Know Labs, Inc. (NYSE:KNW) Q4 2023 Earnings Call Transcript

We are currently undertaking a trial with up to 100 participants, and we plan to kick off trials with external research institutions soon. We will also scale testing for larger population sets, as we believe that trials with 500 to 1,000 participants will provide the amount of diverse data required to increase the generalizability of our technology platform and algorithm. We have an aggressive and results-oriented plan in place. We’ve made significant progress in the last fiscal year and we’ll continue to focus on our core work streams. We have set six primary goals for fiscal year 2024 that support that mission. First, we will soon reveal the Gen 2 prototype device, which will be a wearable CGM that is at least 50% smaller than the Gen 1 prototype device.

This is what we refer to as the earbud’s case size. And it has the potential to be the final format for FDA submission. Our R&D team remains focused on accelerating data collection and continuing algorithm refinement. This is the key message of today’s presentation. More data delivers better results, so we need more data. We will achieve that by continuing testing in-house and partnering with external research institutions. Our goal is to deliver a device with a MARD under 10% when compared to a blood reference device and I believe we’re on track to do that. We will continue the strategic development of our intellectual property portfolio, our patents issued pending and in development, as well as codifying our trade secrets. You should also see more activity from our team with more clinical results being published.

As a result to FDA clearance, shareholders often ask us when we’ll go to the FDA to commence clinical trials and ultimately obtain FDA clearance for our non-invasive glucose monitoring device. It is difficult to set forth exact dates. As we expand data collection and testing conditions, we continue to learn more about what needs to be addressed. We must achieve a repeatable, accurate standard of excellence with market-ready product before undertaking clinical trials for the FDA clearance application. This takes time, but rest assured that as soon as we have high confidence in FDA clearance related timelines, we’ll share them with you. Every new development helps us refine our regulatory strategy. We will continue conversations with potential partners to pursue strategic collaborations.

Lastly, all of the above can only be achieved if we prepare the organization for accelerated growth and a go-to-market plan. We’re executing the plan to develop the first FDA-cleared, truly noninvasive glucose monitoring device in the market, and our broader vision is to transform medical diagnostics through non-invasive means. Now, I’d like to turn the call to Pete Conley so he can review our financials. Pete?

Pete Conley: Thank you, Ron. We detail the financial results in today’s fourth quarter and fiscal year 2023 earnings release, which, as noted by Jordyn, you can find on our website. But I’ll share a few key line items. For FY 2023, Know Labs reported a net loss of $15.29 million compared to a net loss of $20.07 million in FY 2022, a reduction in net loss of 23.8%. This translates to earnings per share of a loss of $0.41, better than FY 2022 earnings per share loss of $0.50, an improvement of 18% before preferred stock dividends. In FY 2023, we also recorded a non-cash charge to earnings of $4.77 million, principally related to the fair market value of dividends on our Series C and D preferred stock in the amount of $2.96 million that were either paid or accrued in shares of common stock.

And the remaining $1.81 million non-cash charge comprised of $310,000 in depreciation and amortization, $550,000 loss on the sale of assets, $507,000 loss on debt extinguishment, $350,000 from the modification of notes and warrants and $142,000 from the amortization of operating lease right of use during FY 2023. Research and development expense for FY 2023 was $7.73 million as compared to $5.39 million in FY 2022, an increase of 43.5% year-over-year. The increase in R&D expense was related to increases in engineering third-party technical services and expenditures related to the development of our Generation 1 device, which we completed and announced on June 7th, as we continue to execute our path to FDA clinical trials and commercialization.

Selling, general, and administrative expenses for FY 2023 were $6.57 million, which was lower by $1.55 million than the $8.12 million in FY 2022, an improvement of 19.1% as we continue our initiatives to reduce our cash firm. Turning now to the balance sheet, as of September 30, 2023, we had cash and cash equivalents of $8.02 million, as opposed to $12.59 million at the end of September 30, 2022. Net cash used in operations for FY 2023 was $10.35 million compared with $6.92 million in the prior year. During the year and at September 30, 2023, the company made 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 it has enough available cash and flexibility with its operating expenses to operate until at least June 30, 2024.