SMX 20-F/A
SMX (Security Matters) Public Ltd Co (SMX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
Amendment No.1
(Mark One)
| REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the fiscal year ended |
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from __________ to __________ |
OR
| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| Date of event requiring this shell company report: |
Commission File Number:
(Exact name of Registrant as specified in its charter)
| Not applicable | ||
| (Translation of Registrant’s name into English) | (Jurisdiction of incorporation or organization) |
+353-1-920-1000
(Address of principal executive offices)
Tel:
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: On December 31, 2024, the issuer had Ordinary Shares, with a par value of $4.70250015 per share and public warrants each exercisable for one Ordinary Share at an exercise price of $540,787.50 per share outstanding (“Public Warrants”).
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934. Yes ☐
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Emerging growth company |
If an emerging growth company that prepares its financial
statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected to use the extended transition period for
complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has
filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
over Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report.
If securities are registered pursuant to Section 12(b)
of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of
an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| US GAAP ☐ | Other ☐ | |
| by the International Accounting Standards Board ® |
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
EXPLANATORY STATEMENT
In order to comply with certain requirements of the SEC’s rules in connection with this filing, this Amendment No. 1 includes Item 17. Financial Statements and Item 19. Exhibits. This Amendment No. 1 does not, and does not purport to, amend, modify, update, restate or change in any way the information contained or disclosures made in the Original Filing, including the previously reported consolidated financial statements. This Amendment No. 1 speaks as of the original filing date of the Original Filing, and does not reflect events that may have occurred subsequent to the date the Original Filing was filed with the SEC.
Consistent with the rules of the SEC, the certifications of the Company’s principal executive officer and principal financial officer as of the date of this Amendment No. 1 are attached as exhibits to this Amendment No. 1. The only change in these certifications from the certifications of the Company’s principal executive officer and principal financial officer filed as exhibits to the Original Filing is their date. In addition, the Company is also attaching as Exhibit 101 hereto the Interactive Data File disclosure furnished as Exhibit 101 to the Original Filing. No changes have been made to the Interactive Data File disclosure furnished as Exhibit 101 to this Amendment No. 1 from the Interactive Data File disclosure furnished as Exhibit 101 to the Original Filing.
ITEM 17. FINANCIAL STATEMENTS
See pages F-1 though F-54 of this Annual Report.
ITEM 19. EXHIBITS
EXHIBIT INDEX
| 2 |
| 3 |
| 4 |
| 5 |
| 6 |
| 7 |
| 8 |
| # | Indicates a management contract or any compensatory plan, contract or arrangement |
| * | Previously Filed |
| ** | Filed herewith |
| 9 |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Report on its behalf.
| SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY | ||
| May 15, 2025 | By: | /s/ Haggai Alon |
| Name: | Haggai Alon | |
| Title: | CEO | |
| 10 |
INDEX TO FINANCIAL STATEMENTS
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2024
TABLE OF CONTENTS
The amounts are stated in thousands of U.S. Dollars
| F-1 |
Report of Independent Registered Public Accounting Firm
to the Shareholders of
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
Opinion on the Consolidated Financial Statements
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1.D to the consolidated financial statements, the Company has suffered recurring losses and negative cash flows from operations since inception, and as of December 31, 2024, the Company incurred accumulated losses of $82 million. Further, as discussed in note 1.D, the Company was noncompliant with Nasdaq Listing Rule with respect to the bid price of the Company’s ordinary shares on the Nasdaq Capital Market. The Company’s operations have been funded substantially through the issuance of shares and warrants, and convertible notes. These factors and the Company’s dependency on external funding for its operations, raises substantial doubts about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are described in Note 1.D. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
| /s/
| |
| May 14, 2025 | |
| We have served as the Company’s auditor since 2022 | Certified Public Accountants (Isr.) |
| BDO Member Firm |
| F-2 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
| December 31, 2024 | December 31, 2023 | |||||||||
| Note | US$ in thousands | |||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | ||||||||||
| Other current receivables | 4 | |||||||||
| Total current assets | ||||||||||
| Non-current assets | ||||||||||
| Intangible assets, net | 3,7 | |||||||||
| Goodwill | 3,7 | |||||||||
| Property, plant and equipment, net | 5 | |||||||||
| Right of use assets | 14 | |||||||||
| Investment in associated company | 6 | |||||||||
| Total non-current assets | ||||||||||
| Total assets | ||||||||||
| Current liabilities | ||||||||||
| Trade payables | ||||||||||
| Other payables | 15 | |||||||||
| Short term loan | 12 | |||||||||
| Convertible notes | 8 | |||||||||
| Warrants - derivative financial liability | 11 | |||||||||
| Pre-paid advance | 13 | |||||||||
| Bridge loans liabilities | 9 | |||||||||
| Convertible promissory note | 8 | |||||||||
| Lease liabilities | 14,26 | |||||||||
| Total current liabilities | ||||||||||
| Non-current liabilities | ||||||||||
| Lease liabilities | 14 | |||||||||
| Bridge loans liabilities | 9 | |||||||||
| Total non-current liabilities | ||||||||||
| Total liabilities | ||||||||||
| Equity | ||||||||||
| Issued capital and additional paid-in capital | 17 | |||||||||
| Foreign currency translation reserve | ( | ) | ( | ) | ||||||
| Transaction with non-controlling interest reserve | ||||||||||
| Accumulated losses | ( | ) | ( | ) | ||||||
| Total equity attributable to owners of the parent | ||||||||||
| Non- controlling interest | ||||||||||
| Total equity | ||||||||||
| Total equity and liabilities | ||||||||||
| /s/ Amir Bader | /s/ Haggai Alon | /s/ Thomas Hawkins | May 14, 2025 | |||
|
Amir Bader Interim Chief Financial Officer |
Haggai Alon Chief Executive Officer |
Thomas Hawkins Audit Committee Chairperson |
Date of approval of financial statements |
The accompanying notes are an integral part of the financial statements.
