Executive Summary / Key Takeaways

• Intelligent Bio Solutions (INBS) is pivoting its focus towards the commercialization of its non-invasive fingerprint sweat-based drug testing technology (IFPG) following challenges with its development-stage biosensor platform (BPT).
• The IFPG segment, currently accounting for 100% of revenue, is demonstrating significant gross profit margin expansion (Q3 FY25 margin of 46.84% vs 21.67% in Q3 FY24) driven by a favorable sales mix shifting towards higher-margin cartridges and improved production efficiency.
• The company is actively building global commercial momentum through new account acquisitions, strategic partnerships, and multilingual system upgrades, establishing a base of over 450 active accounts across 24 countries.
• A key near-term catalyst is the planned 2025 entry into the substantial U.S. drug screening market, following the FDA 510(k) submission in December 2024 for its opiate test system (codeine), supported by clinical study data showing approximately 94% accuracy.
• Despite operational progress and margin improvement, the company continues to incur operating losses and faces a material risk to its ability to continue as a going concern, necessitating ongoing capital raising efforts which carry risks of dilution and uncertainty regarding terms and availability.

Setting the Scene: Introducing Intelligent Bio Solutions and its Differentiated Approach

Intelligent Bio Solutions Inc. (NASDAQ: INBS) is a medical technology company aiming to deliver intelligent, rapid, and non-invasive testing solutions. The company's journey has involved the pursuit of two distinct technological pathways: the development-stage Biosensor Platform Technology (BPT) and the commercially available Intelligent Fingerprinting Platform (IFPG). While the BPT segment, initially focused on applications like a saliva glucose biosensor utilizing organic thin-film transistor technology, has faced significant delays due to intellectual property licensing complications following the liquidation of a key partner, the company's strategic focus has firmly shifted to leveraging the potential of its IFPG segment.

The core of INBS's current commercial strategy lies in its Intelligent Fingerprinting Platform. This proprietary technology centers around a portable system that analyzes fingerprint sweat using a single-use cartridge and a handheld reader. Unlike traditional drug testing methods that rely on urine or saliva collection, INBS's system offers a non-invasive alternative. The process involves collecting a fingerprint sweat sample in seconds, with the portable analysis unit providing results in under ten minutes. This technology is designed to detect recent use of common drugs of abuse, including opiates, cocaine, methamphetamines, cannabis, methadone, and buprenorphine.

The tangible benefits of this technology are central to INBS's value proposition and competitive differentiation. The non-invasive nature enhances user dignity and simplifies the collection process, eliminating the need for gender-specific staff or specialized facilities often required for traditional methods. The speed of results (under ten minutes) significantly reduces turnaround times compared to laboratory-based testing. Furthermore, the system incorporates features like lockable, tamper-proof seals and a fully witnessed procedure, directly addressing the growing issue of sample tampering reported with traditional tests. Clinical study data, including a method comparison study with CenExel, has supported the technology's performance, demonstrating approximately 94% accuracy, confirming its sensitivity, specificity, and usability. These advantages position INBS's technology as a potentially disruptive force in the drug screening market, particularly in safety-critical industries where rapid, reliable, and discreet testing is paramount.

Building Global Momentum

The IFPG segment currently represents the entirety of INBS's revenue stream, targeting customers primarily in safety-critical industries such as construction, transportation, logistics, manufacturing, engineering, and mining, as well as drug treatment organizations and judicial bodies outside the United States. The company has been actively expanding its global footprint and building commercial momentum.

Recent operational achievements highlight this expansion. In the three months ended March 31, 2025, INBS secured 35 new accounts, contributing to a total active customer base exceeding 450 across 24 countries. Strategic partnerships have been instrumental in extending market access, including collaborations in Spain and Andorra through Detecto and strengthening presence in Europe and the Middle East via IVY Diagnostics. The company has also reported entry into new sectors and regions, such as the luxury marine sector in Europe and expansion into regional and remote testing programs, waste/recycling, and retail sectors in Australia.

