Know Labs, Inc. Reports Second Quarter FY 2024 Results
Know Labs (NYSE American: KNW) reported Q2 FY 2024 results, showing an operating loss of $4.73 million, slightly better than the $4.81 million loss in Q2 FY 2023. EPS improved 30% to a loss of $0.07 from $0.10. R&D expenses dropped 15.1% to $2.18 million, while SG&A expenses increased 13.7% to $2.55 million. Cash and cash equivalents fell to $4.71 million from $8.02 million, and net cash used in operations rose to $7.05 million. Shareholder equity turned negative at -$1.75 million. The company announced an $18 million S-3 shelf registration for liquidity and plans to raise funds through equity and convertible debt.
- EPS loss improved by 30%, from $0.10 to $0.07.
- R&D expenses decreased by 15.1%, from $2.56 million to $2.18 million.
- Operating loss slightly improved from $4.81 million to $4.73 million.
- SG&A expenses increased by 13.7%, from $2.24 million to $2.55 million.
- Cash and cash equivalents decreased by $3.31 million, from $8.02 million to $4.71 million.
- Net cash used in operations increased by $0.71 million, from $6.34 million to $7.05 million.
- Shareholder equity turned negative at -$1.75 million, down from $3.74 million.
- Company reported a net loss of $5.40 million for Q2 FY 2024.
Insights
The financial results for Know Labs, Inc. show significant areas of concern and potential investment risk, particularly from a liquidity perspective. The company's operating loss of
Research and development expenses have decreased by
The company's intention to raise additional funds via equity and convertible debentures will be important for its survival, especially given the going concern opinion highlighted by its auditors. The At the Market Offering Agreement and the effective S-3 shelf registration statement provide potential short-term liquidity solutions but also indicate the company’s heavy reliance on equity markets for funding, which can dilute shareholder value.
Providing a balance between managing operational costs and securing liquidity will be key for the company’s financial health moving forward. Retail investors should closely monitor the company's cash burn rate and upcoming equity raises to gauge the sustainability of its operations.
From a market perspective, Know Labs, Inc. is undergoing a critical phase. The reduction in R&D expenses and the increase in SG&A indicate a pivot towards administrative strengthening and perhaps a strategic positioning for future growth. However, the company’s negative shareholder equity and the going concern qualification are red flags that could deter potential investors and impact the stock's performance adversely.
The company’s reliance on equity issuance for liquidity highlights a potential dilution risk for existing shareholders. The At the Market Offering Agreement and the $18 million S-3 shelf registration are mechanisms to ensure liquidity but suggest that the company is not generating sufficient operational cash flow to sustain itself.
Investors should be aware of the broader market sentiment towards companies with similar profiles—those in the research and development phase with high cash burn rates. The company’s strategic decisions, especially around managing costs and securing new funding, will be important in gaining and maintaining investor confidence.
The announcement of an audio webcast to discuss results and business updates is a positive move towards transparency and can provide investors with more insights into the company’s strategic direction. However, the real test will be in how effectively the company navigates its financial challenges in the coming quarters.
