Filing summary
Entity and period: The supplied filing identifies the registrant as Know Labs, Inc. (NYSE American: KNW), not USBC, Inc. It is an unaudited Form 10-Q for the quarter ended March 31, 2024, the company’s fiscal second quarter, and covers the six months ended on that date.
Business context
Know Labs is developing radio- and microwave-spectroscopy sensor technology, initially for a non-invasive continuous glucose monitor. The company remains pre-commercial and reports no revenue in the financial statements presented. It launched a working prototype during the quarter; the device still requires further development, clinical validation and FDA clearance before commercialization.
Financial results and liquidity
| Metric | Three months ended March 31, 2024 | Six months ended March 31, 2024 |
|---|---|---|
| Revenue | No revenue amount reported | No revenue amount reported |
| Research and development | $2.18 million | $3.66 million |
| Selling, general and administrative | $2.55 million | $4.54 million |
| Operating loss | $4.73 million | $8.20 million |
| Net loss | $5.40 million | $8.84 million |
| Net loss attributable to common shareholders | $5.50 million | $9.01 million |
| Basic and diluted loss per share | $0.07 | $0.11 |
No revenue or gross-margin figure is presented, so operating margins are not meaningful from the supplied statements. Income tax expense was zero.
- Cash and cash equivalents: $4.71 million at March 31, 2024, down $3.31 million from September 30, 2023.
- Cash flow for the six months: $7.05 million used in operating activities; $0.01 million used in investing; and $3.75 million provided by financing. Cash was $6.23 million at March 31, 2023.
- Debt: Convertible notes had a net carrying value of $5.45 million, comprising $3.82 million current and $1.63 million non-current. Total liabilities were $6.69 million, and stockholders’ equity was a deficit of $1.75 million.
- Working capital: Current assets were $4.71 million and current liabilities were $5.06 million. The filing separately states net working capital of $3.47 million excluding the current portion of convertible notes.
- Burn and runway: Management expects operating losses to continue and says available cash and expense flexibility should fund operations until at least October 31, 2024. The filing states that substantial doubt about the company’s ability to continue as a going concern has not been alleviated.
Changes versus the prior comparable period
- For the quarter, operating expenses fell 1.7% to $4.73 million, as R&D declined 15.1% while SG&A rose 13.7%. Net loss increased from $4.93 million to $5.40 million, principally reflecting higher interest expense.
- For the six-month period, operating expenses fell 3.0% to $8.20 million. R&D declined 15.0%, while SG&A increased 9.5%. Net loss rose slightly, from $8.75 million to $8.84 million.
- Six-month operating cash use increased to $7.05 million from $6.34 million. Financing cash provided rose to $3.75 million from $0.01 million, mainly due to the Lind debt financing and a common-stock offering.
- Interest expense for the quarter was $0.72 million, versus $0.12 million a year earlier. Management attributes approximately $0.595 million to expenses associated with the February 2024 note and warrant transaction.
Outlook, financing, risks and unusual items
- Funding: In February, the company issued Lind Global Fund II a $4.8 million senior convertible note for a $4.0 million purchase price, receiving net proceeds of about $3.81 million. The note carries an $0.8 million original issue discount, is secured by company assets, and is convertible initially at $1.00 per share. It was issued with 3 million warrants at an initial $0.80 exercise price. The broader agreement permits up to $14.4 million of note principal for up to $12.0 million of purchase price, subject to its terms.
- Note payments begin 120 days after issuance and are scheduled monthly; the company may pay in cash, shares or a combination, subject to conditions. Cash payments carry a 5% premium. Default provisions can accelerate repayment at 120% of outstanding principal, and Lind has a first-priority security interest in company assets.
- The company entered an at-the-market agreement in March allowing up to $5 million of common stock sales. Management says it expects to seek additional capital, but there is no assurance financing will be available on acceptable terms. Outstanding warrants could generate up to $20.81 million if exercised for cash, but exercise is not assured.
- Dilution: At March 31, the company reported 82.51 million common shares outstanding, 29.02 million options and 22.98 million warrants, in addition to shares potentially issuable on preferred stock, dividends and convertible debt. The cover page reports 85.51 million common shares outstanding as of May 15, 2024.
- Development and regulatory outlook: Management reported interim results from an internal study showing 11.1% mean absolute relative difference (MARD) against venous blood glucose values. It plans to expand testing and refine hardware and algorithms. FDA clearance is required; management cannot estimate the time or likelihood of success. No revenue, profitability or FDA-clearance timetable guidance is provided.
- Management cites competition from established glucose-monitoring companies and other developers, substantial regulatory and commercialization requirements, and dependence on additional capital. The company reports no pending non-routine legal proceedings. Management concluded disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Confirm that this Know Labs, Inc. (KNW) filing—not a USBC, Inc. filing—is the intended document.
- Assess cash runway against the stated October 31, 2024 estimate, ongoing operating cash use, and the need for additional financing.
- Review the Lind note’s payment, conversion, security, default and dilution terms, and whether any additional financing under the agreement or ATM was completed.
- Track independent clinical validation, study populations and results, product development milestones, and the uncertain FDA-clearance path.
- Reconcile the quarter-end share count with the May 15 cover-page count and evaluate potential dilution from options, warrants, preferred shares, dividends and convertible notes.