SmartKem, Inc 10-Q for FY2022 Q2

SmartKem, Inc. (SMTK)

10-Q 2022-08-22 For: 2022-06-30

Added on April 12, 2026

About this 10-Q

SmartKem, Inc filed this 10-Q on August 22, 2022, covering the quarter ended June 30, 2022 (FY2022 Q2).

Headline figures

Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4000
Net loss: $3.7M; compared with a net loss of $2.4M a year earlier
Diluted EPS: -$0.13; compared with -$0.09 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 June 30, 2022 and December 31, 2021	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021	4

	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021	5

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (as restated)	6

	Notes to the Unaudited Interim Condensed Consolidated Financial Statements (as restated)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (as restated)	23

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32

Item 4.	Controls and Procedures	32

Part II	Other Information

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults Upon Senior Securities	36

Item 4.	Mine Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	36



Exhibit Index		37

Signatures		38



	June 30,		December 31,
	2022		2021
ASSETS	(UNAUDITED)

Current assets:
Cash and cash equivalents	$	7,757	$	12,226
Accounts receivable		4		—
Research and development tax credit receivable		1,505		1,070
Prepaid expenses and other current assets		1,815		802
Total current assets		11,081		14,098
Property, plant equipment, net of accumulated depreciation of $1,090 and $1,102		677		802
Right-of-use assets, net		549		154
Other assets		6		6
Total assets	$	12,313	$	15,060

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued expenses	$	1,190	$	1,423
Current lease liabilities		208		87
Total current liabilities		1,398		1,510
Non-current lease liabilities		320		28
Total liabilities		1,718		1,538

Commitments and contingencies (Note 8)
Stockholders’ Equity:
Common stock, par value $0.0001 per share, 300,000,000 shares authorized, 26,949,282 and 25,554,309 shares issued and outstanding, at June 30, 2022 and December 31, 2021, respectively		3		3
Additional paid-in capital		92,612		89,954
Accumulated other comprehensive loss		(485)		(1,363)
Accumulated deficit		(81,535)		(75,072)
Total Stockholders’ equity		10,595		13,522

Total Liabilities and Stockholders’ Equity	$	12,313	$	15,060


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue	$	4	$	—	$	34	$	—
Cost of revenue		2		—		25		—
Gross profit		2		—		9		—

Other operating income		294		256		578		688

Operating Expenses:
Research and development		1,344		1,355		2,802		5,369
Selling, general and administrative		1,370		1,345		2,611		5,328
Transaction expenses		—		16		—		1,329
Total operating expenses		2,714		2,716		5,413		12,026

Loss from operations		(2,418)		(2,460)		(4,826)		(11,338)

Non-operating (Expense)/Income
(Loss)/Gain on foreign currency transactions		(1,284)		57		(1,638)		(412)
Interest expense		—		—		—		(19)
Interest income		1		2		1		2
Total non-operating (expense)/income		(1,283)		59		(1,637)		(429)

Loss before income taxes		(3,701)		(2,401)		(6,463)		(11,767)
Income tax expense		—		—		—		—
Net loss	$	(3,701)	$	(2,401)	$	(6,463)	$	(11,767)

Net loss	$	(3,701)	$	(2,401)	$	(6,463)	$	(11,767)
Other comprehensive loss:
Foreign currency translation		722		15		878		33
Total comprehensive loss	$	(2,979)	$	(2,386)	$	(5,585)	$	(11,734)

Basic & diluted net loss per common share	$	(0.13)	$	(0.09)	$	(0.23)	$	(0.52)

Basic & diluted weighted average shares outstanding		28,751,365		27,066,385		28,595,550		22,733,033


						Accumulated
				Additional		Other
	Common stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Loss		Deficit		Equity (Deficit)
Balance at January 1, 2021	13,627,887	$	1	$	61,276	$	(1,480)	$	(57,946)	$	1,851
Issuance of common shares due to exercise of stock-options	1,404,813		1		19		-		-		20
Stock-based compensation expense	-		-		6,020		-		-		6,020
Repurchase of common stock	(2,307,700)		-		-		-		-		-
Effect of reverse capitalization	2,500,000		-		-		-		-		-
Issuance of common shares to vendor	50,000		-		99		-		-		99
Issuance of common stock and warrants in private placement	10,162,000		1		24,637		-		-		24,638
Issuance costs related to common stock and warrants in private placement	-		-		(2,454)		-		-		(2,454)
Foreign currency translation adjustment	-		-		-		17		-		17
Net loss	-		-		-		-		(9,366)		(9,366)
Balance at March 31, 2021	25,437,000		3		89,597		(1,463)		(67,312)		20,825
Stock-based compensation expense	-		-		75		-		-		75
Issuance of common shares to vendor	25,000		-		50		-		-		50
Foreign currency translation adjustment	-		-		-		15		-		15
Net loss	-		-		-		-		(2,401)		(2,401)
Balance at June 30, 2021	25,462,000	$	3	$	89,722	$	(1,448)	$	(69,713)	$	18,564