| F-3 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS |
| Year ended | ||||||||||||||
| December 31, 2024 | December 31, 2023 | December 31, 2022 | ||||||||||||
| Note | US$ in thousands | |||||||||||||
| General and administrative expenses | 18 | |||||||||||||
| Research and development expenses | 19 | |||||||||||||
| Selling and marketing expenses | 20 | |||||||||||||
| Impairment and amortization | 7 | |||||||||||||
| Listing expenses | ||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ||||||||
| Finance expenses | ||||||||||||||
| Finance income | ||||||||||||||
| Gain from remeasurement of investment in associated company | ||||||||||||||
| Share of net profit (loss) of associated companies | 6 | ( | ) | |||||||||||
| Loss before income tax | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax | 21 | |||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive loss: | ( | ) | ( | ) | ( | ) | ||||||||
| Total comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to: | ||||||||||||||
| Equity holders of the Company | ( | ) | ( | ) | ||||||||||
| Non- controlling interest | ( | ) | ( | ) | ||||||||||
| Basic and diluted loss per share attributable to shareholders | 18 | )(1) | )(1) | )(1)(2) | ||||||||||
| (1) |
| (2) |
The accompanying notes are an integral part of the consolidated financial statements.
| F-4 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
Issued Additional | Transaction with non-controlling interest | Foreign currency translation reserve | Accumulated loss | Total equity attributable to owners of the parent | Non- controlling interests | Total equity | ||||||||||||||||||||||
| Balance as of January 1, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Comprehensive loss | ||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Issuance of ordinary shares, net | ||||||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||||||
| Conversion of convertible notes into ordinary shares | ||||||||||||||||||||||||||||
| Conversion of bridge loan into ordinary shares and warrants | ||||||||||||||||||||||||||||
| Conversion of pre-paid advanced into ordinary shares | ||||||||||||||||||||||||||||
| Issuance of investment units | ||||||||||||||||||||||||||||
| Exercise of warrants and options into ordinary shares, net | ||||||||||||||||||||||||||||
| Transaction with non-controlling interests | ( | ) | ||||||||||||||||||||||||||
| Balance as of December 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-5 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
Issued Additional | Foreign currency translation reserve | Accumulated loss | Total equity attributable to owners of the parent | Non- controlling interests | Total | |||||||||||||||||||
| Balance as of January 1, 2023 | ( | ) | ( | ) | ||||||||||||||||||||
| Comprehensive loss | ||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||
| Total comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Issuance of ordinary shares, net | ||||||||||||||||||||||||
| Recapitalization due to issuance of ordinary shares following the SPAC transaction, net | ||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||
| Conversion of financial liabilities into ordinary shares | ||||||||||||||||||||||||
| Exercise of options into ordinary shares | ||||||||||||||||||||||||
| Issuance of ordinary shares and warrants B, net | ||||||||||||||||||||||||
| Conversion of warrants A into ordinary shares | ||||||||||||||||||||||||
| Exercise of warrants B into ordinary shares, net | ||||||||||||||||||||||||
| Issuance of warrants B after reset | ||||||||||||||||||||||||
| Non-controlling interests arising from initially consolidated companies | ||||||||||||||||||||||||
| Balance as of December 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-6 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
Issued Additional | Foreign reserve | Accumulated loss | Total
| |||||||||||||
| Balance as of January 1, 2022 | ( | ) | ||||||||||||||
| Comprehensive loss | ||||||||||||||||
| Loss after income tax for the year | ( | ) | ( | ) | ||||||||||||
| Other comprehensive loss for the year | ( | ) | ( | ) | ||||||||||||
| Total comprehensive loss for the year | ( | ) | ( | ) | ( | ) | ||||||||||
| Issuance of ordinary shares, net | ||||||||||||||||
| Share-based compensation | ||||||||||||||||
| Issuance of options to acquire intangible asset | ||||||||||||||||
| Balance as of December 31, 2022 | ( | ) | ( | ) | ||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-7 |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS |
Year ended December 31, 2024 | Year ended December 31, 2023 | Year ended December 31, 2022 | ||||||||||
| US$ in thousands | ||||||||||||
| Cash flows from operating activities: | ||||||||||||
| Loss before tax for the year | ( | ) | ( | ) | ( | ) | ||||||
| Share based compensation | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Decrease (increase) in other current receivables | ( | ) | ||||||||||
| Impairment of intangible assets | ||||||||||||
| Impairment of goodwill | ||||||||||||
| Increase (decrease) in trade payables | ( | ) | ||||||||||
| Increase (decrease) in other payables | ( | ) | ||||||||||
| Increase in other liabilities | ||||||||||||
| Revaluation of financial liabilities at fair value | ||||||||||||
| Interest expenses and revaluation of convertible notes | ||||||||||||
| Financial expenses due to bridge loans principal amounts | ||||||||||||
| Remeasurement of investment in associated company | ( | ) | ||||||||||
| Provision of borrowing to related parties | ||||||||||||
| Share in (earnings) losses of associated companies, net | ( | ) | ||||||||||
| Issuance of ordinary shares due to underwriter fees | ||||||||||||
| Issuance cost due to inducement Alpha warrant B’s exercise price | ||||||||||||
| Issuance of ordinary shares due to commitment fee | ||||||||||||
| SPAC transaction - listing costs | ||||||||||||
| Net cash flow used in operating activities | ( | ) | ( | ) | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ( | ) | ||||||
| Capitalized development cost | ( | ) | ( | ) | ( | ) | ||||||
| Net cash flow used in investing activities | ( | ) | ( | ) | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Payments of borrowings to related parties | ( | ) | ||||||||||
| Payment of lease liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Repayment of bridge loans | ( | ) | ( | ) | ||||||||
| Repayment of pre-paid advances/Advance payment for equity, net | ( | ) | ||||||||||
| Proceeds from issuance of ordinary shares and pre-funded warrants | ||||||||||||
| Exercise of warrants and pre-funded warrants into ordinary shares | ||||||||||||
| Proceeds from issuance of convertible notes and warrants | ||||||||||||
| Proceeds from short term loan | ||||||||||||
| Proceeds from issuance of bridge loans and warrants | ||||||||||||
| Issuance of shares in the SPAC transaction, net | ||||||||||||
| Net cash flow provided by financing activities | ||||||||||||
| Increase (decrease) in cash and cash equivalents | ( | ) | ( | ) | ||||||||
