USBC, Inc 10-Q, filed Feb 14, 2025

USBC, Inc. (USBC)

10-Q 2025-02-14 For: 2024-12-31

Added on April 10, 2026

About this 10-Q

USBC, Inc filed this 10-Q on February 14, 2025, covering the quarter ended December 31, 2024.

Headline figures

Quarter ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net loss: $4.67M; compared with a net loss of $3.45M a year earlier
Diluted EPS: -$0.04; compared with -$0.04 a year earlier

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

619 Western Avenue, Suite 610 Seattle, Washington 98104		98104
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		KNWN		OTC Markets

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

TABLE OF CONTENTS
		Page Number

PART I	FINANCIAL INFORMATION

ITEM 1	Financial Statements (Unaudited)	3

	Consolidated Balance Sheets as of December 31, 2024 and September 30, 2024	3

	Consolidated Statements of Operations for the three months ended December 31, 2024 and 2023	4

	Consolidated Statements of Changes in Stockholders’ Deficit	5

	Consolidated Statements of Cash Flows for the three months ended December 31, 2024 and 2023	6

	Notes to the Financial Statements	7

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

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	29

ITEM 4	Controls and Procedures	30

PART II	OTHER INFORMATION

ITEM 1A.	Risk Factors	31

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	32

ITEM 3	Defaults upon Senior Securities	32

ITEM 4	Other Information	32

ITEM 6	Exhibits	33

	SIGNATURES	34

	December 31, 2024			September 30, 2024 (1)
ASSETS	Unaudited

CURRENT ASSETS:
Cash and cash equivalents	$	1,032,329		$	3,110,755
Total current assets		1,032,329			3,110,755

PROPERTY AND EQUIPMENT, NET		56,913			66,796

OTHER ASSETS
Other assets		149,174			149,174
Operating lease right-of-use asset		309,011			337,703

TOTAL ASSETS	$	1,547,427		$	3,664,428

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES:
Accounts payable - trade	$	889,009		$	552,680
Accrued expenses		92,086			101,582
Accrued expenses - related parties		103,473			84,573
Current portion of convertible notes payable, net		2,128,687			2,855,058
Current portion of convertible notes payable - related parties		1,876,073			1,460,926
Current portion of operating lease right-of-use liability		109,960			108,560
Total current liabilities		5,199,288			5,163,379

NON-CURRENT LIABILITIES:
Operating lease liability, net of current portion		218,196			249,728
Non-current portion of convertible notes payable, net		44,843			407,522
Total liabilities		5,462,327			5,820,629

COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS’ DEFICIT
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, 30,000 shares authorized, 17,858 shares issued and outstanding at 12/31/2024 and 9/30/2024, respectively		1,790			1,790
Series D Convertible Preferred stock $0.001 par value, 20,000 shares authorized, 10,161 shares issued and outstanding at 12/31/2024 and 9/30/2024, respectively		1,015			1,015
Common stock - $0.001 par value, 300,000,000 shares authorized, 111,166,117 and 108,097,936 shares issued and outstanding at 12/31/2024 and 9/30/2024, respectively		111,089			108,021
Additional paid in capital		139,405,148			136,468,855
Accumulated deficit		(143,433,942	)		(138,735,882	)
Total stockholders' deficit		(3,914,900	)		(2,156,201	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	1,547,427		$	3,664,428

	Three Months Ended,
	December 31, 2024			December 31, 2023
OPERATING EXPENSES-
RESEARCH AND DEVELOPMENT EXPENSES	$	802,102		$	1,486,388
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		1,965,133			2,011,246
Total operating expenses		2,767,235			3,497,634
OPERATING LOSS		(2,767,235	)		(3,497,634	)

OTHER INCOME (EXPENSE), NET
Interest income		13,824			51,010
Interest expense		(1,183,799	)		-
Loss on debt extinguishment		(728,298	)		-
Total other (expense) income, net		(1,898,273	)		51,010

LOSS BEFORE INCOME TAXES		(4,665,508	)		(3,446,624	)

Income tax expense		-			-

NET LOSS		(4,665,508	)		(3,446,624	)

Deemed dividends on Series C and D Preferred Stock		(32,552	)		(63,629	)

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(4,698,060	)	$	(3,510,253	)

