Know Labs Q1 2025 Earnings Report

Know Labs EPS Results

• Actual EPS: -$1.60
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Know Labs Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Know Labs Announcement Details

• Quarter: Q1 2025
• Date: 2/14/2025
• Time: After Market Closes
• Conference Call Date: Friday, February 14, 2025
• Conference Call Time: 4:30PM ET

Know Labs (NYSEAMERICAN:KNW), together with its subsidiaries, focuses on the development and commercialization of proprietary sensor technology by radio and microwave spectroscopy in the United States. The company's proprietary platform technologies include ChromaID and Bio-RFID technologies that utilizes electromagnetic energy to detect, record, identify, and measure the signature of said materials or analytes. The company was formerly known as Visualant, Incorporated and changed its name to Know Labs, Inc. in May 2018. Know Labs, Inc. was incorporated in 1998 and is based in Seattle, Washington.

Know Labs Q1 2025 Earnings Call Transcript

Key Takeaways

• NOLabs launched its KTL program to license its RFDS sensor platform globally, targeting near-term revenue by monetizing intellectual property across diverse industries.
• Q1 GAAP net loss widened to $4.67 million, driven largely by $2.45 million of non-cash derivative accounting charges including stock-based compensation and warrant repricing.
• Excluding non-cash adjustments, Q1 cash net loss improved 8% year-over-year to $2.45 million and non-cash-adjusted EPS loss narrowed 33% to $0.02.
• Cash and equivalents fell to $1.03 million with a runway through April 30, 2025, prompting plans for additional equity, preferred stock or convertible debt financings.
• Trading of NOLabs shares was suspended by the NYSE American and a delisting process has begun, which the company is actively appealing amid short-seller pressure.

Presentation

[Operator]

Greetings, and welcome to the NOLabs First Quarter twenty twenty five Earnings Conference Call. Please note, this conference call is being recorded. I will now turn the conference over to Ron Erickson, Nolab's Chairman and Chief Executive Officer. You may begin.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

Thank you, operator, and thank you, everyone, for joining us for this conference call today to review NOLAP's first quarter twenty twenty five financial results and operating highlights. Joining me today is Pete Connolly, our Chief Financial Officer and Senior Vice President of Intellectual Property, who will discuss our financial results. If you have not seen today's financial results, press release and 10 Q filing, please visit the Investors page on the company's website at www.nolabs.co. Before providing an update on our activities, I'd like to remind you that during this conference call, the company will make projections and forward looking statements regarding future events. Any statements that are not historical facts are forward looking statements.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

We encourage you to review the company's SEC filings, including without limitation the company's Form 10 K and 10 Qs, which identify specific risk factors that may cause actual results or events to differ materially from those described in these forward looking statements. These factors may include without limitation risks inherent in the development or commercialization of potential diagnostic products, uncertainty in the results of clinical trials or regulatory approvals, the need to obtain third party reimbursement for patients' use of any diagnostic products the company commercializes our need and ability to obtain future capital and maintenance of IP rights risks inherent in strategic transactions such as a failure to realize anticipated benefits legal, regulatory or political changes in the applicable jurisdictions accounting and quality controls greater than estimated allocations of resources to develop and commercialize technologies or failure to maintain any laboratory accreditation or FDA certification. Therefore, actual outcomes and results may differ materially from what is expressed or implied in these forward looking statements. NOLabs expressly disclaims any intent or obligation to update these forward looking statements, except as otherwise, may be required under applicable law. This quarterly update is being recorded as I have a personal matter, a family funeral that I'll be attending tomorrow.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

Hence, we will not be able to have a Q and A session at the end of this call. With that, I will continue the call by reviewing the operating highlights of our first quarter for fiscal year twenty twenty five. Since our last call, there have been a lot of activities at the company. Here today, I'll provide a brief update on those activities and the progress we've made in some detail regarding our newly announced NOLabs technology licensing, which we refer to by the acronym KTL. In May of twenty twenty four, we created the NOLabs Skunk Works to pursue IP monetization and a global patent licensing program.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

We believed at that time based upon unsolicited inbound inquiries that there was a large opportunity to work with potential strategic partners and customers and drive revenue from non core fields of use of the NOLabs platform technology, both in The U. S. And globally. As we studied those opportunities, it became clear that we needed to give them a more precise focus than provided by the informal Skunk Works. As a consequence, we put together during the past quarter the comprehensive NOLabs technology licensing program, which as I say, we identified by the acronym KTL.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

