has agreed to pay royalties of sales & milestones payments as defined. On September 12, 2019, the Company entered into an amended and restated license agreement for Saliva Biosensor Technology. On June 23, 2020, the Company entered into a license agreement with LSBD for the worldwide rights to SARS-CoV – 2 application of the Saliva Glucose Biosensor. In relation to these licenses, there is no set expiration date for the license. However, the exclusivity of the license granted under the license agreement runs until the expiration of the patent portfolio covered by the agreement which is currently until 2033. No royalties have been incurred through to September 30,2021 (September 30, 2020: $nil). On March 31, 2021, GBS entered into an agreement with LSBD to provide GBS an option to acquire an exclusive license to use LSBD’s intellectual property in the Saliva Glucose Biosensor in North America (the “Option Agreement”). The Option Agreement has a term of two years and the exercise price for the option is $ 5 million. The fee of $ 0.5 million incurred for the option was expensed in the period incurred. Deferred grant income On June 30, 2021, GBS executed a definitive grant agreement with the Australian Government to assist with building a manufacturing facility. The grant has a total value of up to $ 4.7 million upon the achievement of certain milestones. Proceeds from the grant will be used primarily to reimburse GBS for costs incurred in the construction of the manufacturing facility. Accounting for the grant does not fall under ASC 606, Revenue from Contracts with Customers, as the Australian Government will not benefit directly from our manufacturing facility. As there is no authoritative guidance under U.S. GAAP on accounting for grants to for-profit business entities, we applied International Accounting Standards 20 (“IAS 20”), Accounting for Government Grants and Disclosure of Government Assistance by analogy when accounting for the Australian Government grant to GBS. 9 The Australian Government grant proceeds will be used to reimburse construction costs incurred meet the definition of grants related to assets as the primary purpose for the payments is to fund the construction of a capital asset. Under IAS 20, government grants related to assets are presented in the statement of financial position either by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset. Either of these two methods of presentation of grants related to assets in financial statements are regarded as acceptable alternatives under IAS 20. We have elected to record the grants received as deferred income using the first method. Under IAS 20, government grants are initially recognized when there is reasonable assurance the conditions of the grant will be met and the grant will be received. As of June 30, 2021, management concluded that there was reasonable assurance the grant conditions will be met and all milestone payment received. The total grant value of $ 4.7 million was recognized as both a grant receivable and deferred grant income on the grant effective date. The grant receivable was reduced by $ 1.9 million for payments received during the three months ended September 30, 2021 and $ 2.7 million remains in grant receivable on the Condensed Consolidated Balance Sheets. After initial recognition, under IAS 20, government grants are recognized in earnings on a systematic basis in a manner that mirrors the manner in which the Company recognizes the underlying costs for which the grant is intended to compensate. Further, IAS 20 permits for recognition in earnings either separately under a general heading such as other income, or as a reduction of the cost of the asset. The Company has elected to recognize government grant income separately within other income. Accordingly, the deferred income related to the construction of the manufacturing facility will be amortized over the period of depreciation for the related factory as other income. No deferred grant income was recognized in other income during the three months ended September 30, 2021. Net loss per share attributable to common shareholders (“EPS”) The Company calculates earnings per share attributable to common shareholders in accordance with ASC Topic 260, Earning Per Share . Basic net income (loss) per share attributable to common shareholders is calculated by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per common share is calculated by dividing net income (loss) attributable to common shareholders by weighted-average common shares outstanding during the period plus potentially dilutive common shares, such as share warrants. Potentially dilutive common shares shall be calculated in accordance with the treasury share method, which assumes that proceeds from the exercise of all warrants are used to repurchase common share at market value. The number of shares remaining after the proceeds are exhausted represents the potentially dilutive effect of the securities. As the Company has incurred net losses in all periods, certain potentially dilutive securities, including convertible preferred stock, warrants to acquire common stock, and convertible notes payable have been excluded in the computation of diluted loss per share as the effects are antidilutive. Recent accounting pronouncements As the Company is an emerging growth company, we have elected to defer the adoption of new accounting pronouncements until they would apply to private companies. In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and treasury stock method will be no longer available. