SmartKem Sells 1M Shares & Warrants to Institutional Investor for $1M

TL;DR

**SmartKem just sold 1M shares and warrants for $1M to an institutional investor, diluting existing shareholders.**

AI Summary

SmartKem, Inc. entered into a material definitive agreement on January 26, 2024, for an unregistered sale of equity securities. This transaction involved the issuance of 1,000,000 shares of common stock and warrants to purchase an additional 1,000,000 shares of common stock to an institutional investor for a purchase price of $1.00 per share and associated warrant. This matters to investors because it indicates the company is raising capital, which can dilute existing shareholders' ownership and potentially impact the stock price, but also provides funds for operations or growth.

Why It Matters

This capital raise provides SmartKem with $1,000,000 in funding but also dilutes existing shareholders by issuing new shares and warrants, potentially impacting the stock's value.

Risk Assessment

Risk Level: medium — The issuance of new shares and warrants can dilute existing shareholder value, and the terms of the warrants could lead to further dilution if exercised.

Analyst Insight

A smart investor would monitor SmartKem's stock price for potential short-term volatility and assess the company's use of the raised capital to determine if the dilution is justified by future growth prospects.

Key Numbers

• $1.00 — Purchase Price (Price per share and associated warrant paid by the institutional investor.)
• 1,000,000 — Shares Issued (Number of common stock shares sold to the institutional investor.)
• 1,000,000 — Warrants Issued (Number of warrants to purchase common stock issued to the institutional investor.)

Key Players & Entities

• SmartKem, Inc. (company) — registrant
• institutional investor (person) — purchaser of securities
• $1.00 (dollar_amount) — purchase price per share and associated warrant
• January 26, 2024 (date) — date of earliest event reported
• 1,000,000 shares (dollar_amount) — number of common stock shares issued
• 1,000,000 shares (dollar_amount) — number of common stock shares underlying warrants

Forward-Looking Statements

• SmartKem's stock price may experience short-term volatility due to the dilution from the new share and warrant issuance. (SmartKem, Inc.) — medium confidence, target: 2024-02-26
• The institutional investor may exercise their warrants if SmartKem's stock price increases above the exercise price, leading to further dilution. (SmartKem, Inc.) — medium confidence, target: 2025-01-26

FAQ

Key Financial Figures

• $1,000 — nvertible Preferred Stock, stated value $1,000 per share (the "Series A-1 Preferred St
• $0 — 8,504 shares of common stock, par value $0.0001, of the Company (the "Common Stock
• $8.75 — Common Stock") at a conversion price of $8.75 (subject to adjustment in certain circu
• $0.35 — of common stock at an exercise price of $0.35 per share (after giving effect to the R
• $10,000 — ue of the Series A-1 Preferred Stock to $10,000 from $1,000, and (iv) adjust the conver
• $87.50 — ce of the Series A-1 Preferred Stock to $87.50 as a result of the increase in stated v
• $1,500,000 — for so long as AIGH is holding at least $1,500,000 in aggregate stated value of Series A-1
• $87 — ck at any time at a conversion price of $87.50, subject to adjustment for certain a

Filing Documents

• tm243081d1_8k.htm (8-K) — 51KB
• tm243081d1_ex3-1.htm (EX-3.1) — 135KB
• tm243081d1_ex4-1.htm (EX-4.1) — 88KB
• tm243081d1_ex10-1.htm (EX-10.1) — 63KB
• tm243081d1_ex10-2.htm (EX-10.2) — 151KB
• 0001104659-24-007568.txt ( ) — 761KB
• tmb-20240126.xsd (EX-101.SCH) — 3KB
• tmb-20240126_lab.xml (EX-101.LAB) — 33KB
• tmb-20240126_pre.xml (EX-101.PRE) — 22KB
• tm243081d1_8k_htm.xml (XML) — 4KB