Supporting this international growth is a strategic focus on enhancing the usability and accessibility of the Intelligent Fingerprinting Drug Screening System. Plans for a major multilingual upgrade are underway, with recent integrations of Arabic and Latin American Spanish. This initiative aims to make the system accessible to over 4 billion speakers worldwide, directly supporting expansion into diverse international settings and catering to the needs of a global workforce. As President and CEO Harry Simeonidis noted, "Our product stands out in the market by offering local language capabilities, something most solutions don’t provide. It’s a clear differentiator." This localization strategy is crucial for meeting growing demand and supporting regional distribution partners effectively.

Financial Performance Reflecting Strategic Focus

Analyzing INBS's recent financial performance provides insight into the impact of its strategic pivot and operational focus on the IFPG segment. For the three months ended March 31, 2025, revenue was $728,867, a decrease of $94,933 compared to $823,800 in the same period of 2024. Similarly, for the nine months ended March 31, 2025, revenue decreased by $175,309 to $2.21 million from $2.38 million in the prior year period. This decline was primarily attributed to instability in the construction sector, which resulted in lower reader sales.

However, despite the decrease in overall revenue, the company demonstrated significant improvement in gross profit and gross profit margin. Gross profit for the three months ended March 31, 2025, increased by $162,879 to $341,368 (46.84% margin) from $178,489 (21.67% margin) in the prior year quarter. For the nine months ended March 31, 2025, gross profit increased by $301,214 to $911,282 (41.26% margin) from $610,068 (25.59% margin). Management explicitly stated that this growth in gross profit margin is mainly due to a larger share of revenue coming from high-margin cartridge sales, coupled with enhanced production capacity leading to reduced direct costs. Cartridge sales, being consumable and recurring, offer a contribution margin of approximately 90%, significantly higher than the approximately 66.68% contribution margin from readers. This shift in sales mix and operational streamlining is a positive indicator of improving unit economics within the IFPG segment.

Operating expenses saw mixed trends. Selling, general, and administrative expenses decreased slightly for both the three and nine-month periods, primarily due to lower legal, insurance, and general overhead costs, partially offset by increased advertising, marketing, and travel as the company expands. Development and regulatory approval expenses decreased in the three-month period but increased significantly for the nine months ended March 31, 2025, rising by $890,335 to $1.81 million. This increase was driven by investment in in-house R&D staff and work performed by research partners required for the FDA 510k clinical study plan, highlighting the resources being directed towards the critical U.S. market entry. Government support income also increased, attributable to investment in qualifying R&D expenditures.

Overall, the net loss attributable to INBS decreased for the three months ended March 31, 2025, to $2.54 million from $2.98 million, primarily due to the improved gross profit margin and higher government support income. However, for the nine months ended March 31, 2025, the net loss attributable to INBS increased to $7.48 million from $7.37 million, mainly driven by the increased R&D investment for the FDA clinical study. These results underscore that while the core IFPG business is showing improving profitability metrics at the gross level, significant operating expenses, particularly R&D for regulatory approval, continue to result in substantial net losses.

The Competitive Arena: Differentiated Technology vs. Established Players

The drug screening market is characterized by established players offering traditional testing methods, primarily urine and saliva tests, and larger medical device companies with broader diagnostic portfolios. INBS's Intelligent Fingerprinting Drug Screening System directly competes with these traditional methods and positions itself as a disruptive alternative based on its unique technology and the benefits it provides.

