Smart Wires Technology Ltd (the “Company”) today announced an additional closing of approximately USD $5 million under the Preferred Stock Financing first announced on November 16, 2022. This investment was made by funds affiliated with an existing stockholder, 3×5 Partners, LLC, under the terms as previous closings in this Preferred Stock facility and remains  subject to the terms and conditions outlined in the Amended and Restated Memorandum and Articles of Association (the “AR M&A”).

The Company also wishes to address questions it has received following the announcement of its intention to delist for the Nasdaq First North Growth Market.

Delisting:

1. Why is the Company delisting?

The Company’s Board of Directors determined it was in the best interests of the Company and the Members to delist the Swedish Depository Receipts (“SDRs“), taking into consideration the evolution of trading since the Company listed their SDRs on Nasdaq First North Growth Market in May of 2021, and noting the trading volumes of and market prices for the SDRs that the Company’s Board of Directors believes may not be reflective of the Company’s value proposition. The Company has also considered the additional costs related to maintaining the listing of the SDRs on the Nasdaq First North Growth Market weighed against its benefits.

2. When will the SDRs stop trading on the Nasdaq First North Growth Market?

The Company announced its desire to delist the SDRs from trading on the Nasdaq First North Growth Market on November 16, 2022.  The Company plans to wait for 3 months after the announcement (approximately around February 16, 2023) to apply for the delisting, unless otherwise advised by the Nasdaq First North Growth Market (“Nasdaq”).  The Company anticipates that Nasdaq will evaluate the application and set a final day of trading if the delisting application is approved.

The SDR program will be terminated in connection with the delisting. As the date of delisting draws closer Pareto Securities AB (“Pareto”), the SDR Custodian, will communicate with SDR holders directly with more specifics.

3. What will happen to the SDRs and Ordinary Shares once the Company delists?

By following the instructions that will be provided by Pareto, SDR holders may convert their SDRs to Ordinary Shares of the Company and continue to hold Ordinary Shares following the delisting.

While there will not be a public market for the Ordinary Shares following the delisting, Ordinary Shares will be freely transferable, provided that any sales of Ordinary Shares must be made in compliance with Regulation 6 of the Company’s Articles of Association, which requires that sales must be made by a written instrument of transfer signed by the transferor and containing the name and address of the transferee. The written instrument may be sent to the Company so that it can update the Registry of Members. In addition, any sale of Ordinary Shares must comply with applicable laws, such as section 54A of the BVI Business Companies Act, 2004, and the Securities Act of 1933, as amended, in the United States.

4. Will the Company relist on any other exchanges?

The Company does not have immediate plans to relist on any other exchanges.

5. Will share certificates be issued for Ordinary Shares following the delisting?

No. The Company does not issue physical share certificates for Ordinary Shares of the Company. All shares will be recorded in the Registry of Members of the Company.

Preferred Stock Financing:

6. What are the terms of the new Preferred Shares and warrants?

Pursuant to the Company’s Amended and Restated Memorandum and Articles of Association, dated November 14, 2022, the Company is authorized to issue up to 20,000 Preferred Shares, no par value per Preferred Share. When issued, Preferred Shares will receive certain preferential rights over the issued and outstanding Ordinary Shares, which are discussed in more detail in the Company’s press release dated November 16, 2022 (located at https://www.smartwires.com/press-releases-investors/) and in the Company’s AR M&A (located at https://www.smartwires.com/governance/). Additionally, holders of Preferred Shares may choose to convert into a number of equity securities (without additional payment) in the next equity financing of the Company (not including the financing covered by the Preferred Shares Subscription Agreement dated November 14, 2022 (“PSSA“), which is referred to as the “November Financing“), at a discount. In connection with the Company’s November Financing, the Company issued to such investors certain warrants, which are exercisable for Ordinary Shares of the Company at an exercise price of One Cent USD ($0.01) per Ordinary Share.  The Investors paid USD $1,000 per each USD $5 million of Preferred Shares purchased for the warrant, with such warrant representing an option to purchase up to 12,792,282 Ordinary Shares, or $0.0000781217213 per warrant share.  The warrants have an expiration period of 10 years, if not terminated sooner pursuant to the terms of the warrants.

