10-Q: Know Labs Reports Q1 2024 Results, Focuses on Non-Invasive Glucose Monitoring Development

Sentiment:

Quarterly Report 14 February 2024 4:17 PM

Know Labs, Inc. reported its financial results for the quarter ended December 31, 2023, highlighting ongoing development of its non-invasive glucose monitoring technology and a reduction in operating expenses.

Capital raiseThe company states it will need to raise additional funds by selling additional equity or incurring debt.The company is currently working on some capital fund raising transactions.The company expects to raise additional funds through the issuance of preferred stock, convertible debentures or equity during the remainder of 2024.

Worse than expectedThe company's net loss and cash burn rate indicate that the company is not yet profitable and is reliant on external funding.The company's cash position has decreased significantly, raising concerns about its ability to continue operations without additional funding.

Summary

Know Labs, Inc. reported a net loss of $3.45 million for the quarter ended December 31, 2023, compared to a net loss of $3.82 million for the same period in 2022.
The company's research and development expenses decreased to $1.49 million from $1.74 million year-over-year, reflecting a reduction in personnel and a shift towards external consultants.
Selling, general, and administrative expenses increased slightly to $2.01 million from $1.91 million in the prior year.
The company's cash and cash equivalents stood at $4.82 million as of December 31, 2023, with a net working capital of $1.03 million.
Know Labs believes it has sufficient cash to operate until at least June 30, 2024, but will need to raise additional funds through equity or debt financing.
The company is focused on developing its non-invasive blood glucose monitoring device and has made progress on its Generation 1 prototype and is working on a Generation 2 wearable device.
The company has 28,220,473 stock options outstanding, 20,984,961 warrants outstanding, and 8,108,356 shares issuable upon conversion of preferred stock.
The company has also reserved 9,020,264 shares for the conversion of convertible debentures.

Sentiment

Score: 4

Explanation: The document highlights the company's ongoing losses and need for additional funding, which are negative indicators. However, there is also progress in technology development and cost reduction, which are positive. Overall, the sentiment is cautiously negative due to the financial challenges.

Positives

The company reduced its net loss compared to the same quarter last year.
Research and development expenses decreased, indicating cost-saving measures.
The company has made progress on its non-invasive glucose monitoring technology, including the development of a Generation 2 wearable device.
The company has enough cash to operate until at least June 30, 2024.

Negatives

The company continues to operate at a loss and has an accumulated deficit of $125.35 million.
The company's cash position has decreased from $8.02 million at the end of September 2023 to $4.82 million at the end of December 2023.
The company needs to raise additional funds through equity or debt financing to continue operations.
The company has significant debt obligations, including convertible promissory notes.

Risks

The company's ability to continue as a going concern is dependent on securing additional financing.
The company is in the early stages of commercialization and may not be able to successfully develop and market its products.
The company is subject to extensive regulation by the FDA, which could restrict the sales and marketing of its products.
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 its listing on the NYSE American.
The company faces intense competition in the medical device industry.
The company is dependent on key personnel and may face difficulties in recruiting and retaining qualified employees.
The company relies on third-party suppliers for components and parts, which could be disrupted.
The company has limited insurance coverage, which may not cover all potential claims.
The company may face difficulties in protecting its intellectual property.
The company may face difficulties with respect to coverage and reimbursement by various payors.
The company may face difficulties from changes to current regulations and future legislation.
The company may face difficulties from cybersecurity risks and cyber incidents.

Future Outlook

The company anticipates that it will record losses from operations for the foreseeable future and will need to raise additional funds through the issuance of equity securities or debt. The company believes it has enough cash to operate until at least June 30, 2024.

Management Comments

Management intends to raise additional funds through the issuance of equity securities or debt.
Management believes that it has enough available cash and flexibility with its operating expenses to operate until at least June 30, 2024.

Industry Context

The company is operating in the highly competitive medical device industry, specifically in the area of non-invasive glucose monitoring. The company is competing with established players as well as new entrants in the market. The company is focused on developing a differentiated technology that can provide accurate and cost-effective solutions for its customers.

Comparison to Industry Standards

The company's technology is differentiated from existing continuous glucose monitors (CGMs) from companies like Abbott Labs (Freestyle Libre) and DexCom (G6) by being completely non-invasive.
The company's technology aims to address the limitations of non-invasive optical technologies, which can be affected by skin tones and other factors.
The company's Mean Absolute Relative Difference (MARD) of 11.3% in a recent study is within the range of independently reported values for certain FDA-cleared blood glucose monitoring devices.
The company is working towards FDA clearance for its non-invasive blood glucose monitor, which is a key step for commercialization.

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.
On October 10, 2023, the Company issued 105,000 fully vested stock awards total to three directors at an exercise price of $0.25 per share for director services.
On October 10, 2023, the Company issued stock option grants to three directors for a total of 238,584 shares at an exercise price of $0.25 per share.