Compared to traditional urine and saliva testing, INBS highlights several competitive advantages. The non-invasive nature is a significant differentiator, addressing patient discomfort and privacy concerns. The speed of results (under ten minutes) offers operational efficiency gains, particularly in high-throughput or on-site testing scenarios. The system's design, including tamper-evident features and a witnessed collection process, directly combats the rising issue of test tampering reported with other methods. Furthermore, the portability and ease of use mean testing can be conducted in various settings without requiring specialized facilities or staff, potentially reducing logistical complexities and costs for customers. As Doug Heath, VP of Global Sales, stated, "Traditional testing methods aren’t keeping up with operational demands – our solution is." Customer feedback from partners like SMARTOX in the U.S. Forensic market and Princebuild in the UK construction sector corroborates these benefits, citing improved efficiency, enhanced user dignity, simplified operations, reduced turnaround times, and lower costs.

While INBS's technology offers distinct operational advantages, it competes in a market dominated by much larger, financially stronger companies like Abbott Laboratories (ABT), DexCom (DXCM), Medtronic (MDT), and Becton, Dickinson and Company (BDX). These companies possess vast resources, established global distribution networks, deep regulatory expertise, and diversified product portfolios. Looking at recent TTM financial ratios, INBS's performance metrics starkly contrast with these larger players. INBS exhibits negative gross, operating, and net margins (TTM Gross Profit Margin: 59.72%, Operating Margin: -289.40%, Net Margin: -246.82%), reflecting its early commercial stage and high R&D investment. In comparison, large competitors demonstrate healthy positive margins (e.g., Abbott Laboratories TTM Gross Margin ~55%, Net Margin ~32%; DexCom TTM Gross Margin ~61%, Net Margin ~14%; Medtronic TTM Operating Margin ~18%, Net Margin ~14%; Becton, Dickinson and Company TTM Gross Margin ~45%, Net Margin ~8%).

INBS's current scale is significantly smaller, with an estimated market share of less than 1% compared to the substantial shares held by leaders in related diagnostic or monitoring segments (e.g., DexCom's 40-50% in CGM). Its financial health, as indicated by a Current Ratio of 1.12 and negative cash flow from operations, is considerably weaker than its larger counterparts who generate substantial positive cash flows and maintain stronger balance sheets.

Despite these disadvantages in scale and financial strength, INBS's strategy appears to be leveraging its technological differentiation to carve out a niche, particularly in markets and applications where the benefits of non-invasive, rapid, tamper-resistant testing are highly valued. The growing number of accounts and successful transitions of customers from traditional methods suggest that the technology's unique features resonate with specific industry needs. The company's intellectual property portfolio, including its sixth U.S. patent granted for the lateral flow test strip, helps strengthen its competitive position and provides a degree of protection for its core technology as it seeks to expand market share.

The Critical US Market and Regulatory Pathway

A pivotal element of INBS's strategy and a key potential catalyst for future growth is its planned entry into the United States market. The U.S. represents a significant opportunity, being one of the largest drug screening markets globally, with projections for the Latin American market alone reaching $1.1 billion by 2030 and Spain's market expected to reach $368.4 million by 2030. Rising substance abuse cases, increasing focus on workplace safety, and issues like the reported six-fold increase in drug test tampering in the U.S. workforce in 2023 highlight the demand for effective, reliable, and tamper-resistant testing solutions like INBS's.

The company is actively pursuing regulatory clearance from the U.S. Food and Drug Administration (FDA) for its Intelligent Fingerprinting Drug Screening System. In December 2024, INBS announced the submission of its 510(k) premarket notification for review and clearance of its opiate test system for codeine. This submission follows supporting clinical studies, including the method comparison study with CenExel, which validated the system's performance and usability. As of the May 2025 filing, the FDA clearance process remains on track for a planned launch in the U.S. in 2025.

Successful FDA clearance and subsequent U.S. market entry are critical steps for INBS. It would unlock access to a vast market, allowing the company to leverage its technological advantages on a much larger scale. The growing international adoption and established partnerships, including the existing presence in the U.S. Forensic Use Only market through SMARTOX, provide a foundation upon which to build its commercial presence in the broader U.S. market. The ability to offer a non-invasive, rapid, and tamper-resistant alternative directly addresses pain points experienced by U.S. employers and testing providers using traditional methods.

