knwn_10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT

For the transition period from _______ to ________

Commission File number 000-30262

KNOW LABS, INC.

(Exact name of registrant as specified in charter)

Nevada		90-0273142
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

500 Union Street, Suite 810, Seattle, Washington USA		98101
(Address of principal executive offices)		(Zip Code)

	206-903-1351
	(Registrant's telephone number, including area code)


	(Former name, address, and fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		KNW		NYSE American LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock, $.001 par value, issued and outstanding as of August 14, 2023: 52,358,463 shares.

DOCUMENTS INCORPORATED BY REFERENCE: None.

TABLE OF CONTENTS
		Page Number

PART I	FINANCIAL INFORMATION	3

ITEM 1	Financial Statements (Unaudited)	3

	Consolidated Balance Sheets as of June 30, 2023 and September 30, 2022	3

	Consolidated Statements of Operations for the three and nine months ended June 30, 2023 and 2022	4

	Consolidated Statements of Changes in Stockholders’ Equity	5

	Consolidated Statements of Cash Flows for the three and nine months ended June 30, 2023 and 2022	6

	Notes to the Financial Statements	7

ITEM 2	Management's Discussion and Analysis of Financial Condition and Results of Operation	19

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	28

ITEM 4	Controls and Procedures	28

PART II	OTHER INFORMATION

ITEM 1A.	Risk Factors	29

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	38

ITEM 3	Defaults upon Senior Securities	38

ITEM 5	Other Information	38

ITEM 6	Exhibits	40

	SIGNATURES	41

Table of Contents

ITEM 1. FINANCIAL STATEMENTS

KNOW LABS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

Unaudited


	June 30, 2023			September 30, 2022 (1)
ASSETS	Unaudited

CURRENT ASSETS:
Cash and cash equivalents	$	3,928,865		$	12,593,692
Total current assets		3,928,865			12,593,692

PROPERTY AND EQUIPMENT, NET		300,097			862,977

OTHER ASSETS
Other assets		15,766			13,767
Operating lease right of use asset		191,769			287,930

TOTAL ASSETS	$	4,436,497		$	13,758,366

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable - trade	$	526,688		$	526,968
Accrued expenses		416,191			462,940
Accrued expenses - related parties		320,427			348,264
Convertible notes payable, net		2,255,066			2,255,066
Current portion of operating lease right of use liability		202,712			215,397
Total current liabilities		3,721,084			3,808,635

NON-CURRENT LIABILITIES:
Operating lease right of use liability, net of current portion		-			87,118
Total non-current liabilities		-			87,118

COMMITMENTS AND CONTINGENCIES (Note 12)		-			-

STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value, 5,000,000 shares authorized, Series C and D shares issued and outstanding as follows:
Series C Convertible Preferred stock $0.001 par value, 1,785,715 shares authorized, 1,785,715 shares issued and outstanding at 6/30/2023 and 9/30/2022, respectively		1,790			1,790
Series D Convertible Preferred stock $0.001 par value, 1,016,014 shares authorized, 1,016,004 shares issued and outstanding at 6/30/2023 and 9/30/2022, respectively		1,015			1,015
Common stock - $0.001 par value, 200,000,000 shares authorized, 52,358,463 and 48,156,062 shares issued and outstanding at 6/30/2023 and 9/30/2022, respectively		52,358			48,158
Additional paid in capital		119,375,700			111,209,388
Accumulated deficit		(118,715,450	)		(101,397,738	)
Total stockholders' equity		715,413			9,862,613

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	4,436,497		$	13,758,366

(1) Derived from the audited consolidated balance sheet.

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

KNOW LABS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

	Three Months Ended,						Nine Months Ended,
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022

REVENUE- DIGITAL ASSET SALES	$	-		$	-		$	-		$	4,360,087
OPERATING EXPENSES-
RESEARCH AND DEVELOPMENT EXPENSES		1,879,519			1,272,537			6,186,039			3,406,996
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		1,359,782			1,588,823			5,507,511			4,253,997
SELLING AND TRANSACTIONAL COSTS FOR DIGITAL ASSETS		-			164,093			-			3,436,955
Total operating expenses		3,239,301			3,025,453			11,693,550			11,097,948
OPERATING LOSS		(3,239,301	)		(3,025,453	)		(11,693,550	)		(6,737,861	)

OTHER (EXPENSE):
Interest income (expense), net		23,511			(239,760	)		(275,301	)		(8,024,709	)
Other (expense) income		(384,137	)		261,927			(384,137	)		261,927
Total other (expense), net		(360,626	)		22,167			(659,438	)		(7,762,782	)

LOSS BEFORE INCOME TAXES		(3,599,927	)		(3,003,286	)		(12,352,988	)		(14,500,643	)

Income tax expense		-			-			-			-

NET LOSS		(3,599,927	)		(3,003,286	)		(12,352,988	)		(14,500,643	)

Common stock dividends on Series D Preferred Stock		(1,627,230	)		-			(1,627,230	)		-
Deemed dividends on Series C and D Preferred Stock		(3,337,494	)		-			(3,337,494	)		-

NET LOSS AVAILABLE TO COMMON SHAREHOLDERS	$	(8,564,651	)	$	(3,003,286	)	$	(17,317,712	)	$	(14,500,643	)

Basic and diluted loss per share	$	(0.18	)	$	(0.07	)	$	(0.36	)	$	(0.37	)

Weighted average shares of common stock outstanding- basic and diluted		48,928,911			43,760,904			48,604,274			39,032,860

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

KNOW LABS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Unaudited

	Series C Convertible				Series D Convertible								Additional					Total
	Preferred Stock				Preferred Stock				Common Stock				Paid in		Accumulated			Stockholders'
	Shares		$		Shares		$		Shares		$		Capital		Deficit			Equity
Balance as of October 1, 2021		1,785,715	$	1,790		1,016,004	$	1,015		35,166,551	$	35,168	$	82,530,684	$	(81,326,494	)	$	1,242,163
Stock compensation expense - employee options		-		-		-		-		-		-		204,170		-			204,170
Issuance of common stock for exercise of warrants		-		-		-		-		801,486		801		765,685		-			766,486
Issuance of common stock for stock option exercises		-		-		-		-		1,875		2		2,342		-			2,344
Net loss		-		-		-		-		-		-		-		(5,356,619	)		(5,356,619	)
Balance as of December 31, 2021		1,785,715		1,790		1,016,004		1,015		35,969,912		35,971		83,502,881		(86,683,113	)		(3,141,456	)
Stock compensation expense - employee options		-		-		-		-		-		-		432,481		-			432,481
Conversion of debt offering and accrued interest (Note 7)		-		-		-		-		7,672,860		7,673		15,338,047		-			15,345,720
Issuance of common stock for stock option exercises		-		-		-		-		5,000		5		8,995		-			9,000
Issuance of common stock for services		-		-		-		-		90,000		90		152,910		-			153,000
Issuance of warrant for services		-		-		-		-		-		-		71,220		-			71,220
Net loss		-		-		-		-		-		-		-		(6,140,738	)		(6,140,738	)
Balance as of March 31, 2022		1,785,715		1,790		1,016,004		1,015		43,737,772		43,739		99,506,534		(92,823,851	)		6,729,227
Stock compensation expense - employee options		-		-		-		-		-		-		919,224		-			919,224
Issuance of common stock for exercise of warrants		-		-		-		-		62,500		62		27,438		-			27,500
Issuance of common stock for stock option exercises		-

SEC Form 10-Q filed by Know Labs Inc.