KNW.Know Labs, INC
10-K: Know Labs Reports Fiscal Year 2024 Results and Provides Business Update
Sentiment:
Annual Report
Know Labs, a developer of non-invasive medical diagnostics, reported significant progress in its development of a non-invasive glucose monitoring device, but faces financial challenges and ongoing operating losses.
Capital raiseThe company raised approximately $3.468 million in an underwritten offering in August 2024.The company raised approximately $1.515 million in a direct offering in August 2024.The company entered into a securities purchase agreement with Lind Global Fund II LP in February 2024, pursuant to which the company may issue senior convertible notes in the aggregate principal amount of up to $14,400,000.The company entered into an At the Market Offering Agreement with The Benchmark Company, LLC in March 2024, pursuant to which the company may, from time to time, offer and sell shares of common stock in an aggregate amount of up to $5,000,000.The company intends to seek additional cash via equity and debt offerings.
Worse than expectedThe company reported a significant net loss of $16,582,000 for the year ended September 30, 2024.The company has an accumulated deficit of $138,736,000.The company has limited cash on hand and will need additional financing to continue operations beyond February 28, 2025.There is substantial doubt about the company's ability to continue as a going concern.
Summary
- Know Labs is developing a non-invasive glucose monitoring device using proprietary radio frequency dielectric spectroscopy.
- The company reported an accumulated deficit of $138,736,000 and net losses of $16,582,000 and $15,289,000 for the years ended September 30, 2024 and 2023, respectively.
- Cash and cash equivalents were $3,111,000 as of September 30, 2024, with a net working capital deficit of approximately $2,053,000.
- The company believes it has enough cash to operate until February 28, 2025.
- Know Labs is pursuing FDA clearance for its device and has conducted internal studies showing a high degree of correlation with existing continuous glucose monitors.
- The company announced interim results from a clinical research study with a Mean Absolute Relative Difference (MARD) of 11.1%.
- Know Labs is exploring strategic collaborations and joint development agreements to accelerate development and commercial launch.
- The company's intellectual property portfolio includes 279 patents issued, pending, and in process.
- Know Labs reduced its workforce and operating expenses during the year ended September 30, 2024.
- The company raised approximately $3.468 million in an underwritten offering and $1.515 million in a direct offering in August 2024.
Sentiment
Score: 3
Explanation: The company is making progress in its technology development and has a strong IP portfolio, but faces significant financial challenges, including ongoing losses, limited cash, and substantial debt. The need for additional financing and the uncertainty surrounding FDA clearance and market acceptance contribute to a negative outlook.
Positives
- Know Labs' technology is differentiated as a completely non-invasive method for monitoring blood glucose levels.
- The company's sensor technology has shown a high degree of correlation with leading continuous glucose monitors in internal studies.
- Know Labs is the top worldwide IP holder in non-invasive blood glucose monitoring, according to ipCapital Group and PatSnap Research.
- The company has a strong and growing intellectual property portfolio.
- The KnowU prototype device represents significant progress towards commercialization.
- The company is actively pursuing strategic partnerships to accelerate development and market entry.
Negatives
- Know Labs is currently operating at a loss and has an accumulated deficit of $138,736,000.
- The company has limited cash on hand and will need additional financing to continue operations beyond February 28, 2025.
- There is substantial doubt about the company's ability to continue as a going concern.
- The company faces significant debt obligations, owing approximately $4,724,000 under various convertible promissory notes as of September 30, 2024.
- The company experienced a net loss of $16,582,000 for the year ended September 30, 2024.
Risks
- The company may not be able to secure additional financing on acceptable terms, or at all.
- The company may not be able to achieve or maintain profitability.
- FDA clearance for the non-invasive glucose monitoring device is not guaranteed and the process may be lengthy and expensive.
- The company faces intense competition from established medical device companies and new entrants.
- Market acceptance of the company's technology and products is uncertain.
- The company is dependent on key personnel and may face difficulties attracting and retaining talent.
- The company is subject to extensive regulation by the FDA and other regulatory bodies.
- The company may face cybersecurity risks and cyber incidents that could compromise confidential data.
- The company may not be able to maintain its listing on the NYSE American.
- The company's stock price is volatile and subject to significant fluctuations.