First, some background for those of you unfamiliar with the company's work. We're an innovative leader in the field of diagnostic and analytical technologies, inventing and pioneering the development of a groundbreaking sensor platform using radio frequency dielectric spectroscopy, which we refer to as RFDS. The NOLabs technology licensing KTL program is designed to offer diverse industries access to this advanced sensor technology, enabling new applications and fostering collaboration in various sectors. RFDS is a cutting edge technology that uses radio frequency to measure dielectric properties of materials. By analyzing the interaction between electromagnetic waves and materials, RFDS provides precise and non invasive measurements, making it ideal for various applications from medical diagnostics to industrial processes.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

RFDS operates on the principle of dielectric spectroscopy, where the dielectric properties of material are measured by exposing it to a range of radio frequencies. The interaction of these frequencies with the material creates a signature response, which can be analyzed to obtain detailed information about the material's composition and properties. This non invasive method ensures high accuracy and reliability. As we performed research on our Skunk Works, we came to realize from that real experience that NOLab's RFDS sensor platform had the potential to revolutionize multiple industries. In the medical field, it could be used as you know for blood glucose monitoring, early disease detection and personalized health management.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

In the industrial sector, RFDS can optimize manufacturing processes, improve quality control and ensure the safety and authenticity of products. RFDS can truly act as an authenticating watermark providing certainty that the object or material is what it purports to be. The versatility of RFDS opens endless possibilities for innovation. I like to say when asked about the most interesting or unique application of our technology, most unique application is the one I cannot yet imagine. Now for some details on the KTL program.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

The primary objectives of the KTL program are to expand the reach, expand the application of our technology by partnering with industry leaders, researchers and developers. We want to foster innovation. We want to encourage the development of new products and new solutions utilizing our technology. We want to create a network of collaborators by building collaborations with partners who can contribute to the advancement of RFDS technology. And we want to enhance our market presence.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

We want to establish RFDS as a standard technology in various fields, ensuring its widespread recognition and adoption. The KTL program offers numerous benefits to its licensees. Obviously, access to our cutting edge technology, comprehensive support from the NOLabs team, technical support training and other resources to help us integrate our technology into their operation, provides for collaborative development and it provides a market advantage. Licensees who adopt our technology can differentiate themselves in the market, offering unique and superior products and services. Our licensing process at KTL is designed to be straightforward and efficient and involves basic steps.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

There's the initial consultation, followed by technical evaluation, negotiation of agreement, implementation and ongoing collaboration. As the adoption of RFDS technology continues to grow, NOLabs is committed to expanding the KTL program and exploring new opportunities for collaboration. The company envisions a future where RFDS technology becomes a cornerstone in various industries driving innovation and improving lives. NOLabs is dedicated to ongoing research and development to enhance the capabilities of its RFDS technology. We invest in cutting edge research, collaborate with academic institutions and work to stay on the forefront of technological advancements to ensure that our sensor platform evolves and remains state of the art.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

At Knowlabs, we aim to expand the reach of the KTL program on a global scale by partnering with international organizations and industry leaders, bringing the benefits of our technology to a wider audience, fostering global innovation and progress. Now for corporate update. On the corporate side, we've had our hands sold. Combined with existing work and the development of the KTL initiative, I told a long term shareholder yesterday that I felt like the proverbial one arm paper hanger. Much of what has happened on the corporate side has been publicly detailed.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

It is my opinion and the opinion of the others that the company over a period of time has been under ruthless attack by short sellers That commenced during the middle of last year and continues unabated through the end of the year and accelerated in January. So the net impact of that activity made it difficult for the company to raise capital and ultimately led to the decision by the New York Stock Exchange, the American aspect of that exchange, to suspend trading in NOLAP stock and commence a delisting process, which we have appealed. As we move through the regulatory process with the NYSE American, we will continue to keep you, our shareholders, advised on developments. For my part, I only want to emphasize our aggressive activities with KTLs to generate near term revenues from our robust platform. That will obviate some of our need for capital and put short sellers on notice.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

We'll continue to focus on our core objectives, which is the successful development of the Know You to obtain FDA approval. However, we believe we can achieve faster monetization of our technology through strategic collaboration with major players and the capitalization of our intellectual property assets. We've increased our efforts on this front and we're continuing funneling resources into it. Meanwhile, KTL will help maximize shareholder value while bringing disruptive technology to the market that can have an impact on the lives of millions of people around the globe. I'm proud of our work this last quarter.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

We remain committed to bringing our technology into the marketplace and making a difference in the world. I encourage you all to visit our Investor Relations website, on the website, nolabs.co, and to stay updated with our progress. Now, I'd like to turn the call over to Pete Conley, who can review our financials. Pete?

