美国
证券交易委员会
华盛顿特区20549
表格
(Mark One)
交易所法案1934
截至季度结束日期的财务报告
or
1934年交易所法案
过渡期从 至
委托文件编号：001-39866
(根据其章程规定的注册人准确名称)
| ||
（国家或其他管辖区的 | （IRS雇主 | |
公司成立或组织） | （标识号码） |
(主要领导机构的地址)
（报告人电话号码）
在法案第12(b)条的规定下注册的证券：
每一类的名称 |
| 交易标志 |
| 登记的交易所名称 |
|
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请在选项前打勾，表示注册申报人（1）在过去12个月内（或对于申报人需要在该期间内提交这些报告的较短期间）已提交每个根据证券交易所法案第13或15（d）条规定需要提交的报告，并且（2）在过去90天内一直受到这些提交要求的影响。
根据规则405及第232.405章的有关规定，在过去12个月内（或注册人需要提交该等文件的较短时期内），注册人是否已经递交了每个交互式数据文件。
请勾选标记以说明注册人是大型快速申报人、加速申报人、非加速申报人、较小的报告公司还是新兴成长型公司。请查看《交易所法》第120亿.2条中“大型快速申报人”、“加速申报人”、“较小的报告公司”和“新兴成长型公司”的定义。
大型加速报告人 | ☐ | 加速文件提交人 | ☐ |
☒ | 较小的报告公司 | ||
新兴成长公司 |
如果是新兴成长型企业，请勾选表示注册者已选择不使用交易所法案第13(a)条规定的任何新的或修订后的财务会计准则的扩展过渡期。
请勾选是否为外壳公司（如《交易所法案》第120亿.2条所定义）。 是
截至2024年11月8日，有
项目1. 基本报表
SMARTKEm, INC.
缩短的合并财务报表
(以千为单位，股份数及每股资料除外)
九月三十日 | 十二月三十一日 | |||||
| 2024 | 2023 | ||||
(未经查核) | ||||||
资产 |
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流动资产合计 | ||||||
现金及现金等价物 | $ | | $ | | ||
应收帐款 |
| — |
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研究和发展税收抵免应收款 |
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预付费用及其他流动资产 |
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全部流动资产 |
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不动产、厂房及设备净值 |
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净使用权资产 |
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其他非流动资产 |
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资产总额 | $ | | $ | | ||
负债及股东权益 |
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流动负债 | ||||||
应付帐款和应计费用 | $ | | $ | | ||
租赁负债，流动 |
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其他流动负债 | | | ||||
流动负债合计 |
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非流动负债：租赁负债 |
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认股权负债 | — |
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总负债 |
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承诺和可能的事项（注7） |
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股东权益： |
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面额优先股 $ |
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普通股，面值 $ |
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资本公积额额外增资 |
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累积其他全面损失 |
| ( |
| ( | ||
累积亏损 |
| ( |
| ( | ||
股东权益总额 |
| |
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负债和股东权益总额 | $ | | $ | | ||
附注是这些未经审核的中期简明综合财务报表的一个不可分割的部分。
3
SMARTKEm, INC.
综合损益简明综合表
(未经查核)
（金额以千为单位，除每股数字和每股资料外）
截至 9 月 30 日止的三个月 | 截至九月三十日的九个月 | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
营业收入 | $ | — | $ | | $ | | $ | | ||||
营业成本 |
| — |
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毛利润 |
| — |
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其他营业收益 |
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营业费用 |
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研发费用 |
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销售，一般及行政费用 |
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外币交易（增益）/损失 |
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营业费用总计 |
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营运亏损 |
| ( |
| ( |
| ( |
| ( | ||||
营业外收入/（费用） |
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外币交易的收益/（亏损） | — | ( | ( | | ||||||||
分配给认股权证的交易成本 | — | — | — | ( | ||||||||
调整认股权负债公允价值变动 | — | | | | ||||||||
利息收入/(费用) |
| ( | |
| |
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非营业收入/(支出)总额 |
| ( |
| ( |
| |
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收入税前亏损 | ( | ( | ( | ( | ||||||||
所得税支出 | — | — |
| ( |
| — | ||||||
净损失 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
净损失 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
其他综合损失： |
|
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外币兑换 |
| | |
| |
| ( | |||||
总综合损失 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
$ | ||||||||||||
$ | $ | ( | $ | ( | $ | ( | $ | ( | ||||
$ | $ | ( | $ | ( | $ | ( | $ | ( | ||||
每普通股股息 | $ | — | $ | — | $ | ( | $ | — | ||||
带权基本股份平均权重 | | | | | ||||||||
加权平均稀释后扩大十分数* | | | | | ||||||||
于2023年9月21日实行的1:35股票合并，反映在这里。反映于2023年9月21日实行的每35股合并为1股的逆向股票拆分。 | ||||||||||||
附注是这些未经审核的中期简明综合财务报表的一个不可分割的部分。
4
SMARTKEm, INC.
股东权益简明合并报表
(未经查核)
(以千为单位，股份数据除外)
优先股 | 普通股 | 额外的 | 其他未分配盈余 | 总计 | ||||||||||||||||||
面值$0.0001的股票 | 面值$0.0001 | 实收资本 | 全面性 | 累计 | 股东权益 | |||||||||||||||||
股份 |
| 金额 | 股份 |
| 金额 |
| 资本金 |
| 收入/（损失） |
| 赤字 |
| 股东权益 | |||||||||
2024 年 1 月 1 日结存 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
以股份为基础之报酬支出 | — |
| — | — |
| — |
| |
| — |
| — |
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股票奖励的发行 | — |
| — | |
| — |
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| — |
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向供应商发行普通股 | — |
| — | |
| — |
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优先股转换为普通股 | ( |
| — | |
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优先股换股为普通股权证 | ( |
| — | — |
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| — |
| — |
| — |
| — | ||||||||
在偿还优先股时视同股息 | — |
| — | — |
| — |
| |
| — |
| ( |
| ( | ||||||||
将warrants无现金行使为普通股 | — |
| — | |
| — |
| — |
| — |
| — |
| — | ||||||||
外币兑换调整 | — |
| — | — |
| — |
| — |
| ( |
| — |
| ( | ||||||||
净损失 | — |
| — | — |
| — |
| — |
| — |
| ( |
| ( | ||||||||
2024年3月31日止结余 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
以股份为基础之报酬支出 | — |
| — | — |
| — |
| |
| — |
| — |
| | ||||||||
向供应商发行普通股 | — |
| — | |
| — |
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| — |
| — |
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优先股转换为普通股 | ( |
| — | |
| — |
| — |
| — |
| — |
| — | ||||||||
行使权证以换取普通股 | — |
| — | |
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认股证的公允价值已从负债重分类为权益 | — |
| — | — |
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外币兑换调整 | — |
| — | — |
| — |
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净损失 | — |
| — | — |
| — |
| — |
| — |
| ( |
| ( | ||||||||
2024年6月30日余额 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
以股份为基础之报酬支出 | — |
| — | — |
| — |
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| — |
| — |
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向供应商发行普通股 | — |
| — | |
| — |
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| — |
| — |
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优先股转换为普通股 | ( |
| — | |
| — |
| — |
| — |
| — |
| — | ||||||||
外币兑换调整 | — |
| — | — |
| — |
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净损失 | — |
| — | — |
| — |
| — |
| — |
| ( |
| ( | ||||||||
2024年9月30日结余 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
5
SMARTKEm, INC.