Future Outlook
The company expects to continue research and development efforts focused on its non-invasive glucose monitoring device, pursue FDA clearance, and explore strategic partnerships. The company also plans to raise additional funds through equity or debt offerings.
Industry Context
The company is operating in the highly competitive medical device industry, specifically in the growing market for continuous glucose monitoring. The company's non-invasive technology, if successful, could disrupt the existing market dominated by companies like Dexcom, Abbott, and Medtronic.
Comparison to Industry Standards
- The company's reported MARD of 11.1% in its recent study compares favorably with some FDA-cleared blood glucose monitoring devices, although it is still in the development stage.
- Dexcom's G7, an industry-leading CGM, has a reported MARD of around 8.2% in adults.
- Abbott's Freestyle Libre 3 has a reported MARD of around 7.9%.
- Medtronic's Guardian 4 sensor has a reported MARD of around 8.7%.
- It is important to note that these comparisons are based on different study designs and populations, and direct comparisons should be made with caution.
- Know Labs' technology, if successful, would be the first non-invasive continuous glucose monitor on the market, representing a significant advancement over existing technologies that require interstitial fluid sampling.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Chief Executive Officer | NA | Ronald P. Erickson | 2023-01-23 | Appointment |
| Interim Chief Technology Officer | NA | John Cronin | 2024-09 | Appointment |
| Director | NA | Larry K. Ellingson | 2023-11 | Appointment |
| Director | Timothy M. Londergan | NA | 2024-09-06 | Resignation |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Compensation Recovery Policy | Adoption of a Compensation Recovery Policy for the recovery of Erroneously Awarded Compensation | 2023-11-28 | Compliance with Section 10D of the Exchange Act, Rule 10D-1, and NYSE American listing standards |
| 2021 Equity Incentive Plan Amendment | Increase in the total number of shares of common stock available for issuance under the 2021 Plan by 18,000,000 shares to 40,000,000, subject to annual increases. | 2024-10-25 | Provides greater flexibility in granting equity awards to employees, directors, and consultants. |
| Articles of Incorporation Amendment | Increase the number of authorized shares of Common Stock from 200 million to 300 million. | 2024-10-29 | Provides greater flexibility for future capital raising and other corporate purposes. |
Related Party Transactions
- Convertible promissory notes with Clayton A. Struve, a significant stockholder.
- Convertible promissory notes with Ronald P. Erickson, the Company's Chairman and Chief Executive Officer, and J3E2A2Z, an entity affiliated with and controlled by Ronald P. Erickson.
- Transactions with ipCapital Group, Inc., where John Cronin, Interim Chief Technology Officer and former director, is Chairman and CEO.
- Stock option grants to Ronald P. Erickson and Peter J. Conley.
- Issuance of common stock and stock option grants to directors for board services.
Stakeholder Impact
- Shareholders: Potential dilution from future equity offerings and exercise of outstanding warrants and options. Stock price volatility and uncertainty surrounding the company's financial condition and future prospects.
- Employees: Potential impact on job security and compensation due to the company's financial challenges and cost-cutting measures.
- Customers: Potential benefits from the development of a non-invasive glucose monitoring device, if successful.
- Suppliers: Potential impact on business relationships depending on the company's ability to meet its financial obligations.
- Creditors: Risk of default on debt obligations.
Next Steps
- Continue research and development of the non-invasive glucose monitoring device.
- Conduct larger and more diverse clinical studies.
- Pursue FDA clearance for the device.
- Explore and secure strategic partnerships.
- Raise additional capital through equity or debt offerings.
- Work towards achieving profitability and addressing the going concern uncertainty.