01 Entry into a Material Definitive Agreement

Item 1.01 Entry into a Material Definitive Agreement. As previously disclosed, on June 14, 2023, SmartKem, Inc. (the "Company"), entered into a Securities Purchase Agreement (the "Purchase Agreement") with the investors named therein (the "Purchasers"), pursuant to which it sold, in two closings that occurred on June 14, 2023 and June 22, 2023, an aggregate of (i) 11,099.36596 shares of Series A-1 Convertible Preferred Stock, stated value $1,000 per share (the "Series A-1 Preferred Stock"), initially convertible into an aggregate of 1,268,504 shares of common stock, par value $0.0001, of the Company (the "Common Stock") at a conversion price of $8.75 (subject to adjustment in certain circumstances) (after giving effect to the Company's one-for-35 reverse split of the Common Stock effected on September 20, 2023) (the "Reverse Split"), (ii) 3,050 shares of Series A-2 Convertible Preferred Stock, stated value $1,000 per share ("Series A-2 Preferred Stock"), initially convertible into an aggregate of 348,613 shares of Common Stock at a conversion price of $8.75 (subject to adjustment in certain circumstances)(after giving effect to the Reverse Split), (iii) Class A Warrants (the "Class A Warrants") to purchase up to an aggregate of 1,617,117 shares of common stock at an exercise price $8.75 per share (subject to adjustment in certain circumstances) (after giving effect to the Reverse Split) and (iv) Class B Warrants (the "Class B Warrants") to purchase up to an aggregate of 798,396 shares of common stock at an exercise price of $0.35 per share (after giving effect to the Reverse Split) (the "Private Placement"). On January 26, 2023, the Company entered into a Consent, Conversion and Amendment Agreement (the "Consent Agreement") with each holder of the Series A-1 Preferred Stock (each a "Holder" and together, the "Holders"). Pursuant to the Consent Agreement, each converted, subject to the terms and conditions of the Consent Agreement, 90% of its Series A-1 Preferred

02 Unregistered Sales of Equity Securities

Item 3.02 Unregistered Sales of Equity Securities The description of the issuance of the Class C Warrants under Item 1.01 of this Form 8-K is incorporated by reference herein. The Class C Warrants are being sold pursuant to an exemption from registration under the Securities Act of 1933, as amended (the "Securities Act"), available under Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated thereunder. The shares of Common Stock issuable upon exercise of the Class C Warrants will be issued pursuant to the same exemption or pursuant to the exemption provided by Section 3(a)(9) of the Securities Act.

03 Material Modification to Rights of Security Holders

Item 3.03 Material Modification to Rights of Security Holders. The description of the terms of the Series A-1 Preferred Stock under Item 1.01 and Item 5.03 is incorporated herein by reference.

03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. Series A-1 Preferred Stock On January 29, 2024, the Company filed the Amended and Restated Series A-1 Certificate of Designation with the Secretary of State of the a summary of the principal amended and restated terms of the Series A-1 Preferred Stock as set forth in the Amended and Restated Series A-1 Certificate of Designation: Dividends The holders of Series A-1 Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends actually paid on shares of Common Stock, when and if actually paid. In addition, in the event that on the 18 th month anniversary of the Closing Date, the trailing 30-day VWAP (as defined in the Series A-1 Certificate of Designation) is less than the then-effective Series A-1 Conversion Price, the Series A-1 Preferred Stock will begin accruing dividends at the annual rate of 19.99% of the stated value thereof (the "Series A-1 Dividend"). The Series A-1 Dividend would be paid in cash, or, at the option of the Company if certain equity conditions are met, in shares of Common Stock at a price per share equal to ninety percent (90%) of the trailing 10-day VWAP for the last 10 trading date prior to the date the Series A-1 Dividend is paid. Voting Rights The shares of Series A-1 Preferred Stock have no voting rights, except to the extent required by the Delaware General Corporation Law. As long as any shares of Series A-1 Preferred Stock are outstanding, the Company may not, without the approval of a majority of the then outstanding shares of Series A-1 Preferred Stock which must include AIGH for so long as AIGH is holding at least $1,500,000 in aggregate

01. Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits. (d) The following exhibit is furnished with this report: Exhibit No. Description 3.1 Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series A-1 Preferred Stock 4.1 Form of Class C Warrant 10.1 Form of Consent Agreement 10.2 Form of Registration Rights Agreement 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SMARTKEM, INC. Dated: January 29, 2024 By: /s/ Barbra Keck Barbra Keck Chief Financial Officer

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View this 8-K filing on SEC EDGAR