Form 4: KNOW LABS Director Boosts Stake, Preferred Stock Redeemed

KNOW LABS Director Ronald P. Erickson increased his beneficial ownership through a stock award and a significant preferred stock redemption involving an affiliated entity.

Summary

• Ronald P. Erickson, a Director of KNOW LABS, INC. (KNW), was awarded 335,000 shares of common stock on August 6, 2025, with 50% vesting immediately and the remainder vesting in 8 quarterly installments starting six months after the grant date.
• The restricted shares granted to Mr. Erickson will fully vest upon the sale of substantially all of the Company's sensor-related intellectual property or an involuntary termination of his employment.
• On August 6, 2025, the Issuer redeemed 16,916 shares of Series H Convertible Preferred Stock held by J3E2A2Z Limited Partnership, an entity affiliated with Mr. Erickson.
• The redemption price for the Series H Preferred Stock was its stated value of $70 per share, plus accrued and unpaid dividends totaling $140,210.15.
• The redemption resulted in a cash payment of $654,276.15 to J3E2A2Z and the issuance of 2,000,000 shares of common stock at a conversion price of $0.335 per share.
• Following these transactions, Mr. Erickson directly owns 472,202 shares of common stock (including unvested restricted shares) and indirectly owns 2,000,000 shares of common stock through J3E2A2Z.
• Mr. Erickson also directly holds 21,375 warrants to purchase common stock at $9.6 and 50,000 warrants at $61.2, while J3E2A2Z indirectly holds 25,992 warrants at $9.6.

Sentiment

Score: 4

Explanation: The sentiment is mixed. While the director's stock award indicates commitment, the significant cash outflow and dilution from the preferred stock redemption at a very low conversion price could be viewed negatively by investors.

Positives

• A Director, Ronald P. Erickson, received a significant award of 335,000 common shares, indicating continued commitment and alignment with shareholder interests.
• The redemption of Series H Convertible Preferred Stock simplifies the company's capital structure by converting a complex security into common equity and cash.

Negatives

• The redemption of Series H Convertible Preferred Stock involved a substantial cash outflow of $654,276.15.
• The redemption also resulted in the issuance of 2,000,000 common shares at a low conversion price of $0.335 per share, which could lead to significant dilution for existing common shareholders.

Risks

• Potential dilution of existing common shareholders due to the issuance of 2,000,000 new common shares at a conversion price of $0.335.
• Significant cash outflow of $654,276.15 for the preferred stock redemption could impact the company's liquidity or working capital.
• The vesting conditions for Mr. Erickson's restricted shares, tied to the sale of sensor-related intellectual property or involuntary termination, introduce specific event-driven risks or incentives.

Future Outlook

The vesting schedule for the 335,000 restricted shares awarded to Ronald P. Erickson indicates future increases in his direct beneficial ownership over eight quarterly installments, starting six months after August 6, 2025. Full vesting is also contingent on specific corporate events like the sale of sensor-related intellectual property or involuntary termination of employment.

Industry Context

This Form 4 filing details insider transactions and capital structure adjustments for KNOW LABS, INC. (KNW). Without specific industry context from the filing, it's difficult to assess how these transactions relate to broader industry trends. However, insider stock awards and preferred stock redemptions are common mechanisms for executive compensation and capital management across various industries.

Corporate Governance

Related Party Transactions

• Redemption of 16,916 shares of Series H Convertible Preferred Stock held by J3E2A2Z Limited Partnership, an entity affiliated with Ronald P. Erickson, a Director of the Issuer.

Stakeholder Impact

• Shareholders: Potential dilution due to the issuance of 2,000,000 common shares at a low conversion price as part of the preferred stock redemption. Also, increased alignment with a director's interests through a stock award.
• Creditors: Cash outflow of $654,276.15 for the preferred stock redemption could impact the company's cash reserves, potentially affecting liquidity.

Next Steps

• The remaining 50% of Ronald P. Erickson's 335,000 common stock award will vest in 8 quarterly installments, with the first two installments vesting six months after August 6, 2025.

Key Dates

Keywords

KNOW LABS, KNW, SEC Form 4, Insider Trading, Beneficial Ownership, Common Stock, Preferred Stock Redemption, Stock Award, Director Compensation, Capital Structure, Dilution, Warrants