						Accumulated
				Additional		Other
	Common stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Loss		Deficit		Equity (Deficit)
Balance at January 1, 2022	25,554,309	$	3	$	89,954	$	(1,363)	$	(75,072)	$	13,522
Stock-based compensation expense	-		-		98		-		-		98
Issuance of common shares to vendor	12,500		-		43		-		-		43
Issuance of common stock in private placement (note 13)	1,000,000		-		2,000		-		-		2,000
Issuance costs related to common stock in private placement	-		-		(160)		-		-		(160)
Foreign currency translation adjustment	-		-		-		156		-		156
Net loss	-		-		-		-		(2,762)		(2,762)
Balance at March 31, 2022	26,566,809		3		91,935		(1,207)		(77,834)		12,897
Stock-based compensation expense	-		-		97		-		-		97
Issuance costs related to common stock in private placement	-		-		(10)		-		-		(10)
Issuance of common shares to vendor	382,473		-		590		-		-		590
Foreign currency translation adjustment	-		-		-		722		-		722
Net loss	-		-		-		-		(3,701)		(3,701)
Balance at June 30, 2022	26,949,282	$	3	$	92,612	$	(485)	$	(81,535)	$	10,595


	For the Six Months Ended
	June 30,
	2021
Net cash used in operating activities as previously reported	$	(6,441)
Adjustment for (Loss)/Gain on foreign currency transactions		412
Net cash used in operating activities as restated	$	(6,029)

Effect of exchange rate changes on cash as previously reported	$	25
Adjustment for (Gain)/Loss on foreign currency transactions		(412)
Effect of exchange rate changes on cash as restated	$	(387)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Operating lease cost	$	68	$	52	$	131	$	99
Short-term lease cost		2		13		4		26
Variable lease cost		41		64		95		98
Total lease cost	$	111	$	129	$	230	$	223


	As of
	June 30,
	2022
2022	$	137
2023		220
2024		219
2025		9
2026		—
Thereafter		—
Total undiscounted lease payments		585
Less imputed interest		(57)
Total net lease liabilities	$	528


				Weighted-
				Average
		Weighted-		Remaining
		Average		Contractual
	Number of	Exercise		Term
	Shares	Price		(Years)
Warrants outstanding at January 1, 2022	985,533	$	2.00	4.15
Exercised	—		—	—
Forfeited or Expired	—		—	—
Granted	—		-	—
Warrants outstanding at June 30, 2022	985,533	$	2.00	3.65


		Three Months Ended June 30,				Increase (Decrease)
US$000		2022		2021	Amount		Percentage
Revenue	$	4	$	—	$	4	100	%
Cost of revenue		2		—		2	100	%
Gross Profit		2		—		2	100	%
Other operating income		294		256		38	15	%
Operating expenses
Research and development		1,344		1,355		(11)	(1)	%
Selling, general and administrative		1,370		1,345		25	2	%
Transaction expenses		—		16		(16)	(100)	%
Total operating expenses		2,714		2,716		(2)	(0)	%
Loss from operations	$	(2,418)	$	(2,460)	$	42	(2)	%


	Three Months Ended June 30,				Increase (Decrease)				% of total	% of total
US$000	2022		2021		Amount		Percentage		2022	2021
Research & development tax credit	$	294	$	251	$	43	17	%	100%	98%
Research & development grants		—		2		(2)	(100)	%	0%	1%
Other grants		—		3		(3)	(100)	%	0%	1%
Total other operating income	$	294	$	256	$	38	15	%	100%	100%


		Six Months Ended				Increase (Decrease)
		June 30,		June 30,
US$000		2022		2021		Amount	Percentage
Revenue	$	34	$	—	$	34	—	%
Cost of revenue		25		—		25	—	%
Gross Profit		9		—		9	—	%
Other operating income		578		688		(110)	(16)	%

Research and development		2,802		5,369		(2,567)	(48)	%
Selling, general and administrative		2,611		5,328		(2,717)	(51)	%
Transaction expenses		—		1,329		(1,329)	(100)	%
Total operating expenses		5,413		12,026		(6,613)	(55)	%
Loss from operations	$	(4,826)	$	(11,338)	$	6,512	(57)	%


	Payments Due by Period
US$(000)		2022		2023		2024		2025		Total
Operating lease obligations	$	137	$	220	$	219	$	9	$	585
Purchase obligations		502		523		62		-		1,087
	$	639	$	743	$	281	$	9	$	1,672


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)