Smith Micro Founder and CEO Bill Smith to Invest $3.0 Million in Financing

Rhea-AI Summary

Smith Micro Software (NASDAQ: SMSI) has announced two concurrent financing agreements totaling approximately $6.9 million in gross proceeds. The financing includes:

1. A registered offering of 3,321,881 shares at $1.165 per share with accompanying warrants, yielding about $3.9 million.

2. A private placement with CEO Bill Smith investing $3.0 million for 2,575,107 unregistered shares at $1.165 per share with warrants.

Both offerings include warrants exercisable at $1.04 per share after six months, expiring in five years. The transactions are expected to close on October 2, 2024. Proceeds will be used for working capital and general corporate purposes.

Positive

• CEO Bill Smith commits to a significant $3.0 million investment in the company
• Total anticipated proceeds of $6.9 million from two concurrent financings
• Warrants included in both offerings provide potential for additional future capital

Negative

• Dilution of existing shareholders due to issuance of new shares
• Offering price of $1.165 per share may be below current market price
• Private placement to CEO could increase his control over the company, potentially affecting other shareholders

Insights

Financial Analyst

Smith Micro's dual financing strategy, combining a $3.9 million registered offering and a $3.0 million private placement, signals a significant capital infusion totaling $6.9 million. The CEO's substantial personal investment of $3.0 million demonstrates strong insider confidence in the company's future prospects.

The financing structure, utilizing both common stock and warrants, provides flexibility while potentially minimizing immediate dilution. The warrant exercise price of $1.04 per share, slightly below the offering price of $1.165, could incentivize future exercise and additional capital inflow.

With a current market cap of only $11.6 million, this 59.5% capital increase is substantial and could significantly impact the company's financial position and operations. Investors should monitor how effectively management deploys this capital for working capital and general corporate purposes to drive growth and potentially improve the company's market position.

Legal Expert

The dual-pronged financing approach by Smith Micro demonstrates careful legal structuring to comply with securities regulations. The registered offering leverages an existing shelf registration, streamlining the process for issuing securities to institutional and accredited investors. This approach offers greater liquidity and fewer restrictions for participants.

Conversely, the private placement with the CEO utilizes exemptions under Section 4(a)(2) and Rule 506 of Regulation D, avoiding the need for immediate registration but imposing resale limitations. The company's commitment to file a subsequent registration for these shares balances the CEO's interests with regulatory compliance.

The warrant structure, particularly the 19.99% ownership limitation tied to NASDAQ Rule 5635(b), shows thoughtful consideration of listing requirements and shareholder approval thresholds. This legal framework provides capital while safeguarding against unintended control shifts or regulatory complications.

Anticipated Proceeds of Two Concurrent Financings Total $6.9 Million

PITTSBURGH--(BUSINESS WIRE)-- Smith Micro Software, Inc.(the “Company” or “Smith Micro”) (NASDAQ: SMSI) today announced that it has entered into definitive agreements with respect to two separate offerings; a registered offering with certain institutional and accredited investors, and an unregistered offering with the Company’s chief executive officer. Both offerings have been priced based on the market value of the offered securities as of the time of signing the purchase agreements. The aggregate gross proceeds of the two offerings are expected to be approximately $6.9 million, which includes a committed investment of $3.0 million from the Company’s chief executive officer.

Registered Offering

The Company and certain investors have entered into a definitive agreement for the issuance of an aggregate of 3,321,881 registered shares of the Company’s common stock (together with an accompanying unregistered warrant) at a price of $1.165 per share (the “Registered Offering”). Each warrant will be exercisable for one share of common stock at an exercise price of $1.04 per share. The warrants will become exercisable six months after they are issued and will expire five years thereafter.

The Registered Offering will result in gross proceeds to the Company of approximately $3.9 million prior to offering expenses. The Registered Offering is expected close on October 2, 2024, subject to customary closing conditions.

Private Placement

In addition, the Company concurrently entered into a definitive purchase agreement for an investment in Company securities by the Company’s chief executive officer, to be completed pursuant to the private placement of 2,575,107 unregistered shares of the Company’s common stock (together with unregistered warrants to purchase an equal number of shares) at a purchase price of $1.165 per share, which represents the market value of the securities as of the signing of the definitive purchase agreement for the transaction (the “Private Placement”). Each warrant issued as part of the Private Placement transaction will be exercisable for one share of common stock at an exercise price of $1.04 per share, will become exercisable six months after it is issued and will expire five years thereafter; provided, however, that the warrants will not be exercisable if such exercise would cause the holder’s ownership of Company common stock to exceed 19.99%, unless and until the transaction is approved by Company stockholders in accordance with NASDAQ Listing Rule 5635(b).

