Know Labs, Inc. — FY2022 Form 10-K
Issuer and period: The supplied filing is for Know Labs, Inc. (NYSE American: KNW), not USBC, Inc. It covers the fiscal year ended September 30, 2022; the filing does not report a separate “2022 Q4” period.
Business context
Know Labs is developing Bio-RFID and ChromaID sensor platforms paired with AI analytics. Its primary focus is a non-invasive glucose monitor, with the KnowU and UBand devices described as under development. The company reported no revenue from its core sensor technology or from Particle; FY2022 revenue came from AI-generated digital art sold as NFTs.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $4.36 million | $0 |
| Operating expenses | $16.93 million | $10.45 million |
| Operating loss | $12.57 million | $10.45 million |
| Net loss | $20.07 million | $25.36 million |
| Basic and diluted loss per share | $0.50 | $0.86 |
| Net cash used in operating activities | $6.92 million | $6.85 million |
- All FY2022 revenue was digital-asset/NFT sales. Related selling and transactional costs were $3.43 million; the filing presents these as operating expenses rather than cost of goods sold, so it does not report a conventional gross margin.
- Research and development expense rose to $5.39 million from $3.97 million; selling, general and administrative expense rose to $8.12 million from $6.48 million.
- Cash and cash equivalents were $12.59 million at September 30, 2022, versus $12.26 million a year earlier. Investing cash use was $0.86 million and financing provided $8.11 million.
- Current liabilities were $3.81 million, including $2.26 million of convertible notes payable, net. Management reported working capital of approximately $11.04 million excluding convertible notes payable, and estimated available cash would fund operations through December 31, 2023.
- The company completed a September 2022 public offering of 4.14 million shares at $2.00 per share, receiving $7.42 million net. It reported an accumulated deficit of $101.40 million.
Changes, outlook and risks
- Net loss narrowed year over year, principally as interest expense declined to $8.02 million from $14.91 million. Operating loss widened as operating expenses increased; the new NFT revenue did not represent commercialization of the core sensor business.
- The 2021 convertible-note financing converted into common shares during FY2022. At year-end, the company reported $2.26 million of net convertible notes payable. It also disclosed substantial potential dilution from outstanding options, warrants, preferred shares and convertible securities.
- Management said Bio-RFID hardware was complete, product form factor was nearing completion and algorithms were in final development. FDA clearance is required before marketing the glucose monitor; the company could not estimate the approval timeline or likelihood of success. No quantified revenue or earnings guidance was provided.
- Management described internal and laboratory results for non-invasive glucose measurement, including comparison testing against existing monitors. These are company-described results, not FDA clearance or assurance of commercial performance. The company said further validation, clinical work and regulatory review remained necessary.
- Key risks include continuing losses and cash burn, dependence on additional financing, uncertain product accuracy and market acceptance, FDA and other regulatory hurdles, reliance on external engineering and manufacturing partners, supply-chain and inflation impacts, and possible dilution. Management said it did not expect to repeat the NFT sales experiment.
- NFT sales involved Ethereum and, initially, the CEO’s personal digital wallet and Coinbase account. The CEO received approximately $1.09 million in compensation related to NFT development, and the company reported $91,500 of rent paid to him. The auditor identified digital-asset sales as a critical audit matter, while issuing an unqualified opinion on the financial statements.
- The company reported no material pending legal proceedings. Management concluded disclosure controls and internal control over financial reporting were effective at September 30, 2022; the auditor did not provide an ICFR attestation. The filing says a full-time CFO was hired and controls strengthened to address previously identified material weaknesses.
Investor verification priorities
- Confirm the issuer identity: this filing is Know Labs, Inc. (KNW), not USBC, Inc., and the reporting year ended September 30, 2022.
- Assess whether the glucose-monitoring claims have been independently validated and establish the actual FDA pathway, clinical-study requirements, timeline and costs.
- Verify cash runway assumptions, future financing needs, note repayment extensions and related-party debt obligations.
- Review the NFT revenue’s non-recurring nature, associated costs, Ethereum-to-cash handling, CEO-related payments and the controls around digital assets.
- Evaluate potential dilution from securities outstanding and reconcile the filing’s disclosures on options, warrants, convertible notes and preferred stock.