Filing identity and period
The supplied filing is Know Labs, Inc.’s unaudited Form 10-Q, filed February 14, 2024, for the three months ended December 31, 2023 (the company’s fiscal first quarter of 2024). This does not match the request metadata naming USBC, Inc. or 2024 Q1. Know Labs trades as KNW on NYSE American.
Business context
Know Labs is developing radio- and microwave-spectroscopy sensor technology, with non-invasive blood-glucose monitoring as its primary intended application. It reported a Generation 1 working prototype and was developing a wearable Generation 2 device. The product is not yet commercialized and requires FDA clearance before marketing. The company reported no revenue for the quarter; its prior NFT-related business had been discontinued following the dissolution of AI Mind in 2023.
Financial results and liquidity
| Metric | Three months ended Dec. 31, 2023 | Prior comparable period |
|---|---|---|
| Revenue | No revenue reported | No revenue reported |
| Research and development expense | $1.486 million | $1.743 million |
| Selling, general and administrative expense | $2.011 million | $1.905 million |
| Total operating expenses / operating loss | $3.498 million | $3.648 million |
| Net loss | $3.447 million | $3.823 million |
| Net loss attributable to common shareholders | $3.510 million, including $63,629 of deemed preferred dividends | $3.823 million |
| Basic and diluted loss per share | $0.04 | $0.08 |
| Net cash used in operating activities | $3.393 million | $2.917 million |
Net loss improved year over year, mainly alongside lower R&D expense and a shift from prior-period interest expense to current-period interest income. SG&A increased. Gross margin and operating margin are not meaningful because the filing reports no revenue.
Cash and cash equivalents were $4.821 million at December 31, 2023, down $3.202 million from September 30, 2023. Total assets were $5.013 million and stockholders’ equity was $1.226 million. Current liabilities were $3.787 million, including $2.762 million of convertible notes payable. Working capital was $1.034 million including those notes; management also reports $3.796 million excluding them.
Convertible notes payable were reported at $2.762 million. The notes are owed to significant stockholder Clayton A. Struve and to Ronald P. Erickson and affiliated entities; the filing says their due dates were extended to September 30, 2024. It separately presents $2.255 million of contractual note obligations, excluding a $506,865 accounting adjustment. The filing also describes the notes as convertible upon demand. Lease liabilities were approximately $106,000.
Material changes and notable items
- R&D expense fell by about $257,000, which management attributes to reduced staffing and changes in consultant use and development spending. SG&A rose by about $106,000.
- Operating cash use increased from $2.917 million to $3.393 million; the filing identifies working-capital changes, including reductions in payables and accrued expenses, as a significant cash-flow factor.
- In October 2023, the company sold 883,061 common shares for net proceeds of $203,105. Common shares outstanding rose to 81,346,524 at quarter-end from 80,358,463 at September 30, 2023.
- Outstanding options covered 28.2 million shares and warrants covered 21.0 million shares. Preferred stock conversion and accrued dividends, as well as convertible notes, could add further dilution. The filing reports approximately 3.2 million common shares reserved for accrued preferred dividends.
- After quarter-end, the company terminated a lab lease on February 5, 2024; issued director compensation in options and shares on February 8; and extended certain warrants by two years.
Outlook, risks, and contingencies
Management expects operating losses to continue, says available cash is expected to fund operations only through at least June 30, 2024, and expects to seek additional equity or debt financing. The filing states that substantial doubt about the company’s ability to continue as a going concern for the next 12 months remains unalleviated. Management says further cost reductions may be made if financing is not obtained. Potential cash proceeds from outstanding warrants are not assured.
Development remains dependent on refining the device and algorithms, expanding testing to more diverse participants, completing clinical and regulatory work, and obtaining FDA clearance. The filing cites internal studies, including reported MARD results, but does not establish FDA clearance or commercial readiness. Management says it cannot estimate the time required for FDA approval or the likelihood of success.
Key risks include financing availability and dilution, ongoing losses, FDA and clinical-trial uncertainty, competition, reliance on external development resources and key personnel, and potential NYSE American listing compliance. The company reports being informally advised by exchange staff that its equity and loss history may place it under certain continued-listing standards. It reports no pending material legal proceedings and no off-balance-sheet arrangements. Management concluded disclosure controls and procedures were effective at the reasonable-assurance level as of December 31, 2023.
Investor verification points
- Confirm the issuer and period: the supplied document is Know Labs, Inc. (KNW), not USBC, Inc., and covers the quarter ended December 31, 2023.
- Assess the cash runway against the reported quarterly operating cash burn, upcoming obligations, and the company’s stated need for financing; verify whether financing was subsequently secured.
- Reconcile the $1.034 million working-capital figure with the $3.796 million figure excluding convertible notes, and clarify the notes’ payment and conversion terms and the contractual-obligations presentation.
- Evaluate potential dilution from options, warrants, preferred shares and dividends, and convertible notes, including subsequent issuances and warrant extensions.
- Verify the status and independent validation of clinical testing, FDA pathway and timetable, and NYSE American listing compliance; do not treat exploratory study results as regulatory clearance or proof of commercial performance.