股东权益的综合存货表演（续）
(未经查核)
(以千为单位，股份数据除外)
优先股 | 普通股 | 额外的 | 其他未分配盈余 | 总计 | ||||||||||||||||||
每股价值为$0.0001 | 每股价值为$0.0001 | 实收资本 | 全面性 | 累计 | 股东权益 | |||||||||||||||||
股份 |
| 金额 | 股份 |
| 金额 |
| 资本金 |
| 收入/（损失） |
| 赤字 |
| 股东权益 | |||||||||
2023 年 1 月 1 日结存 | — | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
以股份为基础之报酬支出 | — |
| — | — |
| — |
| |
| — |
| — |
| | ||||||||
向供应商发行普通股 | — |
| — | |
| — |
| |
| — |
| — |
| | ||||||||
外币兑换调整 | — |
| — | — |
| — |
| — |
| ( |
| — |
| ( | ||||||||
净损失 | — |
| — | — |
| — |
| — |
| — |
| ( |
| ( | ||||||||
2023年3月31日结束余额 | — | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
以股份为基础之报酬支出 | — |
| — | — |
| — |
| |
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| — |
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发行优先股，扣除发行成本后的净额 | |
| — | — |
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外币兑换调整 | — |
| — | — |
| — |
| — |
| ( |
| — |
| ( | ||||||||
净损失 | — |
| — | — |
| — |
| — |
| — |
| ( |
| ( | ||||||||
2023年6月30日结余 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
以股份为基础之报酬支出 | — |
| — | — |
| — |
| |
| — |
| — |
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优先股转换为普通股 | ( |
| — | |
| — |
| — |
| — |
| — |
| — | ||||||||
行使权证转换为普通股 | — |
| — | |
| — |
| |
| — |
| — |
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外币兑换调整 | — |
| — | — |
| — |
| — |
| |
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净损失 | — |
| — | — |
| — |
| — |
| — |
| ( |
| ( | ||||||||
截至2023年9月30日的结余 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
于2023年9月21日实行的1:35股票合并，反映在这里。反映于2023年9月21日实行的每35股合并为1股的逆向股票拆分。 | ||||||||||||||||||||||
附注是这些未经审计的中期简明综合财务报表的重要组成部分.
6
SMARTKEm, INC.
简明合并现金流量量表
(未经查核)
（以千为单位）
截至九月三十日的九个月 | ||||||
| 2024 |
| 2023 | |||
从营运活动中的现金流量: |
|
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净损失 | $ | ( | $ | ( | ||
调整为使净亏损转化为经营活动所使用现金： |
|
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折旧 | | | ||||
以股份为基础之报酬支出 | | | ||||
向供应商发行普通股 | | | ||||
使用权资产摊销 | | | ||||
外币交易亏损 | | ( | ||||
分配给认股权证的交易成本 | — | | ||||
调整认股权负债公允价值变动 | ( | ( | ||||
营运资产及负债的变动： | ||||||
应收帐款 | | ( | ||||
研究和发展税收抵免应收款 | ( | | ||||
预付费用及其他流动资产 | | ( | ||||
其他非流动资产 | | — | ||||
应付帐款和应计费用 | | | ||||
租赁负债 | ( | ( | ||||
应付所得税 | — | ( | ||||
其他流动负债 | ( | ( | ||||
经营活动所使用之净现金流量 |
| ( |
| ( | ||
投资活动之现金流量: |
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固定资产购入 | ( | ( | ||||
投资活动所使用之净现金 |
| ( |
| ( | ||
来自融资活动的现金流量 |
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私募发行优先股所得款项 | — | | ||||
私募发行认股权所得款项 | — | | ||||
支付发行成本 | — | ( | ||||
行使认股权的收益 | | | ||||
筹资活动提供的净现金 |
| |
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汇率变动对现金的影响 | |
| ( | |||
现金的净变化 |
| ( |
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期初现金余额 | | | ||||
期末现金余额 | $ | | $ | | ||
现金和非现金投资和筹资活动的补充披露 |
|
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就咨询服务发行普通股 | $ | | $ | | ||
warrants公平价值的初始分类 | $ | — | $ | | ||
使用权资产和租赁负债的增加 | $ | | $ | | ||
附注是这些未经审核的中期简明综合财务报表的一个不可分割的部分。
7
1. | 组织、业务、持续经营和报表编制基础 |
组织
SmartKem, Inc.（以下简称“公司”），前身为Parasol Investments Corporation（“Parasol”），成立于2020年5月13日，为成立于英格兰和威尔士法律下的SmartKem Limited的继承者。该公司最初成立为根据1934年修改的《证券交易所法》（以下简称“交易法”）注册的“外壳”公司，没有具体的业务计划或目的，直到在2021年2月21日与SmartKem Limited签订的《证券交易所协议》（以下简称“交易协议”）完成的交易后，开始经营SmartKem Limited的业务。根据交易协议，除了以$购买的某些延迟股份外，所有SmartKem Limited的股权均以Parasol普通股和SmartKem Limited的股权交换（以下简称“交易”）。
业务
公司正在寻求通过其破坏性有机薄膜晶体管（“OTFTs”）来重塑电子产业，这种产品有潜力革新显示屏行业。公司的专利TRUFLEX®液态半导体聚合物用于制造一种可以应用于多种显示技术的新型晶体管，包括下一代微LED显示屏。公司的油墨实现低温印刷工艺，与现有制造基础设施相容，提供性能优于现有技术的低成本显示屏。公司在英国曼彻斯特的研发中心开发材料，并在英国瑟奇菲尔德的创新中心（“CPI”）提供快速成型服务。公司与台湾工业技术研究院（ITRI）签订了技术转移协议（TTA），用于在其Gen2.5生产线上进行产品快速成型，并在台湾设有一个现场应用办公室。公司拥有庞大的知识产权组合，包括19个专利家族中的125项授权专利和40项法规化的商业秘密。
风险与不确定性
公司的业务面临重大风险和不确定性，包括未能获得额外资金以妥善执行公司的业务计划的风险。公司面临开发阶段公司常见的风险，包括但不限于公司或竞争对手开发新技术创新，依赖关键人员，依赖第三方制造商，保护专有技术和遵守监管要求。
公司根据一项框架协议获得设备使用权，用于制造采用公司油墨的演示产品。如果公司失去对这个生产设施的使用权，将会重大不利地影响公司制造原型机和为潜在客户展示产品的能力。失去这种使用权将明显妨碍公司进行产品开发和流程改进活动。存在替代提供相似服务的供应商，但将需要努力和时间将其纳入公司的运营中。
经营概念
该公司持续亏损，包括在截至2024年9月30日的九个月内净亏损为＄
该公司预期截至2024年9月30日，其现金及现金等价物为＄
8
其业务和研究发展活动之后。如果支出显著增加或开发计划进展比预期更迅速，这段期间可能会缩短。
公司未来的生存能力取决于筹集额外资金以资助其业务。公司将需要获得额外资金来满足其运营需求，资助其销售和市场推广努力、研究和开发支出以及业务发展活动。直到公司能够通过收入产生足够现金的时候，管理层的计划是通过股本发行，债务融资，合作，战略联盟和市场营销，分销或许可安排来资助公司的营运资本需求。如果公司通过发行股权证券筹集额外资金，公司现有的安全持有人可能会遭受稀释。如果公司借钱，债务增加将产生增加的债务服务义务，并可能要求公司同意可能限制其业务的营运和财务契约。如果公司进行合作，战略联盟或其他类似安排，则可能被迫放弃有价值的权利。然而无法保证将有足够数量的融资在需要时提供，且可能无法通过可接受条款或完全提供。在这个时候无法准确确定筹集资金所需的确切金额和时间，这将取决于多个因素，包括对公司产品和服务的市场需求，产品开发努力的质量，营运资本的管理，以及对服务采购的正常支付条款和条件的继续。如果公司无法大幅增加收入、减少支出或以其他方式产生营运现金流，则公司将需要筹集额外资金。