Stakeholder Impact

Shareholders face the risk of dilution and potential loss of investment due to the company's need for additional funding.
Employees may be affected by potential cost-cutting measures or changes in staffing levels.
Customers may benefit from the development of a non-invasive glucose monitoring device, but the timeline for commercialization is uncertain.
Suppliers may be affected by the company's financial situation and potential changes in purchasing patterns.
Creditors face the risk of non-payment or restructuring of debt obligations.

Next Steps

The company will continue to develop its non-invasive glucose monitoring technology.
The company will continue to expand its testing and data gathering with larger and more diverse populations.
The company will pursue FDA clearance for its non-invasive blood glucose monitor.
The company will explore potential avenues for moving its products into the marketplace, including direct to consumer, initial launch partners, broad distribution partners, licensing partners and private label approaches.
The company will continue to build its internal commercial and marketing team.
The company will continue to refine its algorithms to improve accuracy.
The company will continue to expand its patent portfolio.

Key Dates

Date	Description
2016-08-05	Company closed a Series C Preferred Stock and Warrant Purchase Agreement with Clayton A. Struve.
2017-04-13	Company leased its executive office located at 500 Union Street, Suite 810, Seattle, Washington, USA, 98101.
2017-08-14	The price of the Series C Stock and warrant and its conversion price, were adjusted to $0.25 per share.
2017-08-14	The price of the Series D Preferred Stock were adjusted to $0.25 per share.
2018-03-16	Company entered into a Note and Account Payable Conversion Agreement with J3E2A2Z.
2020-04-30	Company incorporated Particle, Inc. in the State of Nevada.
2021-05-18	Company entered into a lease for its lab facilities located at 914 E Pine Street, Suite 212, Seattle, WA 98122.
2021-08-12	Company established its 2021 Equity Incentive Plan.
2021-10-11	Company entered into the First Amendment of Lease and added 2,485 square feet for $5,000 per month.
2021-10-15	The Companys authorized shares of common stock were increased to 200,000,000 shares of voting common stock.
2021-10-31	Company extended the lease from June 1, 2022 to May 31, 2023 at $2,986 per month.
2022-09-20	Company entered into the Second Amendment of Lease for additional space.
2022-11-22	Company leased an additional 1,800 square feet of lab facilities at 123 Boylston Ave, Suite C, Seattle, WA 98102.
2022-12-07	Company signed Amendments to the convertible promissory or OID notes, extending the due dates to September 30, 2023.
2023-01-23	Mr. Erickson was appointed Chief Executive Officer.
2023-01-25	Company approved Amendments to the convertible redeemable promissory notes with Ronald P. Erickson and J3E2A2Z, extending the due dates to September 30, 2023.
2023-04-21	Company announced the publication of a peer-reviewed study in Sensors Journal.
2023-04-26	Company extended the lease from June 1, 2023 to May 31, 2024 at $2,908.
2023-05-05	Company announced the results of a technical feasibility study that was presented at the American Association of Clinical Endocrinology (AACE) Annual Meeting.
2023-06-07	Company revealed the portable Generation 1 prototype for non-invasive glucose monitoring.
2023-06-27	Company settled all cash dividends with respect to the Series D preferred stock accrued and accumulated through December 31, 2022 in exchange for the issuance to Mr. Struve of 1,402,784 shares of the Companys common stock.
2023-07-25	AI Mind was dissolved.
2023-07-26	Company announced the completion of a new study demonstrating that continued algorithm refinement and more high-quality data improved the accuracy of the Bio-RFID sensor technology.
2023-08-09	Company authorized the Company to file a series of amendments to the certificates of designation for certain series of our preferred stock, and the restatement of its articles of incorporation.
2023-08-11	Amendments to the certificates of designation for certain series of our preferred stock, and the restatement of its articles of incorporation were filed with the Nevada Secretary of State.
2023-09-15	Company signed amendments to the convertible promissory or OID notes, held by Clayton A. Struve and Ron Erickson, to extend the due dates to September 30, 2024.
2023-09-29	Company closed an offering of its common stock pursuant to which it sold 28,000,000 shares of common stock, at a purchase price of $0.25 per share.
2023-10-10	Company issued 105,000 fully vested stock awards total to three directors at an exercise price of $0.25 per share for director services.
2023-10-26	Company closed an offering of its common stock pursuant to which it sold 883,061 shares of common stock, at a purchase price of $0.25 per share.
2023-12-31	End of the reporting period for the quarterly report.
2024-02-05	Company terminated a lease for its lab facilities located at 914 E Pine Street, Suite 212, Seattle, WA 98122.
2024-02-08	Company issued compensation to directors for 2023 and 2024 services.
2024-02-08	Company extended certain warrants.
2024-02-14	Date of the quarterly report.

Keywords

non-invasive glucose monitoring, medical device, radio frequency spectroscopy, FDA clearance, blood glucose levels, machine learning, wearable technology, financial results, research and development, capital raise

Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.