SEC Filing Summary: Know Labs, Inc. (KNW)
Business Context and Reporting Period
This summary covers the Form 10-Q for Know Labs, Inc. (KNW) for the quarterly and nine-month periods ended June 30, 2024. Know Labs is a pre-revenue medical technology company focused on developing non-invasive sensor technology using radio and microwave spectroscopy. Its primary application is a wearable continuous glucose monitor (KnowU™) currently in the clinical testing and algorithm refinement phase. The company has no commercial revenue and is dependent on capital raises to fund operations.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2024 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(4,103,460) | $(12,947,748) |
| Net Loss Attributable to Common Shareholders | $(4,203,505) | $(13,210,031) |
| Cash and Cash Equivalents (End of Period) | $2,129,954 | $2,129,954 |
| Net Cash Used in Operating Activities | N/A | $(9,573,764) |
| Total Debt (Convertible Notes Payable) | $5,485,076 | $5,485,076 |
| Working Capital Deficit | $(3,987,763) | $(3,987,763) |
Note: The company reported no revenue for the periods presented. Operating expenses totaled $3.84 million for the quarter and $12.04 million for the nine-month period.
Material Changes vs. Prior Period
- Operating Expenses: Total operating expenses increased by 18.4% ($597,000) for the three months ended June 30, 2024, compared to the same period in 2023. This was driven by a significant increase in Selling, General, and Administrative (SG&A) expenses ($1.13 million increase), primarily due to higher stock-based compensation ($479,000 increase) and legal fees ($257,000 increase). Conversely, Research and Development (R&D) expenses decreased by 28.2% ($531,000) due to reduced headcount and increased reliance on consultants.
- Interest Expense: Interest expense for the quarter was $298,248, compared to $0 in the prior year quarter. This increase is attributed to the amortization of debt issuance costs and interest on new convertible notes issued in February 2024.
- Liquidity: Cash balances decreased from $8.02 million as of September 30, 2023, to $2.13 million as of June 30, 2024, reflecting a net cash burn of approximately $5.9 million over the nine-month period.
Outlook, Risks, and Management Commentary
- Liquidity and Going Concern: Management states there is substantial doubt about the company's ability to continue as a going concern. With cash of approximately $2.13 million, the company believes it has sufficient funds to operate only until October 31, 2024. Additional financing is required to continue operations.
- Capital Raises:
- Debt Offering: In February 2024, the company entered an agreement with Lind Global Fund II, LP, issuing a $4.8 million senior convertible note for net proceeds of $3.8 million. An additional $9.6 million in notes remains available under the agreement.
- Equity Offering: In August 2024 (subsequent to the period end), the company closed a public offering of 13.25 million units (stock + warrants) at $0.26 per unit, raising approximately $3.45 million in gross proceeds.
- ATM Facility: An At-The-Market (ATM) offering agreement for up to $5 million was established in March 2024, though no funds were raised under it as of June 30, 2024.
- Product Development: The company launched the Generation 2 working prototype (KnowU) in Q1 2024. Recent internal clinical studies reported a Mean Absolute Relative Difference (MARD) of 11.1% when compared to venous blood glucose, a key metric for FDA clearance. The company is currently refining algorithms and preparing for expanded clinical trials.
- Risks: Key risks include the inability to secure additional financing, failure to obtain FDA clearance, intense competition from established glucose monitor manufacturers (e.g., Dexcom, Abbott), and significant dilution from convertible debt and preferred stock dividends.
Investor Verification Checklist
- Cash Runway: Verify the company's ability to raise capital before the projected October 31, 2024, liquidity deadline.
- Dilution Impact: Assess the potential dilution from the $5.5 million in convertible notes, outstanding warrants (25.8 million shares), and preferred stock dividends (Series C and D) which accrue quarterly.
- FDA Timeline: Confirm the status of the FDA clearance process and the timeline for the next phase of clinical trials, as commercialization is entirely dependent on regulatory approval.
- Debt Terms: Review the terms of the Lind Global Fund II note, specifically the monthly payment requirements (cash or stock) and the 120% penalty upon default.
- Subsequent Equity Offering: Analyze the impact of the August 2024 public offering on share count and market capitalization.