DEF: Know Labs Seeks Stockholder Approval for Reverse Stock Split to Maintain NYSE Listing

Know Labs is asking shareholders to approve a reverse stock split of up to 1-for-15 to maintain its listing on the NYSE American and potentially attract new investors.

Summary

• Know Labs is holding a special meeting on March 7, 2025, to seek stockholder approval for a reverse stock split.
• The proposed reverse stock split would be at a ratio of not more than 1-for-15, with the exact ratio and timing to be determined by the Board.
• The primary reason for the reverse stock split is to maintain the company's listing on the NYSE American.
• The company received a notice from the NYSE American on September 27, 2024, stating that it was not in compliance with minimum stockholders' equity requirements.
• The NYSE American accepted the company's plan to regain compliance and granted an extension through March 27, 2026.
• The reverse stock split may also assist the company's capital-raising efforts and make the stock more attractive to investors.
• The board has unanimously approved the reverse stock split proposal and recommends that stockholders vote in favor of it.
• Stockholders of record as of January 6, 2025, are eligible to vote at the special meeting.
• The company is also seeking approval to adjourn the special meeting to solicit additional proxies if needed.

Sentiment

Score: 6

Explanation: The document is neutral to slightly positive. While the reverse stock split is a necessary action to avoid delisting, it also carries risks and uncertainties. The company is taking proactive steps to address its listing issues, but the outcome is not guaranteed.

Positives

• The reverse stock split is intended to help maintain the company's listing on the NYSE American, which is crucial for investor confidence and access to capital.
• A higher stock price may make the company's stock more attractive to a broader range of investors.
• The reverse stock split could reduce price volatility and transaction costs for investors.
• The company believes a higher stock price will help attract and retain employees.
• The board has the flexibility to determine the exact ratio of the reverse stock split based on market conditions.

Negatives

• The market price of the company's stock may decline after a reverse stock split due to factors outside of the company's control.
• The reverse stock split does not change the intrinsic value of the business or a stockholder's proportional ownership.
• The reverse stock split may leave some shareholders with odd lots, which can increase transaction costs.
• If the overall value of the common stock declines after the reverse stock split, the value of shares held by stockholders will also decrease.

Risks

• There is a risk that the reverse stock split may not result in an increase in the company's stock price.
• The company may still be unable to maintain its listing on the NYSE American despite the reverse stock split.
• Market volatility and investor response to the reverse stock split could negatively impact the stock price.
• The company's ability to raise additional financing could be adversely affected if it is delisted from the NYSE American.
• Delisting could also lead to a loss of employee confidence and institutional investors.

Future Outlook

The company intends to effect a reverse stock split before September 30, 2025, if approved by stockholders, to maintain its NYSE American listing and potentially improve its stock price and ability to raise capital. The board will determine the exact ratio and timing of the split.

Management Comments

• The Board has unanimously approved Proposal 1 and Proposal 2, and has determined that they are advisable, fair to and in the best interests of the Company and its stockholders.
• The Board unanimously recommends that stockholders vote FOR the proposals set forth in the accompanying proxy statement.
• We believe that hosting a virtual meeting is in the best interest of the Company and its stockholders.

Industry Context

Reverse stock splits are a common strategy for companies facing delisting from exchanges due to low stock prices. This action is often taken to regain compliance with listing requirements and improve investor perception. The company is acting to avoid delisting which would be a negative outcome.

Comparison to Industry Standards

• Many companies facing similar listing issues have implemented reverse stock splits to regain compliance.
• The proposed reverse stock split ratio of up to 1-for-15 is within the typical range seen in similar situations.
• Other companies that have recently undertaken reverse stock splits include Cassava Sciences (up to 1-for-10), and Faraday Future (1-for-80).
• The company's situation is similar to other small-cap companies that have struggled to maintain minimum stock price and equity requirements.

Stakeholder Impact

• Shareholders will be impacted by the reverse stock split, which will reduce the number of shares they own but may increase the per-share price.
• Employees may be impacted by the company's ability to maintain its listing and raise capital.
• Potential investors may be more interested in the company if the stock price increases.
• The company's ability to access capital markets could be affected by the outcome of the reverse stock split.

Next Steps

• Stockholders will vote on the reverse stock split proposal at the special meeting on March 7, 2025.
• If approved, the Board will determine the exact ratio and timing of the reverse stock split.
• The company will file a Certificate of Change with the Nevada Secretary of State to effect the reverse stock split.
• The company will notify shareholders of the reverse stock split and provide instructions for exchanging stock certificates.

Key Dates

Keywords

reverse stock split, NYSE American, stockholders equity, listing compliance, capital raising, proxy statement, common stock, stock price, shareholders, corporate action