By Popular Demand: Cleveland Weighs In On The Financial Condition Of Know Labs
What Do You Really Know About Know Labs, Inc. (KNWN)?
Financial and Ownership Review
by Cleveland (Not a Ghostwriter)
Objective: To analyze the financial condition and ownership of Know Labs and other miscellaneous factors of the Company
Market Cap at $1.20 share for 17.5 million shares is $ 21 Million
Fully Diluted Market Cap at $ 1.20 share for 49.1 million shares is $ 59 million
Watch You Video about the Company https://www.youtube.com/watch?v=NkPMc4ZorwQ&feature=youtu.be
Summary Description of Company
First Non-invasive Biotech Company
Company has invented the World’s First non-invasive blood monitoring platform using a wearable wrist band monitoring device.
Company’s platform technology can measure other substances on a noninvasive basis using a wearable wrist band monitoring device
They believe their technology platform is on par with the invention of the X-ray machine
The monitoring system is like wearing a fit bit around one’s wrist and they call it a U-band
The Company will launch it first product via KickStarter being a $99 automatic calorie intake counter with a smartphone application in Spring 2019.
The Company will launch a second product subject to FDA approval as a medical device as a non-invasive constant glucose monitor with smartphone APP for only $99 plus $49 per month subscription to data . Company’s goal is to have a million subscribers ($ 687 million of revenue). Company believes this is a $ 32 billion market opportunity.
32 million diagnosed diabetics with annual costs per person $ 948 consumables, $1422 of medications, 720 finger pricks (invasive !) , $ 5,530 patient care and physician visits
$ 327 Billion total costs of diagnosed diabetic patients
Know Labs annual cost of U-Band glucose monitoring system $ 687 annual cost with a present market cap of $ 59 million fully diluted market cap.
Three competitors with a combined market cap of over $ 250 million with invasive monitoring systems a) DexCom $ 5,560 Annual Cost $11.26 Billion market cap b) Medtronic Guardian Connect $ 3.355 Annual Cost $ 121 Billion Market Cap c) Abbott Labs Freestyle Libre $ 1,800 annual cost $124 Billion market cap
The third product lines involves measuring hormone levels or other substances with a smartphone app. For example measuring medication monitoring for the 60,000+ clinical trials taking place presently in the United States alone. There is no competition for these products.
Using Annual Form 10-K September 30, 2018 and this video https://www.youtube.com/watch?v=NkPMc4ZorwQ&feature=youtu.be
1) Review of Kickstarter Spring Program –Product Calorie Counter which requires no regulatory approvals. Counting Calories one consumes (Note this is not the first KickStarter program for CEO Phil Bosua-see below)
Company Goal is $ 5,000,000 or at $99 is 50,505 units…..seems easily attainable with number of people in Weightwatchers or
Interested in losing weight. With over 2.0 billion people overweight in the world the interest in this product could be meaningful. How many will fund??? Could this revitalize the financial condition of the company?
For this initial U-Band model only carbohydrate calories ingested are monitored. Subsequent U-Band Calorie Counter models will enable monitoring of carbohydrate calories, ingested fat, and protein calorie quantification.
IMHO the Spring KickStarter Program should vastly, if successful, propel the company as far as financing FDA clinical studies with no further stock dilution. Imagine that.
This device could become viral and sales could be 10 to 20 times what they are hoping for. Imagine $ 50 to $ 100 million impact on the balance sheet and the market cap of the company.
2) Analyzing Ownership
Shares Outstanding 17,531,522 (Market Cap at $ 1.20 share is $ 21 million)
Directors and Officers
Ronald P. Erickson 7,889,015 32.6
Philip A Bosua 2,917,500 16.6
Jon Pepper 238,000 1.4
Ichiro Takesako 150,000 .9
William A Owens 650,000 3.7
Clayton Struve 800,000 4.6
Public 4,887,007 27.8
Total 17,531,522 100.00
Fully Diluted Shares Outstanding 49,121,923 ( Fully Diluted Market Cap $ 1.20 share is $ 59 million)
So IF (big IF) company valued at $ 20 Billion the multiple would be 338 times your money. Goal could be to own 1,000 shares—see below for discussion.