Financial Highlights:
-
In Q2 FY 2024, Know Labs reported an operating loss of
$4.73 million dollars$4.81 million dollars1.7% . This translates to Earnings Per Share of a loss of$0.07 $0.10 30% , before preferred stock dividends. -
Recorded a non-cash charge to earnings of
$976,000 $617,000 $251,000 -
Research and development expense for Q2 FY 2024 was
$2.18 million dollars$2.56 million dollars15.1% year over year. The decrease in R&D expense was related to decreased personnel and the use of external consultants to reduce the cost of product development. -
Selling, general and administrative expenses for Q2 FY 2024 was
$2.55 million $308,000 $2.24 million dollars13.7% , reflecting key hires made in the quarter, as well as an increase in legal expenses related to IP and financing activities. -
As of March 31, 2024, Know Labs had cash and cash equivalents of
$4.71 million dollars$8.02 million $7.05 million dollars$6.34 million -
During the year ended September 30, 2023, the Company made adjustments to its fixed expenses and the impact of those adjustments has significantly reduced the monthly burn rate. Given the significant reduction in fixed expenses, the Company believes that it has enough available cash and flexibility with its operating expenses to operate until at least October 31, 2024. As stated in its Q1 FY 2024 10-Q, the Company expects to raise additional funds through the issuance of equity, preferred stock, and convertible debentures. To that end, on March 20, 2024, the Company entered into an At the Market Offering Agreement with The Benchmark Company, LLC pursuant to which the Company may, from time to time, offer and sell shares of its common stock through or to The Benchmark Company, LLC as its sales agent or manager in an aggregate amount of up to
$5,000,000 $18 million -
Shareholder equity for Q2 FY 2024 was a negative
$1.75 million $3.74 million
As previously disclosed in its annual report on Form 10-K for the fiscal year ended September 30, 2023, which was filed with the Securities and Exchange Commission on December 19, 2023, the audit opinion contained a going concern qualification from the Company's independent registered public accounting firm. This announcement is being made solely to comply with the New York Stock Exchange's Company Guide Sections 401(h) and 610(b), which require separate disclosure of receipt of an audit opinion that contains a going concern qualification. This announcement does not represent any change or amendment to the Company's 2023 audited financial statements or to its 2023 annual report on Form 10-K.
Conference Call:
Know Labs will host an audio webcast to discuss its results and provide a business update today, May 15, 2024, at 4:30 pm ET (1:30 pm PT). The live webcast will be available on the Investors page of the Company’s website, https://ir.knowlabs.co/, and a replay will be available for six months.
Participant Dial-In: 877-514-3621 / +1 215-268-9856
Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=SyKIAQ9X
A copy of the form 10-Q filed with the SEC can also be downloaded from the Company’s website.
Income Statement:
| Three Months Ended, | Six Months Ended, | |||||||||||
| March 31, 2024 | March 31, 2023 | March 31, 2024 | March 31, 2023 | |||||||||
| Unaudited | Unaudited | Unaudited | Unaudited | |||||||||
| OPERATING EXPENSES- | ||||||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | $ | 2,175,245 |
|
$ | 2,563,469 |
|
$ | 3,661,633 |
|
$ | 4,306,520 |
|
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 2,550,848 |
|
2,242,658 |
|
4,538,657 |
|
4,147,729 |
|
||||
| Total operating expenses | 4,726,093 |
|
4,806,127 |
|
8,200,290 |
|
8,454,249 |
|
||||
| OPERATING LOSS | (4,726,093 |
) |
(4,806,127 |
) |
(8,200,290 |
) |
(8,454,249 |
) |
||||
| OTHER INCOME (EXPENSE), NET | ||||||||||||
| Interest income | 45,243 |
|
- |
|
96,253 |
|
- |
|
||||
| Interest expense | (716,814 |