公司可能无法按期支付债务，管理层计划未能减轻这种重大怀疑。截至2024年9月30日的简明综合财务报表是在假设该公司将作为持续经营进行准备的。因此，合并财务报表不包括可能在公司无法持续作为持续事业时所需的资产和负债金额和分类的任何调整。
报告基础
2024年9月30日和2023年12月31日这家公司的未经审计的中期简明综合财务报表，以及截至2024年9月30日和2023年的三个月和九个月应该与包含在该公司年度报告10-k的经审计的合并财务报表和附注一起阅读，该报告于2024年3月27日期提交给证券交易委员会（SEC），并且也可以在公司的网站上找到（www.smartkem.com）。在这些对中期简明综合财务报表的附注中，“我们”，“我们”或“我们的”一词指的是公司及其合并子公司。
这些中期简明综合财务报表未经审计，按照美国普遍公认的会计原则（GAAP）和SEC对Form 10-Q和附表S-X的规定，由公司编制用于中期报告。它包括所有全资子公司的账户，并且所有重要的公司内账户和交易在合并中已被消除。金额以千为单位表示，除股份数和每股数据外。
编制中期简明综合财务报表需要管理层做出影响报告金额的假设和估计。这些中期简明综合财务报表反映了所有调整，包括常规的累计调整，以便公平呈现公司截至2024年9月30日和2023年的中期结果，财务状况和现金流量; 但是，重要的是要注意，公司的中期营运结果和现金流量不一定能反映出预期的全年或任何中期期间的营运结果和现金流量。
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股票合并倒数
基本报表中呈现的所有股份数字和每股金额，包括这些注脚，反映了2023年9月21日实施的一比三十五的股票逆向拆分。 (1:35) 反向股份拆分于2023年9月21日实施。
2. 重大会计政策摘要
除下列政策外，公司重要会计政策并未有任何实质变化，如附注3 所述，详细列于公司年度报告所包含合并财务报表中的重要会计政策。
公司在必要时会为以下情况记录被视为分红派息：(i)为优先股兑换发前投资期权，基于发前投资期权的公平价值超过优先股带值；(ii)为优先股修正订为电销帐务，基于修正前后优先股的公平价值。
管理层的估计使用
按照GAAP准则编制合并财务报表要求管理层对会计资产和负债的金额进行估计和假设，包括在合并财务报表日期的资产负债显示和揭露，以及报告期间的收入和费用金额。公司合并财务报表中最重要的估计与假设涉及普通股的估值，期权公平价值和认股权负债的公平价值。这些估计和假设基于当前事实、历史经验和其他各种因素，认为在当时情况下是合理的，其结果形成对金融资产和负债价值的判断以及记录支出，这些支出无法从其他来源上明显得出。由于在准备合并财务报表时所使用的估计或判断周围因素的不确定性，实际结果可能与这些估计存在重大差异。
最近会计宣告
2023年11月，财务会计标准委员会(FASB)发布会计标准更新(ASU)编号2023-07。板块报告（主题280），改善可报告部门披露将要求公司披露定期提供给首席营运决策者（CODM）的重要业务部门费用。该公告将对截至2024年12月31日的年度申报生效。公司仍在评估采用该标准的影响。
在2023年12月14日，FASB发布了ASU 2023-09，所得税揭露的改进适用于所有受所得税影响的实体。该标准要求就报告实体的有效税率调解提供细分信息，以及有关所支付所得税的信息。该标准旨在提供更详细的所得税披露。对于上市公众企业（PBEs），新的要求将在2024年12月15日后开始的年度期间生效。指导将以前瞻性方式应用，有选择性地适用该标准的回顾性应用。公司仍在评估采用该标准的影响，但不认为其对其业务成果、财务状况或现金流量产生实质影响。
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3. 预付费用和其他流动资产
预付费用和其他流动资产包括以下内容：
九月三十日 | 十二月三十一日 | |||||
（以千为单位） |
| 2024 | 2023 | |||
预付保险 | $ | | $ | | ||
研究补助金应收款项 | | | ||||
预付设施成本 | | | ||||
增值税应收款项 | | | ||||
预付软体许可证 | | | ||||
预付专业服务费用 |
| — |
| | ||
其他应收款和其他预付费用 | | | ||||
预付费用及其他流动资产总额 | $ | | $ | | ||
4. 资产、计划与设备
物业、厂房及设备包括以下项目：
九月三十日 | 十二月三十一日 | |||||
（以千为单位） |
| 2024 | 2023 | |||
厂房和设备 | $ | | $ | | ||
家具和装置 |
| |
| | ||
电脑硬体和软体 |
| |
| | ||
| |
| | |||
减：累积折旧 |
| ( |
| ( | ||
不动产、厂房及设备净值 | $ | | $ | | ||
透过折旧的支出为2023年和2024年六月三十日止的三个月和六个月分别为$9,577和$465,639。
5. 应付帐款和应计费用
应付帐款和应计费用包括以下项目：
九月三十日 | 十二月三十一日 | |||||
（以千为单位） |
| 2024 | 2023 | |||
应付帐款-交易 | $ | | $ | | ||
薪资负债 |
| |
| | ||
应付增值税 | | — | ||||
应计费用 - 审计与会计费用 |
| — |
| | ||
应计费用 - 技术费用 |
| |
| | ||
应计费用 - 其他 |
| |
| | ||
应付帐款和应计费用总额 | $ | | $ | | ||
6. 租赁
公司有营运租赁，包括办公室、实验室空间和设备，剩余租期为
该公司并非任何租赁协议中的出租人，也没有任何因租赁安排而发生的关联交易。
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下面的表格呈现了关于公司营运租赁的租金成本与截至期间相关的某些信息:
截至 9 月 30 日止的三个月 | 截至九月三十日的九个月 | |||||||||||
（以千为单位） |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
营运租赁成本 | $ | | $ | | $ | | $ | | ||||
短期租赁成本 |
| |
| — |
| |
| | ||||
变量租赁成本 |
| — |
| |
| — |
| | ||||
租赁成本总额 | $ | | $ | | $ | | $ | | ||||
全部租赁成本已包含在未经审核的简化合并营运财务报表中，如下所示:
截至 9 月 30 日止的三个月 | 截至九月三十日的九个月 | |||||||||||
（以千为单位） | 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
研发费用 | $ | | $ | | $ | | $ | | ||||
销售，一般及行政费用 |
| |
| |
| |
| | ||||
租赁成本总额 | $ | | $ | | $ | | $ | | ||||
公司运作租赁的租赁资产和租赁负债已纪录在未经审核的简明综合账目资产负债表中，具体如下:
| 九月三十日 | 十二月三十一日 | ||||
（以千为单位） |
| 2024 |
| 2023 | ||
资产 |
|
|
| |||
使用权资产-营运租赁 | $ | | $ | | ||
租赁资产总额 | $ | | $ | | ||
负债 |
|
|
|
| ||
流动负债： |
|
|
|
| ||
租赁负债，流动 - 经营租赁 | $ | | $ | | ||
非流动负债： |
|
|
| |||
租赁负债，非流动资产 - 营运租赁 |
| |
| | ||
租赁负债总额 | $ | | $ | | ||
截至2024年6月29日或2023年12月31日，公司拥有外汇期货合约、股票掉期合约或普通股投资，均属于第三层资产。
下表呈现了与公司经营租赁相关的现金流量资讯，截至以下期间为止：
九月三十日 | ||||||
（以千为单位） | 2024 |
| 2023 | |||
经营租赁的经营现金流出 | $ | | $ | | ||
营运租赁负债的补充非现金金额，源自取得使用权资产 | $ | | $ | | ||
下表显示公司截至该时期营运租赁的加权平均剩余租期和加权平均折扣率相关资讯：
九月三十日 | |||
2024 | |||
租赁剩余加权平均期限（年）- 营运租赁 | |||
折现率加权平均（运营租赁） | |||
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公司营运租约的剩余到期期限（不包括短期租赁）如下：
九月三十日 | |||
（以千为单位） | 2024 | ||
2024 | $ | | |
2025 | | ||
2026 | | ||
2027 | | ||
未折现租赁总支付款项 | | ||
扣除假定利息 | ( | ||
总净租赁负债 | $ | | |
7. 承诺与负债
法律诉讼
公司在业务的正常运作中，可能会涉及各种诉讼事项。管理层认为，由此类索赔引起的任何潜在责任将不会对中期简明综合基本报表产生实质影响。
8. 股东权益
股票合并倒数
在2023年8月25日举行的公司股东年度大会（“2023年年度大会”）上，股东们批准了一项建议，即批准并采纳对公司修订和重订章程的修订，以在范围内对其已发行和流通或预留发行的普通股进行逆向股份合并，比率从1股合并至 至1 股合并至，在股东批准该提议之首年周年纪念日之前，授权董事会自行判断是否实施逆向股份合并，以及确定其具体的时机和比率。于2023年9月19日，公司董事会采纳决议，尽快实施对现有股份进行逆向合并，比率为1股合并至.
