USBC, Inc 10-K, filed Dec 19, 2023

USBC, Inc. (USBC)

10-K 2023-12-19 For: 2023-09-30

Added on April 10, 2026

About this 10-K

USBC, Inc filed this 10-K on December 19, 2023, covering the fiscal year ended September 30, 2023.

Headline figures

Fiscal year ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $0; compared with $4.36M a year earlier
Net loss: $15.29M; compared with a net loss of $20.07M a year earlier

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	Estimated Useful Lives	June 30, 2023			September 30, 2022
Machinery and equipment	2-3 years	$	961,529		$	1,510,265
Furniture and fixtures	5 years		26,855			26,855
Leasehold improvements	5 years		3,612			3,612
Less: accumulated depreciation			(691,899	)		(677,755	)
		$	300,097		$	862,977

Year Ended June 30, 2024-
Total remaining payments	$	204,534
Less imputed interest		(1,822	)
Total lease liability	$	202,712

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

500 Union Street, Suite 810, Seattle, Washington		98101
(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		KNW		NYSE American LLC

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

PART I

Item 1.	Business.	4
Item 1A.	Risk Factors.	16
Item 1B.	Unresolved Staff Comments.	34
Item 2.	Properties.	34
Item 3.	Legal Proceedings.	34

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	35
Item 6.	Selected Financial Data.	41
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	42
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	49
Item 8.	Financial Statements and Supplementary Data.	49
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	49
Item 9A.	Controls and Procedures.	49
Item 9B.	Other Information.	50

PART III

Item 10.	Directors, Executive Officers and Corporate Governance.	51
Item 11.	Executive Compensation.	58
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	66
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	68
Item 14.	Principal Accounting Fees and Services.	70

PART IV

Item 15.	Exhibit and Financial Statement Schedules.	71
Item 16.	Form 10-K Summary.

	·	our goals and strategies;
	·	our future business development, financial condition and results of operations;
	·	expected changes in our revenue, costs or expenditures;
	·	growth of and competition trends in our industry;
	·	our expectations regarding demand for, and market acceptance of, our products;
	·	our expectations regarding our relationships with investors, institutional funding partners and other parties with whom we collaborate;
	·	fluctuations in general economic and business conditions in the markets in which we operate; and
	·	relevant government policies and regulations relating to our industry.

	·	Through first principles, our sensor technology’s ability 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 non-invasive, using radio waves to identify and measure what is going on inside the body in real-time.

	·	Our sensor technology platform can 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 your body, making our sensor convenient and pain-free.

	·	No expensive supplies, such as test strips and lancets, 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 not be able to.

	·	Know Labs is the world intellectual property leader in non-invasive blood glucose monitoring, according to ipCG Capital and PatSnap.

	·	Initially, entering the diabetes glucose monitoring market with our non-invasive glucose monitoring device.

	·	Following our entry into the glucose monitoring market, entering other clinical monitoring markets for continuous, non-invasive hormone, medication metabolites, endocrinology components, and biomolecular monitoring.

	·	Applying our platform technology to lifestyle analysis, clinical trials, and chronic illnesses. We believe that potential use cases include real-time wearable medication monitoring and detection of, for example, ovulation and hormone deficiency.

	·	With an ever-growing body of non-invasively determined analytes available from individuals utilizing our technology we believe, over time, with longitudinal data we will be able to engage in so-called “predictive health” and provide early warnings of the onset of disease.

	·	Significantly, every new application will function utilizing the same sensor. We expect that hardware changes will not be required to target new analytes, so you will not need a new device, but an updated software algorithm will be required.

	·	Each new application provides potential new opportunities for monetization of the platform technology. Each additional analyte we identify over time may require its own subsequent FDA approval.

	·	warning letters, fines, injunctions or civil penalties;

	·	recalls, detentions or seizures of products;

	·	operating restrictions;

	·	delays in the introduction of products into the market;

	·	total or partial suspension of production;

	·	delay or refusal of the FDA or other regulators to grant 510(k) clearance, PMA approvals, or other marketing authorization to new products;

	·	withdrawals of marketing authorizations; or

	·	in the most serious cases, criminal prosecution.

	·	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 June 30, 2024;

	·	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 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 required to submit an investigational device exemption application, or IDE, to FDA, which must become effective prior to commencing certain human clinical trials of medical devices, and FDA may reject our IDE and notify us that we may not begin clinical trials;

	·	the cost of clinical trials may be greater than we anticipate;

	·	FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold;

	·	patients do not enroll in clinical trials at the rate we expect;

	·	patients do not comply with trial protocols;

	·	patient follow-up is not at the rate we expect;

	·	patients experience adverse side effects;

	·	patients die during a clinical trial, even though their death may not be related to our products;

	·	we may not reach agreement on acceptable terms with prospective contract research organizations (CROs), and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

	·	institutional review boards and third-party clinical investigators may delay or reject our trial protocol;

	·	third-party clinical investigators decline to participate in a trial or do not perform a trial on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices, or other FDA requirements;

	·	data collection, monitoring, and analysis is not performed in a timely or accurate manner or consistent with the clinical trial protocol or investigational or statistical plans;

	·	regulatory inspections of our clinical trials or manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials;

	·	changes in governmental regulations or administrative actions applicable to our trial protocols, including, for example, recent legislation passed by Congress requiring clinical trial sponsors to increase engagement with FDA on matters related to appropriate representation of racial and ethnic minorities in clinical trial data for pivotal studies;

	·	the interim or final results of the clinical trial are inconclusive or unfavorable as to safety or effectiveness; and

	·	FDA concludes that the results from our trial and/or trial design are inadequate to demonstrate safety and effectiveness of the product.

