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A brief introduction to Know Labs
Know Labs, Inc. (OTCQB:KNWN) (KNW) has applied to raise $6 million in an initial public offering of its common stock, according to an S-1 registration statement.
The company is developing a non-invasive Blood glucose monitoring and associated vital sign device in the United States
While day traders or other retail investors will be drawn to the extremely low notional price per share for the IPO and can generate significant early trade volatility, I pause on the company’s prospects.
Know Labs Overview
Based in Seattle, Washington, Know Labs was formed 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 led by Chief Executive Officer Phillip A. Bosua, who has been with the company since 2017 and was previously the Founder and CEO of LIFX, a smart lightbulb maker, and before that was the Founder and CEO of LimeMouse Apps, a mobile app developer at iOS -Platform.
The Company aims to develop sensing technologies that use electromagnetic energy to perform sensing (bio-RFID) functions for consumers.
Know Labs has booked a fair market value investment of $100 million as of March 31, 2022 from investors including Clayton Struve and others.
The Company is still developing its primary devices, which require US FDA market approval, and as part of that process, the Company has conducted comparative reference testing against existing glucose monitoring products.
Know Labs generated revenue not from product sales in Q1 2022, but from sales of NFTs, or crypto non-fungible tokens.
Understand the Labs market and competition
According to a 2022 market research report by Grand View Research, the global blood glucose meter market was estimated at US$11.7 billion in 2021 and is projected to reach US$21.7 billion by 2030.
This represents a projected CAGR of 8.0% from 2022 to 2030.
The main drivers for this expected growth are increasing consumer awareness of monitoring their blood glucose levels and a growing number of patients suffering from diabetes or pre-diabetic conditions.
Also, below is a chart showing U.S. Blood Glucose Monitoring Market history and projected future growth path from 2020 to 2030:
Glucose Meter Market in United States (Grand View Research)
Key contestants or other industry participants include:
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Abbott Laboratories (ABT)
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Medtronic plc (MDT)
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F. Hoffmann-La Roche AG
-
Ascensia Diabetes Care
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DexCom, Inc. (DXCM)
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Sanofi (SNY)
-
Novo Nordisk (NVO)
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Island Corporation (PODD)
-
Ypsomed Holding
-
Glysens Incorporated
Learn about Labs’ financial performance
The company’s recent financial results can be summarized as follows:
-
Topline earnings from independent NFT sales
-
Continued Operating Losses
-
Variable means of payment used in the company
The following are relevant financial results arising from the company’s registration statement:
|
total revenue |
||
|
Period |
total revenue |
% variance vs. before |
|
Six months ending 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. before |
|
Six months ending March 31, 2022 |
$1,087,225 |
1982.3% |
|
FYE September 30, 2021 |
$- |
–% |
|
FYE September 30, 2020 |
$- |
|
|
gross margin |
||
|
Period |
gross margin |
|
|
Six months ending 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 months ending 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 months ending 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 months ending March 31, 2022 |
$(1,022,019) |
|
|
FYE September 30, 2021 |
$(6,850,699) |
|
|
FYE September 30, 2020 |
$(3,913,803) |
|
|
(Glossary of terms) |
(Source – SEC)
As of March 31, 2022, Know Labs had $11.2 million in cash and $5.9 million in total debt.
Free cash flow for the twelve months ended March 31, 2022 was negative ($5.7 million).
Do you know IPO details of Labs, Inc
Know Labs intends to raise $6 million in gross proceeds from an IPO by uplisting its common stock and is offering 3 million shares at a proposed price of $2.00 per share.
No existing shareholder has expressed an interest in buying shares at the IPO price.
Assuming a successful IPO, the Company’s enterprise value at IPO would be approximately $77.7 million, excluding the impact of underwriters’ over-allotment options.
The free float to outstanding share ratio (excluding over-allotments by underwriters) will be approximately 6.41%. A number below 10% is generally considered a “low float” stock, which can experience 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’s roadshow is not available.
Regarding pending litigation, management said the company is not currently involved in any litigation “that is not an ordinary routine litigation related to our business.”
The sole public bookrunner for the IPO is Boustead Securities.
Valuation metrics for Know Labs
Below is a table of relevant cap and valuation numbers for the company:
|
Measure [TTM] |
Crowd |
|
Market capitalization at IPO |
$93,653,562 |
|
Enterprise value |
$77,655,292 |
|
price / sale |
21.48 |
|
EV / Revenue |
17.81 |
|
EV / EBITDA |
-5.48 |
|
earnings per share |
-$0.78 |
|
operating margin |
-324.73% |
|
net margin |
-845.34% |
|
Ratio of float to shares outstanding |
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 |
|
investment rate |
-4.24 |
|
(Glossary of terms) |
(Source – SEC)
Comment on Know Labs IPO
KNW is seeking public capital market funding to advance its medical device development plans.
The company’s financials showed only revenue from independent NFT sales, significant operating losses, and fluctuating cash for operations.
Free cash flow for the twelve months ended March 31, 2022 was negative ($5.7 million).
The company currently plans not to pay dividends and intends to retain future profits to reinvest in the company.
The market opportunity for improved blood glucose monitoring technologies is large and is expected to increase as the world population ages and has a higher incidence of diabetic diseases.
Boustead Securities is the sole underwriter and IPOs led by the firm over the past 12 months have generated an average negative yield (6.5%) since going public. This is a lower performance for all major underwriters over the period.
The main risk to the company’s prospects is that its lead product is still in the development phase and its US FDA clearance is unknown.
As for the valuation, management is asking investors to pay an enterprise value in excess of $77 million for a company with no licensed or commercialized product.
While day traders or other retail investors will be drawn to the IPO’s extremely low per-share price and could generate significant early trade volatility, I pause on the company’s prospects.
Estimated IPO Price Date: To be announced.
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