Shares Outstanding 17,531,522
Warrants Outstanding 15,473,398 at average price of $ .326
Employee Stock options 2,182,668 at average price of $ 1.70
Convertible Preferred Stock 4,914,071
Convertible Note Payable 9,020,264 at $ .25 share
Grand Total Fully Diluted Shares 49,121,923
Break Down of major shareholders
Clayton A Struve 16,763,790 34%
Ronald P Erickson 7,889,015 16%
Philip A Bosua 2,917,500 6%
Dale Broadrick 2,226,036 4.5%
Total 29,796,341 61%
3) Backgrounds of major shareholders of Know Labs, Inc.-note experience of holders—Note successes
Clayton Struve https://tinyurl.com/y966lxym
Mr. Clayton A. Struve, Clay has been Partner of CSS LLC, a Proprietary Trading Firm since September 1998. From October 1997 to joining CSS LLC, Mr. Struve pursued personal investment activities.
From January 1991 to October 1997, Mr. Struve served as Managing Director of Swiss Bank Corporation, holding various positions, including co-head of equities and co-head of Global Risk Control.
From 1981 to 1991, Mr. Struve served as Partner at O’Connor & Associates and served Head Of Equities, Head Of Risk and Head of New Products. He also directed development of risk modeling and systems. He has been Director of Peak6 Investment, LP (Alternate name: Peak6 Corp.), since March 2001. Mr. Struve also serves as a Member of the board of directors of O’Connor Partnerships, a Private Investment Firm.
He serves on the boards of Target Discovery Inc., a Biotechnology Firm, and Prediction Cos. LLC, a Quantitative Trading Advisory Firm. Mr. Struve holds a BS in Management and Finance from Massachusetts Institute of Technology.
Ron Erickson-attorney and venture capitalist https://en.wikipedia.org/wiki/Ron_Erickson_(investor) Ron Erickson (born December 24, 1943, Tacoma, Washington) is an American business executive, lawyer, and angel investor based in Seattle. After co-founding Microrim in 1981, he has either founded or served as an executive for companies such as GlobalTel Resources, Inc., GlobalVision, Inc, Egghead Software, Inc., and Blue Frog Media. He was the sole investor in Double Down Interactive, a social video game studio that was sold for up to $500 million in 2012.
Early in his career Erickson worked in public policy at the White House and the Office of Economic Opportunity in Washington, D.C., becoming the latter’s Branch Chief for Emergency Food and Medical Services. He also worked for the Rockefeller Commission on Critical Choices in New York City. He studied law at the University of California at Davis, graduating with a Juris Doctor,[ and is licensed to practice law through the Washington State Bar Association.He has worked in Seattle at firms such as Kargianis, Austin & Erickson, and Ronald P. Erickson & Associates.
Philip Bosua –approximately 45 years old
Company CEO 4/10/18 Chief product officer since 7/7/17 From 9/12 to 2/15 CEO of LIFX, Inc
Philip Bosua Linked in
Bosua has had previous success at Kickstarter in 2014- in other words this is not his first rodeo at Kickstarter.
Bright idea: Australian Phil Bosua raises $US12m as he readies smart light switch
After a hugely successful Kickstarter campaign, LIFX secures $12M for its smart light bulbs
After a hugely successful Kickstarter campaign, LIFX secures $12M for its smart light bulbs
“Back in 2012, when a smart home was just whispers and dreams, we kickstarted into action and launched the first ever multicolored LED Wi-Fi light. Its been a crazy 5 years and we now offer 12 products in over 80 countries that bring the future of lighting within your control. Oh, and we’ve made some friends along the way. Like any good smart home product, LIFX works seamlessly with other industry leaders such as Amazon Alexa, Nest & Google Home. You can check out the full range here.”
“Leaders in Wi-Fi connected smart lights.”
“The San Francisco– and Melbourne-based startup launched in 2012 with a $1.3 million Kickstarter crowdfunding raise. It was founded by CEO Phil Bosua, CTO Marc Alexander, Guy King, Jake Lawton, CIO Daniel May and Bevan Clark.”
4) Chief Medical Officer
James Anderson, MD, has joined the Company as Medical Director in September 2018
James H. Anderson, Jr., M.D., FFPM, FACE, is a diabetologist and endocrinologist.
Dr. Anderson previously joined Eli Lilly and Company (LLY) where he was responsible for Lilly’s global clinical diabetes development program. He managed diabetes and cardiometabolic drug clinical development, and drove the clinical development of three families of billion dollar diabetes care products.
