Filing summary
Entity and period: The supplied filing is Know Labs, Inc. (NYSE American: KNW), not USBC, Inc. It is a Form 10-Q for the quarter and six months ended March 31, 2023, filed May 15, 2023. Amounts below are U.S. dollars.
Business context
Know Labs is developing Bio-RFID and ChromaID sensing technologies, with its primary focus on a non-invasive blood-glucose monitor. Its planned KnowU and UBand products require FDA clearance before marketing. The company reported no product revenue; the prior-year digital-asset/NFT revenue was not expected to recur.
Financial performance and position
| Metric | Three months ended March 31 | Six months ended March 31 |
|---|---|---|
| Revenue | 2023: $0; 2022: $8,687 | 2023: $0; 2022: $4.36 million |
| Operating expenses | 2023: $4.81 million; 2022: $2.85 million | 2023: $8.45 million; 2022: $8.07 million |
| Operating loss | 2023: $4.81 million; 2022: $2.84 million | 2023: $8.45 million; 2022: $3.71 million |
| Net loss | 2023: $4.93 million; 2022: $6.14 million | 2023: $8.75 million; 2022: $11.50 million |
| Basic and diluted loss per share | 2023: $0.10; 2022: $0.16 | 2023: $0.18; 2022: $0.31 |
For the six months, R&D expense rose to $4.31 million from $2.13 million, and SG&A rose to $4.15 million from $2.67 million. Lower interest expense—$0.30 million versus $7.78 million, including substantial prior-year debt-discount amortization—helped reduce net loss despite the higher operating loss. With no current-period revenue, a revenue margin is not meaningful.
Cash and cash equivalents were $6.23 million at March 31, down from $12.59 million at September 30, 2022. Six-month operating cash use was $6.34 million (prior year: $1.02 million); investing cash use was $42,000, and financing provided $15,000. Total assets were $7.14 million and stockholders’ equity was $3.40 million. Current convertible notes payable were $2.26 million; the filing also cites approximately $2.58 million owed when related accrued liabilities are included. Notes were extended to September 30, 2023. Management reports $4.75 million of working capital excluding convertible notes.
Changes, outlook, and risks
- Management said staffing changes and the CEO/CTO departure reduced the monthly cash burn rate; headcount fell from 19 to 10 full-time employees. Cash was expected to fund operations at least through February 2024, but management anticipated operating losses and said it may further reduce costs if it does not obtain new capital.
- The company intends to seek additional debt or equity financing. Outstanding warrants could produce up to approximately $15.89 million if exercised, but exercise is not assured. Potential financing and outstanding options, warrants, preferred stock, and convertible notes create dilution risk.
- Former CEO Philip Bosua resigned in January 2023. His separation terms included $400,000 severance, 18 months of COBRA benefits, a one-year consulting arrangement at $10,000 per month, and other costs and intellectual-property provisions. The filing reports approximately $859,000 of severance and related departure expenses in R&D for the six months.
- Commercialization remains contingent on technical performance, validation, clinical trials, and FDA clearance; the company said it could not estimate the time or likelihood of FDA approval. Other key risks include continued funding needs, no established product revenue, competition, dependence on personnel and third parties, and potential dilution.
- The filing reports no non-routine pending legal proceedings. Two leased premises were listed for sublease, with no assurance of success or reduced lease costs.
Important facts for investors to verify
- Confirm the issuer: the provided filing is for Know Labs, Inc. (KNW), not the USBC, Inc. named in the request metadata.
- Check the company’s cash use, financing plans, and ability to meet note obligations due September 30, 2023; the stated runway is a management estimate.
- Track objective validation, clinical-trial progress, and FDA clearance requirements for the glucose-monitoring products.
- Review potential dilution from securities exercisable or convertible into common stock, including the notes and warrants.
- Assess the terms and costs of the former CEO’s separation and the reported related-party debt and accrued liabilities.