SciMar seeks U.S. retail investors amid cash crunch

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This article was published 14/05/2024 (513 days ago), so information in it may no longer be current.

Dauphin-based biotech company SciMar Ltd. has been working on a game-changing way to treat diabetes for more than a decade. It has all sorts of patented technology and has raised close to $20 million over the years.

This month, after spending close to two years getting the necessary work done, the company started raising money from retail investors through a U.S. Securities and Exchange Commission process called Regulation A, which lowers the threshold for “qualified investors” and allows the company to remain private and unlisted.

However, in the meantime, it has laid off most of its staff — about 10 people — and its senior executives may be working without pay.

Mick Lautt, CEO of SciMar, acknowledged the company’s current cash crunch and the challenging environment when it comes to raising capital.

“We have had to lean down and we have temporarily laid people off,” he said. “But we still have everything ready to go. We have a plan in place and the capacity to do everything we say we will do.”

Lautt insists its senior executive team of four people are all still working full-time with the company. He said the working relationship is private and would not disclose whether or not they are getting paid.

An offering circular detailing the investment opportunity — the offering seeks to raise up to US$55 million — also says the company has 14 full-time employees. (One former employee who was laid off at the end of October told the Free Press they doubt there are that many workers.)

The offering circular gives the company a year to attract investors under its terms and conditions. Lautt said it details conditions as they existed when the circular was originally filed, in December 2023, and it can be revised when material changes occur.

For instance, he said there have been patent developments subsequent to the release of the offering circular, as well as additional grant funding that are not included in the circular.

However, one Winnipeg lawyer who practises securities law wonders whether the difference in SciMar’s staffing situation between the release of the offering and now does not represent a material change which would otherwise need to be disclosed.

Lautt insisted everyone who has been laid off have been promised to be hired back when funds start rolling in. In addition to the retail investors who are being targeted in the Regulation A offering, Lautt said there significant progress has also been made in attracting private institutional investors.

Manitoba’s Employment Standards branch confirmed there is one active claim against SciMar, filed in March 2024.

One former employee, who asked not to be named, said in addition to holiday and severance pay, SciMar also owes the individual one month’s worth of salary.

While it is a regrettable situation, Lautt said the company takes its responsibilities seriously and has made it clear the funds will be paid when they are available.

The employee who was laid off and is owed back pay agreed Lautt has stayed in touch and has said in emails the former employee will eventually be paid.

“It’s one of the hardest things I’ve ever had to do,” Lautt said about having to temporarily lay off employees. “We take our ethical responsibilities very seriously.”

SciMar’s situation is not so uncommon for tech startups. (Even though SciMar has been around since 2009, the Bioscience Association of Manitoba named SciMar the 2023 emerging bioscience company of the year.)

“It is a very normal thing they are going through,” said Joelle Foster, CEO of North Forge Technology Exchange, who has worked with SciMar over the years. “The company is just in between funding rounds. This is not uncommon.”

Andrea Ladouceur, BAM executive director, said: “It’s a tough time for them, but it will take time for any (capital raising) funnel to rev up.”

SciMar may be a little uncommon, however, in that it has a sizable intellectual property portfolio and is effectively a family business.

Lautt’s father, Wayne Lautt, is the scientist whose discoveries form the basis of SciMar’s commercialization efforts; the company’s chief development officer, John West, is Mick Lautt’s brother-in-law.

The company also has plenty of goodwill in the community.

At least one supplier who is owed money from SciMar, spoke to the Free Press on condition his name not be used.

“Mick has made a 100 per cent commitment to me that it is just a matter of time, not a matter of ‘if’ I get paid,” the supplier said.

The unpaid bills have caused his own company to be “pushed into a corner” but the supplier remains convinced SciMar will pull things together.

“These things (developing new diabetes diagnosis and drug treatment) take long and are so hard to develop,” he said. “I know if someone is going to make it it is Mick. He is 110 per cent invested. He has said to me that he will never give up.”

martin.cash@freepress.mb.ca