Know Labs, Inc. (KNW) Q1 2023 Earnings Call Transcript

Know Labs, Inc. (NYSE:KNW) Q1 2023 Earnings Conference Call February 14, 2023 4:30 PM ET

Company Participants

Jordyn Hujar - Chief of Staff

Ron Erickson - Chairman and Chief Executive Officer

Pete Conley - Senior Vice President and Chief Financial Officer

Operator

Greetings, and invited to nan Know Labs Fiscal Year 2023 First Quarter Earnings Conference Call and Webcast. Please note, this convention telephone is being recorded.

I will now move nan convention telephone complete to Jordyn Hujar, Know Labs’ Chief of Staff. You whitethorn begin.

Jordyn Hujar

Thank you, operator. Thank you, everyone, for joining america for today’s convention telephone to talk Know Labs first 4th of fiscal twelvemonth 2023 financial results and caller operating highlights. If you person not seen today’s financial results, property merchandise and 10-Q filings, please sojourn nan Investors page connected nan Company’s website.

Before turning nan telephone complete to Ron Erickson, Know Labs’ Chairman and Chief Executive Officer, I would for illustration to punctual you that during this convention call, nan Company will make projections and forward-looking statements regarding early events. Any statements that are not humanities facts are forward-looking statements. We promote you to reappraisal nan Company’s SEC filings, including without limitations, nan Company’s Form 10-K and 10-Q, which place circumstantial consequence factors that whitethorn origin existent results aliases events to disagree materially from those described successful these forward-looking statements.

These factors whitethorn include, without limitation, risks inherent successful nan improvement and/or commercialization of imaginable diagnostic products; uncertainty and nan results of objective tests aliases regulatory approvals; nan request to get third-party reimbursement for patients usage of immoderate diagnostic products, nan Company commercializes; our request and expertise to get early superior and attraction of IP rights; risks inherent successful strategical transactions specified arsenic nonaccomplishment to recognize anticipated benefits; legal, regulatory aliases governmental changes successful nan applicable jurisdictions; accounting and value controls; greater than estimated allocations of resources to create and commercialize technologies aliases nonaccomplishment to support immoderate laboratory legalization aliases FDA certification; and uncertainties associated pinch nan COVID-19 pandemic and its imaginable effects connected our operations.

Therefore, existent outcomes and results whitethorn disagree materially from what is expressed aliases implied by these forward-looking statements. Know Labs expressly disclaims immoderate intent aliases responsibility to update these forward-looking statements isolated from arsenic different whitethorn beryllium required nether applicable law.

Today’s telephone will beryllium followed by a Q&A session. Your questions tin beryllium submitted done nan webcast portal, which tin beryllium accessed done our website. Due to nan ample number of participants connected today’s call, we will not beryllium taking questions complete nan phone.

With that, I’ll move nan telephone complete to Ron Erickson, Know Labs’ CEO. Ron?

Ron Erickson

Thanks, Jordyn, and welcome, everyone, to our convention telephone to talk our first 4th 2023 financial results and operating highlights. Joining maine coming is Pete Conley, our Chief Financial Officer, who will talk our financial results.

Today, I’m going to locomotion done our advancement against our strategical milestones, supply an overview of our achievements for nan fiscal 4th ending connected December 31, 2022, and preview our goals for nan equilibrium of fiscal twelvemonth 2023.

Our squad continues to activity to bring nan first FDA-cleared, non-invasive glucose monitoring instrumentality to nan market. We person made important changes to our activity squad to accelerate our execution.

As disclosed connected January 26, Phil Bosua will measurement down arsenic an Executive Officer of nan institution and Board member, and I was named Chief Executive Officer by nan company’s Board of Directors while continuing arsenic Chairman of nan Board. Phil remains engaged pinch Know Labs successful a consulting capacity, which will let him to prosecute his passion for caller discoveries successful science, package and artificial intelligence, while providing arsenic needed method guidance to our merchandise improvement team.

We welcomed caller members to nan executive squad and redistributed halfway responsibilities. These activity changes were elaborate successful a property merchandise issued connected January 27. This caller building should accelerate merchandise improvement and testing, while activity towards nan FDA clearance process for aesculapian devices is being executed successful parallel. I judge we put an fierce and results oriented scheme successful place, which I’ll reappraisal pinch you this afternoon.

We besides precocious disclosed connected February 2nd strategical partners successful information science, sensor technology, merchandise creation and regulatory affairs, who we’ve been engaging pinch complete nan past fewer years and are continuing and they are supportive successful nan Labs’ team. We are fortunate to person world-class respected experts moving alongside our ain talented team. These property announcements tin each beryllium recovered connected our website.

