Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to historical information, this discussion contains forward-looking statements based upon management's current expectations that are subject to risks and uncertainties which may cause our actual results to differ materially from plans and results discussed herein. We encourage you to review the risks and uncertainties discussed in the sections entitled Item 1A. "Risk Factors" included in Part II of this Quarterly Report on Form 10-Q and Item 1A. "Risk Factors" included in Part I of the 2025 Form 10-K. You should read the following discussion in conjunction with our audited historical consolidated financial statements, which are included in our Annual Report on Form 10-K for fiscal 2025 and our unaudited condensed consolidated financial statements for the fiscal quarter ended December 31, 2025, included elsewhere in this Quarterly Report on Form 10-Q.

Non-GAAP Financial Measures

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

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

Forward-Looking Information

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

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in "Item 1A - Risk Factors" of this Quarterly Report on Form 10-Q and in our 2025 Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, we cannot guarantee future results, levels of activity, performance, or achievements. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Overview

Intelligent Bio Solutions Inc. and its wholly owned Delaware subsidiary, GBS Operations Inc., were each formed on December 5, 2016, under the laws of the state of Delaware. The Company's Australian subsidiary, Intelligent Bio Solutions (APAC) Pty Ltd, was formed on August 4, 2016, under the laws of New South Wales, Australia and was renamed to Intelligent Bio Solutions (APAC) Pty Ltd on January 6, 2023. On October 4, 2022, INBS acquired Intelligent Fingerprinting Limited ("IFP"), a company registered in England and Wales. The Company's headquarters are in New York City.

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

The Company's current product portfolio includes:

Intelligent Fingerprinting Platform: The Company's current active product is the Intelligent Fingerprinting Platform, which consists of the proprietary portable platform that analyzes fingerprint sweat using a one-time cartridge and portable handheld reader. The flagship product from this platform, which is commercially available in certain countries outside of the U.S., is the Intelligent Fingerprinting Drug Screening System (the "IFP System" or "IFP Products"), a two-part system that consists of non-invasive, fingerprint sweat-based diagnostic testing products designed to detect drugs of abuse including opiates, cocaine, methamphetamines, benzodiazepines, cannabis, methadone, and buprenorphine. The IFP System comprises a small, tamper-evident drug screening cartridge onto which ten fingerprint sweat samples are collected in under a minute before the portable analysis unit provides an on-screen result in under ten minutes. Samples collected with a confirmatory kit can also be sent to a third-party laboratory service provider for confirmation testing. Customers include safety-critical industries such as construction, transportation and logistics, mining, manufacturing, engineering, drug treatment organizations in the rehabilitation sector, and judicial organizations.

We plan to bring the IFP System to new markets and grow within existing markets concentrating on:

● increasing market share across the United Kingdom and mainland Europe;

● expanding sales and distribution throughout Australia, New Zealand and other countries in the Asia Pacific Region ("APAC Region"), and establishing the infrastructure and satisfying the regulatory requirements needed to do so;

● continuing to work to gather additional supporting data to strengthen its new 510(k) submission to the FDA;

● initiating research aimed at broadening the capabilities of the IFP System to test for additional drugs and indications, facilitating the expansion of the platform into point-of-care medical testing;

● expanding the IFP System into new customer segments, including major sporting organizations, law enforcement, and commercial airlines; and

● developing a strategic network of distributors with established customer bases throughout the APAC Region, Europe and North America to distribute the IFP Products.

Highlights of Achievements

Major highlights and achievements for the three months ended December 31, 2025:

	●	On December 31, the Company announced a new strategic manufacturing partnership with Syrma Johari MedTech Ltd., to support and scale the production of its Intelligent Fingerprinting Drug Screening Reader. The collaboration is expected to support long-term margin improvement and deliver significant operational and financial benefits for the Company. The Company anticipates annual production cost savings of more than 40%, translating to an expected improvement of approximately 20 percentage points in gross profit compared with its previous manufacturing arrangement.
	●	On December 18, the Company announced it had entered into a non-exclusive strategic alliance and collaboration agreement with Vlepis Pty Ltd, an Australian medical and wellbeing technology company specializing in advanced sensing and wearable patch technologies, better positioning the Company to enter the consumer health monitoring market. The partnership will focus on collaboration, leveraging research and development, and expanding distribution networks to strengthen and accelerate international sales and market development. The partnership also provides INBS with the opportunity to evaluate and engage Vlepis' proprietary enabling technologies and software designed to connect wearable devices with cloud-based platforms and mobile screening applications.
	●	On October 23, the Company announced a major new contract with one of the United Kingdom's largest industrial service providers, representing one of its most significant U.K. commercial deployments to date.

