Know Labs Seeks $6 Million In Uplisting IPO To Nasdaq

Summary

• Know Labs has filed proposed terms for a $6 million U.S. IPO uplisting.
• The firm is developing a non-invasive blood glucose monitoring device and vital signs monitoring system.
• KNW is still in development for its devices. While the low nominal per share price may attract day traders seeking volatility, I'm on Hold for the company's prospects.
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A Quick Take On Know Labs

Know Labs, Inc. (KNWN) (NYSE:KNW) has filed to raise $6 million in an IPO of its common stock, according to an S-1 registration statement.

The firm is developing a non-invasive blood glucose monitoring and related vital signs device in the U.S.

While day traders or other retail investors may be attracted to the extremely low nominal price per share for the IPO and create significant early trading volatility, I'm on Hold for the company's prospects.

Know Labs Overview

Seattle, Washington-based Know Labs was founded to develop its KnowU and UBand devices for external testing and monitoring of blood glucose levels and potentially other vital signs in humans.

Management is headed by Chief Executive Officer Phillip A. Bosua, who has been with the firm since 2017 and was previously founder and CEO of LIFX, a smart light bulb manufacturer and prior to that was founder and CEO of LimeMouse Apps, a mobile app developer on the iOS platform.

The company is seeking to develop measurement technologies using electromagnetic energy to perform sensing functions (Bio-RFID) for consumers.

Know Labs has booked fair market value investment of $100 million as of March 31, 2022, from investors including Clayton Struve and others.

The firm is still in development for its primary devices which will require U.S. FDA marketing clearance, and the company has undertaken comparison reference testing with existing glucose monitoring products as part of that process.

Know Labs generated revenue in Q1 2022 not from product sales, but from the sale of NFTs, or crypto Non-Fungible Tokens.

Know Labs' Market & Competition

According to a 2022 market research report by Grand View Research, the global market for blood glucose monitoring devices was an estimated $11.7 billion in 2021 and is forecast to reach $21.7 billion by 2030.

This represents a forecast CAGR of 8.0% from 2022 to 2030.

The main drivers for this expected growth are an increasing awareness by consumers for monitoring their blood sugar level and a growing number of patients suffering from diabetes or pre-diabetic conditions.

Also, below is a chart showing the U.S. blood glucose monitoring market history and projected future growth trajectory from 2020 to 2030:

U.S. Blood Glucose Monitoring Devices Market (Grand View Research)

Major competitive or other industry participants include:

• Abbott Laboratories (ABT)

• Medtronic plc (MDT)

• F. Hoffmann-La Roche Ltd.

• Ascensia Diabetes Care

• DexCom, Inc. (DXCM)

• Sanofi (SNY)

• Novo Nordisk (NVO)

• Insulet Corporation (PODD)

• Ypsomed Holding

• Glysens Incorporated

Know Labs Financial Performance

The company's recent financial results can be summarized as follows:

• Topline revenue from unrelated NFT sales

• Continued operating losses

• Variable cash used in operations

Below are relevant financial results derived from the firm's registration statement:

Total Revenue
Period	Total Revenue	% Variance vs. Prior
Six Mos. Ended March 31, 2022	$ 4,360,087	--%
FYE September 30, 2021	$ -	-100.0%
FYE September 30, 2020	$ 121,939
Gross Profit (Loss)
Period	Gross Profit (Loss)	% Variance vs. Prior
Six Mos. Ended March 31, 2022	$ 1,087,225	1982.3%
FYE September 30, 2021	$ -	--%
FYE September 30, 2020	$ -
Gross Margin
Period	Gross Margin
Six Mos. Ended March 31, 2022	24.94%
FYE September 30, 2021	0.00%
FYE September 30, 2020	0.00%
Operating Profit (Loss)
Period	Operating Profit (Loss)	Operating Margin
Six Mos. Ended March 31, 2022	$ (3,712,408)	-85.1%
FYE September 30, 2021	$ (10,446,148)	--%
FYE September 30, 2020	$ (6,825,928)	-5597.8%
Net Income (Loss)
Period	Net Income (Loss)	Net Margin
Six Mos. Ended March 31, 2022	$ (11,497,357)	-263.7%
FYE September 30, 2021	$ (25,360,213)	-581.6%
FYE September 30, 2020	$ (13,562,641)	-311.1%
Cash Flow From Operations
Period	Cash Flow From Operations
Six Mos. Ended March 31, 2022	$ (1,022,019)
FYE September 30, 2021	$ (6,850,699)
FYE September 30, 2020	$ (3,913,803)
(Glossary Of Terms)

Click to enlarge

(Source - SEC)

As of March 31, 2022, Know Labs had $11.2 million in cash and $5.9 million in total liabilities.

