SmartKem, Inc 10-Q/A for FY2021 Q3

SmartKem, Inc. (SMTK)

10-Q/A 2022-08-23 For: 2021-09-30

Added on April 12, 2026

About this 10-Q/A

SmartKem, Inc filed this 10-Q/A on August 23, 2022, covering the quarter ended September 30, 2021 (FY2021 Q3).

Headline figures

Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net loss: $2.66M; compared with a net loss of $622K a year earlier
Diluted EPS: -$0.10; compared with -$0.05 a year earlier

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Delaware		85-1083654
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒


		Page

Part I	Financial Information

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020	4

	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020	5

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (as restated)	7

	Notes to the Unaudited Condensed Consolidated Financial Statements (as restated)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (as restated)	29

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41

Item 4.	Controls and Procedures (as restated)	41

Part II	Other Information

Item 1.	Legal Proceedings	43

Item 1A.	Risk Factors (as restated)	43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60

Item 3.	Defaults Upon Senior Securities	60

Item 4.	Mine Safety Disclosures	60

Item 5.	Other Information	60

Item 6.	Exhibits	60



Exhibit Index		61

Signatures		62



	September 30,		December 31,
	2021		2020
ASSETS	(UNAUDITED)

Current assets:
Cash and cash equivalents	$	14,719	$	764
Accounts receivable		—		18
Research and development tax credit receivable		921		982
Prepaid expenses and other current assets		937		259
Total current assets		16,577		2,023
Property, plant equipment, net of accumulated depreciation of $1,041 and $908		805		682
Right-of-use assets, net		170		236
Other assets		6		8
Total assets	$	17,558	$	2,949

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued expenses	$	1,323	$	861
Current lease liabilities		125		217
Total current liabilities		1,448		1,078
Non-current lease liabilities		16		20
Total liabilities		1,464		1,098

Stockholders’ Equity:
Common stock, par value $0.0001 per share, 300,000,000 shares authorized, 25,541,809 and 13,627,887 shares issued and outstanding, at September 30, 2021 and December 31, 2020, respectively*		3		1
Additional paid-in capital		89,831		61,276
Accumulated other comprehensive loss		(1,365)		(1,480)
Accumulated deficit		(72,375)		(57,946)
Total Stockholders’ equity		16,094		1,851

Total Liabilities and Stockholders’ Equity	$	17,558	$	2,949


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue	$	—	$	50	$	—	$	71
Cost of revenue		—		26		—		38
Gross profit		—		24		—		33

Other operating income		447		747		1,135		1,125

Operating Expenses:
Research and development		1,356		1,102		6,725		3,213
Selling, general and administrative		1,368		292		6,695		1,061
Transaction expenses		—		—		1,329		—
Total operating expenses		2,724		1,394		14,749		4,274

Loss from operations		(2,277)		(623)		(13,614)		(3,116)

Non-operating (Expense)/Income
(Loss)/Gain on foreign currency transactions		(386)		1		(799)		—
Interest expense		—		—		(19)		(6,835)
Interest income		1		—		3		3
Change in fair value of derivative asset		—		—		—		(6,282)
Loss on conversion of convertible notes payable		—		—		—		(5,470)
Total non-operating (expense)/income		(385)		1		(815)		(18,584)

Loss before income taxes		(2,662)		(622)		(14,429)		(21,700)
Income tax expense		—		—		—		—
Net loss	$	(2,662)	$	(622)	$	(14,429)	$	(21,700)

Net loss	$	(2,662)	$	(622)	$	(14,429)	$	(21,700)
Other comprehensive loss:
Foreign currency translation		82		156		115		(405)
Total comprehensive loss	$	(2,580)	$	(466)	$	(14,314)	$	(22,105)

Basic & diluted net loss per common share	$	(0.10)	$	(0.05)	$	(0.59)	$	(1.73)

Basic & diluted weighted average shares outstanding		27,671,646		13,596,438		24,397,327		12,551,073


						Accumulated
				Additional		Other
	Common stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Loss		Deficit		Equity (Deficit)
Balance at June 30, 2020	13,447,057		1		60,963		(1,757)		(55,891)		3,316
Issuance of common stock	180,830		-		313		-		-		313
Foreign currency translation adjustment	-		-		-		156		-		156
Net loss	-		-		-		-		(622)		(622)
Balance at September 30, 2020	13,627,887	$	1	$	61,276	$	(1,601)	$	(56,513)	$	3,163