) |
(124,075 |
) |
(740,251 |
) |
(298,812 |
) |
||||
| Total other expense, net | (671,571 |
) |
(124,075 |
) |
(643,998 |
) |
(298,812 |
) |
||||
| LOSS BEFORE INCOME TAXES | (5,397,664 |
) |
(4,930,202 |
) |
(8,844,288 |
) |
(8,753,061 |
) |
||||
| Income tax expense | - |
|
- |
|
- |
|
- |
|
||||
| NET LOSS | (5,397,664 |
) |
(4,930,202 |
) |
(8,844,288 |
) |
(8,753,061 |
) |
||||
| Deemed dividends on Series C and D Preferred Stock | (98,609 |
) |
- |
|
(162,238 |
) |
- |
|
||||
| NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (5,496,273 |
) |
$ | (4,930,202 |
) |
$ | (9,006,526 |
) |
$ | (8,753,061 |
) |
| Basic and diluted loss per share | $ | (0.07 |
) |
$ | (0.10 |
) |
$ | (0.11 |
) |
$ | (0.18 |
) |
| Weighted average shares of common stock outstanding- basic and diluted | 81,766,128 |
|
48,207,937 |
|
81,428,231 |
|
48,197,581 |
|
||||
Balance Sheet:
| March 31, 2024 | September 30, 2023 (1) | |||||
| ASSETS | Unaudited | |||||
| CURRENT ASSETS: | ||||||
| Cash and cash equivalents | $ | 4,709,690 |
|
$ | 8,023,716 |
|
| Total current assets | 4,709,690 |
|
8,023,716 |
|
||
| PROPERTY AND EQUIPMENT, NET | 55,655 |
|
81,325 |
|
||
| OTHER ASSETS | ||||||
| Other assets | 163,628 |
|
15,766 |
|
||
| Operating lease right-of-use asset | 9,175 |
|
145,090 |
|
||
| TOTAL ASSETS | $ | 4,938,148 |
|
$ | 8,265,897 |
|
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||
| CURRENT LIABILITIES: | ||||||
| Accounts payable - trade | $ | 1,031,600 |
|
$ | 1,292,861 |
|
| Accrued expenses | 98,954 |
|
94,062 |
|
||
| Accrued expenses - related parties | 97,822 |
|
218,334 |
|
||
| Current portion of convertible notes payable, net | 3,819,660 |
|
2,761,931 |
|
||
| Current portion of operating lease right-of-use liability | 14,500 |
|
154,797 |
|
||
| Total current liabilities | 5,062,536 |
|
4,521,985 |
|
||
| NON-CURRENT LIABILITIES: | ||||||
| Non-current portion of convertible notes payable, net | 1,629,586 |
|
- |
|
||
| Total liabilities | 6,692,122 |
|
4,521,985 |
|
||
| COMMITMENTS AND CONTINGENCIES (Note 11) | ||||||
| STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||
| Preferred stock - |
||||||
| issued and outstanding as follows: | ||||||
| Series C Convertible Preferred stock |
||||||
| 17,858 shares issued and outstanding at 3/31/2024 and 9/30/2023, respectively | 1,790 |
|
1,790 |
|
||
| Series D Convertible Preferred stock |
||||||
| 10,161 shares issued and outstanding at 3/31/2024 and 9/30/2023, respectively | 1,015 |
|
1,015 |
|
||
| Common stock - |
||||||
| 80,358,463 shares issued and outstanding at 3/31/2024 and 9/30/2023, respectively | 82,512 |
|
80,358 |
|
||
| Additional paid in capital | 129,008,023 |
|
125,501,537 |
|
||
| Accumulated deficit | (130,847,314 |
) |
(121,840,788 |
) |
||
| Total stockholders' (deficit) equity | (1,753,974 |
) |
3,743,912 |
|
||
| TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | $ | 4,938,148 |
|
$ | 8,265,897 |
|
Cash Flow:
| Six Months Ended, | ||||||
| March 31, 2024 | March 31, 2023 | |||||
| Unaudited | Unaudited | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net loss | $ | (8,844,288 |
) |
$ | (8,753,061 |
) |
| Adjustments to reconcile net loss to net cash (used in) | ||||||
| operating activities | ||||||
| Depreciation and amortization | 38,367 |
|
205,094 |
|
||
| Stock based compensation - stock option grants | 1,315,563 |
|
1,927,187 |
|
||
| Issuance of common stock for services | 277,010 |
|
- |
|
||
| Amortization of operating lease right-of-use asset | 135,915 |
|
89,612 |
|
||
| Amortization of debt issuance costs | 100,029 |
|
- |
|
||
| Interest expense for extension of notes and warrants | 594,761 |
|
349,721 |
|
||
| Changes in operating assets and liabilities: | ||||||
| Other long-term assets | (147,862 |
) |
(1,999 |
) |
||
| Operating lease right-of-use liability | (140,297 |
) |
(92,270 |
) |
||