Basic and diluted loss per share	$	(0.04	)	$	(0.04	)

Weighted average shares of common stock outstanding- basic and diluted		108,468,489			81,094,007

	Series C Convertible				Series D Convertible								Additional					Total Stockholders'
	Preferred Stock				Preferred Stock				Common Stock				Paid in		Accumulated			Equity/
	Shares		$		Shares		$		Shares		$		Capital		Deficit			(Deficit)
Balance as of October 1, 2023		17,858	$	1,790		10,161	$	1,015		80,358,463	$	80,358	$	125,501,537	$	(121,840,788	)	$	3,743,912
Stock compensation expense - employee options		-		-		-		-		-		-		699,246		-			699,246
Issuance of common stock for services		-		-		-		-		105,000		105		26,145		-			26,250
Deemed dividends on Series C and D Preferred Stock		-		-		-		-		-		-		63,629		(63,629	)		-
Isssuance of common stock for common stock offering		-		-		-		-		883,061		884		202,221		-			203,105
Net loss		-		-		-		-		-		-		-		(3,446,624	)		(3,446,624	)
Balance as of December 31, 2023		17,858		1,790		10,161		1,015		81,346,524		81,347		126,492,778		(125,351,041	)		1,225,889

Balance as of October 1, 2024		17,858	$	1,790		10,161	$	1,015		108,097,936	$	108,021	$	136,468,855	$	(138,735,882	)	$	(2,156,201	)
Stock compensation expense - employee options		-		-		-		-		-		-		550,703		-			550,703
Deemed dividends on Series C and D Preferred Stock		-		-		-		-		-		-		32,552		(32,552	)		-
Isssuance of common stock for common stock offering		-		-		-		-		1,250,000		1,250		298,750		-			300,000
Issuance of common stock for debt payment		-		-		-		-		1,818,181		1,818		238,182		-			240,000
Repricing of convertible notes payable and warrants		-		-		-		-		-		-		1,302,607		-			1,302,607
Extension of warrants		-		-		-		-		-		-		513,499		-			513,499
Net loss		-		-		-		-		-		-		-		(4,665,508	)		(4,665,508	)
Balance as of December 31, 2024		17,858	$	1,790		10,161	$	1,015		111,166,117	$	111,089	$	139,405,148	$	(143,433,942	)	$	(3,914,900	)

	·	identification of the contract, or contracts, with the customer;

	·	identification of the performance obligations in the contract;

	·	determination of the transaction price;

	·	allocation of the transaction price to the performance obligations in the contract; and

	·	recognition of the revenue when, or as, the Company satisfies a performance obligation.

	Useful Lives	December 31, 2024			September 30, 2024
Machinery and equipment	2-3 years	$	279,683		$	279,683
Furniture and fixtures	3 years		21,366			21,366
Less: accumulated depreciation			(244,136	)		(234,253	)
		$	56,913		$	66,796

Year Ended December 31,
2025	$	128,829
2026		144,883
2027		86,812
Total remaining payments		360,524
Less imputed interest		(32,369	)
Total lease liability	$	328,155

	December 31, 2024		September 30, 2024
Convertible note- Clayton A. Struve	$	1,590,585	$	1,301,005
Convertible note- Ronald P. Erickson and affiliates		1,876,073		1,460,926
Lind Global Fund II LP		582,945		1,961,575
	$	4,049,603	$	4,723,506

Long term	$	44,843	$	407,522
Short term - third party		2,128,687		2,855,058
Short term - related party		1,876,073		1,460,926
	$	4,049,603	$	4,723,506

	·	300,000,000 shares of common stock, par value $0.001 per share; and

	·	5,000,000 shares of “blank check” preferred stock, par value $0.001 per share, of which:

	·	30,000 shares have been designated as our Series C Convertible Preferred Stock, $0.001 par value per share; and

	·	20,000 shares have been designated as our Series D Convertible Preferred Stock, $0.001 par value per share.

	·	111,166,117 shares of common stock issued and outstanding, held by holders of record; held by held by 178 stockholders of record. This number does not include approximately 5,000 beneficial owners whose shares are held in the names of various security brokers, dealers and registered clearing agencies.

	·	17,858 shares of Series C Convertible Preferred Stock issued and outstanding, held by one holder of record; and

	·	10,161 shares of Series D Convertible Preferred Stock issued and outstanding, held by one holder of record.