	·	the federal false claims and civil monetary penalties laws, including the civil False Claims Act, which can be enforced by private citizens through civil whistleblower or qui tam actions, prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

	·	HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information;

	·	the federal Physician Payments Sunshine Act requires applicable manufacturers of covered drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to annually report to Centers for Medicare & Medicaid Services (CMS) starting in 2022 information regarding payments and other transfers of value to physicians, certain other healthcare providers, and teaching hospitals, as well as information regarding ownership and investment interests held by physicians and their immediate family members. The information reported will be publicly available on a searchable website, with disclosure required annually; and

	·	analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.

	·	differing regulatory requirements and reimbursement regimes in foreign countries;

	·	unexpected changes in tariffs, trade barriers, price and exchange controls, and other regulatory requirements;

	·	economic weakness, including inflation, or political instability in particular foreign economies and markets;

	·	compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad;

	·	foreign taxes, including withholding of payroll taxes;

	·	foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

	·	difficulties staffing and managing foreign operations;

	·	workforce uncertainty in countries where labor unrest is more common than in the U.S.;

	·	potential liability under the Foreign Corrupt Practices Act (FCPA) or comparable foreign regulations;

	·	challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the U.S.;

	·	production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

	·	business interruptions resulting from geo-political actions, including war and terrorism.

	·	any of our existing patents will continue to be held valid, if challenged;

	·	patents will be issued for any of our pending applications;

	·	any claims allowed from existing or pending patents will have sufficient scope or strength to protect us;

	·	our patents will be issued in the primary countries where our products are sold in order to protect our rights and potential commercial advantage; or

	·	any of our products or technologies will not infringe on the patents of other companies.

	·	our inability to recruit and retain adequate numbers of effective sales and marketing personnel;

	·	the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

	·	unforeseen costs and expenses associated with creating an independent sales and marketing organization.

	·	the availability of suitable candidates;

	·	higher than anticipated acquisition costs and expenses;

	·	competition from other companies for the purchase of available candidates;

	·	our ability to value those candidates accurately and negotiate favorable terms for those acquisitions;

	·	the availability of funds to finance acquisitions and obtaining any consents necessary under our credit facility;

	·	the ability to establish new informational, operational and financial systems to meet the needs of our business;

	·	the ability to achieve anticipated synergies, including with respect to complementary products or services; and

	·	the availability of management resources to oversee the integration and operation of the acquired businesses.

·	a limited availability of market quotations for our securities;

·	reduced liquidity for our securities;

·	substantially impair our ability to raise additional funds;

·	result in a loss of institutional investor interest and a decreased ability to issue additional securities or obtain additional financing in the future;

·	a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

·	a limited amount of news and analyst coverage; and

·	potential breaches of representations or covenants of our agreements pursuant to which we made representations or covenants relating to our compliance with applicable listing requirements, which, regardless of merit, could result in costly litigation, significant liabilities and diversion of our management’s time and attention and could have a material adverse effect on our financial condition, business and results of operations.

·	Announcements by us regarding liquidity, significant acquisitions, equity investments and divestitures, strategic relationships, addition or loss of significant customers and contracts, capital expenditure commitments and litigation;

·	Issuance of convertible or equity securities and related warrants for general or merger and acquisition purposes;

·	Issuance or repayment of debt, accounts payable or convertible debt for general or merger and acquisition purposes;

·	Sale of a significant number of shares of our common stock by stockholders;

·	General market and economic conditions;

·	Quarterly variations in our operating results;

·	Investor and public relation activities;

·	Announcements of technological innovations;

·	New product introductions by us or our competitors;

·	Competitive activities;

·	Low liquidity; and

·	Additions or departures of key personnel.

	·	200,000,000 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.

	·	80,358,463 shares of common stock issued and outstanding, held by holders of record;

	·	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.