						Accumulated
				Additional		Other
	Common stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Loss		Deficit		Equity (Deficit)
Balance at June 30, 2021	25,462,000		3		89,722		(1,447)		(69,713)		18,565
Stock-based compensation expense	-		-		2		-		-		2
Issuance of common shares to vendor	60,000		-		107		-		-		107
Stock options exercised	19,809		-		-		-		-		-
Foreign currency translation adjustment	-		-		-		82		-		82
Net loss	-		-		-		-		(2,662)		(2,662)
Balance at September 30, 2021	25,541,809	$	3	$	89,831	$	(1,365)	$	(72,375)	$	16,094


	For the Nine Months Ended
	September 30,
	2021
Net cash used in operating activities as previously reported	$	(8,100)
Adjustment for Loss/(Gain) on foreign currency transactions		799
Net cash used in operating activities as restated	$	(7,301)

Effect of exchange rate changes on cash as previously reported	$	133
Adjustment for Gain/(Loss) on foreign currency transactions		(799)
Effect of exchange rate changes on cash as restated	$	(666)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Operating lease cost	$	60	$	45	$	159	$	132
Short-term lease cost		3		2		29		15
Variable lease cost		7		95		105		221
Total lease cost	$	70	$	142	$	293	$	368


	September 30,
	2021
Weighted average remaining lease term (in years) – operating leases	0.89
Weighted average discount rate – operating leases	6.07	%


	As of
	September 30,
	2021
2021	$	73
2022		75
2023		8
2024		—
2025		—
Thereafter		—
Total undiscounted lease payments		156
Less imputed interest		(15)
Total net lease liabilities	$	141


				Weighted-
				Average
		Weighted-		Remaining
		Average		Contractual
	Number of	Exercise		Term
	Shares	Price		(Years)
Warrants outstanding at January 1, 2021	—	$	—	—
Exercised	—		—	—
Forfeited or Expired	—		—	—
Granted	985,533		2.00	5.00
Warrants outstanding at September 30, 2021	985,533	$	2.00	4.40


		Nine Months Ended
		September 30, 2021
Expected term (years)		5 years
Risk-free interest rate		0.60%
Expected volatility		54%
Expected dividend yield		0%


		Three Months Ended September 30,				Increase (Decrease)
US$000		2021		2020		Amount	Percentage
Revenue	$	—	$	50	$	(50)	(100)	%
Cost of revenue		—		26		(26)	(100)	%
Gross Profit		—		24		(24)	(100)	%
Other Operating Income		447		747		(300)	(40)	%
Operating Expenses
Research and development		1,356		1,102		254	23	%
Selling, general and administrative		1,368		292		1,076	368	%
Transaction expenses		—		—		—	—	%
Total operating expenses		2,724		1,394		1,330	95	%
Loss from operations		(2,277)		(623)		(1,654)	265	%
Non Operating (Expense)/Income
(Loss)/gain on foreign currency transactions		(386)		1		(387)	(38,700)	%
Interest expense		—		—		—	—	%
Interest income		1		—		1	—	%
Total non operating (expense)/income		(385)		1		(386)	(38,600)	%
Loss before income taxes		(2,662)		(622)		(2,040)	328	%
Income tax expense		—		—		—	—
Foreign Currency Translation		82		156		(74)	(47)	%
Total comprehensive loss	$	(2,580)	$	(466)	$	(2,114)	454	%


Exhibit No.	Description

2.1 #	Share Exchange Agreement, dated as of February 23, 2021, among the Registrant, SmartKem Limited and the shareholders of SmartKem Limited (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

3.1	Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

3.2	Amended and Restated Bylaws of the Registrant, as currently in effect (incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

31.1†	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2†	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1††	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2††	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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)

	SMARTKEM, INC.

	By:	/s/ Ian Jenks
	Name:	Ian Jenks
	Title:	President, Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Robert Bahns
	Name:	Robert Bahns
	Title:	Executive Vice President, Chief Financial Officer
		(Principal Financial Officer)