Warrant No./Class	Issue Date	No. Warrant Shares		Exercise Price		Current Expiration Date	Amended Expiration Date
Clayton A. Struve Warrant	08-14-2017		1,440,000	$	0.24	08-13-2025	08-13-2030
Clayton A. Struve Warrant	12-12-2017		1,200,000	$	0.24	12-11-2025	12-11-2030
Clayton A. Struve Warrant	08-04-2016		1,785,715	$	0.24	08-04-2025	08-04-2030
Clayton A. Struve Warrant	02-28-2018		1,344,000	$	0.24	02-28-2025	02-28-2030

			Weighted
			Average
			Exercise
	Shares		Price
Outstanding October 1, 2024		49,341,861	$	0.66
Issued		1,387,500		0.24
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at end of period		50,729,361	$	0.59

December 31, 2024
		Weighted		Weighted				Weighted
		Average		Average				Average
Number of		Remaining		Exercise		Shares		Exercise
Warrants		Life ( In Years)		Price		Exercisable		Price
	39,532,429		4.51	0.24-0.29			39,532,429	0.24-0.29

	6,512,207		0.97	1.20-1.85			6,512,207	1.20-1.85
	4,684,725		1.33	2.00-3.00			4,684,725	2.00-3.00
	50,729,361		2.29	$	0.59		50,729,361	$	0.59

Assumptions
Dividend yield		0	%
Stock price	$	0.25
Exercise price	$	0.24
Expected life	3 years
Expected volatility		107	%
Risk free interest rate		4.26	%

	Weighted Average
	Options			Exercise Price
Outstanding as of September 30, 2024		27,506,731		$	0.81
Granted		300,000			0.24
Exercised		-			-
Forfeitures		(2,993,061	)		(1.03	)
Outstanding as of December 31, 2024		24,813,670		$	0.78

	·	Published Technology: Multiple peer-reviewed publications demonstrating use cases including groundbreaking results in non-invasive glucose monitoring

	·	Extensive Intellectual Property Portfolio: Over 330 patents globally, positioning Know Labs as a leader in RF spectroscopy and related innovations.

	·	Broad Applicability: Applications span medical diagnostics, industrial processes, and automotive health monitoring, showcasing unparalleled versatility.

	·	Complete Commercialization Toolkit: Offering IP licensing, white-label mobile apps, software development kits (SDKs), wet lab support, and prototyping capabilities.

	·	Through first principles, our sensor technology’s is expected to not only identify a wide range of organic and inorganic materials and analytes, but to do so non-invasively, accurately, and in real time, which potentially enables new multivariate models of clinical diagnostics, and health and wellness monitoring.

	·	Our sensor technology is designed to be non-invasive, using radio waves to identify and measure what is going on inside the body.

	·	Our sensor technology platform is designed to be integrated into a variety of wearable, mobile, or counter-top form factors, and we believe eventual interoperability with existing products from current market leaders.

	·	No needles nor invasive transmitters in the user’s body, making our sensor convenient and pain-free.

	·	No expensive supplies, such as replaceable sensors, test strips and lancets or other disposables, are required to operate our device.

	·	A core focus on accessibility and affordability for the populations we will serve around the globe.

	·	The current prototype sensor collects approximately 1.5 million data points per hour, which allows us to potentially build a deep understanding of health and wellness that other sensors may be unable to match.

	·	Know Labs is the world intellectual property leader in non-invasive blood glucose monitoring and has a significant position in other applications and fields of use of its technology according to ipCapital Group and PatSnap Research.

	·	the ability of our research and development team to produce an FDA clearance quality technology;

	·	our ability to recruit and maintain quality personnel with the talent to bring our technology to the market;

	·	the production of market ready products that can sustain FDA clearance quality results;

	·	the clearance by FDA after their rigorous clinical trial process of our products for the marketplace;

	·	the receptivity of the marketplace and the addressable diabetes community to our new non-invasive glucose monitoring technology; and

	·	access to sufficient capital to support us until our products achieve FDA clearance and are accepted in the marketplace.

