Shares of Smart for Life Inc. (Nasdaq: SMFL) were up 13.24% at $0.2266 at the time of the most recent check in after-hours trading after the firm took a strategic move.
What decision has SMFL made?
Last week, Smart for Life (SMFL) disclosed a number of agreements intended to improve the capital structure, raise shareholder ownership, and help the company meet its ongoing Nasdaq listing requirements. First, Smart for Life and investors engaged in a securities purchase agreement under which SMFL gave the investors 1,282,896 shares of common stock and pre-funded warrants to acquire 1,574,248 shares of SMFL common stock for $0.35 per share or an aggregate purchase price of $1,000,000.
Prior to this, $2,250,000 worth of 12% Unsecured Subordinated Convertible Debentures were given to the investors. These securities had a $1.00 per share conversion price and could be converted into shares of common stock. Shareholders agreed to convert all outstanding interest and principal on the debentures, totaling $2,542,500, into a total of 2,542,501 shares of common stock in line with the debentures’ provisions as part of the private placement.
In addition, SMFL gave the investors funded rights to buy a total of 4,721,787 shares of common stock as payment for and an enticement for their consent to convert the debentures. Additionally, warrants to buy common stock at a price of $6.25 per share that included a full ratchet antidilution adjustment for securities issuances below that price were previously given to the investors.
The par value of these warrants was lowered to $0.35 as a consequence of the $0.35 private placement, and the number of shares backing the warrants rose in line with the complete ratchet antidilution adjustment. Following such adjustment, the investors agreed to change the warrants’ terms, including removing the clause requiring the issuance of extra shares in response to a triggering event. As a result, the exercise price would be reduced in response to a particular stimulus but the number of securities underlying the warrant would not be increased further.
What effect will this have on SMFL?
By eliminating anti-dilutive clauses from its warrants, these most recent agreements substantially improve and streamline SMFL’s capital structure. They also give us more working capital to carry out its strategic plan and raise shareholders’ equity, which is crucial for maintaining its Nasdaq listing. In order to generate $100 million in yearly sales by 2023, Smart for Life (SMFL) has made headway in that direction. The company believes that these most recent actions will help unlock considerable long-term shareholder value through an improved capital structure.