SMX (Security Matters) Public Limited Company — Form 6-K
Reporting period: April 2024; filed April 12, 2024. The filing reports financing transactions consummated on April 11, 2024, with funding expected on or about April 15, 2024.
Transaction and Financial Terms
- SMX issued a promissory note and warrants to an institutional investor for approximately $2.0 million of gross proceeds, before fees and expenses.
- The note has a $2.25 million principal amount, reflecting a 10% original issue discount, and matures 12 months after April 11, 2024.
- Interest accrues at 12% annually and is payable at maturity, acceleration, prepayment, or otherwise.
- Net proceeds are intended to repay approximately $425,000 of amounts owed and fund working capital and general corporate purposes.
- The investor may convert the note at $0.24 per ordinary share, subject to customary adjustments and a 4.99% beneficial ownership limitation. Under specified conditions, conversion may instead occur at a 15% discount to the lowest volume-weighted average price during the preceding 15 trading days.
- The warrant covers 11,825,508 ordinary shares, has an exercise price of $0.157 per share, and expires five and one-half years after issuance. It includes customary adjustments, certain price-based anti-dilution protections, cashless exercise provisions, and a 4.99% beneficial ownership limitation.
- SMX paid EF Hutton approximately $20,000 in cash placement-agent fees.
Material Changes and Dilution
- The financing creates new debt with a 12% cash interest obligation and potential equity dilution through note conversion and warrant exercise.
- The investor also agreed to exercise an existing warrant for 2,619,367 ordinary shares in full for approximately $5,762, at a reduced exercise price of $0.0022 per share, compared with its prior fixed exercise price of $1.6378.
- SMX agreed to register for resale the ordinary shares underlying the new note and warrant, as well as the shares underlying the existing warrant.
- For 90 business days after April 11, 2024, SMX generally may not issue equity or debt securities without the investor’s consent, subject to specified exceptions.
- The transaction documents include investor participation, first-refusal, most-favored-nation, indemnification, variable-security restrictions, and other covenants.
Risks, Contingencies, and Unusual Terms
- Upon an event of default, unpaid amounts may bear interest at the lesser of 24.5% annually or the maximum lawful rate. The outstanding principal and accrued amounts may increase to 120% of the applicable amount, or in certain events to 500% retroactively to the effective date, plus collection costs.
- If SMX fails to timely deliver shares upon note conversion, it may owe a conversion default payment of $2,000 per day. Failure to deliver warrant shares may trigger a separate buy-in obligation.
- The investor may accelerate repayment following customary events of default.
- The securities were issued in a private placement under Section 4(a)(2) of the Securities Act and are not registered. Resales require an effective registration statement or an applicable exemption.
- The filing does not provide operating revenue, profit, cash flow, margin, total debt, or liquidity figures for the comparable prior period.
Key Facts for Investors to Verify
- Whether the approximately $2.0 million financing proceeds were funded on or about April 15, 2024.
- The amount of net proceeds remaining after repayment of approximately $425,000 of obligations and transaction expenses.
- The number of ordinary shares issuable upon note conversion and the potential dilution from the 11,825,508-share warrant and 2,619,367-share existing-warrant exercise.
- The status and timing of the resale registration statement.
- SMX’s ability to service or refinance the note at maturity and its compliance with the financing covenants and 4.99% ownership limitations.