The Private Placement transaction is expected to result in aggregate gross proceeds to the Company of approximately $3.0 million. The Private Placement transaction is expected close on October 2, 2024.

Smith Micro intends to use the net proceeds from both the Registered Offering and the Private Placement transaction for working capital and general corporate purposes. Buchanan Ingersoll & Rooney PC served as legal counsel to the Company.

A shelf registration statement on Form S-3, File No. 333-264667, relating to the Registered Offering of the shares of common stock described above was filed with the Securities and Exchange Commission (“SEC”) and declared effective on May 12, 2022. A prospectus supplement describing the terms of the Registered Offering and the accompanying base prospectus will be filed with the SEC and will be available for free on the SEC’s website located at http://www.sec.gov. The offering of the securities in the Registered Offering may be made only by means of a prospectus. Electronic copies of the prospectus supplement and the accompanying prospectus relating to the Registered Offering, when available, may be obtained by contacting: Smith Micro Software, Inc., 5800 Corporate Drive, Pittsburgh, PA 15237 Attn: Investor Relations, telephone: 412-837-5300, or by email at ir@smithmicro.com.

The common stock issued in the Private Placement transaction and the warrants for the Registered Offering and Private Placement transaction were offered and are being sold in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act and in reliance on similar exemptions under applicable state laws. Accordingly, the privately placed shares, all warrants and underlying shares of common stock issuable upon exercise of the warrants issued in both the Registered Offering and Private Placement transaction may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Act and such applicable state securities laws. The Company has agreed to file a registration statement with the SEC registering the resale of the shares of common stock issued in the Private Placement transaction, and the shares of common stock issuable upon exercise of the warrants issued in connection with the Registered Offering and the Private Placement transaction.

This press release is not an offer to sell, or a solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

About Smith Micro Software, Inc.

Smith Micro develops software to simplify and enhance the mobile experience, providing solutions to some of the leading wireless service providers around the world. From enabling the family digital lifestyle to providing powerful voice messaging capabilities, our solutions enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer IoT devices. The Smith Micro portfolio also includes a wide range of products for creating, sharing and monetizing rich content, such as visual voice messaging, optimizing retail content display and performing analytics on any product set. For more information, visit www.smithmicro.com.

Forward-Looking Statements

Certain statements in this release are forward-looking statements regarding future events or results, including statements related to the Company’s market and other conditions; the ability of the Company to satisfy all conditions precedent to the closing of the offerings; the ability of the Company to satisfy its post-closing obligations in connection with the offerings; the anticipated use of proceeds from the offerings; and other statements using such words as “expect,” “anticipate,” “believe,” “plan,” “intend,” “could,” “may,” “will” and other similar expressions. Forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including risks and uncertainties related to completion of the offerings on the anticipated terms or at all, market conditions, risks that the second closing of the Private Placement may not occur, the satisfaction of offering-related contractual post-closing obligations in connection with the offerings, and the use of proceeds from the offerings These and other factors discussed in our filings with the Securities and Exchange Commission, including our filings on Forms 10-K and 10-Q, could cause actual results to differ materially from those expressed or implied in any forward-looking statements. The forward-looking statements contained in this release are made on the basis of the views and assumptions of management, and we do not undertake any obligation to update these statements to reflect events or circumstances occurring after the date of this release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241002062728/en/

PR/IR INQUIRIES:

Charles Messman

Investor Relations

(949) 362-2306

IR@smithmicro.com

Source: Smith Micro Software, Inc.

FAQ

What is the total amount of financing Smith Micro Software (SMSI) is raising?

Smith Micro Software (SMSI) is raising approximately $6.9 million in gross proceeds through two concurrent financing agreements.

How much is Smith Micro's CEO investing in the company?

Smith Micro's CEO, Bill Smith, is investing $3.0 million in the company through a private placement.

What is the price per share for the registered offering of Smith Micro (SMSI)?

The registered offering of Smith Micro (SMSI) is priced at $1.165 per share.

When are the warrants issued in Smith Micro's (SMSI) offerings exercisable?

The warrants issued in Smith Micro's (SMSI) offerings become exercisable six months after they are issued and expire five years thereafter.

What is the expected closing date for Smith Micro's (SMSI) financing transactions?

Smith Micro's (SMSI) financing transactions are expected to close on October 2, 2024, subject to customary closing conditions.