于2023年9月19日，公司向特拉华州州秘书提交了公司修订和重订章程 ( “章程修订”)，以对公司已发行和流通的普通股进行逆向股份合并，每股面值
优先股
董事会有权，无需股东进一步行动，最多发行
A系列第一并议股票
于2023年6月14日，公司向特拉菲卡州州书记提交了一份指定优先、权利和限制的凭证。
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以下是A-1特选股票的主要修订和重述条款摘要，如在修订和重述的A-1指定证书中所载：
分红派息
A-1特选股票持有人将享有分红派息，按折换计算，等同于和实际支付的普通股股息形式相同的金额，实际支付时。此外，如果在第18th 在结束日期的月周年纪念日之后，其后的
投票权
Series A-1 首选股的股份
只要尚有任何一股 Series A-1 首选股尚未赎回，公司便不得未经获得当时已发行股份过半数同意的情况下，对 Series A-1 首选股的权力、权益或特殊权利进行修改或更改。此过半数同意必须包括 AIGH Investment Partners LP 及其联属公司（以下简称“AIGH”），只要 AIGH 持有至少 $
清偿能力
在任何公司解散、清偿或停业，无论自愿或非自愿（以下简称“清偿”）的情况下，时任 Series A-1 首选股股东有权从可供分配给公司股东的资产中获得以下金额
转换
A-1优先股可随时按照转换价格$转换为普通股
持有人选择转换
A-1优先股持有人可随时根据持有人的选择按当时有效的A-1转换价格进行转换、并可不时进行转换。
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根据公司选择的强制转换
只要符合某些股权条件，本公司可能会发出通知，要求持有人按当时生效的 A-1 系列转换价将所有未发行的 A-1 系列优先股转换股转换为普通股股。
实惠所有权限制
如持有人及其附属公司有利地拥有超过以上，则 A-1 系列优先股不能转换为普通股
优先权利
赎回
本公司不能赎回 A-1 系列优先股份。
负立约
只要任何 A-1 系列优先股票仍未偿还，除非持有人超过
交易市场
没有任何 A-1 系列优先股的交易市场，我们也不预期市场发展。我们不打算在任何证券交易所或其他国家认可的交易系统申请任何 A-1 系列优先股票上市。如果没有活跃的交易市场，A-1 系列优先股的流动性将受到限制。
A-2 系列优先股
2023 年 6 月 14 日，该公司向特拉华州国务司长提交特拉华州务司长指定优惠、权利和限制证书，以指定
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(“Series A-2 设计证书”)。以下是Series A-2 首选股票的主要条款摘要，如Series A-2 设计证书所载：
分红派息
持有Series A-2 首选股票的持有人将有权享有按换算后基准相同形式及数目的股息，当且如果实际支付时，等同于并且与实际支付的普通股息相同。
投票权
Series A-2优先股的股份
只要任何Series A-2优先股股份仍存在，公司不得在未获得大多数当时流通的Series A-2优先股同意的情况下（a）修改或改变Series A-2优先股的权力、偏好或权利，（b）修改或修订公司宪章、Series A-2指定书或公司章程，以使对Series A-2优先股的任何权利受到实质不利影响，（c）授权或创建任何与Series A-2优先股相比在清偿时分红、赎回或资产分配较优先或以其他方式相关的股等级，（d）订立任何协议从事以上任何事项。pari passu在清算中，Series A-2优先股的持有人有权从公司向股东分配的资产中获得的金额等于
清偿能力
。
转换
A-2优先股可随时按照1美元的换股价格转换为普通股，但须调整为A-2特设细则中所载的某些抗稀释条款（“A-2换股价格”）
持有人选择的情况下转换
A-2优先股可由持有人在任何时间选择按当时有效的A-2换股价格转换
自动转换
在纽交所美国交易日马上前一天，当普通股于纽交所美国市场、纳斯达克资本市场、纳斯达克全球市场、纳斯达克全球精选市场或纽约证券交易所所有，但不少于所有优先A-2优先股股份中的股份，应自动转换，无需持有人进行任何操作，也无需支付任何额外的代价，转换为根据当时适用的A-2换股价格除以A-2优先股的指定货币数所确定的普通股股份。
《有益所有权限制》
如果持有人及其联属公司在转换后持有的普通股比例将超过特定比例，则A-2优先 股无法转换为普通股。
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的
优先权利
赎回
本公司不能赎回 A-2 系列优先股份。
交易市场
没有任何 A-2 系列优先股的交易市场，并且本公司也不预期市场发展。本公司不打算在任何证券交易所或其他国家认可的交易系统申请任何 A-2 系优先股票上市。如果没有活跃的交易市场，A-2 系列优先股的流动性将受到限制。
A-1 及 A-2 系优先股票及 A 类及 B 类认股证发行
于 2023 年 6 月 14 日，本公司和部分投资者签订了证券购买协议（「购买协议」），该协议根据该协议总出售（i）
二零二三年六月二十二日，在二零二三年六月份管道的第二次收市中，本公司总销售 (i)
每张 A 类认股证的行使价为 $
还有一个额外的
该公司已根据 ASC 815「衍生产品及对冲」规定，将 A 类及 b 类认股权证作为衍生工具对帐。本公司将认股权证作为负债，因为由于在某些情况下调整行使价的情况下调整发行股份数量，以及 Black-Scoles 计算中有预先指定波动输入，可用于计算合约中定义的基本交易时的代价计算。本公司于 2024 年 5 月 31 日上市纳斯达克资本市场后，有关调整股份数量的条文已不再生效。此外，公司重新评估预先指定的波动性输入，并确定这并不阻止认股权证被视为已指定为公司股票指数。因此，由 2024 年 5 月 31 日起，认股权证会作为股票工具帐目。
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公司在扣除开支后收到了$的净收益。
根据购买协议的条款，在截至2025年12月15日的一段期间，如果我们在随后的融资中发行普通股或普通股等价证券（如购买协议中所定义的）, 重要买家（在购买协议中定义为购买至少
另外，在此期间内，公司可能不得在随后的融资中发行每股普通股的有效价格低于当时有效的 A-1 优先股转换价格，未经重要买家的同意，其中必须包括 AIGH 及其关联者，只要他们根据购买协议购买的 A-1 优先股的总额已达至少 $
如果公司在普通股上市前的后续融资中发行普通股或普通股等价物，购股协议规定，如果某重要买方合理认为后续融资的任何条款比2023年6月PIPE的条款对于后续融资的投资者更有利，该重要买方有权要求公司修改2023年6月PIPE的条款以包含该较有利的条款给予该重要买方。此条款可能使在上市之前获得额外资金变得更昂贵，因为它允许任何重要买方“挑选”后续融资的条款，并要求将任何被认为更有利的条款追溯性地纳入2023年6月PIPE的条款中。此条款可能也在后续融资的条款方面造成不确定性，因为重要买方有权在决定哪些后续融资条款对他们更有利之前，审阅已完成后续融资的条款。
购股协议规定，在2025年6月14日之前，重要买方可以通过交换其拥有的面额等于后续融资认购金额的A-1优先股中的部分或全部份额参与后续交易。此条款可能对公司在后续融资中筹集到的资本金额产生不利影响，因为它允许重要买方将现有投资转为新融资，而不需要投入现金。此条款也可能使公司更难筹集额外资本，因为其他投资者可能希望提供后续融资中提供的全部或更大部分资金，或可能要求公司筹集一定数量的新资本，或可能不愿意承诺提供融资，除非知道有多少重要买方将以现金提供后续融资金额。
18
如果公司无法在需要时筹集额外资金，公司可能需要延迟、限制、减少或终止商业化、研究和产品开发，或者授予开发和市场销售其产品的权利，而这些是公司本来希望自行开发和市场销售的，这可能对公司的业务、财务状况和营运结果产生重大不利影响。
同意、转换和修订协议
2024年1月26日，公司与每位A-1系列优先股的持有人（每位为“持有人”，合称“持有人”）签订了一份同意、转换和修订协议（“同意协议”）。根据同意协议，每位持有人根据同意协议的条款和条件转换，
根据同意协议，公司发行了(i)
根据同意协议，公司与持有人同意修订和重述A-1系列优先股的优惠、权利及限制的授权证书（“修订和重述的A-1系列授权证书”），以(i)进行某些调整以反映反向拆分，(ii)删除所有投票权，除非适用法律要求，(iii)将A-1系列优先股的申报价值提高至$
公司因认定的分红派息而增加了$
截至2024年9月30日，共有
普通股
投票权
每位普通股股东有权得到
19
出席人或代理代表出席的票数在股东会的所有会议中组成决议所需的法定人数。
分红派息
公司从未向股东支付任何现金分红，并且不预期在可预见的将来向股东支付现金分红。未来支付现金股息的决定将由董事会自行决定，并将取决于财务状况、营运结果、资本需求以及董事会认为相关的其他因素。
供应商提供服务所发行的普通股
2024年9月10日，公司发行了普通股股份。
普通股票认股权证
公司购买普通股的认股权活动摘要如下：
| Weighted- | |||||||||
平均价格 | ||||||||||
Weighted- | 仍未行使的期权数量： | |||||||||
平均价格 | 合约上的 | |||||||||
购回的股票数目 | 行使价格 | 行使数量： | 期限 | |||||||
股份 | 每股股票 | 价钱 | （年） | |||||||
2024年1月1日的未到期认股权证 |
| | $ | $ | |
| ||||
已发行 |
| — | — |
|
| |||||
已行使 |
| ( |
| |
|
| ||||
Expired |
| — |
| — |
|
| ||||
截至2024年9月30日的未行使认股权证 |
| | $ | $ | |
| ||||
公司预先资助认股权凭证购买普通股的活动摘要如下：
Weighted- | ||||||
平均价格 | ||||||
购回的股票数目 | 行使数量： | |||||
股份 | 价钱 | |||||
2024年1月1日持有的预先资助认股权 |
| | $ | | ||
已发行 |
| |
| | ||
已行使 |
| — |
| |||
Expired |
| — |
| |||
2024年9月30日前资助认股权仍未行使 |
| | $ | | ||
9. 分享基础报酬
公司于2021年2月23日批准了2021年股权激励计划（"2021 Plan"），根据2021 Plan可发行的普通股股票最大总数为
在2023年度股东大会上，公司股东批准了对公司2021年计划的修订（"2021年计划修订"），增加了为普通股预留的股份数量。
20
根据2021年计划发行的股份
确定股份奖励的适当公平价值需要主观假设的输入，包括公司普通股的公平价值，以及对于期权而言，期权的预期存续期间，以及预期股价波动率。公司使用Black-Scholes期权定价模型来评估其期权奖励。用于计算股份奖励的公平价值的假设代表管理层的最佳估计，涉及固有不确定性和管理层裁决的应用。因此，如果因素发生变化并且管理层使用不同的假设，未来股份奖励的股份报酬成本可能大不相同。
在截至2024年9月30日的三个月内，公司未发行任何期权。在截至2024年9月30日的九个月内，公司向员工、董事和顾问发行了期权，发行总数为
以下表格反映了截至2024年9月30日的九个月内的选择权计划下的股票活动：
| Weighted- | ||||||||||||
平均价格 | |||||||||||||
Weighted- | 仍未行使的期权数量： | Weighted- | 总计 | ||||||||||
平均价格 | 合约上的 | 平均价格 | 内在价值： | ||||||||||
购回的股票数目 | 行使数量： | 期限 | Fair Value at | 价值 | |||||||||
股份 | 价钱 | （年） | 授予日期 | （以千为单位） | |||||||||
Options outstanding at January 1, 2024 |
| |
| $ | |
|
| $ | |
| |||