| Cash and cash equivalents at beginning of year | ||||||||||||
| Exchange rate differences on cash and cash equivalent | ( | ) | ||||||||||
| Cash and cash equivalents at end of year | ||||||||||||
| F-8 |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS |
Year ended December 31, | Year ended December 31, | Year ended December 31, | ||||||||||
| US$ in thousands | ||||||||||||
| Appendix A – Non-cash transactions during the year: | ||||||||||||
| Conversion of financial liability into ordinary shares | ||||||||||||
| Conversion of bridge loans into ordinary shares and warrants | ||||||||||||
| Conversion of convertible notes and warrants into ordinary shares | ||||||||||||
| Exercise of cashless options into ordinary shares | ||||||||||||
| Exercise of warrants and pre-funded warrants into ordinary shares | ||||||||||||
| Issuance cost | ||||||||||||
| Other current receivable in connection to exercise of Series A Common Warrant | ||||||||||||
| Remeasurement of investment in associated company | ( | ) | ||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-9 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 1 - GENERAL:
| A. | SMX (Security Matters) Public Limited Company (“Security Matters” or the “Company” and together with its subsidiaries, the “Group” or the “consolidated entity”) was incorporated on July 1, 2022 under the laws of Ireland with registered number 722009 and its registered office at Mespil Business Center, Mespil House, Sussex Road, Dublin 4, Ireland, D04 T4A6. The Company was incorporated in 2022 as part of the Business Combination (see Note 1.B). |
The Group provides one solution to solve both authentication and track challenges in order to uphold supply chain integrity and provide quality assurance and brand accountability to producers of goods. Its technology works as a track and trace system using a marker, a reader and an algorithm to identify embedded sub-molecular particles in order to track and trace different components along a production process (or any other marked good along a supply chain) to the end producer. Its proprietary marker system embeds a permanent or removable (depending on the needs of the customer) mark on solid, liquid or gaseous objects or materials. Each marker is comprised of a combination of marker codes such that each marker is designed to be unique and unable to be duplicated. The marker system is coupled with an innovative patented reader that responds to signals from the marker and, together with a patented algorithm, captures the details of the product retrieved and stored on a blockchain digital ledger. Each marker can be stored, either locally on the reader and on private servers, cloud servers or on a blockchain ledger, to protect data integrity and custody.
| B. | On March 7, 2023 (the “Closing Date”) the Company completed its SPAC transaction (the “Business Combination”) with Lionheart III Corp (“Lionheart”), following that Lionheart and Security Matters PTY Ltd. (formerly named Security Matters Limited, which was incorporated in May 2018 under Australian law) became the Company’s wholly-owned subsidiaries and the Company listed its ordinary shares and public warrants on the NASDAQ stock market under the tickers SMX and SMXWW, respectively. On July 26, 2022, Security Matters PTY Ltd. and Lionheart, a publicly traded special purpose acquisition company (SPAC), entered into a business combination agreement (the “BCA”) and accompanying scheme implementation deed (“SID”). Under the BCA, the existing Lionheart stockholders received the Company’s shares and warrants in exchange for their existing Lionheart shares and warrants and all shares existed in Security Matters PTY Ltd. were cancelled in return for the Company’s shares and resulting in Security Matters PTY Ltd. becoming a wholly owned subsidiary of the Company. Security Matters PTY Ltd. shareholders received consideration of ordinary share per Security Matters PTY Ltd. shares, having an implied value of $ per ordinary share and the Company became the holder of all of the issued shares in Security Matters PTY Ltd. and Lionheart, with Security Matters PTY Ltd. being delisted from the Australian Stock Exchange. |
The Business Combination resulted in
| C. | On October 3, 2023, the Company signed an agreement with True Gold Consortium Pty Ltd.’s (“TrueGold”) shareholders to acquire an additional |
| D. | As of December 31, 2024,
the Company incurred accumulated losses of $ |
| F-10 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands except share and per share data) |
NOTE 1 – GENERAL (CONT.):
During the period, the
Company entered into funding agreements of up to $
| E. | The Company operates primarily with 8 wholly owned subsidiaries and two majority owned subsidiaries, all of which have been consolidated in these consolidated financial statements |
| Controlled entity | Country of Incorporation | Percentage December 31, | Percentage December 31, | |||||||
| Security Matters (SMX) PLC | % | % | ||||||||
| Security Matters PTY Ltd. (Formerly - Security Matters Limited) | % | % | ||||||||
| Lionheart III Corp | % | % | ||||||||
| SMX (Security Matters) Ireland Limited | % | % | ||||||||
| SMX Fashion and Luxury | % | % | ||||||||
| TrueSilver SMX Platform Ltd. | % | % | ||||||||
| SMX (Security Matters) Israel Ltd. (Formerly - Security Matters Ltd.) | % | % | ||||||||
| Security Matters Canada Ltd. | % | % | ||||||||
| SMX Beverages Pty Ltd. | % | % | ||||||||
| SMX Circular Economy Platform PTE, Ltd. | % | % | ||||||||
| True Gold Consortium Pty Ltd. | %* | %* | ||||||||
| SMX Circular Economy FZCO ** | ||||||||||
In addition, the Company’s has the following investments in associated company:
| Entity | Country of Incorporation | Percentage Owned December 31, | Percentage Owned December 31, | |||||||
| Yahaloma Technologies Inc. | % | % | ||||||||
The proportion of ownership interest is equal to the proportion of voting power held.
| * |
| ** |
| F-11 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 1 – GENERAL (CONT.):
| F. | A. | On July 15, 2024, the Company’s Ordinary Shares began trading on
the Nasdaq Capital Market post-reverse stock split of 75:1 under the symbol “SMX,” with a new CUSIP number of G8267K208 and
ISIN code IE000IG23NR9. Approved by shareholders and Board of Directors on June 11, 2024. This reverse split consolidated every |
| G. | On January 15, 2025, after the balance sheet date, the Company’s
Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 28.5:1 under the symbol “SMX,” with
a new CUSIP number of G8267K158 and ISIN code IE000WZ90ZV5. Approved by shareholders and Board of Directors on December 10, 2024. This
|
| F-12 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS:
The significant accounting policies followed in the preparation of the financial statements, on a consistent basis, are:
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (“IASB”). The financial statements have been prepared under the historical cost convention except for certain financial liabilities which are measured at fair value.
