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) (NYSE American: KNW) is a life sciences company developing non‐invasive sensing solutions based on its proprietary Bio‐RFID platform. The technology employs low‐power radio‐frequency spectroscopy to scan the skin, enabling the detection of biochemical markers such as blood glucose, hydration levels and alcohol concentration without the need for blood draws or fingersticks. By applying sophisticated signal‐processing algorithms to reflected electromagnetic waves, the company aims to deliver real‐time, continuous monitoring devices that could transform standard practices in healthcare and wellness.

The company is focused on advancing its flagship prototype devices through clinical validation studies and regulatory pathways. Know Labs has assembled a patent portfolio covering hardware design, signal analysis and data‐interpretation methods, and is collaborating with academic and industry partners to refine its technology. These collaborations are intended to demonstrate the accuracy, reliability and safety of non‐invasive measurements across applications in diabetes management, sports performance, consumer wellness and beyond.

Headquartered in the United States, Know Labs is positioning its Bio‐RFID platform for global deployment, with initial emphasis on markets that demand painless, continuous biomarker tracking. The management team brings together expertise in biomedical engineering, product development and medical‐device commercialization. As the company advances toward regulatory clearance and potential strategic partnerships, it aims to license its technology to device manufacturers or offer integrated solutions directly to end users.

Know Labs Q1 2025 Earnings Call Transcript

Key Takeaways

• Comprehensive KTL program launched to license NOLabs’ RFDS technology globally, aiming to generate near-term revenue through strategic partnerships.
• RFDS sensor platform touted as versatile for medical diagnostics and industrial applications, expected to foster innovation and market adoption.
• Adjusted cash burn decreased by 44% year-over-year, with runway secured until April 2025 following cost-reduction initiatives.
• GAAP net loss of $4.67 M in Q1 was driven by $2.45 M of non-cash derivative accounting charges, resulting in a $2.45 M cash net loss, an 8% improvement from last year.
• Shareholder equity is negative $3.91 M, prompting plans for additional equity or convertible debt financing amid an ongoing NYSE delisting appeal.

Presentation

[Operator]

Greetings and welcome to the Know Labs' First Quarter 2025 Earnings Conference Call. Please note this conference call is being recorded. I will now turn the conference over to Ron Erickson, Know Labs' Chairman and Chief Executive Officer. You may begin.

[Ron Erickson, Chairman and CEO at Know Labs]

Thank you, Operator. Thank you, everyone, for joining us for this conference call today to review Know Labs' first quarter 2025 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.knowlabs.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. 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 result or events to differ materially from those described in these forward-looking statements.

[Ron Erickson, Chairman and CEO at Know Labs]

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. Know Labs expressly disclaims any intent or obligation to update these forward-looking statements except as otherwise may be required under applicable law.

[Ron Erickson, Chairman and CEO at Know Labs]

This quarterly update is being recorded as I have a personal matter, a family funeral that I'll be attending tomorrow. Hence, we will not be able to have a Q&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 2025. 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 and some detail regarding our newly announced Know Labs Technology Licensing, which we refer to by the acronym KTL. In May of 2024, we created the Know Labs Skunk Works to pursue IP monetization and a global patent licensing program.

[Ron Erickson, Chairman and CEO 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 Know Labs 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 Know Labs Technology Licensing program, which, as I say, we identified by the acronym KTL. 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 radiofrequency dielectric spectroscopy, which we refer to as RFDS.

[Ron Erickson, Chairman and CEO at Know Labs]

The Know Labs 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 radiofrequency 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. RFDS operates on the principle of dielectric spectroscopy, where the dielectric properties of a 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.

[Ron Erickson, Chairman and CEO at Know Labs]

As we performed research on our Skunk Works, we came to realize from that real experience that Know Labs RFDS sensor platform had the potential to revolutionize multiple industries. In the medical field, it can be used, as you know, for blood glucose monitoring, early disease detection, and personalized health management. 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, the most unique application is the one I cannot yet imagine. Now for some details on the KTL program.

[Ron Erickson, Chairman and CEO 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. 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 Know Labs 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.

[Ron Erickson, Chairman and CEO at Know Labs]

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. 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, Know Labs 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. Know Labs 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 CEO at Know Labs]

At Know Labs, 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 a corporate update. On the corporate side, we've had our hands full. Combined with existing work in 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. 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 continued unabated through the end of the year and accelerated in January.

[Ron Erickson, Chairman and CEO at Know Labs]

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 Know Labs 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 KTL to generate near-term revenues from our robust platform. That will obviate some of our need for capital and put short sellers on notice. We'll continue to focus on our core objectives, which is the successful development of the KnowU to obtain FDA approval.

[Ron Erickson, Chairman and CEO at Know Labs]

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 will continue 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. We've remained 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, knowlabs.co, and to stay updated with our progress. Now I'd like to turn the call over to Pete Connolly, who can review our financials. Pete.

[Pete Connolly, CFO and Senior VP at Know Labs]

Thank you, Ron. We detailed the financial results in today's first quarter of fiscal year 2025 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, and there may be some confusion about our financials, namely the topic of 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 derivatives are then reported on the income statement with an immediate impact on earnings, potentially causing significant volatility in a reported net income. Another area is in executive compensation.

[Pete Connolly, CFO and Senior VP at Know Labs]

Changes in the fair value of vested options are recorded as an expense and affect 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 2025, Know Labs reported a net loss of $4.67 million compared with a net loss of $3.45 million in Q1 fiscal 2024. As stated, it is important to note this quarter's results were substantially impacted by significantly higher non-cash expense of $2.45 million, or in other words, 52% of the total net loss in the quarter from the aforementioned GAAP-based derivative accounting. And that compares to $792,000 in the same accounting adjustment a year ago. That's an increase of 209%.

[Pete Connolly, CFO and Senior VP at Know Labs]

This quarter's non-cash charged to earnings of $2.45 million, 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 2025 were a net loss of $2.45 million versus a net loss of $2.66 million 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 at 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%. Research and development expense for Q1 fiscal 2025 was $802,000 as compared to $1.49 million in the year-ago quarter.

[Pete Connolly, CFO and Senior VP at Know Labs]

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 2025 was $1.97 million, which was 2% lower than the $2.01 million in the year-ago period. The decrease in SG&A was due primarily to lower insurance and other expenses. Turning now to the balance sheet, as of December 31, 2024, Know Labs had cash and cash equivalents of $1.03 million as compared to $3.11 million at the end of September 30, 2024. Net cash used in operations for the first quarter of fiscal 2025 was $1.89 million compared with $3.39 million in the year-ago period, a decrease in our cash burn rate of 44%.

[Pete Connolly, CFO and Senior VP at Know Labs]

During the quarter, the company continued to make adjustments to its fixed expenses, and the impact of those adjustments has 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 April 30, 2025. As we have stated in our Q1 fiscal 25 10-Q, we expect to raise additional funds through the issuance of equity, preferred stock, and/or convertible debentures. Finally, shareholder equity for Q1 fiscal 2025 was a negative $3.91 million versus a negative $3.16 million in fiscal 2024 ending September 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 CEO at Know Labs]

Thanks, Pete. As already mentioned, we won't have a Q&A session as this earnings call was 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. 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 CEO
• Pete Connolly, CFO and Senior VP