已行使 | — | — | |||||||||||
已取消/失效 |
| ( |
|
| |
|
|
|
|
|
| ||
Expired |
| — |
|
| — |
|
|
|
|
|
| ||
已授予股份 |
| |
|
| |
|
|
|
|
|
| ||
2024年9月30日尚未行使的期权 |
| |
| $ | |
|
| $ | |
| |||
截至2024年9月30日可行使的期权 | | $ | | $ | |||||||||
股票报酬已包括在未经审核的中期简明综合营业报表中，具体如下：
截至 9 月 30 日止的三个月 | 截至九月三十日的九个月 | ||||||||||||
（以千为单位） | 2024 |
| 2023 |
| 2024 |
| 2023 | ||||||
研发费用 | $ | | $ | | $ | | $ | | |||||
销售、一般和行政 |
| |
| |
| |
| | |||||
总计 | $ | | $ | | $ | | $ | | |||||
截至2024年9月30日尚未认列的与未发放股票期权奖励相关的总报酬成本为$
10. 每股网损
基本每股网损是通过将净损除以期间内普通股权重平均数来确定，不考虑可以转换为现金或几乎不需要现金的潜在稀释证券，除了那些可以发行用于少量或无现金代价的股份。稀释每股净损是通过将净损除以稀释后的权重平均股份数来确定。稀释后的权重平均股份反映出可能具有稀释效应的潜在稀释普通股，如按库藏股法计算的期权和认股权证。在报告净营运亏损的时期，所有普通股期权和认股权证通常被视为具有抗稀释性质，因此基本每股净损和稀释每股净损相等。
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Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
(in thousands, except share data) | 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Net loss - basic | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Preferred stock dividends | — | — | ( | — | ||||||||
Net loss - diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average shares outstanding - basic* | | | | | ||||||||
Weighted average shares outstanding - diluted* | | | | | ||||||||
Net loss per common share - basic* | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Net loss per common share - diluted* | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Dividend per common share | $ | - | $ | - | ( | - | ||||||
* reflects a one-for-thirty-five (1:) reverse stock split effected on September 21, 2023 | ||||||||||||
The following potentially dilutive securities were excluded from the computation of earnings per share as of September 30, 2024 and 2023 because their effects would be anti-dilutive:
September 30, | ||||||
| 2024 | 2023 | ||||
Common stock warrants | | | ||||
Assumed conversion of preferred stock | | | ||||
Stock options | | | ||||
Total | | | ||||
At September 30, 2024, the Company had
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2024 |
| 2023 |
| 2024 |
| 2023 | ||||||
Weighted average shares issued | | | | | ||||||||
Weighted average pre-funded and penny warrants | | | | | ||||||||
Weighted average shares outstanding | | | | | ||||||||
11. DEFINED CONTRIBUTION PENSION
The Company operates a defined contribution pension scheme for its UK employees. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund. Pension cost is included in the unaudited interim condensed consolidated statements of operations as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
(in thousands) | 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Research and development | $ | | $ | | $ | | $ | | ||||
Selling, general and administration |
| |
| |
| |
| | ||||
Total | $ | | $ | | $ | | $ | | ||||
22
12. FAIR VALUE MEASUREMENTS
The table below presents activity within Level 3 of the fair value hierarchy, our liabilities carried at fair value during the nine months ended September 30, 2024:
(in thousands) | Warrant Liability | ||
Balance at January 1,2024 | $ | | |
Total change in the liability included in earnings |
| ( | |
Reclass from liability to equity | ( | ||
Balance at September 30, 2024 | $ | — | |
The valuation of the warrants was determined using option pricing models. These models use inputs such as the underlying price of the shares issued at the measurement date, expected volatility, risk free interest rate and expected life of the instrument. Since our common stock was not publicly traded until February 2022 there has been insufficient volatility data available. Accordingly, we have used an expected volatility based on historical common stock volatility of our peers. The Company initially accounted for the warrants as derivative instruments in accordance with ASC 815, adjusting the fair value at the end of each reporting period. Upon the Company’s uplisting to the Nasdaq Capital Market on May 31, 2024 certain provisions within the warrant agreements were no longer in effect. As a result, the warrants are accounted for as an equity instrument with the balance of the derivative liability on May 31, 2024 being transferred to Additional Paid-In Capital.
The fair value of the common warrants was determined by using an option pricing model assuming the following:
May-24 | December 31 | |||||
2024 |
| 2023 | ||||
Expected term (years) |
| |||||
Risk-free interest rate |
| |||||
Expected volatility |
| |||||
Expected dividend yield |
| |||||
Additionally, the Company had determined that the warrant liability was most appropriately classified within Level 3 of the fair-value hierarchy by evaluating each input for the option pricing models against the fair-value hierarchy criteria and using the lowest level of input as the basis for the fair-value classification as called for in ASC 820. There are six inputs: closing price of the Company’s common stock on the day of evaluation; the exercise price of the warrants; the remaining term of the warrants; the volatility of the Company’s stock over that term; annual rate of dividends; and the risk-free rate of return. Of those inputs, the exercise price of the warrants and the remaining term are readily observable in the warrant agreements. The annual rate of dividends is based on the Company’s historical practice of not granting dividends. The closing price of SmartKem stock would fall under Level 1 of the fair-value hierarchy as it is a quoted price in an active market (ASC 820-10). The risk-free rate of return is a Level 2 input as defined in ASC 820-10, while the historical volatility is a Level 3 input as defined in ASC 820. Since the lowest level input is a Level 3, the Company determined the warrant liability was most appropriately classified within Level 3 of the fair value hierarchy.
