SmartKem, Inc. Announces \$3.75 Million Senior Secured Notes Financing

Key Details of the Transaction

• Date of Agreement: March 18, 2026
• Issuer: SmartKem, Inc., a company specializing in organic semiconductor materials, headquartered at the Manchester Technology Centre, UK.
• Securities Issued: Senior secured promissory notes (the “Notes”) with an aggregate original principal amount of \$3,750,000.
• Investors: Accredited investors (the “Buyers”).
• Purchase Price: Aggregate purchase price of \$3,750,000 for the Notes.
• Stock Exchange: Common Stock is listed on Nasdaq Market LLC.

Material Terms and Shareholder-Impacting Information

• Use of Proceeds: The proceeds from the sale of the Notes will be used for general corporate purposes. Importantly, the funds will not be used, directly or indirectly, for the satisfaction of existing indebtedness (except as specified), redemption or repurchase of any securities, or settlement of any outstanding litigation. This restriction ensures that the new capital is allocated towards growth and operational needs, not legacy liabilities.
• Restrictions on Company Actions:
  • While the Notes are outstanding, the company is prohibited from redeeming or paying dividends (in cash or otherwise) on any securities without prior written consent from the required noteholders.
  • The company cannot effect any stock splits, combinations, or similar transactions (or even announce such plans) without the required holders’ written consent, except as necessary to maintain the Nasdaq listing.
  • No further issuance of Notes or other securities that would breach or default the terms of the current Notes is permitted without the required holder’s consent.
• Security and Guarantees:
  • The Notes are senior secured obligations, with security interests in substantially all assets of the company and its subsidiaries. This seniority means they rank above other indebtedness in right of payment.
  • The company and its subsidiaries must deliver stock certificates and other instruments to the collateral agent as part of the security package.
• Financial and Disclosure Covenants:
  • SmartKem is required to maintain timely SEC filings and ensure transparency with investors, including prompt public disclosure of all material information via press releases and Form 8-K filings.
  • Any material, non-public information provided to buyers must be disclosed publicly within one business day, protecting all shareholders and reducing information asymmetry.
  • The company is restricted from providing any further material, non-public information to buyers after the date of the agreement without their prior written consent.
  • Buyers are not subject to confidentiality obligations regarding any inadvertent receipt of material, non-public information.
• No Dividend or Redemption Payments: For as long as the Notes are outstanding, the company may not pay cash dividends or make redemptions on its equity securities unless it receives express written approval from the majority holders of the Notes. This may affect shareholder expectations for returns during the period the Notes remain outstanding.
• Maintenance of Nasdaq Listing: The company is obligated to maintain its Nasdaq listing, and any action that could result in delisting or suspension is explicitly prohibited. This helps preserve liquidity and investor confidence.
• Passive Foreign Investment Company (PFIC) Status: SmartKem commits to operating its business such that it will not be classified as a PFIC, thereby preserving U.S. tax advantages for certain shareholders.
• Internal Controls and Financial Integrity: The company asserts that it has effective internal controls over financial reporting and disclosure, and there are no material weaknesses or significant deficiencies reported by its accountants or regulators.
• No Material Adverse Change: Since the date of the last audited financial statements, there has been no material adverse change or development in the company’s business, assets, liabilities, or financial condition.

Potential Share Price Implications

• Improved Liquidity and Financial Flexibility: The \$3.75 million in secured financing strengthens SmartKem’s balance sheet and provides capital for ongoing operations and growth, which may be viewed favorably by the market.
• Restrictions on Dividends and Redemptions: The inability to pay dividends or redeem shares while the Notes are outstanding may be viewed negatively by investors seeking income or share buybacks.
• Increased Leverage and Security Interests: The Notes are senior secured obligations, which may increase the company’s leverage and encumber assets, impacting future financing flexibility.
• Enhanced Transparency: Mandatory public disclosure of all material information and restrictions on selective disclosure may reduce the risk of insider trading and benefit all shareholders.
• Price Volatility: The issuance of senior secured notes and the associated restrictions could be considered price-sensitive information, as they materially affect the company’s capital structure and operational flexibility.

Other Noteworthy Provisions

• Investors in the Notes are accredited and are purchasing in reliance on exemptions from U.S. securities registration requirements.
• The company will file a Form D with the SEC and comply with all applicable “Blue Sky” laws relating to the offering.
• There are standard representations and warranties regarding organizational status, capitalization, compliance, and absence of undisclosed liabilities.
• There are no current or anticipated disagreements with the company’s auditors or lawyers, and no need for financial statement restatements has been identified.

Conclusion

The entry into this \$3.75 million senior secured notes financing marks a significant development for SmartKem, Inc., strengthening its financial position while imposing substantial restrictions on corporate actions, especially regarding dividends, redemptions, and further indebtedness. Shareholders should note the improved liquidity, the enhanced transparency requirements, and the operational restrictions that could impact future returns and strategic flexibility.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should review the full text of the Securities Purchase Agreement and related filings, and consult their own financial advisors before making investment decisions. The information presented is based on the company’s public filings and may be subject to change without notice.

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