Results of Operations

Comparison of the Three and Six Months Ended December 31, 2025 and 2024

		Three Months Ended December 31,								Six Months Ended December 31,
		2025				2024				2025				2024
Revenue		$	896,774			$	607,494			$	2,008,571			$	1,479,781
Cost of revenue (exclusive of amortization shown separately below)			(437,035	)			(384,381	)			(1,030,541	)			(909,867	)
Gross profit			459,739				223,113				978,030				569,914
Other income
Government support income			72,720				133,640				265,987				259,768
Operating expenses
Selling, general and administrative expenses			(2,337,041	)			(1,809,114	)			(4,996,865	)			(3,758,130	)
Development and regulatory approval expenses			(522,113	)			(506,944	)			(1,008,282	)			(1,455,696	)
Depreciation and amortization			(281,896	)			(305,177	)			(585,274	)			(605,599	)
Impairment of long-lived assets			(27,147	)			-				(288,927	)			-
Total operating expenses			(3,168,197	)			(2,621,235	)			(6,879,348	)			(5,819,425	)
Loss from operations			(2,635,738	)			(2,264,482	)			(5,635,331	)			(4,989,743	)
Other income (expense), net
Interest expense			(56,209	)			(13,502	)			(60,112	)			(35,829	)
Realized foreign exchange loss			-				(750	)			-				(801	)
Interest income			5,334				21,937				13,838				74,777
Total other income (expense), net			(50,875	)			7,685				(46,274	)			38,147
Net loss			(2,686,613	)			(2,256,797	)			(5,681,605	)			(4,951,596	)
Net loss attributable to non-controlling interest			(9,023	)			(7,327	)			(21,009	)			(16,493	)
Net loss attributable to Intelligent Bio Solutions Inc.		$	(2,677,590	)		$	(2,249,470	)		$	(5,660,596	)		$	(4,935,103	)
Other comprehensive income (loss)
Foreign currency translation gain (loss)			13,149				(143,165	)			61,865				73,190
Total other comprehensive income (loss)			13,149				(143,165	)			61,865				73,190
Comprehensive loss			(2,673,464	)			(2,399,962	)			(5,619,740	)			(4,878,406	)
Comprehensive loss attributable to non-controlling interest			(9,023	)			(7,327	)			(21,009	)			(16,493	)
Comprehensive loss attributable to Intelligent Bio Solutions Inc.		$	(2,664,441	)		$	(2,392,635	)		$	(5,598,731	)		$	(4,861,913	)

Revenue

Sales of goods

Revenue from sales of goods increased by $289,280 to $896,774 for the three months ended December 31, 2025, from $607,494 for the three months ended December 31, 2024. This increase is mainly due to the addition of 17 new customers and increase in the ongoing re-order rate for the consumables. We expect this trend to continue as we expand into new markets in the future.

Revenue from sales of goods increased by $528,790 to $2,008,571 for the six months ended December 31, 2025, from $1,479,781 for the six months ended December 31, 2024. This increase is mainly due to the addition of 49 new customers. We expect this trend to continue as we expand into new markets in the future.

Cost of revenue

Cost of revenue increased by $52,654 to $437,035 for the three months ended December 31, 2025, from $384,381 for the three months ended December 31, 2024. The increase in cost of revenue is mainly due to an increase in direct labor cost due to annual salary revision for direct manufacturing labor during the fourth quarter of fiscal 2025.

Cost of revenue increased by $120,674 to $1,030,541 for the six months ended December 31, 2025, from $909,867 for the six months ended December 31, 2024. The increase in cost of revenue is mainly due to an increase in direct labor cost due to annual salary revision for direct manufacturing labor during the fourth quarter of fiscal 2025.

Gross profit

Gross profit increased by $236,626 to $459,739 for the three months ended December 31, 2025, from $223,113 for the three months ended December 31, 2024.

Gross profit increased by $408,116 to $978,030 for the six months ended December 31, 2025, compared to $569,914 for the six months ended December 31, 2024. Gross margin increased to 48.69% from 38.51% in the prior-year period.

