Item 1.01 |
Entry into a Material Definitive Agreement. |
As
previously disclosed, on June 14, 2023, SmartKem, Inc., a Delaware corporation (the “Company”), entered into a
Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which it sold, in an initial closing of a private
placement, securities of the Company for aggregate gross proceeds of $12,179,000 (the “Initial Closing” and the date of
the Initial Closing, the “Initial Closing Date”).
On
June 22, 2023, the Company sold, pursuant to the Purchase Agreement, an additional (i) 1,870.36596 shares (the “Series A-1 Preferred
Shares”) of the Company’s Series A-1 Convertible Preferred Stock, stated value $1,000 per share (the “Series A-1 Preferred
Stock”), initially convertible into an aggregate of 7,481,464 shares of the Company’s common stock, par value $0.0001 (the
“Common Stock”) at a conversion price of $0.25 (subject to adjustment in certain circumstances), (ii) 100 shares (the “Series
A-2 Preferred Shares” and together with the Series A-1 Preferred Shares, the “Preferred Shares”) of the Company’s
Series A-2 Convertible Preferred Stock, stated value $1,000 per share (“Series A-2 Preferred Stock” and together with the
Series A-1 Preferred Stock, the “Preferred Stock”), initially convertible into an aggregate of 400,000 shares of Common Stock
at a conversion price of $0.25 (subject to adjustment in certain circumstances) (the shares of Common Stock issuable upon conversion of
the Preferred Shares, collectively, the “Conversion Shares”), and (iii) Class A Warrants (the “Class A Warrants”),
to purchase up to an aggregate of 7,881,464 shares of Common Stock (the “Class A Warrant Shares”) at an exercise price $0.25
per share (subject to adjustment in certain circumstances) for aggregate gross proceeds of approximately $1.97 million (the “Second
Closing” and the date of the Second Closing, the “Second Closing Date”). The offering of the Preferred Stock and the
Class A Warrants by the Company pursuant to the Purchase Agreement is hereinafter referred to as the “Offering.”
The
Purchase Agreement contains customary representations and warranties and agreements of the Company and the purchasers party to the
Purchase Agreement and customary indemnification rights and obligations of the parties. The representations and warranties of each
party set forth in the Purchase Agreement have been made solely for the benefit of the other parties to the Purchase Agreement, and
such representations and warranties should not be relied on by any other person.
The
Special Equities Group, a division of Dawson James Securities, Inc., and Katalyst Securities LLC acted as the Company’s placement
agents in connection with the Offering (the “Placement Agents”). Pursuant to the terms of the amended and restated engagement
letter, as amended, between the Company and the Placement Agents, on the Second Closing Date, the Company paid the Placement Agents a
fee of approximately $1.1 million, of which approximately $900,000 was paid in cash. The Placement Agents used the remaining approximately
$200,000 to purchase 199 shares of Series A-1 Preferred Stock and Class A Warrants to purchase up to 796,000 shares of Common Stock in
the Offering. In addition, pursuant to the engagement letter, on the Second Closing Date, the Company issued to the Placement Agents or
their designees warrants (the “Placement Agent Warrants”) to purchase up 4,464,118 shares of Common Stock. The Placement Agent
Warrants have exercise price of $0.25 per share. The Placement Agent Warrants will be exercisable beginning on the 180-day anniversary
of the Second Closing Date and will expire five years from the Initial Closing Date. The Company also agreed to pay the Placement Agents
a non-accountable legal expense allowance of $30,000, $15,000 of which was paid on the Initial Closing Date with the remaining $15,000
paid on the Second Closing Date.
In
connection with the Second Closing, the Company issued Class B Warrants (the “Consultant Warrants”) to purchase up to 300,000
shares of Common Stock (the “Consultant Warrant Shares”) to a consultant in exchange for services to be provided to the Company.
The
Company issued a press release on June 23, 2023 announcing the Second Closing of the Offering which press release is attached as Exhibits
99.1 hereto.