	Three Months Ended December 31,
	2024			2023			$ Variance			% Variance

Operating expenses-
Research and development and operating expenses-
Research and development expenses	$	802		$	1,487		$	685			46.1	%
Selling, general and administrative expenses		1,965			2,011			46			2.3	%
Total operating expenses		2,767			3,498			731			20.9	%
Operating loss		(2,767	)		(3,498	)		731			20.9	%
Other (Expense) Income, Net:
Interest income		14			51			(37	)		-72.5	%
Interest expense		(1,184	)		-			(1,184	)		-100.0	%
Loss on debt extinguishment		(729	)		-			(729	)		-100.0	%
Total other (expense), net		(1,899	)		51			(1,950	)		-3823.5	%
Loss before income taxes		(4,666	)		(3,447	)		(1,219	)		-35.4	%
Income tax expense		-			-			-			0.0	%
Net loss	$	(4,666	)	$	(3,447	)	$	(1,219	)		-35.4	%

			Less Than
Contractual Cash Obligations (1)	Total		1 Year		1-3 Years
Operating leases	$	360,524	$	128,829	$	231,695
Convertible notes payable		5,375,066		5,135,066		240,000
	$	5,735,590	$	5,263,895	$	471,695

	·	We might not be able to continue as a going concern. We believe that our cash on hand will be sufficient to fund our operations at least through April 30, 2025.

	·	We are still in the early stages of commercialization, refining our technology. Our success depends on our ability to conclude development and market devices that are recognized as accurate, safe, and cost-effective as other options currently available in the market and cleared by FDA.

	·	We are subject to extensive regulation by FDA, which could restrict the sales and marketing of our products and could cause us to incur significant costs.

	·	The market price of our common stock may fluctuate, and you could lose all or part of your investment.

	·	We may not be able to maintain a listing of our common stock or achieve the listing of the Public Warrants on the NYSE American.

	·	We do not expect to declare or pay dividends in the foreseeable future.

	·	Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our securities to decline and would result in the dilution of your holdings.

	·	Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock.

	·	We may be unable to achieve FDA clearance of our KnowU™ product and a change in control of our company may not occur prior to the expiration of the Public Warrants, in which case the Public Warrants will not become exercisable for shares of our common stock.

Exhibit No.		Description
3.1		Certificate of Amendment to Articles of Incorporation, dated October 29, 2024 (incorporated by reference to Company’s Current Report on Form 8-K, filed October 30, 2024)
4.1†		2021 Know Labs Inc. Equity Incentive Plan, as amended (incorporated by reference to Company’s Current Report on Form 8-K, filed October 30, 2024)
10.1		Form of Subscription Agreement (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 17, 2024)
10.2		Form of Warrant (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 17, 2024)
10.3		Warrant Agency Agreement, December 16, 2024, between the Company and Equinity Trust Company, LLC (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 17, 2024)
10.4		Amendment 10 dated December 17, 2024 to Senior Secured Convertible Redeemable Note dated September 30, 2016 by and between Know Labs, Inc. and Clayton A. Struve (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 18, 2024)
10.5		Amendment 10 dated December 17, 2024 to Senior Secured Convertible Redeemable Note dated August 14, 2017 by and between Know Labs, Inc. and Clayton A. Struve (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 18, 2024)
10.6		Amendment 10 dated December 17, 2024 to Senior Secured Convertible Redeemable Note dated December 12, 2017 by and between Know Labs, Inc. and Clayton A. Struve (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 18, 2024)
10.7		Amendment 9 dated December 17, 2024 to Senior Secured Convertible Redeemable Note dated February 28, 2018 by and between Know Labs, Inc. and Clayton A. Struve (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 18, 2024)
10.8		Extension of Warrant Agreement dated December 17, 2024 by and between Know Labs, Inc. and Clayton A. Struve (incorporated by reference to Company’s Current Report on Form 8-K, filed on December 18, 2024
31.1*		Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document).
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		The Cover Page Interactive Data File, formatted in Inline XBRL (included within the Exhibit 101 attachments)

*	Filed herewith
**	Furnished herewith
†	Executive compensation plan or arrangement

Date: February 14, 2025	By:	/s/ Ronald P. Erickson
		Ronald P. Erickson
		Chief Executive Officer, and Director
		(Principal Executive Officer)

Date: February 14, 2025	By:	/s/ Peter J. Conley
		Peter J. Conley
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and