Principles of consolidation
Subsidiaries are all those entities over which the Company has control. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is obtained by the Company and until the date that control is lost.
Intercompany transactions between entities in the consolidated entity are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Investments in associated companies
Investments in associated companies are accounted under the equity method and are initially recognized at cost. The investment’s cost includes transaction costs. The consolidated financial statements include the Group’s share in net income or loss, in other comprehensive income or loss, and in the net assets of associated companies accounted by the equity method from the date when significant influence or joint control materialized, until the date on which the conditions for significant influence or joint control are no longer met.
Losses of an associate in amounts which exceed its equity are recognized by the Company to the extent of its investment in the associate plus any losses that the Company may incur as a result of a guarantee or other financial support provided in respect of the associate.
Reverse acquisition transaction
The result of the merger between the Company and Security Matters PTY Ltd. as described in Note 1.B is that legally the Company owns the entire share capital of Security Matters PTY Ltd.
Accordingly, for financial reporting purposes, Security
Matters PTY Ltd. (the legal subsidiary) is the accounting acquirer, and the Company (the legal parent) is the accounting acquiree. The
consolidated financial statements prepared following the reverse acquisition are issued under the name of the Company, but they are a
continuation of the financial statements of Security Matters PTY Ltd. and reflect the fair values of the assets and liabilities of the
Company (the acquiree for accounting purposes), together with a deemed issuance of shares by Security Matters PTY Ltd. at fair value based
on the quoted opening share price of the Company in its first trading day following the closing of the business combination transaction
($), and a recapitalization of its equity. This deemed issuance of shares is in fact both an equity transaction under IAS 32 (receiving
the net assets of the Company) and an equity-settled share-based payment transaction under IFRS 2 (receiving the listing status of the
Company). The difference, in the amount of $
| F-13 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (CONT.):
The Company is initially consolidated in the financial
statements from the closing date of the Business Combination. Substantially all of the assets and liabilities of the Company were comprised
of marketable securities held in a trust account ($
| 1. | The assets and liabilities of Security Matters PTY Ltd. have been recognized and measured in these consolidated financial statements at their pre-combination carrying amounts. |
| 2. | The retained earnings and other equity balances recognized in those consolidated financial statements are the retained earnings and other equity balances of Security Matters PTY Ltd. immediately before the Business Combination. |
| 3. | The amount recognized as issued equity instruments in these consolidated financial statements has been determined by adding to the issued equity of Security Matters PTY Ltd. immediately before the Business Combination the fair value of the deemed issuance of shares, as described above. However, the equity structure (the number and type of shares issued) reflects the equity structure of the Company, including the shares issued by the Company through recapitalization. Accordingly, the equity structure of Security Matters PTY Ltd. (issued capital and addition paid in capital) in comparative periods is restated using the exchange ratio established in the Business Combination to reflect the number and par value of shares of the Company issued in the reverse acquisition transaction. |
| 4. | The statement of comprehensive loss reflects that of Security Matters PTY Ltd. for the full period together with the post-acquisition results of the Company from the Closing Date. Loss per share of Security Matters PTY Ltd. for periods prior to the acquisition date is restated such the denominator of the historical loss per share calculation is adjusted by multiplying the weighted-average shares used in each historically reported loss per share calculation by the exchange ratio established in the Business Combination. |
Foreign currency
The consolidated financial statements are prepared in US Dollars, which is the functional and presentation currency of the Company. The Company’s functional currency is US Dollar. The functional currency of Lionheart III Corp is US Dollar. The functional currency of SMX Fashion and Luxury is EURO. The functional currency of True Silver SMX Platform is Canadian Dollars. The functional currency of SMX (Security Matters) Ireland Limited is US Dollar. The functional currency of SMX Circular Economy Platform PTE, Ltd. is Singapore Dollar. Security Matters Pty Ltd.’s functional currency is Australian Dollars. The functional currency of Security Matters Ltd. (Israel) is New Israeli Shekels. The functional currency of Security Matters Canada Ltd. is Canadian Dollars. The functional currency of SMX Beverages Pty Ltd. is Australian Dollar. The functional currency of True Gold is Australian Dollar.
Transactions and balances in foreign currencies are converted into US Dollars in accordance with the principles set forth by International Accounting Standard (IAS) 21 (“The Effects of Changes in Foreign Exchange Rates”). Accordingly, transactions and balances have been converted as follows:
| ● | Assets and liabilities – at the rate of exchange applicable at the reporting date. |
| ● | Expense items – at annual average rate at the statements of financial position date. |
| ● | Share capital, capital reserve and other capital movement items were at the rate of exchange as of the date of recognition of those items. |
| ● | The accumulated deficit was based on the opening balance for the beginning of the reporting period in addition to the movements mentioned above. |
| ● | Exchange gains and losses from the aforementioned conversion are recognized in the statement of other comprehensive losses in the Foreign Currency Translation Reserve. |
| F-14 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (CONT.):
Issue of a unit of financial instruments
The issue of a unit of financial instruments such as a financial liability (e.g., a loan) and free-standing derivative (e.g. warrants) involves the allocation of the proceeds received (before issuance costs) to financial derivatives and other financial instruments measured at fair value in each period and to financial liabilities that are measured at amortized cost, with residual allocated to equity instruments. Issuance costs are allocated to each component pro rata to the amounts determined for each component in the unit.