Our astir important extremity for 2023 is outer validation of our Bio-RFID exertion platform. We will execute this done a dense attraction connected early engineering done information subject and algorithm refinement, objective improvement and trials, and partnerships pinch starring investigation institutions for further information postulation and accuracy validation.

Taking this nonsubjective into consideration, our scheme is comprised of 4 coordinated activity streams: one, continued improvement of our hardware solution aliases patented sensor; two, nan continued improvement of our package solution, moving successful conjunction pinch cardinal 3rd parties connected our proprietary waste and acquisition concealed algorithm and instrumentality learning platform; three, continued testing some internally and nether existent and early IRB-approved protocols to summation our objective information postulation and analysis; and four, continued strategical improvement of our intelligence spot portfolio, our patents issued pending and successful improvement arsenic good arsenic codifying our waste and acquisition secrets. We are pleased coming to study advancement connected each of these activity streams.

First, our Bio-RFID prototype sensor has achieved its intended first capacity goals. And while it will beryllium continually improved, it has enabled america to cod information and behaviour testing connected a prototype sensor to accurately measurement and show successful humans glucose readings successful real-time. Our squad has been moving connected nan improvement of a functional KnowU prototype, which we expect to stock pinch you erstwhile completed.

Igor Institute, a merchandise improvement patient specializing successful mechanical, electrical, and firmware engineering; and Dr. Reza Kassayan, an MD, is simply a lead designer and strategy designer for galore commercially successful large-scale projects. These are 2 captious partners for this endeavor. Both assistance our squad pinch nan miniaturization and refinement of Know Labs Bio-RFID sensor.

In parallel pinch KnowU hardware optimization, Bould Design, a respected business creation patient down successful products from ample user equipment brands, is providing Know Labs pinch creation support for this updated prototype.

Second, arsenic a consequence of our soul testing, we’ve generated tens of millions of objective observations to comprise our dataset from which to refine our algorithms and train our instrumentality learning level to accurately measurement glucose levels successful humans successful real-time. Edge Impulse, creator of nan industry-leading improvement toolkit for instrumentality learning, is collaborating pinch our squad to accelerate Bio-RFID’s algorithm refinement. This is an basal measurement earlier launching large-scale objective trials.

Third, our soul studies person yielded results pinch greater than 90% relationship to nan golden modular Dexcom G6 pinch little than 10% mean absolute error. While we judge these soul results speak powerfully to nan specificity and sensitivity basal to execute our extremity of FDA clearance and are opinionated successful nan competitory landscape, we judge further testing is required. We person precocious expanded our squad successful objective improvement functions, which allows america to summation nan magnitude of information utilized to train Bio-RFID’s algorithm.

We person besides been moving pinch NOVUS Management, a aesculapian instrumentality consulting firm, connected nan implementation and execution of regulatory systems and strategy, successful anticipation of upcoming third-party validations of our objective protocols and mentation for nan FDA clearance process.

And fourth, we proceed to grow our robust patent portfolio. As antecedently disclosed, [Patent App Research] and ipCapital Group, 2 starring patent analytic firms, classed Know Labs #1 for patent activity successful non-invasive glucose monitoring.

On January 4th, nan U. S. Patent and Trademark Office granted Know Labs a caller foundational patent that equates nan company’s Bio-RFID diagnostic exertion to a existent reference modular for glucose monitoring, wide utilized by glucosuria researchers, infirmary labs and glucose metre manufacturers and establishes a circumstantial superior benchmark scope of objective accuracy known arsenic nan MARD aliases Mean Absolute Relative Difference.

The patent issued was entitled “high-performance glucose sensor”, extending our IP portfolio to complete 100 patents issued and pending, reinforcing our position arsenic nan apical worldwide IP holder successful non-invasive humor glucose monitoring.

As we proceed to accelerate our activities, we scheme to bring connected caller method and technological Board members pinch applicable assemblage expertise. We judge our Advisory Board members will beryllium captious successful guiding america arsenic we get person to our extremity goal.

Looking up successful 2023, we are very focused connected accelerating our advancement connected hardware merchandise development. We scheme to finalize our first-generation aliases gen-one product, which will beryllium a functioning freestanding prototype that we’ll usage to proceed our information postulation efforts.

On package development, we scheme to further our algorithm improvement accuracy crossed an expanding number of individuals to alteration america to proceed connected our way to nan FDA. In objective studies, our extremity is to cod ample amounts of information to proceed training nan Bio-RFID algorithm and to unafraid third-party validation from starring investigation centers. Lastly, we will proceed our efforts to build a world-class patent portfolio that will service arsenic a instauration for our institution to deduce strategical worth successful nan marketplace.