The following tables present information about the Company’s financial assets and liabilities that have been measured at fair value as of December 31, 2023 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value. In general, the fair values were determined using Level 3:
Quoted Prices | Significant Other | Significant | ||||||||||
in Active | Observable | Unobservable | ||||||||||
Markets | Inputs | Inputs | December 31, | |||||||||
(Level 1) | (Level 2) | (Level 3) | 2023 | |||||||||
Description | ||||||||||||
Liabilities: | ||||||||||||
Warrant liability | $ | — | $ | — | $ | | $ | | ||||
Total liabilities | $ | — | $ | — | $ | | $ | | ||||
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of operations of SmartKem, Inc. (“SmartKem” or the “Company”) should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto contained in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 to provide an understanding of its results of operations, financial condition and cash flows.
All references in this Quarterly Report to “we,” “our,” “us” and the “Company” refer to SmartKem, Inc., and its subsidiaries unless the context indicates otherwise.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 with respect to our business, financial condition, liquidity, and results of operations. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “could,” “would,” “will,” “may,” “can,” “continue,” “potential,” “should,” and the negative of these terms or other comparable terminology often identify forward-looking statements. Statements in this Quarterly Report on Form 10-Q (this “Report”) that are not historical facts are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements, including the risks discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “10-K”) in Item 1A under “Risk Factors” and the risks detailed from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”). These forward-looking statements include, but are not limited to, statements about:
| ● | the implementation of our business model and strategic plans for our business, technologies and products; |
| ● | the rate and degree of market acceptance of any of our products or organic semiconductor technology in |
general, including changes due to the impact of (i) new semiconductor technologies, (ii) the performance of organic semiconductor technology, whether perceived or actual, relative to competing semiconductor materials, and (iii) the performance of our products, whether perceived or actual, compared to competing silicon-based and other products;
| ● | the timing and success of our, and our customers’, product releases; |
| ● | our ability to develop new products and technologies; |
| ● | our ability to comply with the continued listing requirements of Nasdaq; |
| ● | our estimates of our expenses, ongoing losses, future revenue and capital requirements, including |
our needs for additional financing;
| ● | our ability to obtain additional funds for our operations and our intended use of any such funds; |
| ● | our ability to remain eligible on an over-the-counter quotation system; |
| ● | our receipt and timing of any royalties, milestone payments or payments for products, under any current or future collaboration, license or other agreements or arrangements; |
| ● | our ability to obtain and maintain intellectual property protection for our technologies and products and our ability to operate our business without infringing the intellectual property rights of others; |
| ● | the strength and marketability of our intellectual property portfolio; |
| ● | our dependence on current and future collaborators for developing, manufacturing or otherwise bringing our products to market; |
| ● | the ability of our third-party supply and manufacturing partners to meet our current and future business needs; |
| ● | our exposure to risks related to international operations; |
| ● | our dependence on third-party fabrication facilities; |
| ● | the impact of the COVID-19 pandemic and any future communicable disease outbreak on our business and operations; |
| ● | our relationships with our executive officers, directors, and significant stockholders; |
24
| ● | our expectations regarding our classification as a “smaller reporting company,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and an “emerging growth company” under the Jumpstart Our Business Startups Act (the “JOBS Act”) in future periods; |
| ● | our future financial performance; |
| ● | the competitive landscape of our industry; |
| ● | the impact of government regulation and developments relating to us, our competitors, or our industry; and |
| ● | other risks and uncertainties, including those listed under the caption “Risk Factors” in our 10-K. |
These statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” in our 10-K and in this Report and elsewhere in this Report.
