Smartkem Closes $7.65 Million Offering

Rhea-AI Summary

Smartkem (SMTK) has completed concurrent public and private offerings, raising $7.65 million in gross proceeds. The company issued 1,449,997 registered shares of common stock and unregistered Class D warrants at $3.00 per share in the public offering. In a concurrent private placement, they sold 169,784 unregistered shares, pre-funded warrants for 930,215 shares, and Class D warrants to institutional investors.

The Class D warrants are exercisable at $3.00 per share until December 31, 2025, while pre-funded warrants are exercisable at $0.0001 per share. The company plans to use the net proceeds for working capital and general corporate purposes. Craig-Hallum Capital Group served as the exclusive placement agent.

Positive

• Secured $7.65 million in gross proceeds from offerings
• Participation from existing institutional investors in private placement
• Immediate availability of funds through exercisable warrants

Negative

• Potential dilution for existing shareholders through new share issuance
• Warrants could lead to additional future dilution if exercised
• Low warrant exercise price of $0.0001 for pre-funded warrants

Insights

Financial Analyst

<p>The <money>$7.65 million</money> capital raise through a mixed offering structure reveals a strategic but potentially dilutive financing move for Smartkem. The offering price of <money>$3.00</money> per share and warrant combination indicates current market constraints, while the inclusion of warrants at the same price suggests a balanced approach to investor incentivization. The structure, combining registered shares, unregistered shares and pre-funded warrants, demonstrates sophisticated financial engineering to accommodate different investor preferences and regulatory requirements.</p><p>The warrant exercise price matching the offering price at <money>$3.00</money> could create near-term selling pressure if the stock rises above this level, as warrant holders may exercise and sell for arbitrage. The pre-funded warrants with their nominal <money>$0.0001</money> exercise price effectively represent immediate equity with delayed issuance, helping the company manage its share count while providing investors with flexibility.</p><p>For a company with a <money>$5.16 million</money> market cap, this raise represents significant dilution but provides essential working capital. The participation of existing investors in the private placement portion signals continued support from institutional backers, though the need for such financing terms suggests challenging market conditions for small-cap technology companies.</p>

Legal Expert

<p>The concurrent public and private offering structure showcases sophisticated securities law compliance, utilizing both registered and unregistered securities to maximize financing flexibility. The registration rights agreement, requiring filing by April 25, 2025, provides investors with a clear path to liquidity while allowing the company to manage its SEC filing obligations efficiently.</p><p>The shelf registration statement's recent effectiveness (August 2024) provided the foundation for this transaction, demonstrating proactive capital markets planning. The combination of registered and unregistered securities, particularly the inclusion of pre-funded warrants, reflects careful structuring to address both regulatory requirements and investor preferences while maintaining compliance with securities laws.</p>

MANCHESTER, England, Dec. 23, 2024 /PRNewswire/ -- Smartkem (Nasdaq: SMTK), which is seeking to change the world of electronics using its disruptive organic thin-film transistors (OTFTs), announced it has completed its previously announced concurrent public and private offerings of its securities, including shares of its common stock and common stock equivalents, for an aggregate total gross proceeds of $7.65 million.

Smartkem issued 1,449,997 registered shares of common stock and unregistered Class D warrants to purchase up to 1,449,997 shares of common stock to investors in concurrent public and private offerings at a price of $3.00 per share and related Class D warrant. Each investor received one Class D warrant for each share purchased in the public offering.

Pursuant to the separate concurrent private placement, the Company sold to certain institutional investors, including existing investors in the Company, 169,784 unregistered shares of common stock, unregistered pre-funded warrants to purchase up to 930,215 shares of common stock and unregistered Class D warrants to purchase up to 1,099,999 shares of common stock at a price of $3.00 per share and related Class D warrant and a price of $2.9999 per pre-funded warrant and related Class D warrant.  Each investor received one Class D warrant for each share of common stock or pre- funded warrant purchased in the offering.