Governmental grants
Government grants received for the use of research and development activities, for which the Group undertook to pay royalties to the state, contingent on future sales arising from this financing, were treated as forgivable loans. The grant was recognized as a liability in the financial statements, except when there is reasonable assurance that the Group will comply with the conditions for the forgiveness of the loan, then it would be recognized as a government grant. When the loan bears a below-market rate of interest, the liability is recognized at its fair value in accordance with the market interest rate prevailing at the time of receiving the grant. The difference between the consideration received and the liability recognized at inception was treated as a government grant and recognized as a reimbursement of research expenses. The repayment of the liability to the state is reviewed every reporting period, with changes in the liability resulting from a change in the expected royalties recognized in profit or loss.
Fair value measurement
Fair value is the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
| A. | In the principal market for the asset or liability; or | |
| B. | In the absence of a principal market, in the most advantageous market for the asset or liability. |
The principal or the most advantageous market must be accessible to the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
Classification of financial instruments by fair value hierarchy
The financial instruments presented in the statements of financial position at fair value are grouped into classes with similar characteristics using the following fair value hierarchy which is determined based on the source of input used in measuring fair value:
| Level 1 | - | Quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| Level 2 | - | Inputs other than quoted prices included within Level 1 that are observable either directly or indirectly. |
| Level 3 | - | Inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data). |
Financial assets
The Group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group’s accounting policy for each category is as follows:
Other receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services, but also incorporate other types of contractual monetary asset. These assets are carried at amortized cost less any provision for impairment.
The Group has no financial assets classified at fair value through profit or loss.
| F-15 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands except share and per share data) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (CONT.):
Financial liabilities
financial liabilities measured at amortized cost:
Financial liabilities are initially recognized at fair value less transaction costs that are directly attributable to the issue of financial liability.
After initial recognition, the Group measures all financial liabilities at amortized cost using the effective interest rate method, which ensures that any interest expense over the period is at a constant interest rate on the balance of the liability carried in the statement of financial position, except for financial liabilities which are measured at fair value through profit or loss.
measured at fair value through profit or loss:
These financial liabilities comprise of derivatives that are options which are to be settled in equity instruments but nevertheless do not meet the definitions of equity instruments. The Group measures those financial liabilities at fair value. Transaction costs are recognized in profit or loss. After initial recognition, changes in fair value are recognized in profit or loss.
Impairment of non-financial assets
Intangible assets and goodwill that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.
Property, plant and equipment
Items of property, plant and equipment are initially recognized at cost. Cost includes directly attributable costs and the estimated present value of any future costs of dismantling and removing items. Depreciation is computed by the straight-line method, based on the estimated useful lives of the assets, as follows:
| % | ||||
| Computers | ||||
| Machines and equipment | ||||
| Furniture and office equipment | ||||
| Leasehold improvements | ||||
Leasehold improvements are depreciated over the term of the expected lease including optional extension, or the estimated useful lives of the improvements, whichever is shorter.
Reimbursement of research and development expenses
Reimbursements in proof of concept (POC) agreements of expenditures on research and development in order to achieve commercial agreement once this activity is successful, are offset in profit or loss against the related expenses (research and development expenses). Any IP generated from this activity remains at the ownership of the Group.
Right-of-use assets
All leases are accounted for by recognizing a right-of-use asset and a lease liability, excluding leases where the lease term is 12 months or less, or where the underlying asset is of low-value. These leases expenditures are recognized on a straight-line basis over the lease term. A right-of-use asset is recognized at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of-use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
| F-16 |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (CONT.):
Lease liabilities
All leases are accounted for by recognizing a right-of-use asset and a lease liability. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate implicit in the lease unless (as is typically the case) this is not readily determinable, in which case the Group’s incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
| ● | amounts expected to be payable under any residual value guarantee. | |
| ● | the exercise price of any purchase option granted in favor of the Group if it is reasonably certain to exercise that option. | |
| ● | any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised. |
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Lease liabilities are remeasured when there is a change in future lease payments arising from a change in an index or rate or when there is a change in the assessment of the term of any lease the remeasurement being recognized in front of the right of use assets.
Capitalized technology development costs
Expenditures on research activities are recognized in profit or loss as incurred. Expenditures on internally developed products are mainly employee salaries and legal fees for filing of patents and are capitalized when the Group demonstrates all the following criteria:
| a. | The technical feasibility of completing the intangible asset so that it will be available for use or sale. | |
| b. | The intention to complete the intangible asset and use or sell it. | |
| c. | The ability to use or sell the intangible asset. | |
| d. | The probability of the intangible asset to generate future economic benefits. Among other things, the Group considers the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset. | |
| e. | The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset. | |
| f. | The ability to measure reliably the expenditures attributable to the intangible asset during its development. |
The recognition criteria above are considered by the Group at each stage of development to determine when the criteria have been initially met in full.
The technical feasibility criteria is determined to be met when a the milestone of initial marking and reading capabilities is satisfied. The milestone’s identification occurs only following a detailed broad mapping of the raw material characteristics and establishing the formula for the chemical marker architecture to be embedded into the raw material based on industry standards and regulations. The result is the initial evidence that the x-ray algorithm of the designated reader is in a stage that can identify the marker and convey information. At this stage, the Group believes that the technical feasibility of completing the development for use is probable.
The Group notes that technical feasibility has been established and the achieved technology is ready for the next stage which consists of performing a proof-of-concept pilot with an industry partner, in order to adapt the technology for the relevant industry and adjust the development to meet the industry’s needs.
| F-17 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (CONT.):
Capitalized technology development costs (Cont.)