5) Analysis of Financial Statements Year Ended 9/30/18
Current Assets $ 1,478,667
Analysis of Liabilities—
63% of Liabilities is to related parties and Deferred Revenue-not true third party debt
37% True Third Party Debt $ 1,729,943 (which is relative to the total current assets of $ 1,478,667)
The Spring KickStarter Program should vastly improve the financial condition of Know Labs. In fact, if successful it could propel the company as far as financing FDA clinical studies with no further stock dilution.
Accounts payable-related parties $ 12,019
Convertible Notes Payable $ 2,255,066
(convertible into 9,020,264 shares)
Accrued Expenses-related parties $ 657,551
Deferred Revenue $ 55,959
Total $ 2,980,595 63%
True Debt or Liabilities
Accounts Payable-trade $ 1,512,617
Accrued Expenses $ 72,140
Note Payable –current Long term $ 145,186
Total True Debt $ 1,729,943 37%
Total Liabilities $ 4,710,538 100%
Conclusion: Know Labs Financial Condition is not DIRE at all. All the dire statements in the Form 10-K are standard generally accepted accounting principle language seen in every start-up company in the world. These are boiler plate statements of doom and gloom. Real risks have to be analyzed and evaluated.
The Company is about to close a $ 5 million funding at Flash Funders. 8% Subordinated convertible Debt one year at $ 1.25 share One-Half five year warrant at 120% of conversion price of Debt. This financing vastly improves the Company’s financial situation.
6) Compensation Ronald P Erickson CEO Salary $ 180,000 Philip A Bosua CEO Salary $ 106,095 Comment: Beyond reasonable.
7) Intellectual Property “The Company actively pursues a robust intellectual property strategy and has been granted twelve patents. The Company also has 20 patents pending.”
8) Pipeline of Company- There is not a single biotech company in the Pub that has a wider pipeline than Know Labs. It will take years and years to yield all the possible applications of the technology and IMHO it will be acquired by the Apple, MicroSoft or Googles of the world long before reaching all possible applications.
9) Dr. Mark Tapsak
Know Labs White paper co-author and Professor of Chemistry and Biochemistry at Bloomsburg University, Mark Tapsak, Ph.D., says of the technology, “The Know Labs Bio-RFID sensor represents a significant development in medicine, and I expect that their team will create disruptive products from this technology platform.”
The white paper states in part:
“The Know Labs Bio-RFID glucose sensing system effectively uses RF spectroscopy to selectively measure glucose concentrations. This system will enable the creation of a wearable non-invasive blood glucose sensor for consumer and medical use.”
“In his first industry position with Medtronic Inc. (Minneapolis, MN), he helped to develop novel polyurethane and silicone-based biomaterials to be used in Medtronic’s implantable medical devices.
In his second industrial appointment with DexCom Inc. (San Diego, CA), he developed and refined numerous manufacturing processes for a fully implantable amperometric glucose sensor. Those processes included the production of a multilayer polyurethane membrane that incorporated an immobilized glucose oxidase, and multiple epoxy and silicone adhesive steps in the fabrication of the device.”
Comment: Note Dr. Tapsak was involved with competitor product DexCom
Per personal email from Dr. Tapsak regarding initial white paper:
“There are, and will continue to be, additional experiments that we can share that demonstrate our understanding of the BioRFID technology platform. The white paper only scratched the surface……. ….Please keep an eye on the newswire, we will be sharing more papers.
Comment: The onion will be peeled back and with the Spring release of the Calorie counter it will reveal more of the science behind the technology.
10) The Company had existing revenues in 2018 of $ 4.3 million and gross profit of $ 821,00 as a distributor of products for employee and personnel identification and authentication.
11) I am so OCD that I began yesterday to following Know Labs employee Tyler Odenthal on Instagram and Twitter. I saw pictures of the Company’s new offices on his Instagram feed. Hardly a step a company in dire straits would take. Anecdotal agree.
12) For those groping to determine how to allocate limited resources to a wealth of splendid opportunities by Doc think about owning as little as 1,000 shares of Doc’s top eight positions.
[Disclaimer: Cleveland is a nom de plume for a highly credentialed financial analyst and accountant who formerly traded stocks for George Soros. His discussion should not be regarded as investment advice or recommendation as to any course of action. There can be no guarantee that the information presented here is accurate or complete, though he has striven for accuracy. The biotech discussed herein is extremely high risk as is investment in all biotech companies. The author has a long position in $KNWN but no financial relationship with the company or its officers. He is free, however, both to invest in $KNWN and to pursue such a relationship subject to disclosure to readers. As per policy, he will be asked to refrain for 72 hours hence as regards trading in $KNWN shares.—The Editors.]