Period Ended	High		Low
Year Ending September 30, 2023
September 30, 2023	$	1.17	$	0.23
June 30, 2023	$	1.39	$	0.80
March 31, 2023	$	1.59	$	0.80
December 31, 2022	$	2.02	$	0.92

Year Ending September 30, 2022
September 30, 2022	$	3.44	$	1.85
June 30, 2022	$	2.71	$	1.36
March 31, 2022	$	2.19	$	1.22
December 31, 2021	$	2.60	$	1.48

	2023			2022

STATEMENT OF OPERATIONS DATA:
Revenue	$	-		$	4,360
Operating expenses-
Research and development expenses		7,727			5,386
General and administrative expenses		6,571			8,118
Selling and transactional costs for digital assets		(274	)		3,430
Total research and development and operating expenses		14,024			16,934
Operating loss		(14,024	)		(12,574	)
Total other (expense), net		(1,265	)		(7,497	)
Loss before income taxes		(15,289	)		(20,071	)
Income tax expense		-			-
Net loss		(15,289	)		(20,071	)
Common stock dividends on Series D Preferred Stock		(1,627	)		-
Deemed dividends on Series C and D Preferred Stock		(3,527	)		-
Net loss available to common shareholders	$	(20,443	)	$	(20,071	)
Basic and diluted loss per share	$	(0.41	)	$	(0.50	)
Weighted average shares of common stock outstanding- basic and diluted		49,581,467			40,370,473

	·	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.

	Years Ended September 30,
	2023			2022			$ Variance			% Variance

Revenue- digital asset sales	$	-		$	4,360		$	(4,360	)		-100.0	%
Operating expenses-
Research and development and operating expenses-
Research and development expenses		7,727			5,386			(2,341	)		-43.5	%
Selling, general and administrative expenses		6,571			8,118			1,547			19.1	%
Selling and transactional costs for digital assets		(274	)		3,430			3,704			108.0	%
Total operating erxpenses		14,024			16,934			2,910			17.2	%
Operating loss		(14,024	)		(12,574	)		(1,450	)		-11.5	%
Other expense:
Interest income		127			15			112			746.7	%
Interest expense		(390	)		(8,034	)		7,644			95.1	%
Loss on debt extinguishment		(507	)		-			(507	)		-100.0	%
Other (expense) income		(495	)		522			(1,017	)		-194.8	%
Total other (expense), net		(1,265	)		(7,497	)		6,232			83.1	%
Loss before income taxes		(15,289	)		(20,071	)		4,782			23.8	%
Income tax expense		-			-			-			0.0	%
Net loss	$	(15,289	)	$	(20,071	)	$	4,782			23.8	%

			Less Than
Contractual Cash Obligations (1)	Total		1 Year
Operating leases	$	134,633	$	134,633
Convertible notes payable		2,255,066		2,255,066
	$	2,389,699	$	2,389,699

	·	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 our company satisfies a performance obligation.

Name	Age	Director/ Executive Officer
Ronald P. Erickson	79	Chief Executive Officer, Chairman Of the Board of Directors and Director
Peter J. Conley	68	Chief Financial Officer and SVP Intellectual Property
William A. Owens	83	Director
Jon Pepper	72	Director
Ichiro Takesako	64	Director
John Cronin	68	Director
Timothy M. Londergan	50	Director
Larry K. Ellingson	77	Director

	·	been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

	·	had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

	·	been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

	·	been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

	·	been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

	·	been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

											All
							Stock		Option		Other
			Salary		Bonus		Awards		Awards		Compensation		Total
Name	Principal Position		($)		($)		($)		($) (4)		($)		($)
Ronald P. Erickson (1)	Chief Executive Officer and Chairman of the Board	Fiscal year 2023	$	371,083	$	-	$	-	$	551,569	$	173,885	$	1,096,537
		Fiscal year 2022	$	474,475	$	-	$	-	$	1,748,231	$	-	$	2,222,706

Phillip A. Bosua (2)	Former Chief Executive Officer	Fiscal year 2023	$	519,583	$	-	$	-	$	181,715	$	96,440	$	797,738
		Fiscal year 2022	$	1,437,926	$	-	$	-	$	865,601	$	91,500	$	2,395,027

Peter J. Conley (3)	Chief Financial Officer and SVP Intellectual Property	Fiscal year 2023	$	319,792	$	-	$	-	$	244,750	$	-	$	564,542
		Fiscal year 2022	$	110,000	$	-	$	-	$	-	$	-	$	110,000

	Option Awards
	Number of		Number of
	Securities		Securities
	Underlying		Underlying
	Unexercised		Unexercised		Option
	Options		Options		Exercise		Option
	Exercisable		Unexerciseable		Price		Expiration
Name	(#)		(#)		($) (4)		Date

Ronald P. Erickson (1)		1,200,000		-	$	1.10	11/4/2024
		-		1,865,675	$	1.53	12/15/2025
		266,525		1,599,150	$	1.53	12/15/2025
		2,000,000		-	$	1.53	12/15/2025
		437,500		562,500	$	2.09	12/16/2026
		187,500		812,500	$	1.41	12/14/2027

Phillip A. Bosua (2)		1,000,000		-	$	1.28	1/23/2024
		304,600		-	$	1.53	1/23/2024
		325,000		-	$	2.09	1/23/2024

Peter J. Conley (3)		312,500		687,500	$	1.48	5/20/2027