Currently, the Group’s capitalized development activities focus on:
| 1. | Development of marker architecture to be embedded topically or in-situ (application) for each material/product within the optimal industrial manufacturing phase, based on industry standards and regulations. | |
| 2. | Semi Industrial scale – technology implementation in semi-industrial production. | |
| 3. | Development of a digital platform to support the end-to-end traceability from raw material to final product to recycling. |
The Group’s management has the full intention to complete the development of the technology and ultimately to sell it. This intention is demonstrated by initiating partnerships with industry market leaders and continuing the development into the next phase. The Group’s intention is also reflected in the Group’s approved budget.
The Group’s management intends to concentrate its future sales and marketing efforts in the U.S. and Asia Pacific markets, including, but not limited to, recruitment of sales and marketing personnel. It plans to advance successful proof-of-concept pilots performed with industry leading partners, and further advance its innovative technology and commercialization efforts and collaborations in the segments relevant to its technology.
The Group’s business model targets leading brands and manufacturers in order to create a new market standard for circular economy solutions, brand authentication and supply chain integrity. The Group’s technology is applicable for multiple industries such as gold, fashion, electronics and circular economy – plastic and rubber. The Group is able to provide an adaptive solution for multiple market segments, based on a unified technology solution, through collaborative relationships with leading market companies which provide it with access to various potential entities to sell its solution. This is part of the Group’s strategy to create strategic partnerships with market leaders across its main segments of activity. The Group believes that this close collaboration with market leaders, and developing a product that meets their requests, suggest that there is a strong potential market for its development.
Adequate technical and financial resources are available to complete the development; the development will be completed by the Group’s technology team which consists of professional experienced scientists and engineers, with a track record in the industrial sector and with financial resources successfully raised through the issuance of ordinary shares and loans. The Group has already accomplished its core technology development and is currently focused on development of specific adjustments for different market segments. This stage is focused and short-termed, therefore, management believes that limited financial resources are required for completing the development and that there is high probability for commencing commercial agreements following the successful proof-of-concept pilots.
The Group has financial systems in place that allow it to maintain records in sufficient detail that enable it to measure reliably the expenditures attributable to the intangible asset during its development.
Development expenditures not satisfying all the above criteria are recognized in the consolidated statement of comprehensive income as incurred.
Subsequent measurement
In subsequent periods, capitalized development expenditures are measured at cost less accumulated amortization and accumulated impairment losses.
An asset is ready for its intended use, when the developed technology becomes operational and the Group completes an initial customization.
| F-18 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (CONT.):
Capitalized technology development costs (Cont.)
Intangible assets with a finite useful life are amortized over their estimated useful lives and reviewed for impairment whenever there is an indication that the asset may be impaired. The amortization period and the amortization method for intangible assets are reviewed at least at each year end.
The carrying amount of these assets is reviewed whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. An expenditure incurred in development activities, including the Group’s software development is capitalized only where it clearly increases the economic benefits to be derived from the asset to which it relates, the expenditure will lead to new or substantially improved products, the products are technically and commercially feasible and the Group has sufficient resources to complete the development and reach the stage for which the product is ready for use.
All other expenditure, including those incurred in order to maintain an intangible assets current level of performance, is expensed as incurred.
The Group measures the share-based expense and the cost of equity-settled transactions with employees and service providers by reference to the fair value of the equity instruments at the date at which they are granted. The Group selected the Black-Scholes model as the Group’s option pricing model to estimate the fair value of the Group’s options awards. The model is based on share price, grant date and on assumptions regarding expected volatility, expected life of the options, expected dividend, and a no risk interest rate. As for granted options which are settled in equity instruments, the fair value of the options at the grant date is charged to the statement of comprehensive loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options that eventually vest.
New standards, interpretations and amendments adopted from January 1, 2024
The following amendments are effective for the period beginning January 1, 2024:
| ● | Supplier Finance Arrangements (Amendments to IAS 7 & IFRS 7); | |
| ● | Lease Liability in a Sale and Leaseback (Amendments to IFRS 16); | |
| ● | Classification of Liabilities as Current or Non-Current (Amendments to IAS 1); and | |
| ● | Non-current Liabilities with Covenants (Amendments to IAS 1). |
These amendments to various IFRS Accounting Standards are mandatorily effective for reporting periods beginning on or after January 1, 2024.
Supplier Finance Arrangements (Amendments to IAS 7 & IFRS 7)
On May 25, 2023, the IASB issued Supplier Finance Arrangements, which amended IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures. The amendments require entities to provide certain specific disclosures (qualitative and quantitative) related to supplier finance arrangements. The amendments also provide guidance on characteristics of supplier finance arrangements.
| F-19 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (CONT.):
Classification of Liabilities as Current or Non-Current and Non-current Liabilities with Covenants
(Amendments
The IASB issued amendments to IAS 1 in January 2020 Classification of Liabilities as Current or Non-current and subsequently, in October 2022 Non-current Liabilities with Covenants.
The amendments clarify the following:
| ● | An entity’s right to defer settlement of a liability for at least twelve months after the reporting period must have substance and must exist at the end of the reporting period. | |
| ● | If an entity’s right to defer settlement of a liability is subject to covenants, such covenants affect whether that right exists at the end of the reporting period only if the entity is required to comply with the covenant on or before the end of the reporting period. | |
| ● | The classification of a liability as current or non-current is unaffected by the likelihood that the entity will exercise its right to defer settlement. | |
| ● | In case of a liability that can be settled, at the option of the counterparty, by the transfer of the entity’s own equity instruments, such settlement terms do not affect the classification of the liability as current or non-current only if the option is classified as an equity instrument. |
These amendments have no effect on the measurement of any items in the consolidated financial statements of the Group.
New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.
The following amendments are effective for the period beginning January 1, 2025:
| ● | Lack of Exchangeability (Amendment to IAS 21 The Effects of Changes in Foreign Exchange Rates) |
The following amendments are effective for the period beginning January 1, 2026:
| ● | Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 Financial instruments and IFRS 7) |
The following standards and amendments are effective for the annual reporting period beginning January 1, 2027:
| ● | IFRS 18 Presentation and Disclosure in Financial Statements | |
| ● | IFRS 19 Subsidiaries without Public Accountability: Disclosures. |
The Group is currently assessing the effect of these new accounting standards and amendments.
