10-Q: Know Labs Reports First Quarter 2024 Results, Highlights Progress in Non-Invasive Glucose Monitoring Technology

Know Labs, Inc. released its first quarter 2024 financial results, showcasing advancements in its non-invasive glucose monitoring technology and ongoing efforts to secure FDA clearance.

Summary

• Know Labs, Inc. reported a net loss of $5.4 million for the three months ended March 31, 2024, compared to a net loss of $4.9 million for the same period in 2023.
• The company's research and development expenses decreased to $2.2 million, while selling, general, and administrative expenses increased to $2.6 million for the quarter.
• The company launched its Generation 2 working prototype device during the quarter, which is a wearable format and may be a final form factor, ready for commercialization.
• Know Labs has cash and cash equivalents of $4.7 million and net working capital of $3.5 million as of March 31, 2024.
• The company believes it has enough cash to operate until at least October 31, 2024.
• Know Labs entered into a securities purchase agreement for up to $14.4 million in convertible notes and warrants, and an at-the-market offering agreement for up to $5 million in common stock sales.
• The company's total assets were $4.9 million and total liabilities were $6.7 million as of March 31, 2024.
• The company has a significant accumulated deficit of $130.8 million.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there is progress in technology development and fundraising, the company's financial losses and going concern risks temper the positive aspects. The sentiment is neutral to slightly negative due to the financial challenges.

Positives

• The company has made significant progress in the development of its non-invasive glucose monitoring technology, with the launch of the Generation 2 prototype.
• The internal clinical study showed promising results with a MARD of 11.1%, indicating the potential accuracy of the sensor.
• The company has secured additional funding through convertible notes and an at-the-market offering, providing capital for continued operations.
• Know Labs has a strong intellectual property portfolio with 327 patents issued and pending.
• The company is actively working towards FDA clearance for its glucose monitoring device.

Negatives

• The company continues to operate at a loss, with a net loss of $5.4 million for the quarter.
• The company has a significant accumulated deficit of $130.8 million.
• The company's ability to continue as a going concern is dependent on raising additional capital and achieving profitability.
• The company's operating expenses remain high, with total operating expenses of $4.7 million for the quarter.
• The company's current cash reserves are only expected to last until October 31, 2024.

Risks

• The company's ability to continue as a going concern is dependent on raising additional capital and achieving profitability.
• The company is subject to extensive regulation by the FDA, which could restrict the sales and marketing of its products.
• The company faces intense competition in the blood glucose monitoring market.
• The company's technology is still in the development stage and may not achieve the desired accuracy or receive FDA clearance.
• The company's stock price may fluctuate, and investors could lose all or part of their investment.
• The company may not be able to maintain a listing of its common stock on the NYSE American.

Future Outlook

The company anticipates recording losses from operations for the foreseeable future and is dependent on achieving a level of revenues adequate to support its cost structure. Management intends to raise additional funds through the issuance of equity securities or debt. The company is currently working on some capital fund raising transactions.

Management Comments

• The company is focused on the development and commercialization of its proprietary sensor technology utilizing radio and microwave spectroscopy.
• The first application of our sensor technology is in a product to non-invasively monitor blood glucose levels.
• The company launched the Generation 2 working prototype device during the three months ended March 31, 2024.
• The company believes that it has enough available cash and flexibility with its operating expenses to operate until at least October 31, 2024.

Industry Context

Know Labs is operating in the competitive medical diagnostics industry, specifically targeting the non-invasive glucose monitoring market. The company is competing with established players like Dexcom and Abbott, as well as new entrants in the non-invasive monitoring space. The company's technology aims to differentiate itself through its non-invasive approach and real-time monitoring capabilities.

Comparison to Industry Standards

• Know Labs' reported MARD of 11.1% in its internal clinical study is within the range of independently reported values for certain FDA-cleared blood glucose monitoring devices, such as the Dexcom G6 and Abbott Freestyle Libre.
• The company's technology is differentiated from existing continuous glucose monitors (CGMs) by its non-invasive nature, which does not require needles or invasive transmitters.
• The company's focus on affordability and accessibility aims to address a broader market than current CGM providers, who have penetrated less than 1% of the global addressable market.
• The company's intellectual property portfolio, ranked #1 globally in non-invasive glucose monitoring patents by ipCG Capital and PatSnap, positions it as a leader in the space.
• The company's technology is also differentiated from non-invasive optical technologies, which may be inhibited by skin tones and other factors.

Related Party Transactions

• The company owes Clayton A. Struve, a significant stockholder, $1,301,005 under convertible promissory or OID notes.
• The company owes Ronald P. Erickson and J3E2A2Z, an entity affiliated controlled by Ronald P. Erickson $1,460,926 under convertible promissory notes.
• On October 10, 2023, the Company issued a stock option grant to Ronald P. Erickson for 4,640,844 shares at an exercise price of $0.25 per share.
• On October 10, 2023, the Company issued a stock option grant to Peter J. Conley for 3,001,000 shares at an exercise price of $0.25 per share.
• During the six months ended March 31, 2024, the Company issued stock option grants to six directors for a total of 2,809,817 shares at an exercise price of $0.46 per share.

Stakeholder Impact

• Shareholders face the risk of dilution from future equity issuances and potential loss of investment due to the company's financial challenges.
• Employees are impacted by the company's financial situation, which may affect job security and compensation.
• Customers may benefit from the company's non-invasive glucose monitoring technology if it achieves FDA clearance and commercialization.
• Suppliers and creditors are exposed to the risk of non-payment if the company fails to secure additional funding or achieve profitability.

Next Steps

• The company will continue to refine its glucose monitoring device and expand testing, both internally and externally.
• The company will pursue FDA clearance for its non-invasive blood glucose monitor.
• The company will explore various avenues for moving its products into the marketplace, including direct-to-consumer, partnerships, and licensing.
• The company will continue to build its internal commercial and marketing team.
• The company will continue to expand its patent portfolio and protect its trade secrets.
• The company will continue to collect data to further refine the accuracy of the algorithm.

Key Dates

Keywords

non-invasive glucose monitoring, continuous glucose monitor, radio frequency spectroscopy, FDA clearance, medical diagnostics, blood glucose, sensor technology, intellectual property, convertible notes, at-the-market offering