8-K: Know Labs Implements 1-for-40 Reverse Stock Split to Maintain NYSE American Listing Compliance

Know Labs enacts a 1-for-40 reverse stock split to meet NYSE American listing requirements, effective February 19, 2025.

Summary

• Know Labs, Inc. has implemented a 1-for-40 reverse stock split of its common stock.
• The reverse stock split was approved by the Board of Directors and filed with the Nevada Secretary of State on February 10, 2025.
• FINRA processed and announced the split on February 18, 2025.
• Trading on a post-split basis commenced on the OTC Pink Market under the temporary symbol KNWND on February 19, 2025, for a 20-day period.
• After the 20-day period, the shares will continue to trade under the KNWN symbol on the OTC Pink Market.
• The reverse stock split reduces the number of authorized shares from 300,000,000 to 7,500,000 and outstanding shares from 112,423,912 to approximately 2,810,598.
• No fractional shares will be issued; instead, stockholders will receive an additional fractional share to round up to the next whole number.
• The primary purpose of the reverse stock split is to meet the per share price requirements for continued listing on the NYSE American.
• The company is appealing the delisting process to the Listings Qualifications Panel of the Exchange.
• The CUSIP number for the common stock following the reverse stock split is 499238202.

Sentiment

Score: 4

Explanation: The sentiment is cautiously negative. While the company is taking steps to maintain its listing, the reverse stock split itself is often viewed as a sign of financial distress. The management's comments express hope but also acknowledge the challenges.

Positives

• The reverse stock split aims to help Know Labs regain compliance with NYSE American listing criteria.
• The company is actively appealing the delisting process.
• The reverse stock split does not affect stockholders' percentage ownership interest or voting power, except for minor adjustments due to fractional shares.
• The company expects near-term revenues from its recently announced Know Labs Technology Licensing (KTL) undertaking.
• The company continues to work on its medical diagnostic efforts with a focus on blood glucose monitoring.

Negatives

• The company's stock is currently suspended from trading on the NYSE American during the appeal process.
• The company's stock is temporarily trading on the OTC Pink Market under the symbol KNWND for 20 days, then will revert to KNWN.
• The reverse stock split was necessary due to the company's stock price falling below $0.10, indicating potential financial distress.

Risks

• There is no guarantee that the appeal to the NYSE American Listings Qualifications Panel will be successful.
• Failure to regain compliance with NYSE American listing requirements could result in permanent delisting.
• The reverse stock split may negatively impact investor perception of the company.
• The company's stock price may continue to be volatile.
• The company's future success depends on the successful development and commercialization of its technology, including obtaining FDA clearance for its non-invasive glucose monitor.

Future Outlook

The company is focused on regaining compliance with NYSE American listing criteria and expects near-term revenues from its Know Labs Technology Licensing (KTL) undertaking, while continuing to develop its medical diagnostic efforts, particularly in blood glucose monitoring.

Management Comments

• Know Labss CEO, Ron Erickson, stated, 'On several occasions, during my career, both as an investor and as a manager, I have experienced the impact of reverse stock splits.'
• Ron Erickson stated, 'A reverse stock split is not something that I, or the Board of Directors, take lightly.'
• Ron Erickson stated, 'We believe it is in the best interests of the Company to maintain its listing on the NYSE American.'
• Ron Erickson stated, 'A reverse stock split is one component of our efforts to maintain that listing.'
• Ron Erickson stated, 'Our intrinsic value is not appreciated by the public market.'
• Ron Erickson stated, 'We expect near-term revenues from our recently announced Know Labs Technology Licensing (KTL) undertaking.'
• Ron Erickson stated, 'Meanwhile, we continue to work on our medical diagnostic efforts with our focus on blood glucose monitoring.'

Industry Context

Reverse stock splits are often used by companies facing delisting from major exchanges due to low share prices; this action is intended to increase the share price and meet minimum listing requirements, but it can also signal financial difficulties to investors.

Comparison to Industry Standards

• Reverse stock splits are a relatively common strategy for companies attempting to maintain exchange listing compliance.
• Companies like DryShips Inc. have used reverse stock splits multiple times to maintain listing, but the long-term success of this strategy varies.
• Compared to companies that focus on operational improvements to increase share value, Know Labs is primarily relying on a financial maneuver while also pursuing licensing and diagnostic development.
• The success of Know Labs' approach will depend on its ability to generate revenue from KTL and advance its blood glucose monitoring technology.

Stakeholder Impact

• Shareholders will experience a reduction in the number of shares they own, but their percentage ownership will remain largely unchanged.
• Employees may be concerned about the company's financial stability and future prospects.
• Customers and partners may be reassured by the company's efforts to maintain its listing, but they may also be cautious about the company's long-term viability.
• Creditors may be more closely scrutinizing the company's financial performance.

Next Steps

• The company will continue to trade on the OTC Pink Market under the symbol KNWN after the initial 20-day period under the symbol KNWND.
• The company will await the outcome of its appeal to the NYSE American Listings Qualifications Panel.
• The company will continue working on certain additional curative actions to regain compliance to maintain any additional listing standards while it awaits its appeal.
• The company will focus on generating revenue from its Know Labs Technology Licensing (KTL) undertaking.
• The company will continue to develop its medical diagnostic efforts, particularly in blood glucose monitoring.

Key Dates