The Class D warrants are immediately exercisable at an exercise price of $3.00 per share and expire on December 31, 2025.  The pre-funded warrants are immediately exercisable at an exercise price of $0.0001 per share and may be exercised at any time until all of the pre-funded warrants have been exercised in full.

The gross proceeds of the offerings described above were $7.65 million before deducting placement agent fees and other offering expenses payable by the Company. The Company intends to use the net proceeds of the offerings for working capital and general corporate purposes.

Craig-Hallum Capital Group LLC acted as the Company's exclusive placement agent for the offerings.

In connection with the offerings described above, the Company has entered into a registration rights offering pursuant to which it has agreed to register the shares of common stock issued in the private placement, the shares of common stock issuable upon the exercise of the Class D warrants and the pre-funded warrants sold in the offerings and certain other securities for resale by the holders thereof no later than the earlier of (i) the 10^th day after the filing of the Company's annual report on Form 10-K for the year ended December 31, 2024 or (ii) April 25, 2025.

The sale of the registered shares of common stock was made pursuant to Smartkem's effective shelf registration statement on Form S-3 (file no. 333- 281608), including a base prospectus, filed with the Securities and Exchange Commission (the "SEC") and declared effective by the SEC on August 22, 2024 and a prospectus supplement dated December 18, 2024 filed with the SEC. Copies of the prospectus supplement and the accompanying base prospectus may be obtained from Craig-Hallum Capital Group LLC, Attention: Equity Capital Markets, 222 South Ninth Street, Suite 350, Minneapolis, MN 55402, by telephone at (612) 334-6300 or by email at prospectus@chlm.com. Alternatively, copies of the prospectus supplement and the accompanying base prospectus may be obtained for free at the SEC's EDGAR website at www.sec.gov.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any Smartkem securities.

About Smartkem

Smartkem is seeking to reshape the world of electronics with its disruptive organic thin-film transistors (OTFTs) that have the potential to revolutionize the display industry.  Smartkem's patented TRUFLEX® liquid semiconductor polymers can be used to make a new type of transistor that can be used in a number of display technologies, including next generation microLED displays. Smartkem's organic inks enable low temperature printing processes that are compatible with existing manufacturing infrastructure to deliver low-cost displays that outperform existing technology.

Smartkem develops its materials at its research and development facility in Manchester, UK and provides prototyping services at the Centre for Process Innovation (CPI) at Sedgefield, UK. It has a field application office in Taiwan. The company has an extensive IP portfolio including 138 granted patents across 18 patent families, 16 pending patents and 40 codified trade secrets.

Forward-Looking Statements

All statements in this press release that are not historical are forward-looking statements, including, among other things, the expected use of proceeds received from the offerings. These statements are not historical facts but rather are based on Smartkem Inc.'s current expectations, estimates, and projections regarding its business, operations and other similar or related factors. Words such as "may," "will," "could," "would," "should," "anticipate," "predict," "potential," "continue," "expect," "intend," "plan," "project," "believe," "estimate," and other similar or related expressions are used to identify these forward-looking statements, although not all forward-looking statements contain these words. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and assumptions that are difficult or impossible to predict and, in some cases, beyond the Company's control. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to revise or update information in this release to reflect events or circumstances in the future, even if new information becomes available.

View original content:https://www.prnewswire.com/news-releases/smartkem-closes-7-65-million-offering-302337972.html

SOURCE SmartKem

FAQ

How much did Smartkem (SMTK) raise in their December 2024 offering?

Smartkem raised $7.65 million in gross proceeds through concurrent public and private offerings.

What is the exercise price and expiration date for SMTK's Class D warrants?

The Class D warrants are exercisable at $3.00 per share and expire on December 31, 2025.

How many registered shares did SMTK issue in the public offering?

Smartkem issued 1,449,997 registered shares of common stock in the public offering.

When must SMTK register the private placement shares for resale?

SMTK must register the shares by the earlier of 10 days after filing their 2024 Form 10-K or April 25, 2025.

What will SMTK use the proceeds from the offering for?

Smartkem intends to use the net proceeds for working capital and general corporate purposes.