Free cash flow during the twelve months ended March 31, 2022, was negative ($5.7 million).

Know Labs, Inc. IPO Details

Know Labs intends to raise $6 million in gross proceeds from an IPO uplisting of its common stock, offering 3 million shares at a proposed price of $2.00 per share.

No existing shareholders have indicated an interest to purchase shares at the IPO price.

Assuming a successful IPO, the company's enterprise value at IPO would approximate $77.7 million, excluding the effects of underwriter over-allotment options.

The float to outstanding shares ratio (excluding underwriter over-allotments) will be approximately 6.41%. A figure under 10% is generally considered a 'low float' stock which can be subject to significant price volatility.

Management says it will use the net proceeds from the IPO as follows:

Proposed Use Of Proceeds (SEC EDGAR)

Management's presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management said the company is not currently a party to any legal proceeding 'that is not ordinary routine litigation incidental to our business.'

The sole listed bookrunner of the IPO is Boustead Securities.

Valuation Metrics For Know Labs

Below is a table of relevant capitalization and valuation figures for the company:

Measure [TTM]	Amount
Market Capitalization at IPO	$93,653,562
Enterprise Value	$77,655,292
Price / Sales	21.48
EV / Revenue	17.81
EV / EBITDA	-5.48
Earnings Per Share	-$0.78
Operating Margin	-324.73%
Net Margin	-845.34%
Float To Outstanding Shares Ratio	6.41%
Proposed IPO Midpoint Price per Share	$2.00
Net Free Cash Flow	-$5,716,879
Free Cash Flow Yield Per Share	-6.10%
Debt / EBITDA Multiple	-0.03
CapEx Ratio	-4.24
(Glossary Of Terms)

Click to enlarge

(Source - SEC)

Commentary About Know Labs' IPO

KNW is seeking public capital market funding to advance its medical device development plans.

The company's financials have produced revenue only from unrelated NFT sales, considerable operating losses, and fluctuating cash used in operations.

Free cash flow for the twelve months ended March 31, 2022, was negative ($5.7 million).

The firm currently plans to pay no dividends and intends to retain any future earnings to reinvest back into the business.

The market opportunity for improved blood glucose monitoring technologies is large and expected to grow as the global population ages and has a higher incidence of diabetic-related conditions.

Boustead Securities is the sole underwriter, and IPOs led by the firm over the last 12-month period have generated an average return of negative (6.5%) since their IPO. This is a lower-tier performance for all major underwriters during the period.

The primary risk to the company's outlook is that its primary product is still in development stage and its U.S. FDA approval is an unknown.

As for valuation, management is asking investors to pay an Enterprise Value of above $77 million for a company with no approved or commercialized product.

While day traders or other retail investors may be attracted to the extremely low nominal price per share for the IPO and create significant early trading volatility, I'm on Hold for the company's prospects.

Expected IPO Pricing Date: To be announced.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This report is intended for educational purposes only and is not financial, legal or investment advice. The information referenced or contained herein may change, be in error, become outdated and irrelevant, or removed at any time without notice. You should perform your own research for your particular financial situation before making any decisions. IPO investing can involve significant volatility and risk of loss.

Comments

[qwerty11]

Why shouldn't there be a huge pop when they have uplisted?

[Naysay Analysis]

@qwerty11 They announced it months ago, and the fundamentals haven't changed.

[qwerty11]

@Naysay Analysis OK in that case I'll not buy this one.

+1 anyway for the article in such an obscure name.

[Naysay Analysis]

I'm confused. It has a market cap of $92 million. If it is IPO-ing for $6 million, what happens to the other $86 million?

[arcfast1]

@Naysay Analysis The rest of the shares are kept by the company, a small float (5% of shares) to raise the $6M.