Gross profit margin improvement during the period was driven by a combination of operational efficiencies and the capitalization of certain direct labor costs relating to software development activities. The software development activities reduced reported cost of sales and increased gross margin. Excluding the impact of this capitalization, underlying gross margin also improved due to operational efficiencies and a more favourable sales mix. Management intends to further enhance strategic sales mix and optimize operational processes to continue driving sustainable gross profit improvement. We intend to enhance our strategic sales mix and optimize operational processes, with the objective of continuing to improve gross profit.

Contribution margin (non-GAAP)

Contribution margin, which is a non-GAAP measure of our financial performance, increased by $235,881 to $667,923 for the three months ended December 31, 2025, from $432,042 for the three months ended December 31, 2024. The contribution margin improved by approximately 3.36 percentage points due to improved production efficiency and sales mix, as the sales of high margin cartridges continue to increase as a proportion of the total revenue.

Contribution margin, which is a non-GAAP measure of our financial performance, increased by $473,016 to $1,469,657 for the six months ended December 31, 2025, from $996,641 for the six months ended December 31, 2024. The contribution margin improved by approximately 5.82 percentage points due to improved production efficiency and sales mix, as the sales of high margin cartridges continue to increase as a proportion of the total revenue.

		Three Months Ended December 31,								Six Months Ended December 31,
		2025				2024				2025				2024
Revenue		$	896,774			$	607,494			$	2,008,571			$	1,479,781
Direct material cost			(228,851	)			(175,452	)			(538,914	)			(483,140	)
Contribution margin (non-GAAP)		$	667,923			$	432,042			$	1,469,657			$	996,641
Contribution margin % (non-GAAP)			74.48	%			71.12	%			73.17	%			67.35	%

Reconciliation of contribution margin (non-GAAP)

		Three Months Ended December 31,								Six Months Ended December 31,
		2025				2024				2025				2024
Revenue (GAAP)		$	896,774			$	607,494			$	2,008,571			$	1,479,781
Less: Cost of revenue (exclusive of amortization) (GAAP)			(437,035	)			(384,381	)			(1,030,541	)			(909,867	)
Gross Profit (GAAP)		$	459,739			$	223,113			$	978,030			$	569,914
Add: Direct labor cost			203,608				194,462				472,806				399,396
Add: Direct overhead cost			4,576				14,467				18,821				27,331
Contribution margin (non-GAAP)		$	667,923			$	432,042			$	1,469,657			$	996,641
Contribution margin % (non-GAAP)			74.48	%			71.12	%			73.17	%			67.35	%

Government support income

Government support income decreased by $60,920 to $72,720 for the three months ended December 31, 2025, from $133,640 for the three months ended December 31, 2024. This decrease was primarily attributable to changes in U.K. R&D tax credit legislation, reducing the benefit from 14.5% to 10% of eligible R&D expenditures.

Government support income increased by $6,219 to $265,987 for the six months ended December 31, 2025, from $259,768 for the six months ended December 31, 2024. The increase was primarily driven by higher qualifying research and development expenditures eligible for reimbursement under government support programs in Australia offset by the reduction in the U.K. R&D tax credit rate from 14.5% to 10% of eligible R&D expenditures.

Operating expenses

Selling, general and administrative expenses

Selling, general and administrative expenses increased from $1,809,114 to $2,337,041 (being an increase of $527,927) for the three months ended December 31, 2025, compared to the three months ended December 31, 2024, and from $3,758,130 to $4,996,865 (being an increase of $1,238,735) for the six months ended December 31, 2025, compared to the six months ended December 31, 2024. This is largely driven by efforts to establish the foundations of the Company as it expands its market share and market awareness. The major components were:

Marketing: $522,325 for the 3 months ending December 31, 2025, compared to $229,485 for the same period last year and $1,132,259 for the 6 months ending December 31, 2025, compared to $391,554 for the same period last year. Marketing expenditure has increased for this period as the company moves to the next phase of strategic direction in expanding market awareness into existing and potential markets. The company believes this is achieving the objectives through increased revenue and successful capital raising

Wages and Salaries: $924,451 for the 3 months ending December 31, 2025, compared to $813,042 for the same period last year and $1,938,280 for the 6 months ending December 31, 2025, compared to $1,799,489 for the same period last year. Wages and Salaries include additional expenditure for marketing staff as part of the marketing awareness strategy, additional expenditure for finance staff to implement NetSuite, the new accounting system with the objective to remediate the internal control issues raised at "Item 4. Controls and Procedures" to bring this to a level of effectiveness as the Company expands into the future and increases in the minimum wage in the United Kingdom.

