Know Labs, Inc. (KNW) - 10-K Filing Summary
Business Context and Reporting Period
Company: Know Labs, Inc. (KNW)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended September 30, 2024
Business Overview: Know Labs is an emerging leader in non-invasive medical diagnostics, focusing on proprietary radio and microwave dielectric spectroscopy sensor technology. The company's primary application is the development of the "KnowU" wearable continuous glucose monitor (CGM), which aims to measure blood glucose levels non-invasively. The company is currently in the pre-revenue, development stage, seeking FDA clearance for its devices.
Key Financial Metrics
| Metric | Fiscal Year 2024 | Fiscal Year 2023 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(16,582,000) | $(15,289,000) |
| Operating Expenses | $15,223,000 | $14,024,000 |
| Research & Development | $6,114,000 | $7,727,000 |
| Cash and Cash Equivalents (Sept 30, 2024) | $3,111,000 | $8,024,000 |
| Net Working Capital | $(2,053,000) Deficit | Positive |
| Convertible Notes Payable | $4,724,000 | $2,762,000 |
| Accumulated Deficit | $(138,736,000) | $(121,841,000) |
Material Changes vs. Prior Period
- Increased Net Loss: Net loss increased by approximately 8.5% to $16.6 million, driven primarily by higher interest expenses ($1.51 million vs. $0.39 million) and increased Selling, General, and Administrative (SG&A) expenses ($9.11 million vs. $6.57 million).
- SG&A Increase: SG&A expenses rose by $2.54 million due to increased salaries, legal expenses, and stock-based compensation for services.
- R&D Decrease: R&D expenses decreased by $1.61 million to $6.11 million, attributed to headcount reductions and a shift toward using external consultants to reduce fixed costs.
- Capital Raises: The company completed two significant equity offerings in August 2024 (an underwritten offering and a registered direct offering), raising approximately $5.0 million in net proceeds to extend its runway.
- Debt Obligations: Convertible notes payable increased significantly due to a new senior convertible note agreement with Lind Global Fund II, LP, adding $4.8 million in principal.
Guidance, Outlook, Risks, and Contingencies
- Going Concern: The company has raised substantial doubt about its ability to continue as a going concern. Management estimates cash on hand will fund operations only until February 28, 2025. Additional financing is required to continue operations and service debt.
- Regulatory Path: The company is pursuing FDA clearance for its non-invasive glucose monitor, likely via a De Novo classification request. No timeline for approval is guaranteed.
- Listing Compliance: The company received a notice from NYSE American regarding non-compliance with minimum stockholders' equity requirements. A plan to regain compliance by March 27, 2026, was submitted on October 27, 2024. Failure to comply could result in delisting.
- Debt Covenants: The company owes approximately $4.7 million in convertible notes. Failure to satisfy these obligations could trigger acceleration of debt payments. The Lind Global Fund II note includes a default provision if market capitalization falls below $15 million for 10 consecutive days.
- Technology Validation: Recent internal studies reported a Mean Absolute Relative Difference (MARD) of 11.1% in non-invasive glucose monitoring, which the company states is within the range of certain FDA-cleared devices. However, the technology remains in the prototype and testing phase.
Investor Verification Checklist
- Cash Runway: Verify the company's ability to secure financing before February 28, 2025, to avoid insolvency.
- NYSE Compliance: Monitor the status of the plan submitted to NYSE American to avoid delisting and the associated liquidity risks.
- Dilution Risk: Assess the impact of outstanding warrants (49.3 million shares), options (27.5 million shares), and convertible notes on future share count and earnings per share.
- FDA Timeline: Confirm the specific regulatory pathway (De Novo vs. 510(k)) and the schedule for pivotal clinical trials required for market entry.
- Debt Structure: Review the terms of the Lind Global Fund II note, specifically the monthly payment obligations and the 120% penalty upon default.