Liquidity, Funding, and Going Concern

Despite the operational progress and improving gross margins within the IFPG segment, Intelligent Bio Solutions continues to face significant financial challenges, particularly concerning its liquidity and ability to fund future operations. As of March 31, 2025, the company had cash and cash equivalents of $2.81 million and working capital of $542,946.

The company has incurred substantial net losses, totaling $7.48 million attributable to INBS for the nine months ended March 31, 2025, and anticipates operating losses for the foreseeable future.

Funding for operations and development has historically relied on equity and debt financing and government support income. Recognizing the need for additional capital, the company has actively engaged in fundraising activities. Between September 18, 2024, and March 31, 2025, INBS raised approximately $1.49 million net through an At The Market (ATM) offering. Additionally, in February 2025, the company completed an underwritten public offering, raising approximately $2.65 million net, including the full exercise of the over-allotment option.

However, management has explicitly stated that the company's cash and cash equivalents as of March 31, 2025, may be insufficient to fund its current operating plan through at least the next twelve months from the issuance of the financial statements. This condition raises substantial doubt about the company's ability to continue as a going concern unless it can successfully raise additional capital or achieve its operational objectives, such as regulatory approval and revenue base expansion. There is no assurance that future financing will be available on favorable terms, or at all. The inability to secure necessary funding could force the company to delay or reduce research programs, limit or cease operations, or be unable to realize its assets and discharge its liabilities in the normal course of business. Furthermore, future equity financings could result in significant dilution for existing stockholders. The company also faces a liability of $2.28 million as of March 31, 2025, related to the Australian government grant, which will require a refund of certain amounts due to missed project milestones, adding another financial pressure point.

Key Risks and Investment Considerations

Investing in Intelligent Bio Solutions involves considering several significant risks. The most pressing risk is the substantial doubt about the company's ability to continue as a going concern, directly linked to its ongoing operating losses and the need to raise additional capital within the next twelve months. The availability and terms of future financing are uncertain and could lead to significant dilution or operational constraints if not secured.

Beyond funding, the uncertainty surrounding the Biosensor Platform Technology (BPT) segment poses a risk. The postponement of further BPT development pending licensing finalization with the University of Newcastle, following the liquidation of the previous IP holder, means that the potential value of this platform technology is currently unrealized and its future is contingent on successful negotiations.

Regulatory risk, while being actively addressed, remains relevant. Although the FDA 510(k) submission is on track, there is no guarantee of timely clearance, which is critical for the planned U.S. market entry and revenue expansion. Delays in regulatory approval could significantly impact the company's growth trajectory and financial position.

Market adoption speed is another factor. While the fingerprint technology offers clear advantages, overcoming inertia and displacing established traditional testing methods requires significant sales and marketing effort and investment. Competition from larger, well-resourced players could also impact market penetration and pricing power.

Conclusion

Intelligent Bio Solutions is at a critical juncture, having strategically focused its efforts on the commercialization and regulatory approval of its differentiated fingerprint sweat-based drug testing technology. The Intelligent Fingerprinting Platform is demonstrating promising operational momentum, evidenced by growing customer adoption, expanding global reach, and improving gross profit margins driven by a favorable sales mix and production efficiency. The planned entry into the large U.S. market, following the FDA 510(k) submission, represents the most significant near-term opportunity to accelerate revenue growth and leverage the technology's unique advantages.

However, the company's financial position presents a substantial challenge. Ongoing operating losses necessitate frequent capital raises, creating a material going concern risk and the potential for significant shareholder dilution. The uncertainty surrounding the future of the BPT segment and the liability related to the Australian grant add further complexity. The investment thesis for INBS hinges on the successful execution of its IFPG strategy, particularly achieving FDA clearance and gaining traction in the competitive U.S. market, while effectively managing its liquidity and securing necessary funding to bridge the path to profitability. Investors must weigh the potential of the innovative technology and market opportunity against the significant financial and execution risks inherent in the company's current stage.