Any forward-looking statement in this Report reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our business, results of operations, industry and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Report and the documents that we reference in this Report and have filed with the SEC as exhibits hereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
Company Overview
We are seeking to reshape the world of electronics with our disruptive organic thin-film transistors (“OTFTs”) that have the potential to revolutionize the display industry. Our patented TRUFLEX® liquid semiconductor polymers are used to make a new type of transistor that can be used in a number of display technologies, including next generation microLED displays. Our inks enable low temperature printing processes that are compatible with existing manufacturing infrastructure to deliver low-cost displays that outperform existing technology.
We develop our materials at our research and development facility in Manchester, UK, and provide prototyping services at the Centre for Process Innovation (“CPI”) at Sedgefield, UK. We have entered into a technology transfer agreement (TTA) with the Industrial Technology Research Institute (“ITRI”) in Taiwan for product prototyping on its Gen2.5 fabrication line. We also have a field application office in Taiwan. We have an extensive IP portfolio including 125 granted patents across 19 patent families and 40 codified trade secrets.
Since our inception in 2009, we have devoted substantial resources to the research and development of materials and production processes for the manufacture of organic thin film transistors and the enhancement of our intellectual property.
Our loss before income taxes was $7.6 million and $7.1 million for the nine months ended September 30, 2024 and 2023. As of September 30, 2024, our accumulated deficit was $109.8 million. Substantially all our operating losses have resulted from expenses incurred in connection with research and development activities and from general and administrative costs associated with our operations.
Results of Operations for the three and nine months ended September 30, 2024
Three months ended September 30, 2024 compared with three months ended September 30, 2023
Revenue and Cost of revenue
We had no revenue or cost of revenue in the three months ended September 30, 2024. We had revenue of $3.0 thousand and cost of revenue of $1.0 thousand in the same period of 2023. Both revenues and related cost of
25
revenue are a result of sales of OTFT backplanes and TRUFLEX® materials for customer assessment and development purposes.
Other operating income
Other operating income was $0.3 million in the three months ended September 30, 2024, compared to $0.3 million in the same period of 2023. The primary source of the income is related to a research grant and research and development tax credits.
Operating expenses
Operating expenses were $3.1 million for each of the three months ended September 30, 2024 and 2023.
Research and development expenses are incurred for the development of TRUFLEX® inks to make OTFT circuits and consist primarily of payroll and technical development costs. The research and development expenses represent 48.1% and 53.1% of the total operating expenses for the three months ended September 30, 2024 and 2023, respectively. Research and development expenses decreased $64 thousand for the three months ended September 30, 2024 compared to the same period for the prior year. This decrease is primarily related to lower personnel expenses, offset in part by higher technical service costs.
Selling, general and administrative expenses consist primarily of payroll and professional services such as accounting, legal services and investor relations. These expenses represent 50.5% and 42.9% of our total operating expenses for the three months ended September 30, 2024 and 2023, respectively. Selling, general and administrative expenses increased by $0.3 million for the three months ended September 30, 2024 compared to the same period for the prior year. This increase was primarily a result of an increase in personnel expenses as well as professional service fees primarily related to business development initiatives.
Non-Operating income/(expense)
We had a gain of $0.5 million for the three months ended September 30, 2023 related to the valuation of the warrant liability, with no similar gain in the same period of 2024. We recorded a loss on foreign currency of $0.8 million for the three months ended September 30, 2023, with no similar loss in the same period of 2024.
Nine months ended September 30, 2024 compared with nine months ended September 30, 2023
Revenue and Cost of revenue
We had revenue of $40.0 thousand and cost of revenue of $32.0 thousand in the nine months ended September 30, 2024. We had revenue of $27.0 thousand and cost of revenue of $23.0 thousand in the same period of 2023. Both revenues and related cost of revenue for the nine months ended September 30, 2024 and 2023 are a result of sales of OTFT backplanes and TRUFLEX® materials for customer assessment and development purposes.
Other operating income
Other operating income was $0.7 million in the nine months ended September 30, 2024 , compared to $0.7 million in the same period of 2023. The primary source of the income is related to a research grant and research and development tax credits.
Operating expenses
Operating expenses were $8.8 million for the nine months ended September 30, 2024, compared to $8.3 million in the same period of 2023, an increase of $0.5 million.
Research and development expenses are incurred for the development of TRUFLEX® inks to make OTFT circuits and consist primarily of payroll and technical development costs. The research and development expenses represent 44.8% and 49.4% of the total operating expenses for the nine months ended September 30, 2024 and 2023, respectively. Research and development expenses decreased $0.1 million for the
26
nine months ended September 30, 2024 compared to the same period for the prior year. This decrease is primarily related to lower personnel expenses, offset in part by higher technical service costs.
Selling, general and administrative expenses consist primarily of payroll and professional services such as accounting, legal services and investor relations. These expenses represent 54.4% and 48.4% of our total operating expenses for the nine months ended September 30, 2024 and 2023, respectively. Selling, general and administrative expenses increased by $0.8 million for the nine months ended September 30, 2024 compared to the same period for the prior year. This increase was primarily a result of an increase in personnel expenses as well as professional service fees primarily related to the NASDAQ uplisting and business development initiatives.
Non-Operating income/(expense)
We recorded a gain of $0.7 million related to the valuation of the warrant liability for the nine months ended September 30, 2024 compared to a gain of $0.5 million for the same period in 2023. We had transaction costs of $0.2 million related to a private placement financing for the nine months ended September 30, 2023 with no similar costs in the same period of 2024. We recorded a loss on foreign currency transactions of $0.2 million for the nine months ended September 30, 2024 compared to gain of $0.2 million in the same period in 2023.
Liquidity and Capital Resources
As of September 30, 2024, our cash and cash equivalents were $1.8 million compared with $8.8 million as of December 31, 2023. We believe this will not be sufficient to fund our operating expenses and capital expenditure requirements for the 12 months from the issuance of these financial statements and that we will require additional capital funding to continue our operations and research development activity. It is possible this period could be shortened if there are any significant increases in spending or more rapid progress of development programs than anticipated.
Our expected cash payments over the next twelve months include (a) $1.6 million to satisfy accounts payable and accrued expenses and (b) $0.2 million to satisfy the lease liabilities. Additional expected cash payments beyond the next twelve months include $31 thousand of lease liabilities.
Our future viability is dependent on our ability to raise additional capital to fund our operations. We will need to obtain additional funds to satisfy our operational needs and to fund our sales and marketing efforts, research and development expenditures, and business development activities. Until such time, if ever, as we can generate sufficient cash through revenue, management’s plans are to finance our working capital requirements through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. If we raise additional funds by issuing equity securities, our existing security holders will likely experience dilution. If we borrow money, the incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations. If we enter into a collaboration, strategic alliance or other similar arrangement, we may be forced to give up valuable rights. There can be no assurance however that such financing will be available in sufficient amounts, when and if needed, on acceptable terms or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the market demand for our products and services, the quality of product development efforts, management of working capital, and continuation of normal payment terms and conditions for purchase of services. If we are unable to substantially increase revenues, reduce expenditures, or otherwise generate cash flows for operations, then we will need to raise additional funding.
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Cash Flow from Operating Activities
Net cash used in operating activities was $7.0 million for the nine months ended September 30, 2024, compared to $5.6 million for the nine months ended September 30, 2023, an increase of $1.4 million. The increase is related to the payout of bonuses and payments made related to the NASDAQ uplisting and business development initiatives.
Contractual Payment Obligations
Our principal commitments primarily consist of obligations under leases for office space and purchase commitments in the normal course of business for research and development facilities and services, communications infrastructure, and administrative services. We expect to fund these commitments from our cash balances and working capital.