Key Dates
| Date | Description |
|---|---|
| 2016-08-05 | Closed a Series C Convertible Preferred Stock and Warrant Purchase Agreement with Clayton A. Struve |
| 2017-08-14 | Price of the Series C Convertible Preferred Stock and warrant and its conversion price, were adjusted to $0.25 per share |
| 2017-08-14 | Price of the Series D Convertible Preferred Stock were adjusted to $0.25 per share |
| 2018-03-16 | Entered into a Note and Account Payable Conversion Agreement with J3E2A2Z |
| 2018-04-01 | Ronald P. Erickson began employment agreement |
| 2021-08-12 | Established the Know Labs, Inc. 2021 Equity Incentive Plan |
| 2022-05-01 | Peter J. Conley began employment agreement |
| 2022-09-16 | Common stock began trading on NYSE American under the symbol KNW |
| 2022-09-30 | End of fiscal year 2023 |
| 2022-12-07 | Signed an Extension of Warrant Agreement with Clayton Struve |
| 2023-01-23 | Signed an Extension of Warrant Agreement with Ronald P. Erickson and an entity controlled by Mr. Erickson |
| 2023-02-15 | Issued stock option grants to two directors |
| 2023-06-27 | Settled all cash dividends with respect to the Series D Convertible Preferred Stock accrued and accumulated through December 31, 2022 in exchange for the issuance to Mr. Struve of 1,402,784 shares of common stock |
| 2023-09-15 | Due dates on the notes was further extended to September 30, 2024 |
| 2023-09-27 | Received a notification from the NYSE American LLC stating that the Company is not in compliance with the minimum stockholders equity requirements |
| 2023-09-29 | Closed an offering of common stock |
| 2023-09-30 | End of fiscal year 2024 |
| 2023-10-01 | Beginning of fiscal year 2024 |
| 2023-10-10 | Issued a stock option grant to Ronald P. Erickson |
| 2023-10-10 | Issued a stock option grant to Peter J. Conley |
| 2023-10-27 | Submitted a plan of actions it has taken or will take to regain compliance with the continued listing standards by March 27, 2026 |
| 2023-11-14 | Date of Form 10-K |
| 2023-11-28 | Adoption of Compensation Recovery Policy |
| 2024-01-30 | Signed an Extension of Warrant Agreement with Ronald P. Erickson and an entity controlled by Mr. Erickson |
| 2024-02-27 | Entered into a securities purchase agreement with Lind Global Fund II LP |
| 2024-03-02 | Signed a lease on executive and research and testing facilities |
| 2024-03-06 | Announced interim results from internal clinical research study |
| 2024-03-19 | Signed an Extension of Warrant Agreement with Clayton Struve |
| 2024-03-20 | Entered into an At the Market Offering Agreement with The Benchmark Company, LLC |
| 2024-03-29 | Last business day of most recently completed second fiscal quarter |
| 2024-05-01 | Lease commenced |
| 2024-06-18 | Mr. Struve converted dividends of $800,384 into 3,201,534 shares of common stock related to the conversion of Series C and D Convertible Preferred Stock |
| 2024-06-27 | Issued 546,697 shares of common stock at $0.44 per share related to a principal payment of convertible debt settled with a common stock issuance for a total value of $240,000 |
| 2024-08-07 | Entered into an Underwriting Agreement with Boustead Securities, LLC and The Benchmark Company, LLC |
| 2024-08-09 | Completed a registered securities offering (the Underwritten Offering) |
| 2024-08-15 | Entered into Subscription Agreements with certain investors for a registered direct offering |
| 2024-08-16 | Completed a registered securities offering (the Registered Offering) |
| 2024-08-28 | Issued 30,000 shares of common stock at $0.26 per share and received $7,800 related to a warrant exercise |
| 2024-09-11 | Board of Directors approved an amendment to the 2021 Plan subject to stockholder approval |
| 2024-10-22 | Due dates on the notes was further extended to September 30, 2025 and increased the interest rate from 6% to 8% |
| 2024-10-25 | Stockholders approved a Plan Amendment which increased the maximum number of shares of common stock that may be delivered to participants under the 2021 Plan to 40,000,000 |
| 2024-10-29 | Amendment to Articles of Incorporation to increase the number of authorized shares of Common Stock from 200 million to 300 million filed and made effective |
| 2024-11-08 | Last reported sales price of common stock on the NYSE American |
| 2024-11-14 | Date of Form 10-K |
| 2025-02-28 | Estimated date until which the company has enough available cash to operate |
| 2026-03-27 | Date by which the company must regain compliance with NYSE listing standards |
| 2027-07-31 | Lease termination |
Keywords
non-invasive, glucose monitoring, medical diagnostics, radio frequency, dielectric spectroscopy, FDA clearance, diabetes, wearable, continuous glucose monitor, CGM, clinical trials, intellectual property, patents, strategic partnerships
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