UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number 001-39825

GBS Inc.

(Exact name of Registrant as specified in its Charter)

Delaware		82-1512711
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

420 Lexington Ave, Suite 300, New York, NY		10170
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (646) 828-8258

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

GBS

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☒

The number of shares of registrant’s common stock outstanding as of May 13, 2022, was 14,889,904.

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Changes in Shareholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	20
Item 4.	Controls and Procedures.	20

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings.	22
Item 1A.	Risk Factors.	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	22
Item 3.	Defaults Upon Senior Securities.	22
Item 4.	Mine Safety Disclosures.	22
Item 5.	Other Information.	22
Item 6.	Exhibits.	22
Signatures		23

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GBS Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

	March 31, 2022			June 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	10,756,089		$	12,573,685
Grant receivable, current portion		1,661,573			2,098,884
Research and development tax incentive receivable		181,598			1,025,455
Other current assets		266,163			2,509,017
Total current assets		12,865,423			18,207,041
Long-term grant receivable		1,186,838			3,148,328
Capital work in progress		306,792			-
Other non-current assets		-			504,000
TOTAL ASSETS	$	14,359,053		$	21,859,369

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	884,284		$	1,467,968
Related party payables		-			13,323
Current portion of deferred grant income		3,376,628			2,098,884
Current employee benefit liabilities		171,263			102,475
Total current liabilities		4,432,175			3,682,650
Employee benefit liabilities		36,549			21,770
Long-term deferred grant income		1,186,838			3,148,328
Total liabilities		5,655,562			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 March 31, 2022 and June 30, 2021, respectively		-			13,000
Common stock, $0.01 par value, 100,000,000 shares authorized, 14,889,904 and 13,582,122 shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively		148,899			135,821
Additional paid-in capital		38,440,011			38,440,089
Accumulated deficit		(29,097,699	)		(22,869,803	)
Accumulated other comprehensive loss		(718,594	)		(661,260	)
Total consolidated GBS Inc. equity		8,772,617			15,057,847
Non-controlling interest		(69,126	)		(51,226	)
Total shareholders’ equity		8,703,491			15,006,621
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	14,359,053		$	21,859,369

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GBS Inc.

Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss)

(Unaudited)

	2022			2021			2022			2021
	Three Months Ended March 31,						Nine Months Ended March 31,
	2022			2021			2022			2021
Revenue:
Other income:
Government support income	$	192,500		$	34,290		$	370,291		$	372,754
Total revenue		192,500			34,290			370,291			372,754

Operating expenses:
General and administrative		1,122,004			1,013,389			3,457,768			2,205,842
Development and regulatory approval		413,325			2,156,316			3,161,306			2,529,074
Prospectus and capital raising		-			5,100			-			358,674
Total operating expenses		1,535,329			3,174,805			6,619,074			5,093,590
Loss from operations		(1,342,829	)		(3,140,515	)		(6,248,783	)		(4,720,836	)

Other income (expense):
Interest expense		(4,217	)		(18,561	)		(4,892	)		(1,091,249	)
Loss from unconsolidated equity method investment		-			-			-			(135,692	)
Realized foreign exchange income (loss)		10			8,774			(3,094	)		(270,333	)
Interest income		2,903			7,635			10,973			8,139
Total other income (expense)		(1,304	)		(2,152	)		2,987			(1,489,135	)
Net loss		(1,344,133	)		(3,142,667	)		(6,245,796	)		(6,209,971	)
Net loss attributable to non-controlling interest		(8,887	)		(14,854	)		(17,900	)		(25,684	)
Net loss attributable to GBS Inc.	$	(1,335,246	)	$	(3,127,813	)	$	(6,227,896	)	$	(6,184,287	)

Other comprehensive loss, net of tax:
Foreign currency translation loss	$	2,793		$	(262,032	)	$	(57,334	)	$	(278,744	)
Total other comprehensive loss		2,793			(262,032	)		(57,334	)		(278,744	)
Comprehensive loss		(1,341,340	)		(3,404,699	)		(6,303,130	)		(6,488,715	)
Comprehensive loss attributable to non-controlling interest		(8,887	)		(14,854	)		(17,900	)		(25,684	)
Comprehensive loss attributable to GBS Inc	$	(1,332,453	)	$	(3,389,845	)	$	(6,285,230	)	$	(6,463,031	)

Net loss per share, basic and diluted	$	(0.09	)	$	(0.27	)	$	(0.43	)	$	(0.64	)
Weighted average shares outstanding, basic and diluted		14,889,904			11,795,741			14,590,656			9,667,399

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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	)
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
Foreign currency translation loss		-			-			-			-			-			-			7,355			-			7,355
Net loss		-			-			-			-			-			(3,459,998	)		-			(3,825	)		(3,463,823	)
Balance, December 31, 2021		-			-			14,882,522			148,825			38,440,085			(27,762,453	)		(721,387	)		(60,239	)		10,044,831
Foreign currency translation loss		-			-			-			-			-			-			2,793			-			2,793
Series B warrants exercised to purchase common shares		-			-			7,382			74			(74	)		-			-			-			-
Net loss		-			-			-			-			-			(1,335,246	)		-			(8,887	)		(1,344,133	)
Balance, March 31, 2022		-		$	-			14,889,904		$	148,899		$	38,440,011		$	(29,097,699	)	$	(718,594	)	$	(69,126	)	$	8,703,491

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	)
Issuance of common stock at initial public offering		-			-			1,270,589			12,706			21,587,307			-			-			-			21,600,013
Issuance cost of common stock at initial public offering		-			-			-			-			(3,867,565	)		-			-			-			(3,867,565	)
Cancellation of common stock in exchange for preferred shares		3,000,000			30,000			(3,000,000	)		(30,000	)		-			-			-			-			-
Conversion of convertible notes into common stock at initial public offering		-			-			710,548			7,105			5,126,601			-			-			-			5,133,706
Conversion of convertible preferred shares into common stock at initial public offering		(2,810,190	)		(28,102	)		2,810,190			28,102			-			-			-			-			-
Beneficial conversion feature		-			-			-			-			905,948			-			-			-			905,948
Series A warrants exercised to purchase common shares		-			-			1,200			12			10,188

SEC Form 10-Q filed by GBS Inc.