7. What percent of the total outstanding equity of the Company, on a fully-diluted basis, will be represented by the new Preferred Shares and warrants?

If the Company issues all of the 20,000 Preferred Shares that are authorized under the Company’s AR M&A, the Preferred Shares and the Ordinary Shares issuable upon conversion of the warrants issued in connection with the November Financing would represent approximately 0.01% and 30.5%, respectively, of the fully-diluted shares of the Company, as of today, and taking into account options and other warrants. This percentage ownership interest is based solely on the number of shares issued or assumed issued and may not reflect the economic benefits due to the preferential rights of the owners of the Preferred Shares as outlined in the AR M&A.

8. Will the investors purchasing the Preferred Shares (the “Preferred Shares Investors“) control the board of directors?

The Preferred Shares Investors (based on the known investors under the PSSA at this time) will not control the board of directors; provided that if the Company is required to redeem the Preferred Shares under the AR M&A, but fails to make a payment for redemption, then the holders of a majority of the Preferred Shares will have the right to appoint a majority of the board of directors.

9. Can I participate in the up to $10 million in additional funding for the Preferred Shares?

The Company is evaluating options for existing shareholders to participate in this facility and will provide additional information if there is such an opportunity, and if so, the applicable parameters.

10. At what price were the Preferred Shares issued (relative to the price of the Ordinary Shares)? What does this mean for the Ordinary Shares?

The Preferred Shares were issued at the purchase price of USD $1,000.00 per Preferred Share, but are not directly convertible into Ordinary Shares and thus cannot be directly compared to the price of the Ordinary Shares.  The holders of Preferred Shares are entitled to various preferential rights under the AR M&A.

11. What are the dilution effects for holders of Ordinary Shares? For example, if prior to the issuance of Preferred Shares you held 1% of the issued Ordinary Shares, is this now only diluted by 20,000 new Preferred Shares?

See response to Question 7 above. In addition, the holders of Preferred Shares have various preferential rights as outlined in the AR M&A.

12. What is the impact of the warrants issued in connection with the Preferred Shares, and at what price can the warrants be exercised?

With respect to dilution, see response to Question 7, above.  The warrants were issued in connection with the issuance of the Preferred Shares. In addition to making an investment in the Preferred Shares, the Investors paid USD $1,000 per each USD $5 million of Preferred Shares purchased for the warrant, with such warrant representing an option to purchase up to 12,792,282 Ordinary Shares, or $0.0000781217213 per warrant shares.  The exercise price to purchase Ordinary Shares under the Warrant will be One Cent USD ($0.01) per Ordinary Share regardless of the fair market value of the Ordinary Shares.

13. In an event of a sale or liquidation of the company, what rights do the members owning Ordinary Shares have vs owners of the Preferred Shares?

Pursuant to Section 8.1(c) of the Company’s AR M&A, the holders of Ordinary Shares are entitled to a pro rata share in the distribution of the surplus assets of the Company on its liquidation after all amounts are paid with respect to the holders of the Preferred Shares. In other words, the holders of Preferred Shares have priority over the holders of Ordinary Shares upon the liquidation of the Company, and the liquidation value of the Preferred Shares varies under different scenarios as outlined in the AR M&A.

14. The PSSA referred to a management incentive plan. What is this?

The PSSA required that the Company create and implement (i) a cash-based management incentive plan for executives that pays out based on milestones, including a liquidity event, and (ii) a cash-based retention plan for employees.

The Company is in the process of developing the management incentive plan to incentivize and retain executives and key employees. Plan details will be released when then plan is finalized and approved. The Company notes that the plan will be sufficiently lucrative to retain key employees in a competitive market.

Employees have separately been notified of cash retention bonuses for which they will be eligible in March 2023.

Further information about the delisting will be provided once the formal delisting process has been initiated with Nasdaq First North Growth Market.

CONTACTS

Julie Andrews, CFO

E-mail: investors@smartwires.com

Tel: +1 (901) 687-8314

Smart Wires’ Certified Adviser is Erik Penser Bank AB, Apelbergsgatan 27, Box 7405, SE-103 91 Stockholm, E-mail: certifiedadviser@penser.se, Tel: +46 8 463 83 00, www.penser.se.

This information is information that Smart Wires Technology Ltd is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above on December 22, 2022 , at 01:50 CET