[Pete Conley, CFO & Senior VP of Intellectual Property at Know Labs]

Thank you, Ron. We detailed the financial results in CAE's first quarter of fiscal year twenty twenty five earnings release, which you can find as Ron indicated on our website. But I will cover a few key line items. Before I do, I would like to briefly cover a topic we get questions on from our investors and shareholders.

[Pete Conley, CFO & Senior VP of Intellectual Property at Know Labs]

And there may be some confusion about our financials, namely the topic of a GAAP based derivative accounting. Derivatives are financial instruments whose value is derived from another asset. Common examples are stock options and warrants. Under GAAP, derivatives must be recognized on the balance sheet at fair value. The changes in the fair value of the derivatives are then reported on the income statement with an immediate impact on earnings, potentially causing significant volatility in reported net income.

[Pete Conley, CFO & Senior VP of Intellectual Property at Know Labs]

Another area is in executive compensation. Changes in the fair value of vested options are recorded as an expense and affects net income. For all the volatility GAAP based derivative accounting may cause, it is important to remember these changes are non cash accounting adjustments and not actual cash impacts from operations. With that said, for Q1 fiscal year twenty twenty five, NOLABS reported a net loss of $4,670,000 compared with a net loss of $3,450,000 in Q1 fiscal twenty twenty four. As stated, it is important to note, this quarter's results were substantially impacted by significantly higher non cash expense of $2,450,000 or in other words 52% of the total net loss in the quarter from the aforementioned GAAP based relative accounting and that compares to July in the same accounting adjustment a year ago.

[Pete Conley, CFO & Senior VP of Intellectual Property at Know Labs]

That's an increase of 209%. So this quarter's non cash charge to earnings of $2,450,000 as stated related principally to GAAP based derivative accounting for stock based compensation of $551,000 loss on debt extinguishment of $728,000 interest expense for the repricing of warrants of $747,000 and amortization of debt issuance costs of $386,000 Net of these non cash charges, cash earnings for Q1 fiscal twenty twenty five were a net loss of $2,450,000 versus a net loss of $2,660,000 in the year ago quarter. This is an 8% improvement year over year. This translates to GAAP earnings per share of a loss of $0.04 unchanged from a year ago of preferred stock dividends. Net of non cash expense, cash EPS was a loss of $0.02 versus a loss of $0.03 in the year ago period, an improvement of 33%.

[Pete Conley, CFO & Senior VP of Intellectual Property at Know Labs]

Research and development expense for Q1 fiscal twenty twenty five was $802,000 as compared to $1,490,000 in the year ago quarter. That's a decrease of 46% year over year. The decrease was due principally to the continued use of consultants to reduce the cost of product development. Selling, general and administrative expense for Q1 fiscal twenty twenty five was $1,970,000 which was 2% lower than the $2,010,000 in the year ago period. The decrease in SG and A was due primarily to lower insurance and other expenses.

[Pete Conley, CFO & Senior VP of Intellectual Property at Know Labs]

Turning now to the balance sheet. As of 12/31/2024, NOLABS had cash and cash equivalents of $1,030,000 as compared to $3,110,000 at the September. Net cash used in operations for the first quarter of fiscal twenty twenty five was $1,890,000 compared with $3,390,000 in the year ago period, a decrease in our cash burn rate of 44%. During the quarter, the company continued to make adjustments to its fixed expenses and the impact of those adjustments have significantly reduced our monthly burn rate. Given the significant reduction in fixed expenses, the company believes that it has enough cash and flexibility in operating expenses to operate until 04/30/2025.

[Pete Conley, CFO & Senior VP of Intellectual Property at Know Labs]

As we have stated in our Q1 fiscal twenty twenty five ten Q, we expect to raise additional funds through the issuance of equity, preferred stock and or convertible debentures. Finally, shareholder equity for Q1 fiscal twenty twenty five was a negative $3,910,000 versus a negative $3,160,000 in fiscal twenty twenty four ending 09/30/2024. We're taking steps to address our negative shareholder equity through the conversion of convertible debt to equity as well as new equity issuances as previously mentioned. That concludes my review of our financial highlights and I'll return the call to Ron for closing remarks. Ron?

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

Thanks, Pete. As already mentioned, we won't have a Q and A session as this earnings call is prerecorded. The conference call replay will be available on our website in the coming days. In the meantime, thanks to all of you for joining us today. There's a lot to look forward to in 2025 and we're excited to report on our progress.

[Ron Erickson, Chairman and Chief Executive Officer at Know Labs]

We appreciate your support, you, our shareholders and the efforts of our employees, board members, advisors and strategic partners. I want to thank all of you and have a great day. All the very best.

Participants

Executives

• Ron Erickson, Chairman and Chief Executive Officer
• Pete Conley, CFO & Senior VP of Intellectual Property