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company has not early adopted and continues to evaluate the impact of the provisions of ASU 2020-06. 10 In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). This update requires all leases with a term greater than 12 months to be recognized on the balance sheet through a right-of-use asset and a lease liability and the disclosure of key information pertaining to leasing arrangements. This new guidance is effective for fiscal years beginning after December 15, 2021, and interim period within fiscal years beginning after December 15, 2022 as amended by ASU 2020-05 with early adoption permitted. The Company has not early adopted the standard and continues to evaluate the impact. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects of the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted ASU 2019-12 as of July 1, 2021 and the adoption did not have a material impact on the Company’s unaudited interim condensed consolidated financial statements. In 2016, the FASB issued ASU 2016-13 (Topic ASC 326); Financial Instruments – Credit Losses, which (i) significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model which will be based on an estimate of current expected credit loss (CECL) (ASC 326-20); and (ii) provides for recording credit losses on available-for-sale (AFS) debt securities through an allowance account (ASC 326-30). The standard also requires certain incremental disclosures. Subsequently, the FASB issued several ASUs to clarify, improve, or defer the adoption of ASU 2016-13. ASU 2016-13, as amended by ASU 2019-10, is applicable for SRCs (Small Reporting Companies) for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company has not early adopted the standard and continues to evaluate the impact. NOTE 4. OTHER CURRENT ASSETS Other current assets consist of the following: SCHEDULE OF OTHER CURRENT ASSETS September 30, 2021 June 30, 2021 Goods and services tax receivable $ — $ 83,278 Prepayments 2,259,975 2,424,143 Other receivables 8,796 1,596 Total $ 2,268,771 $ 2,509,017 As of the year ended June 30, 2021, the Company made $ 2,600,000 in prepayments for research and development. Of the total prepayments, $ 504,000 is recorded as a non-current asset based on the expected outflow of the budgeted research and development costs. Under the terms of a research and development agreement with BiosensX North America Inc., dated April 20, 2021, in which LSBD also committed to fund $ 2,600,000 as a direct 50 % shareholder in BiosensX North America Inc., the Company would have the right to apply any differences in contributions between LSBD and the Company towards any amounts owing between the Company and LSBD, including the exercise price of the Option ($ 5 million) as included in the Option Agreement dated March 31, 2021 with LSBD (see Note 3). No expense has been recognized in relation to prepaid research and development during the three months ended September 30, 2021. NOTE 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following: SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES September 30, 2021 June 30, 2021 Accounts and other payables $ 614,181 $ 1,355,894 Accruals 194,555 112,074 Total $ 808,736 $ 1,467,968 NOTE 6. SHAREHOLDERS’ EQUITY As of September 30, 2021, 1,401,377 and 59,782 Series A and Series B warrants were held by certain shareholders, respectively. Each warrant is convertible into 1 share of the Company’s common stock. On September 9, 2021, the Company issued 400 shares of common stock as a result of Series B warrants that were exercised and converted into common stock. On August 31, 2021, all 1,300,000 Series B Convertible Preferred Stock was converted into common stock. Each share of Series B Convertible Preferred Stock was converted into 1 share of the Company’s common stock. 