Legal Expenses: $162,019 for the 3 months ending December 31, 2025, compared to $80,171 for the same period last year and $356,288 for the 6 months ending December 31, 2025, compared to $183,761 for the same period last year. Additional legal costs were incurred as part of the activities of developing further the foundations of the Company during this reporting period including implementing the 2025 Reverse Stock Split and raising of capital.

Development and regulatory approval expenses

Development and regulatory approval expenses increased by $15,169 to $522,113 for the three months ended December 31, 2025, from $506,944 for the three months ended December 31, 2024. This increase is primarily attributable to the amounts spent on in-house R&D staff and timing of R&D work performed by the research partners.

Development and regulatory approval expenses decreased by $447,414 to $1,008,282 for the six months ended December 31, 2025, from $1,455,696 for the six months ended December 31, 2024. This decrease is primarily attributable to the timing of engagement of the research partner for R&D. During the six months ended December 31, 2024, the Company had partnered with CenExel to perform a method comparison clinical study as part of the Company's FDA 510(k) clinical study plan which contributed to the additional costs during the period

We expect development and regulatory expenses to increase in future periods as the Company continues to work to gather additional supporting data to strengthen its new 510(k) submission to the FDA.

Depreciation and amortization

Depreciation and amortization decreased by $23,281 to $281,896 for the three months ended December 31, 2025 from $305,177 for the three months ended December 31, 2024. This decrease is primarily due to the completion of scheduled amortization of customer relationship (intangible assets) during the prior quarter, resulting in no remaining carrying value for amortization during the three months ended December 31, 2025, partially offset by an amortization of software costs.

Depreciation and amortization decreased by $20,325 to $585,274 for the six months ended December 31, 2025 from $605,599 for the six months ended December 31, 2024. This decrease is primarily due to the completion of scheduled amortization of customer relationship (intangible assets) during the prior quarter, resulting in no remaining carrying value for amortization during the three months ended December 31, 2025, partially offset by an amortization of software costs.

Impairment of long-lived assets

The impairment of long-lived assets increased by $27,147 to $27,147 for the three months ended December 31, 2025, from $0 for the three months ended December 31, 2024. The increase is mainly due to the impairment of construction in progress assets held for sale.

The impairment of long-lived assets increased by $288,927 to $288,927 for the six months ended December 31, 2025, from $0 for the six months ended December 31, 2024. The increase is mainly due to the impairment of construction in progress assets held for sale.

Other income and expenses

Interest expense

Interest expense increased by $42,707 to $56,209 for the three months ended December 31, 2025 from $13,502 for the three months ended December 31, 2024. The increase was primarily attributable to higher interest expense recognized on lease liabilities related to new lease agreements for the Company's U.K. and Australian offices, as well as interest on notes payable.

Interest expense increased by $24,283 to $60,112 for the six months ended December 31, 2025 from $35,829 for the six months ended December 31, 2024. The increase was primarily attributable to higher interest expense recognized on lease liabilities related to new lease agreements for the Company's U.K. and Australian offices, as well as interest on notes payable.

Interest income

Interest income decreased by $16,603 to $5,334 for the three months ended December 31, 2025, from $21,937 for the three months ended December 31, 2024. This decrease was due to the spending of funds received from capital raising activities, which decreases the balance on which interest was earned.

Interest income decreased by $60,939 to $13,838 for the six months ended December 31, 2025, from $74,777 for the six months ended December 31, 2024. This decrease was due to the spending of funds received from capital raising activities, which decreases the balance on which interest was earned.

Liquidity and Capital Resources

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

Since our inception, we have financed our operations primarily though proceeds from public offerings and private placements of equity securities, warrant inducement transactions, existing trade and shareholder financing arrangements, and the incurrence of debt. As of December 31, 2025, we had $740,371 in cash and cash equivalents and working capital of $7,047,443.

Shelf Registration Statement - On April 11, 2025, the Company filed a shelf registration statement on Form S-3 (File No. 333-286489), which became effective on September 10, 2025 ("2025 Shelf"), under which we can sell and issue up to an aggregate of $100 million in any combination of common stock, preferred stock, debt securities, warrants, purchase contracts and units. No securities may be sold under the 2025 Shelf until a prospectus supplement describing the method and terms of any future offering is delivered. The 2025 Shelf replaced the 2022 Shelf (defined below), which expired in 2025.

