8-K: Know Labs Secures $12 Million Funding Agreement with Lind Global Fund II LP

Know Labs has entered into a funding agreement with Lind Global Fund II LP for up to $12 million to accelerate its clinical research and development initiatives.

Summary

• Know Labs has secured a funding agreement with Lind Global Fund II LP for up to $12 million.
• The initial closing of $4 million provides Know Labs with approximately $3.68 million in net proceeds after fees.
• The funding will be provided through convertible secured notes with a total face value of up to $14.4 million.
• The initial note has a face value of $4.8 million and a 24-month maturity date.
• The notes can be repaid in cash or shares of common stock, with the share price determined by 90% of the average of the three lowest daily VWAPs during the 20 trading days prior to the payment date.
• The notes can also be converted into shares at a fixed price of $1.00 per share, subject to adjustment.
• Know Labs will also issue a warrant to Lind to purchase 3,000,000 shares at an exercise price of $0.80 per share, subject to adjustment.
• The company intends to file a resale registration statement covering the shares underlying the notes and warrants within 30 days and seek effectiveness within 90 days.
• Monthly repayments of 1/20th of the face value, or $240,000, will commence 120 days after funding, payable in cash, shares, or a combination.
• Lind has the right to increase two monthly repayments up to $750,000, payable in stock.
• The funding is secured by the assets of Know Labs and its subsidiaries.

Sentiment

Score: 6

Explanation: The document is generally positive in tone, highlighting the funding secured and its intended use. However, the structure of the funding, including the convertible notes and security interest, introduces some risk. The company's focus on clinical trials and FDA clearance is a positive sign, but the company is still in the development stage.

Positives

• The funding will enable Know Labs to accelerate development across its core work streams.
• The investment will support the expansion of data collection in clinical research.
• The funding will support algorithm development.
• The funding will support the expansion of the company's intellectual property.
• The company is focused on validating its technology in large-scale clinical trials.
• The company is on a path to submitting to the FDA for clearance of its non-invasive glucose monitor.

Negatives

• The funding is structured as convertible secured notes, which could lead to dilution if converted.
• The company's obligations under the notes are secured by a first-priority security interest in all of its assets.
• The company is subject to certain negative covenants, including restrictions on distributions, stock repurchases, borrowing, sale of assets, loans and exchange offers.

Risks

• The company's obligations under the notes are secured by a first-priority security interest in all of its assets.
• The company is subject to certain negative covenants, including restrictions on distributions, stock repurchases, borrowing, sale of assets, loans and exchange offers.
• The company's market capitalization is below $15 million for consecutive 10 days, which is an event of default.
• The company's shares of common stock no longer being publicly traded or listed on a national securities exchange is an event of default.
• Any stop order or trading suspension restricting the trading in the company's common stock is an event of default.

Future Outlook

The company intends to use the funding to accelerate development across its core work streams, including hardware development, expanded data collection in clinical research, algorithm development, and expansion of its intellectual property. The company remains focused on validating the performance of its technology in large-scale clinical trials on its path to submitting to the FDA for clearance of its non-invasive glucose monitor.

Management Comments

• Ron Erickson, Chief Executive Officer and Chairman at Know Labs, commented, 'This investment will enable Know Labs to accelerate development across our four core work streams including, hardware development, expanded data collection in clinical research, algorithm development, and expansion of our defensible intellectual property moat around our technology.'
• Ron Erickson also stated, 'We remain focused on validating the performance of the Know Labs proprietary radiofrequency dielectric sensor in large-scale clinical trials on our path to submitting to the FDA for clearance, the worlds first non-invasive wearable continuous glucose monitor.'
• Phillip Valliere, Managing Director at The Lind Partners, said, 'Lind is excited about its investment in Know Labs. Know Labs has demonstrated success across numerous development milestones and has built a strong intellectual property foundation to attract further investment and future strategic partnerships. We are pleased to invest in Know Labs to support its growth and we look forward to working with its high-caliber management team as it moves into this next phase of development.'

Industry Context

This funding agreement highlights the growing interest in non-invasive medical diagnostic technologies, particularly in the area of continuous glucose monitoring. The investment from Lind Partners, a firm specializing in growth capital for smalland mid-cap companies, suggests confidence in Know Labs' technology and its potential to disrupt the market.

Comparison to Industry Standards

• The convertible note structure with warrants is a common financing method for development-stage companies in the medical technology sector.
• The conversion price of $1.00 per share represents a 50% premium to the last closing price, which is a typical incentive for investors in such financings.
• The warrant coverage of 75% of the funded amount is also a common feature in these types of transactions.
• The monthly repayment structure with options for cash or stock payments provides flexibility for the company.
• The security interest in all assets is a standard requirement for lenders in these types of financings.
• Comparable companies in the non-invasive glucose monitoring space include Dexcom and Abbott, which have achieved significant market capitalization and revenue growth. Know Labs is still in the development stage and has not yet received FDA clearance for its product.

Stakeholder Impact

• Shareholders may experience dilution if the convertible notes are converted into shares.
• Employees may benefit from the company's accelerated development and growth.
• Customers may eventually benefit from the company's non-invasive glucose monitoring technology.
• Creditors may be impacted by the company's secured debt obligations.

Next Steps

• Know Labs will file a resale registration statement covering the shares underlying the notes and warrants within 30 days.
• Know Labs will seek to have the registration statement declared effective within 90 days.
• Know Labs will commence monthly repayments 120 days after funding.
• Know Labs will continue to develop its technology and conduct clinical trials.
• Know Labs will seek FDA clearance for its non-invasive glucose monitor.

Key Dates

Keywords

funding, convertible notes, warrants, glucose monitor, non-invasive, clinical research, medical technology, Lind Global Fund II LP, The Lind Partners, security agreement