| Accounts payable - trade and accrued expenses | (376,882 |
) |
(64,933 |
) |
||
| NET CASH (USED IN) OPERATING ACTIVITIES | (7,047,684 |
) |
(6,340,649 |
) |
||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Purchase of research and development equipment | (12,696 |
) |
(41,857 |
) |
||
| NET CASH (USED IN) INVESTING ACTIVITIES: | (12,696 |
) |
(41,857 |
) |
||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Proceeds from debt offering | 3,805,699 |
|
- |
|
||
| Proceeds from issuance of common stock offering, net | 203,105 |
|
- |
|
||
| Payments for debt offering | (262,450 |
) |
- |
|
||
| Proceeds from issuance of common stock for stock options exercise | - |
|
2,343 |
|
||
| Proceeds from issuance of common stock for warrant exercise | - |
|
12,500 |
|
||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 3,746,354 |
|
14,843 |
|
||
| NET (DECREASE) IN CASH AND CASH EQUIVALENTS | (3,314,026 |
) |
(6,367,663 |
) |
||
| CASH AND CASH EQUIVALENTS, beginning of period | 8,023,716 |
|
12,593,692 |
|
||
| CASH AND CASH EQUIVALENTS, end of period | $ | 4,709,690 |
|
$ | 6,226,029 |
|
| Supplemental disclosure of non-cash financing activity: | ||||||
| Deemed dividends on Series C and D Preferred Stock | $ | 162,238 |
|
$ | - |
|
| Warrants issued for debt offering | $ | 1,536,743 |
|
$ | - |
|
About Know Labs, Inc.
Know Labs, Inc. is a public company whose shares trade on the NYSE American Exchange under the stock symbol “KNW.” The Company’s platform technology uses spectroscopy to direct electromagnetic energy through a substance or material to capture a unique molecular signature. The technology can be integrated into a variety of wearable, mobile or bench-top form factors. This patented and patent-pending technology makes it possible to effectively identify and monitor analytes that could only previously be performed by invasive and/or expensive and time-consuming lab-based tests. The first application of the technology will be in a product marketed as a non-invasive glucose monitor. The device will provide the user with accessible and affordable real-time information on blood glucose levels. This product will require
Safe Harbor Statement
This release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements appear in a number of places in this release and include all statements that are not statements of historical fact regarding the intent, belief or current expectations of Know Labs, Inc., its directors or its officers with respect to, among other things: (i) financing plans; (ii) trends affecting its financial condition or results of operations; (iii) growth strategy and operating strategy; and (iv) performance of products. You can identify these statements by the use of the words “may,” “will,” “could,” “should,” “would,” “plans,” “expects,” “anticipates,” “continue,” “estimate,” “project,” “intend,” “likely,” “forecast,” “probable,” “potential,” and similar expressions and variations thereof are intended to identify forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond Know Labs, Inc.’s ability to control, and actual results may differ materially from those projected in the forward-looking statements as a result of various factors. These risks and uncertainties also include such additional risk factors as are discussed in the Company’s filings with the
View source version on businesswire.com: https://www.businesswire.com/news/home/20240515814526/en/
For Know Labs Media Inquiries Contact:
Matter Health
Abby Mayo
Knowlabs@matternow.com
Ph. (617) 272-0592
Know Labs, Inc. Contact:
Jordyn Hujar
jordyn@knowlabs.co
Ph. (206) 629-6414
Source: Know Labs, Inc.
FAQ
What were Know Labs' Q2 FY 2024 financial results?
How did Know Labs' R&D expenses change in Q2 FY 2024?
What was the cash position of Know Labs at the end of Q2 FY 2024?
Why did Know Labs' SG&A expenses increase in Q2 FY 2024?
What is Know Labs' plan for raising additional funds?