At-the-Market (ATM) Offering - On September 18, 2024, the Company entered into an At The Market Offering Agreement (the "ATM Agreement") with Ladenburg Thalmann & Co. Inc. ("Ladenburg"). Pursuant to the terms of the ATM Agreement and under the 2024 ATM Prospectus (as defined below), the Company was originally permitted to sell, from time to time, through Ladenburg, as sales agent or principal, shares of the Company's common stock with an initial aggregate sales price of up to $3.0 million. On March 11, 2025, the Company filed a prospectus supplement (the "2025 March ATM Supplement") to the 2024 ATM Prospectus in connection with the offer, sale, and issuance of up to $1,376,530 of shares of Common Stock. Prior to the expiration of our "shelf" registration statement on Form S-3 (File No. 333-264218), which became effective on April 20, 2022 ("2022 Shelf"), any sale of shares pursuant to the ATM Agreement were made under 2022 Shelf and included base prospectus, and under the related prospectus supplement filed with the SEC, dated September 18, 2024 (the "2024 ATM Prospectus"), as supplemented by the 2025 March ATM Supplement. On September 18, 2025, the Company filed prospectus supplement to the 2025 Shelf (the "2025 September ATM Supplement") in connection with the offer, sale, and issuance of up to $1,211,174 of shares of Company common stock under the ATM Agreement. Since the expiration of the 2022 Shelf, all sales of shares under the ATM Agreement have been made pursuant to the Company's 2025 Shelf, including the related base prospectus, and the 2025 September ATM Supplement.

During the period between September 18, 2024, through December 31, 2025, the Company raised approximately $3,624,773 (net of commissions of approximately $112,169 paid to Ladenburg) through the sale and issuance of 347,863 shares (after adjustment for the 2025 Reverse Stock Split) of Company common stock pursuant to the ATM Agreement. During the three months ended December 31, 2025, the Company raised approximately $1,159,483 (net of commissions of approximately $35,872 paid to Ladenburg) through the sale and issuance of 192,071 shares (after adjustment for the 2025 Reverse Stock Split) of Company common stock pursuant to the ATM Agreement.

Inducement Agreements - On July 25, 2025, the Company entered into warrant exercise inducement offer letters (each an "Inducement Agreement") with certain existing holders (the "Holders") of certain outstanding Company warrants to receive new warrants (the "Series J Warrants") to purchase up to a number of shares of the Company's common stock equal to 200% of the number of warrant shares issued pursuant to the exercise (or prepayment) of outstanding Series G Warrants and outstanding Series H-1 Warrants (the "2025 Warrant Inducement Transaction").

Pursuant to the Inducement Agreements, the Holders agreed to (i) exercise their outstanding Series G and Series H-1 Warrants at a reduced exercise price of $19.00 per share ($1.90 per share pre-2025 Reverse Stock Split) (the "Reduced Exercise Price") to purchase an aggregate 154,549 shares (1,545,494 shares pre-2025 Reverse Stock Split) of the Company's common stock and (ii) prepay $18.90 per share ($1.89 per share pre-2025 Reverse Stock Split) toward the Reduced Exercise Price for the exercise of Series H-1 Warrants to purchase an additional 47,773 shares (477,734 shares pre-2025 Reverse Stock Split), in exchange for the Company's agreement to further reduce the exercise price of the prepaid Series H-1 Warrants to $0.10 per share ($0.01 per share pre-2025 Reverse Stock Split), issue Series J Warrants to purchase up to 404,646 shares (4,046,456 shares pre-2025 Reverse Stock Split) of common stock, and reduce the exercise price of the Series H-2 Warrants to the Reduced Exercise Price for up to 156,868 shares (1,568,680 shares pre-2025 Reverse Stock Split). The 2025 Warrant Inducement Transaction closed on July 28, 2025.

As a result of the exercises of the Series G and Series H-1 Warrants, the Company issued an aggregate of 154,549 shares (1,545,494 shares pre-2025 Reverse Stock Split) of common stock. In addition, as a result of the prepayment of the remaining Series H-1 Warrants, the Company amended such warrants to permit the purchase of 47,773 shares (477,734 shares pre-2025 Reverse Stock Split) of common stock at an exercise price of $0.10 per share ($0.01 per share pre-2025 Reverse Stock Split). The Company received aggregate gross proceeds of approximately $3,839,356 and raised approximately $3,332,646, net of underwriting discounts and commissions of approximately $410,542 and legal and compliance costs of $96,168.