In summary, we judge we are executing connected nan way to delivering connected our extremity to beryllium nan first FDA-cleared, non-invasive glucose monitoring instrumentality successful nan marketplace and our broader imagination to toggle shape aesculapian diagnostics done non-invasive means.

Now, I’d for illustration to move nan telephone complete to Pete Conley to reappraisal our financials. Pete?

Pete Conley

Thank you, Ron. We elaborate nan financial results successful today’s first 4th net release, which, arsenic noted by Jordyn, you tin find connected our website. But I’ll stock a fewer cardinal statement items pinch you now.

Know Labs reported a nett nonaccomplishment of $3.82 cardinal successful nan first 4th of 2023 compared to a nett nonaccomplishment of $5.36 cardinal successful nan year-ago period, which translates to net per stock of a nonaccomplishment of $0.08, an betterment complete nan year-ago play of $0.15. I would statement nan nett nonaccomplishment for nan first 4th of $3.82 cardinal included non-cash disbursal of $1.05 million, comprised chiefly of stock-based compensation, warrant disbursal and depreciation and amortization.

Research and improvement disbursal for nan first 4th was $1.74 cardinal arsenic compared to $886,000 successful 2022. The summation successful R&D disbursal was related to unit increases successful engineering, third-party method services and expenditures related to nan improvement of our Bio-RFID exertion arsenic we proceed to execute our way to FDA objective tests and commercialization.

Selling, wide and administrative disbursal for nan 4th was $1.91 cardinal versus $1.22 cardinal successful 2022, which accrued versus nan anterior year, chiefly owed to cardinal additions to nan executive squad and increases successful third-party services.

Turning now to nan equilibrium sheet. As of December 31, 2022, we had rate and rate equivalents of $9.68 cardinal arsenic compared to $12.5 cardinal astatine nan extremity of September 30, 2022. Net rate utilized successful operations for nan 4th was $2.92 million, compared to $1.91 cardinal successful nan anterior year. We judge our rate connected manus will beryllium capable to money our operations done February 15, 2024.

That concludes my reappraisal of our financial highlights. And I’ll return nan telephone backmost to Ron.

Ron Erickson

Thanks, Pete. We now for illustration to dedicate nan adjacent fewer minutes to questions submitted done nan webcast portal. And I judge we person some. So nan first question, erstwhile will Know Labs use for FDA approval?

Our intent and this – location are respective parts to this. And I’ve talked to galore of you independently regarding really this process works. When you spell to nan FDA, obviously, you person to spell pinch a merchandise that’s complete, that’s fresh to spell successful nan marketplace place. It has to person nan last shape factor. It has to person nan last operating algorithms. It has to person each of those elements travel together.

So arsenic we do this and arsenic we activity to get toward nan FDA, please understand that location are a number of pieces to this that person to travel together simultaneously successful bid for america to spell to nan FDA pinch credibility. It is our anticipation that those pieces will travel together and we’ll beryllium capable during nan people of nan twelvemonth to denote galore of those elements that we will beryllium capable to spell to nan FDA for submission during nan people of 2023. So that should beryllium your anticipation by nan extremity of 2023 that each of those elements will coalesce to let america to do that.

One of nan things is benignant of an admonition. As we do this, a batch of what we do is it involves 3rd parties. And arsenic we recovered complete nan past mates of years, sometimes 3rd parties are not arsenic responsive arsenic you’d for illustration to person them be. So I’d for illustration to propulsion that retired and bespeak that that we are dealing pinch 3rd parties and we promote them to activity arsenic quickly and arsenic – and it’s specified a focused matter that we tin meet our milestones and our goals. But it is portion of our reality that we woody pinch 3rd parties, but sometimes they’re not arsenic responsive arsenic we’d for illustration to person them be.

Let’s see. Another mobility coming in. Could you supply investors pinch an IRB position update?

The IRB, which we announced past February, was for nan intent of having a protocol, an approved protocol that allowed america to bring investors - not investors, individuals disconnected nan thoroughfare for what amounted to a five-minute test. And we person brought a number of group successful for that. What we wished successful this process is that we’re getting much robust information from our ain soul three-hour tests, which are, arsenic you mightiness imagine, important successful their long and besides thing that that has to beryllium very good organized and managed for nan intent of information postulation and nan improvement of our algorithms.

So what we’ve discovered is nan standard of nan information we’re getting from nan three-hour trial was superior than nan benignant of information we’re getting from nan five-hour and nan five-minute trial from individuals who are coming successful disconnected nan thoroughfare aliases voluntary pursuant to nan IRB. So nan existent attraction has been connected information postulation and connected a three-hour trial arsenic opposed to nan five-minute trial that was cardinal to nan IRB.