IFRS 18 Presentation and Disclosure in Financial Statements, which was issued by the IASB in April 2024 supersedes IAS 1 and will result in major consequential amendments to IFRS Accounting Standards including IAS 8 Basis of Preparation of Financial Statements (renamed from Accounting Policies, Changes in Accounting Estimates and Errors). Even though IFRS 18 will not have any effect on the recognition and measurement of items in the consolidated financial statements, it is expected to have a significant effect on the presentation and disclosure of certain items. These changes include categorization and sub-totals in the statement of profit or loss, aggregation/disaggregation and labelling of information, and disclosure of management-defined performance measures.
The Group does not expect to be eligible to apply for IFRS 19.
| F-20 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (CONT.):
The significant accounting judgments, estimates and assumptions followed in the preparation of the financial statements, on a consistent basis, are:
In the process of applying the significant accounting policies, the Group has made the following judgments which have the most significant effect on the amounts recognized in the consolidated financial statements.
The preparation of the consolidated financial statements requires management to make estimates and assumptions that have an effect on the application of the accounting policies and on the reported amounts of assets, liabilities and expenses. Changes in accounting estimates are reported in the period of the change in estimate. The key assumptions made in the financial statements are discussed below.
The Group has a share-based remuneration scheme for employees. The fair value of share options is estimated by using the Black-Scholes model, which was derived to model the value of the firm’s equity over time. The simulation model was designed to take into account the unique terms and conditions of the performance shares and share options, as well as the capital structure of the firm and the volatility of its assets, on the date of grant based on certain assumptions. Those conditions are described in the share-based compensation note and include, among others, the dividend growth rate, expected share price volatility and expected life of the options. The fair value of the equity settled options granted is charged to the statement of profit or loss over the vesting period of each tranche and the credit is taken to equity, based on the consolidated entity’s estimate of shares that will eventually vest.
Intangible assets
The Group capitalizes costs for its developed projects when specific criteria are met. Initial capitalization of costs is based on management’s judgement that technological and economic feasibility is achievable, usually when a product development project has reached a defined milestone according to an established project management model. The management makes assumptions regarding the expected future economic benefit to be derived from the intangible asset and therefore whether the capitalized costs are expected to be recovered.
This amount of capitalized costs includes significant investment in the development of marking and reading capabilities in the subject material. Prior to being marketed, the Group will obtain a proof-of-concept pilot with an industry leading partner. The innovative nature of the product gives rise to some judgement as to whether the proof-of-concept will be successful such that it will lead to obtaining commercial contracts with customers. See also note 7.
Management bases its estimates on historical experience, assumptions, and information currently available and deemed to be reasonable at the time the consolidated financial statements are prepared. However, actual amounts may differ from the estimated amounts as more detailed information becomes available. Estimates and assumptions are reviewed on an ongoing basis and, if necessary, changes are recognized in the period in which the estimate is revised.
Impairment of goodwill and intangible assets
The Group reviews goodwill for impairment at least once a year or more frequently if events or changes in circumstances indicate that there is impairment. Goodwill is tested for impairment by assessing the recoverable amount of the cash-generating unit to which the goodwill has been allocated. This requires management to make an estimate of the projected future cash flows from the continuing use of the cash-generating unit to which the goodwill is allocated and also to choose a suitable discount rate for those cash flows. See more information in note 7.
The carrying values of the long-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. If any indication exists, then the asset’s recoverable amount is estimated. Determining the recoverable amount is subjective and requires management to estimate project future cash flows, among other factors. Future events and changing market conditions may impact on the assumptions as to prices, costs or other factors that may result in changes to the estimates of future cash flows. If the Group concludes that a definite or indefinite long-lived intangible asset is impaired, the Group recognize a loss in an amount equal to the excess of the carrying value of the asset over its fair value at the date of impairment. The fair value at the date of the impairment becomes the new cost basis and will result in a lower depreciation expense than for periods before the asset’s impairment.
Financial liabilities at fair value
The fair value of financial liabilities at fair value was estimated by using a Black Scholes model and Monte-Carlo simulation approach, which was aimed to model the value of the Group’s assets over time. The simulation approach was designed to take into account the terms and conditions of the financial liabilities, which are described in notes 8, 9 and 11, as well as the capital structure of the Group and the volatility of its assets. The valuation was performed based on management’s assumptions and projections.
| F-21 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 3 – TRUE GOLD BUSINESS COMBINATION:
On July 29, 2020, the Group (through Security Matters Limited) signed a shareholders’ agreement with W.A. Mint Pty Ltd. and TrueGold. The purpose of the agreement is to set the framework for TrueGold’s activity. TrueGold’s goal is to establish an industry standard with the development of an innovative system that can invisibly mark (at a molecular level), track and trace gold bars and gold through every stage of the supply chain with blockchain technology, using the Company’s advanced next-generation technology. Under the terms of the agreement, TrueGold will be equally held by the above two-mentioned entities, with the goal of adding other shareholders. Management has assessed the transaction and reached the conclusion that the new entity is jointly controlled by Security Matters Limited, and W.A. Mint Pty Ltd. The Company’s management has further determined that the contractual arrangement provides the parties to the joint arrangement with rights to the net assets of the arrangement.
The contractual arrangement establishes each party’s share in the profit or loss relating to the activities of the arrangement. The arrangement is a joint venture and the Company’s interests in this joint venture is accounted for using the equity method of accounting.