December 2025 Purchase Agreement - On December 31, 2025, the Company entered into a Securities Purchase Agreement with two healthcare-focused institutional investors in connection with a private placement (the "December Private Placement") for the sale by the Company of: (i) 2,298,850 shares of Common Stock or, in lieu thereof, Series L Pre-Funded Warrants (the "Series L Pre-Funded Warrants"), (ii) Series K-1 warrants to purchase up to 2,298,850 shares of Common Stock (the "Series K-1 Warrants"), and (iii) Series K-2 warrants to purchase up to 2,298,850 shares of Common Stock (the "Series K-2 Warrants" and, collectively with the Series K-1 Warrants and Series L Pre-Funded Warrants, the "December 2025 Warrants"). The combined purchase price for one share of Common Stock (or one Series L Pre-Funded Warrant) and accompanying Series K-1 and Series K-2 Warrants was $4.35. The December Private Placement closed on January 2, 2026, at which time the Company issued an aggregate of 105,000 shares of Common Stock, 2,193,850 Series L Pre-Funded Warrants, 2,298,850 Series K-1 Warrants, and 2,298,850 Series K-2 Warrants.

Subject to certain ownership limitations, the December 2025 Warrants are exercisable upon issuance. Each Series L Pre-Funded Warrant is exercisable for one share of Common Stock at an exercise price of $0.01 per share, subject to adjustment, and remains exercisable until exercised in full. Each Series K-1 Warrant and Series K-2 Warrant is exercisable for one share of Common Stock at an exercise price of $4.10 per share, subject to adjustment, and has a term of five years commencing on the date a registration statement registering the resale of the shares underlying Series K-1 Warrant and Series K-2 Warrant, as applicable, is declared effective by the U.S. Securities and Exchange Commission (the "SEC").

Gross proceeds from the December Private Placement were approximately $10.0 million, before deducting placement agent fees and other offering expenses, and excluding any proceeds from the exercise of the December 2025 Warrants. The Company intends to use the net proceeds for working capital and general corporate purposes.

In connection with the December Private Placement, the Company entered into a Registration Rights Agreement with the investors and agreed to file by January 10, 2026, a resale registration statement (the "Resale Registration Statement") with the SEC covering all shares of Common Stock sold to the investors and the shares of Common Stock issuable upon exercise of the December 2025 Warrants, and to use its best efforts to cause the Resale Registration Statement to be declared effective no later than February 14, 2026. The Company filed the Resale Registration Statement on January 9, 2026, which was declared effective on January 21, 2026.

Australian Government Grant - In the fourth fiscal quarter ended June 30, 2025, upon the end of the project deadline for the construction of a manufacturing facility in Australia, a grant acquittal audit was completed by an independent auditor in relation to the grant received from the Australian Government (the "Australian Government Grant"). Following the grant acquittal audit, an amount of $2,096,222 remains payable to the Australian Government, which is disclosed under liabilities in the balance sheet as of December 31, 2025, as "Accounts payable and accrued expenses". The Company has finalized the terms of repayments as of September 30, 2025. For more information regarding the repayment of the Australian Government Grant, see "Item 1A. Risk Factors - The Company may not be able to repay the grant it received from the Australian Government when due."

The Company expects that its cash and cash equivalents and subscription receivable from the investors in the December Private Placement as of December 31, 2025, will be insufficient to fund its current operating plan for at least 12 months from the issuance date of these unaudited condensed consolidated financial statements. In addition, the Company has a significant repayment obligation related to the Australian Government Grant, which further increases its near-term liquidity requirements. These conditions raise substantial doubt about the Company's ability to continue as a going concern for a period of at least one year from the issuance date of these unaudited condensed consolidated financial statements. As a result, the Company will be required to raise additional funds during the next 12 months.

While the Company intends to raise additional capital through equity or debt financings, strategic collaborations, or other arrangements, there can be no assurance that such funding will be available on acceptable terms, or at all. Failure to obtain additional funding when needed could adversely affect the Company's ability to execute its operating plan and meet its long-term liquidity requirements.

Extended Transition Period for "Emerging Growth Companies"

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

Off-Balance Sheet Arrangements

As of December 31, 2025 we did not have any off-balance sheet arrangements.

Critical Accounting Estimates

The preparation of financial statements in conformity with US GAAP requires management to make judgments, estimates and assumptions. Predicting future events is inherently an imprecise activity and, as such, requires the use of significant judgment. Actual results may differ from our estimates in amounts that may be material to the financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our unaudited condensed consolidated financial statements.

Our critical accounting policies, estimates, and judgments are included in Note 3. Summary of Significant Accounting Policies included in Item 8 of Part II of our 2025 Form 10-K for additional information.

Recently issued Accounting Pronouncements

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