The adjacent question, what are nan position of Phil Bosua pinch separation agreement?

Pete Conley

Ron, I tin return that. In some nan 10-Q connected our website, I would nonstop investors to Page 34 successful nan scale of exhibits, connected point 10.8 is nan nexus to Phil’s separation agreement. So I induce each of you that want to delve into that to publication nan agreement. But I tin conscionable summarize astatine a precocious level immoderate of nan cardinal points nether nan position of nan separation and nan lease agreement. Phil was paid one-year severance, and past we hired Phil arsenic a advisor for a play of one-year astatine a complaint of $10,000 a month.

The institution transferred to Phil definite assets related to AI Mind, which is simply a subsidiary we person established to prosecute definite AI activities. AI has really filled passion and we felt it was due to fto Phil proceed to do his activity successful AI. Additionally, nan institution will person an exclusive perpetual and royalty free correct to immoderate patents aliases different IP that Phil develops for anyone moving pinch aliases nether Phil relating to Bio-RFID for a play of 5 years, pursuing his separation connected January 26th.

And lastly, Phil executed a lock-up pinch our statement arsenic pertains to his 3 cardinal shares of nan communal banal that he owns. Outside of that, he forfeited – Phil forfeited banal options totaling astir 7.4 cardinal shares and each of that, again, is reflected successful nan separation agreement, which you tin find linked to nan 10-Q.

Ron Erickson

There’s a follow-on question. With Phil successful a different position pinch Know Labs, but your advancement slowed down.

And I would opportunity nan short reply is no. Phil will proceed to beryllium a advisor pinch nan company. We’ve sewage a awesome squad successful place. Phil was nan inventor of nan foundational IP that underscores and supports Bio-RFID. We’ve sewage very precise roadmap and way that we’re pursuing to accelerate nan advancement of nan institution based upon Phil’s invention. And so, no, I deliberation advancement will not slow down and we’re besides supported by Phil and his consulting capacity. So I deliberation it’s afloat velocity ahead. That’s really nan squad feels. That’s really I feel. And truthful we’ve sewage a large caput of steam and excited to spot nan twelvemonth unfold.

Another mobility that conscionable came in, I deliberation this relates to arsenic we get fresh to spell to nan FDA, only spell to nan market. One of nan questioners wanted to cognize if Racer – if we still person a narration pinch Racer Technology, if they will still beryllium our manufacturing partner?

Yes, they will. We’re still moving pinch them. In fact, we person a telephone pinch them later today. They’ve been to Seattle, we’ve been to Singapore. They are very renowned successful their capacity to build world-class aesculapian devices. We proceed to activity pinch them and expect we will do truthful for nan agelong haul.

Another mobility that conscionable came in, because we’re a level technology, group often inquire america astir different things we tin do pinch this exertion successful summation to glucose. And nan mobility is whether aliases not we’re going to activity immoderate of those different opportunities arsenic we spell done nan process to get FDA clearance for our exertion for humor glucose monitoring.

The short reply is nan attraction is connected humor glucose. We have, successful nan past, announced our capacity to place humor intoxicant levels, humor oxygen levels, and place nan beingness of tylenol and aspirin aft they’ve been ingested, which is really a proxy for nan therapeutics. At this time, our attraction is connected glucose. We do judge complete time, arsenic we’ve indicated, that location will beryllium a number of different analytes that we’re going to beryllium capable to identify. Those each subordinate to quality health, and we deliberation location are really going to beryllium important opportunities to do things pinch our exertion complete nan years to come. But for now, nan attraction is connected glucose arsenic it must be.

That concludes our Q&A. I want to convey everyone for joining america this afternoon. As I’d emotion to look guardant successful 2023 and we’re excited to study connected our progress, I cognize I speak pinch galore of you, truthful to speak, Conley. We’re happy to entertain those calls, truthful don’t beryllium a stranger. We admit your support and we want to admit nan unthinkable effort of our team, of our awesome talented employees.

With that, I want to convey you. Have a awesome day, and I person to extremity by saying because it is nan 14th of February, Happy Valentine’s Day to everyone retired there, and convey you for dialing in, for participating. We admit it very, very much.

Jordyn Hujar

Thanks, Ron. The convention telephone replay will beryllium disposable connected our website successful nan coming days. Thank you, everyone, for your participation.

Question-and-Answer Session

Q -

Operator

Thank you. That does reason today’s teleconference and webcast. You whitethorn now disconnect.