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”), which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors. In addition, there are other items within our financial statements that require estimation but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
Fair Value Measurements
GAAP emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, GAAP establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
Our fair value measurements are generally related to a warrant liability and amendments to preferred stock. The models used for these fair value calculations use inputs such as the underlying price of the shares issued at the measurement date, expected volatility, risk free interest rate and expected life of the instrument. Since our common stock is so thinly traded there is insufficient volatility data available. Accordingly, we have used an expected volatility based on historical common stock volatility of our peers.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
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Item 4. Controls and Procedures
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Exchange Act). Based on that evaluation, the Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2024, because of the material weaknesses in internal control over financial reporting described below.
Material Weakness in Internal Control Over Financial Reporting
In connection with the preparation of the financial statements for the first quarter of 2024 a material weakness in the Company’s internal control over financial reporting was identified relating to the complex financial reporting and accounting associated with the Consent, Conversion and Amendment Agreement the Company entered into on January 26, 2024, a non-cash item. None of the Company’s filed financial statements are impacted. The September 30, 2024 financial statements contained in this Form 10-Q reflect the appropriate accounting for this transaction and no prior financial statements were impacted.
Remediation
In connection with the preparation of its quarterly report for the three and nine months ended September 30, 2024 management continues to implement measures designed to ensure that the control deficiency contributing to the material weakness is remediated, such that the controls are designed, implemented, and operating effectively.
While we believe that these actions will be sufficient to remediate the material weakness, it will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed prior to the end of fiscal 2024.
Changes in Internal Controls over Financial Reporting
Aside from the steps taken to address the material weakness discussed above, there were no other changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act) that occurred during the period covered by this Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the 10-K, which could materially affect our business, financial condition or future results. The risks described in the 10-K may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Except as set forth below there have been no material changes to the risk factors previously disclosed in the 10-K.
Certain of our partners are and many of our potential customers will be located in Taiwan, which increases the risk that a natural disaster, epidemic, labor strike, war or political unrest could have a material adverse effect on our business, financial condition and results of operations.
Certain of our partners, including The Industrial Technology Research Institute of Taiwan (“ITRI”), are located in Taiwan. In addition, we expect that many of our potential customers will be located in Taiwan, where the bulk of display manufacturing occurs. From time to time, Taiwan has been impacted by significant seismic activity in the area, including earthquakes and related aftershocks, and it is expected that similar events will happen in the future. Because of the relatively small size of Taiwan and the proximity of our partners and future customers to each other, earthquakes, tsunamis, fires, floods, other natural disasters, epidemics such as the COVID-19 outbreak, political unrest, war, labor strikes or work stoppages could simultaneously affect our partners’ production capability, our ability to supply our customers, and our customers’ ability to produce products incorporating our technology. As a result, we may be subject to unanticipated costs and delays that could have a material adverse effect on our business, financial condition and results of operations.
We identified a material weakness in connection with our internal financial reporting controls. Although we are taking steps to remediate this material weakness, there is no assurance we will be successful in doing so in a timely manner, or at all, and we may identify other material weaknesses.
In connection with the preparation of the financial statements for the first quarter of 2024 a material weakness in our internal control over financial reporting was identified relating to the complex financial reporting and accounting associated with the Consent, Conversion and Amendment Agreement we entered into on January 26, 2024, a non-cash item. None of the Company’s filed financial statements are impacted.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal control over financial reporting is necessary for us to provide reliable financial reporting. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
If we are not able to comply with the requirements of the Sarbanes-Oxley Act or if we are unable to maintain effective internal control over financial reporting, we may not be able to produce timely and accurate financial statements or guarantee that information required to be disclosed by us in the reports that we file with the SEC, is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. Any failure of our internal control over financial reporting or disclosure controls and procedures could cause our investors to lose confidence in our publicly reported information, cause the market price of our stock to decline, expose us to sanctions or investigations by the SEC or other regulatory authorities, or impact our results of operations.
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We can give no assurance that the measures we are taking and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
If we fail to meet all applicable Nasdaq Capital Market requirements and Nasdaq determines to delist our common stock, the delisting could adversely affect the market liquidity of our common stock and the market price of our common stock could decrease and our ability to access the capital markets could be negatively impacted.
Our common stock is listed on The Nasdaq Capital Market. There can be no assurance that we will be able to continue to maintain compliance with the Nasdaq continued listing requirements, and if we are unable to maintain compliance with the continued listing requirements, including the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) and the minimum stockholders’ equity requirement of $2.5 million set forth in Nasdaq Listing Rule 5550(b)(1), our shares may be delisted from Nasdaq, which could reduce the liquidity of our common stock materially and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees, suppliers, customers and business development opportunities. Such a delisting likely would impair your ability to sell or purchase our common stock when you wish to do so. Further, if we were to be delisted from Nasdaq, our common stock may no longer be recognized as a “covered security,” and we would be subject to regulation in each state in which we offer our securities. Thus, delisting from Nasdaq could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly impact the ability of investors to trade our securities and would negatively impact the value and liquidity of our common shares.
Our recurring losses from operations have raised substantial doubt regarding our ability to continue as a going concern.
We have recognized recurring losses, and as of September 30, 2024, had an accumulated deficit of $109.8 million. We anticipate operating losses to continue for the foreseeable future due to, among other things, costs related to research funding, further development of our technology and products and expenses related to the commercialization of our products. These efforts may be more costly than we expect, and we may not be able to generate revenue to offset our increased operating expenses. We expect our cash and cash equivalents of $1.8 million as of September 30, 2024 to be insufficient to meet our operating expenses and capital expenditure requirements for at least 12 months from the filing of this 10-Q. Our forecast of the period of time through which our current financial resources will be adequate to support our operations and the costs to support our general and administrative and research and development activities are forward-looking statements and involve risks and uncertainties. Our consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
Our ability to continue as a going concern is dependent on our ability to raise additional working capital through public or private equity or debt financings or other sources, which may include collaborations with third parties. There can be no assurance, however, that such financing will be available, on acceptable terms and conditions, or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including our ability to generate significant revenue, the market demand for our products, the quality of product development efforts including potential joint collaborations, management of working capital, and the continuation of normal payment terms and conditions for purchase of services.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our working capital requirements through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making
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acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or products, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate commercialization, our research and product development, or grant rights to develop and market our products that we would otherwise prefer to develop and market ourselves, it may also impact our ability to continue as a going concern. The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On September 10, 2024, we issued 30,000 shares of common stock to a consultant with a value of $152.4 thousand. Such issuances were exempt from registration under 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
Item 6. Exhibits
See Exhibit Index.
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EXHIBIT INDEX
Exhibit No. | Description |
2.1 * | |
3.1 | |
3.2 | |
10.1*† | |
31.1† | |
31.2† | |
32.1†† | |
32.2†† | |
101.INS† | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH† | Inline XBRL Taxonomy Extension Schema Document |
101.CAL† | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF† | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB† | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE† | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104† | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
* Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant hereby undertakes to furnish supplementally a copy of any of the omitted schedules and exhibits to the SEC on a confidential basis upon request.
† Filed herewith.
†† This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the registrant specifically incorporates it by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.
Date: November 8, 2024
SMARTKEM, INC. | ||
By: | /s/ Ian Jenks | |
Name: | Ian Jenks | |
Title: | Chief Executive Officer and Chairman of the Board | |
(Principal Executive Officer) | ||
By: | /s/ Barbra C. Keck | |
Name: | Barbra C. Keck | |
Title: | Chief Financial Officer | |
(Principal Financial Officer) | ||
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