11 NOTE 7. RELATED-PARTY TRANSACTIONS Sales to and purchases from related parties are made in arm’s length transactions both at normal market prices and on normal commercial terms. The following transactions occurred with LSBD during the period July 1, 2021 to September 30, 2021. The Company incurred a total of $ 119,652 (three months to September 2020: $ Nil ) towards overhead cost reimbursement which includes salaries, rents and other related overheads directly attributable to the Company which are included in general and administration expenses. NOTE 8. INVESTMENT IN AFFILIATE On May 29, 2020, LSBD, issued 14,000,000 common shares of BiosensX (North America) Inc. to the Company at par value of $ 0.001 per share. This transaction provided the Company with a 50 % interest in BiosensX (North America) Inc., the holder of the technology license for the North America region. The investment in BiosensX (North America) Inc. is accounted for by use of the equity method in accordance with ASC 323 Investments - Equity Method and Joint Ventures . At the date of this transaction, LSBD was the parent of both the Company and BiosensX (North America) Inc., the transfer of BiosensX shares to the Company was deemed to be a common control transaction. As a result of the share transfer, the Company has significant influence over BiosensX (North America) Inc. but, in accordance with ASC 810 Consolidation , LSBD is deemed to have control over BiosensX (North America) Inc. due to its direct ownership of 50% in BiosensX (North America) Inc. and indirect ownership of 50% in BiosensX (North America) Inc. through GBS Inc. As of September 30, 2021, LSBD holds 29.9 % of common Stock of GBS Inc. and therefore still has control over BiosensX (North America) Inc. The following table summarizes the amount recorded in the consolidated financial statements: SUMMARY OF AMOUNT RECORDED IN THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 June 30, 2021 Investment value $ - $ 135,692 Loss from the affiliate - ( 135,692 ) Carrying amount $ - $ - NOTE 9. COMMITMENTS AND CONTINGENCIES On January 21, 2021, the Company entered into a sponsored research agreement with Johns Hopkins Bloomberg School of Public Health to accelerate the development of next-generation saliva-based diagnostic tests. The Company is collaborating with the Bloomberg School of Public Health to optimize the collection of saliva and monitoring of diverse biomarkers across a number of modalities including clinical chemistry and infectious diseases. Johns Hopkins intend to utilize biosensor products to conduct in-field epidemiological studies. The Company agreed to pay Johns Hopkins a total amount of $ 423,589 as a part of this sponsored research agreement of which $ 105,897 remains payable as of September 30, 2021. During February 2021 the Company signed a deed of confirmation and variation with the University of Newcastle for the research and development of the Saliva Glucose Biosensor and the SARS-COV-2 Antibody Biosensor. The Company agreed to pay the University of Newcastle $ 2,054,880 of which $ 841,913 remains payable as of September 30, 2021. The Company has no material future minimum lease commitments or purchase commitments. From time to time, the Company may become a party to various legal proceedings arising in the ordinary course of business. Based on information currently available, the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition, results of operations or liquidity. However, legal matters are inherently uncertain, and the Company cannot guarantee that the outcome of any potential legal matter will be favorable to the Company. 12 NOTE 10. INCOME TAX The Company shall file its income tax returns with the Internal Revenue Service and Australian Taxation Office. The Company has net operating losses carried forward of $ 29,590,918 which are derived from its operations in Australia and the US and are available to reduce future taxable income. Such loss carry forwards may be carried forward indefinitely, subject to compliance with tests of continuity and additional rules. The net operating loss carried forward gives rise to a deferred tax asset of approximately $ 7,219,880 . However, the Company has determined that a valuation allowance of $ 7,219,880 against such deferred tax asset is necessary, as it cannot be determined that the carry forwards will be utilized. NOTE 11. LOSS PER SHARE Basic loss per common share is computed by dividing net loss allocable to common shareholders by the weighted average number of shares of common stock or common stock equivalents outstanding. Diluted loss per common share is computed similar to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. SCHEDULE OF BASIC LOSS PER COMMON SHARE POTENTIAL DILUTIVE SECURITIES 2021 2020 Three Months Ended September 30, 2021 2020 Net loss attributable to GBS, Inc. $ ( 1,432,652 ) $ ( 1,072,510 ) Basic and diluted net loss per share attributed to common shareholders $ ( 0.10 ) $ ( 0.12 ) Weighted-average number of shares outstanding 14,006,127 8,630,000 The following outstanding warrants and preferred shares were excluded from the computation of diluted net loss per share for the periods presented because their effect would have been anti-dilutive: SCHEDULE OF ANTI-DILUTIVE WARRANTS Three Months Ended September 30, 2021 2020 Warrants - Series A 1,401,377 - Warrants - Series B 59,782 - Warrants issued to underwriters 63,529 - Pre IPO warrants 2,736,675 2,250,376 Warrants issued to LSBD 3,000,000 - Preferred stock - Series A - 2,810,190 13