SmartKem, Inc 10-Q for FY2023 Q1

About this 10-Q

Headline figures

SmartKem, Inc. (SMTK)

10-Q 2023-05-15 For: 2023-03-31

Added on April 12, 2026

SmartKem, Inc filed this 10-Q on May 15, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

March 31,

Weighted average remaining lease term (in years)
– operating leases

Weighted average discount rate – operating leases

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $16K; down 46.7% from $30K a year earlier
Net loss: $2.05M; compared with a net loss of $2.76M a year earlier
Diluted EPS: -$0.07; compared with -$0.10 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	3

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2023 and 2022	4

	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022	5

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022	6

	Notes to the Unaudited Interim Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19
Item 4.	Controls and Procedures	19

Part II	Other Information	21

Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	21

Exhibit Index		22

Signatures		23


	March 31,		December 31,
	2023		2022
Assets
Current assets
Cash and cash equivalents	$	1,700	$	4,235
Accounts receivable, net		1		30
Research and development tax credit receivable		1,366		1,121
Prepaid expenses and other current assets		1,211		1,056
Total current assets		4,278		6,442
Property, plant equipment, net		576		602
Right-of-use assets, net		431		475
Other assets, non-current		6		6
Total assets	$	5,291	$	7,525

Liabilities and stockholders’ equity
Current liabilities
Accounts payable and accrued expenses	$	1,048	$	931
Lease liabilities, current		225		206
Income tax payable		1		22
Other current liabilities		102		244
Total current liabilities		1,376		1,403
Lease liabilities, non-current		188		239
Total liabilities		1,564		1,642

Commitments and contingencies (Note 6)		—		—

Stockholders’ equity:
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, zero shares issued and outstanding, at March 31, 2023 and December 31, 2022, respectively		—		—
Common stock, par value $0.0001 per share, 300,000,000 shares authorized, 27,087,773 and 26,984,996 shares issued and outstanding, at March 31, 2023 and December 31, 2022, respectively		3		3
Additional paid-in capital		93,278		92,930
Accumulated other comprehensive loss		(939)		(483)
Accumulated deficit		(88,615)		(86,567)
Total stockholders' equity		3,727		5,883
Total liabilities and stockholders’ equity	$	5,291	$	7,525


	Three Months Ended March 31,
	2023		2022
Revenue	$	16	$	30
Cost of revenue		16		23
Gross profit		—		7

Other operating income		269		284

Operating expenses
Research and development		1,279		1,459
Selling, general and administrative		1,433		1,240
Loss/(gain) on foreign currency transactions		111		—
Total operating expenses		2,823		2,699

Loss from operations		(2,554)		(2,408)

Non-operating income/(expense)
Gain/(loss) on foreign currency transactions		502		(354)
Interest income		4		—
Total non-operating income/(expense)		506		(354)

Loss before income taxes		(2,048)		(2,762)
Income tax expense		—		—
Net loss	$	(2,048)	$	(2,762)

Net loss	$	(2,048)	$	(2,762)
Other comprehensive loss:
Foreign currency translation		(456)		156
Total comprehensive loss	$	(2,504)	$	(2,606)

Basic & diluted net loss per common share	$	(0.07)	$	(0.10)

Basic & diluted weighted average shares outstanding		29,248,150		28,438,003



						Accumulated
	Common stock			Additional		other				Total
	$0.0001 par value			paid-in		comprehensive		Accumulated		Stockholders'
	Shares	Amount		capital		income		deficit		equity
Balance at January 1, 2023	26,984,996	$	3	$	92,930	$	(483)	$	(86,567)	$	5,883
Stock-based compensation expense	—		—		293		—		—		293
Issuance of common stock to vendor	102,777		—		55		—		—		55
Foreign currency translation adjustment	—		—		—		(456)		—		(456)
Net loss	—		—		—		—		(2,048)		(2,048)
Balance at March 31, 2023	27,087,773	$	3	$	93,278	$	(939)	$	(88,615)	$	3,727


						Accumulated
	Common stock			Additional		other				Total
	$0.0001 par value			paid-in		comprehensive		Accumulated		Stockholders'
	Shares	Amount		capital		income		deficit		equity
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 stock to vendor	12,500		—		43		—		—		43
Issuance of common stock in private placement	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


	March 31,		December 31,
(in thousands)	2023		2022
Prepaid service charges and property taxes	$	108	$	55
Prepaid utilities		96		51
Prepaid insurance		589		358
Prepaid administrative expenses		76		35
Prepaid consulting fees		177		304
Prepaid technical fees		13		22
Research grant receivable		61		—
VAT receivable		41		195
Other receivable and other prepaid expenses		50		36
Total prepaid expenses and other current assets	$	1,211	$	1,056


				Weighted-
				Average
		Weighted-		Remaining
		Average		Contractual
	Number of	Exercise		Term
	Shares	Price		(Years)
Warrants outstanding at January 1, 2023	985,533	$	2.00	3.15
Forfeited	—
Cancelled	—
Granted	—
Warrants outstanding at March 31, 2023	985,533	$	2.00	2.90


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)

10.1	Employment Agreement, dated as of December 14, 2022, by and between the Registrant and Barbra Keck (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K filed on March 30, 2023)

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

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

32.1††	Certification of Principal 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 Principal 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:	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)


	Three Months Ended March 31,
(in thousands)	2023		2022
Operating lease cost	$	64	$	63
Short-term lease cost		4		2
Variable lease cost		45		54
Total lease cost	$	113	$	119


	March 31,		December 31,
(in thousands)	2023		2022
2023	$	188	$	234
2024		241		234
2025		18		19
Total undiscounted lease payments		447		487
Less imputed interest		(34)		(42)
Total net lease liabilities	$	413	$	445