On October 3, 2023 (acquisition date), the Company (through its wholly owned subsidiary - Security Matters Limited)
signed an agreement with TrueGold shareholders to acquire an additional
The Company previously held
The Company has elected to measure the non-controlling interests in TrueGold at full fair value which includes also the non-controlling interests’ share in the entire goodwill of TrueGold. The fair value of the non-controlling interests in TrueGold was based on the fair value of TrueGold as a whole, as described above, and was estimated using the discounted cash flow method of the income approach, as TrueGold is a private company and therefore quoted market prices of its share were unavailable. The fair value has been determined by management with the assistance of a valuation performed by an external and independent valuation specialist using valuation techniques and assumptions as to estimates of projected net future cash flows of TrueGold and estimate of the suitable discount rate for these cash flows. The significant assumptions used in estimating the fair value of TrueGold are:
| 1. | After-tax net cash flow discount rate (weighted average cost of capital) of |
| 2. | Terminal value cash flow multiple of and terminal growth rate of |
| 3. | Discount for lack of marketability of |
The total cost of the business
combination comprised a full forgiveness of the outstanding payables from TrueGold to Security Matters Limited which amounted to AUD
| F-22 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 3 – TRUE GOLD BUSINESS COMBINATION (CONT.):
The fair value of the identifiable assets and liabilities of TrueGold on the acquisition date:
| US$ in thousands | ||||||||
| Cash and cash equivalents | ||||||||
| Other current receivables | ||||||||
| Intangible asset (core technology license) | ||||||||
| Trade payables | ||||||||
| Net identifiable assets | ||||||||
| Non-controlling interests | ( | ) | ||||||
| Goodwill | ||||||||
| Loan to TrueGold | ||||||||
| Fair value of previous investment | ||||||||
The only intangible asset identified in the purchase price allocation, and recognized as shown in the table above, represents a core technology license that reflects the existence of underlying technology that has value through its continued use or re-use in many products or many generations of a singular product (that is, a product family). As mentioned above, this core technology license represents the current right of TrueGold to use the Group’s intellectual property of technology under a license agreement signed in 2020. For the purpose of the purchase price allocation, this right was treated as a reacquired right and accordingly was recognized separately from goodwill and valued on the basis of the remaining contractual term of the related contract, regardless of whether market participants would consider potential contractual renewals. After acquisition, this intangible asset should be amortized in according to its economic useful life. See also note 7.
The goodwill arising from this acquisition is attributed to the expected benefits from the synergies of the combination of the activities of the Group and TrueGold. The goodwill recognized is not expected to be deductible for income tax purposes.
NOTE 4 - OTHER CURRENT RECEIVABLES:
December 31, 2024 | December 31, 2023 | |||||||
| Receivable in respect of exercise of warrants | ||||||||
| Tax authorities | ||||||||
| Prepaid expenses | ||||||||
| Proof of concept receivables | ||||||||
| Other | ||||||||
| Total | ||||||||
| F-23 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT, NET:
| Leasehold improvements | Machines and Equipment | Furniture and Office Equipment | Computers | Total | ||||||||||||||||
| Cost | ||||||||||||||||||||
| At January 1, 2024 | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Currency translation adjustments | ( | ) | ( | ) | ||||||||||||||||
| At December 31, 2024 | ||||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||
| At January 1, 2024 | ||||||||||||||||||||
| Depreciation | ||||||||||||||||||||
| Currency translation adjustments | ( | ) | ( | ) | ||||||||||||||||
| At December 31, 2024 | ||||||||||||||||||||
| Net book value at December 31, 2024 | ||||||||||||||||||||
| Leasehold improvements | Machines and Equipment | Furniture and Office Equipment | Computers | Total | ||||||||||||||||
| Cost | ||||||||||||||||||||
| At January 1, 2023 | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Currency translation adjustments | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| At December 31, 2023 | ||||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||
| At January 1, 2023 | ||||||||||||||||||||
| Depreciation | ||||||||||||||||||||
| Currency translation adjustments | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| At December 31, 2023 | ||||||||||||||||||||
| Net book value at December 31, 2023 | ||||||||||||||||||||
| F-24 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 6 - INVESTMENTS IN ASSOCIATED COMPANY:
| Entity | Country of Incorporation | Percentage Owned December 31, 2024 | Percentage Owned December 31, 2023 | |||||||
| Yahaloma Technologies Inc. | % | % | ||||||||
The proportion of ownership interest is equal to the proportion of voting power held.
Yahaloma Technologies Inc.
On April 30, 2019, Security Matters Ltd. signed an agreement with Trifecta Industries Inc. (“Trifecta”) for the commercialization of Security Matters Ltd.’s trace technology in the diamonds and precious stone industry.
Under the terms of the agreement, Security Matters Ltd. and Trifecta established a new entity – Yahaloma Technologies Inc. (“Yahaloma”), which is equally held by Security Matters Limited and Trifecta.
Yahaloma has the exclusive rights and responsibility to commercialize the Group’s intellectual property in the area of diamonds or precious stone. Management has assessed the transaction and reached the conclusion that the new entity is jointly controlled by Security Matters Limited and Trifecta. Management has further determined that the contractual arrangement provides the parties to the joint arrangement with rights to the net assets of the arrangement. The contractual arrangement establishes each party’s share in the profit or loss relating to the activities of the arrangement. The arrangement is a joint venture and the Company’s interests in this joint venture is accounted for using the equity method of accounting.
NOTE 7 - INTANGIBLE ASSETS, NET AND GOODWILL:
| Capitalization of development costs | Purchased license | Core Technology License | Total | |||||||||||||
| COST | ||||||||||||||||
| As of January 1, 2024 | ||||||||||||||||
| Capitalized development cost | ||||||||||||||||
| Currency translation adjustments | ( | ) | ( | ) | ( | ) | ||||||||||
| As of December 31, 2024 | ||||||||||||||||
| Accumulated amortization | ||||||||||||||||
| As of January 1, 2024 | ||||||||||||||||
| Amortization | ||||||||||||||||
| Impairment | ||||||||||||||||
| Currency translation adjustments | ( | ) | ( | ) | ||||||||||||
| As of December 31, 2024 | ||||||||||||||||
| Net book value as of December 31, 2024 | ||||||||||||||||
| F-25 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 7 - INTANGIBLE ASSETS, NET AND GOODWILL (CONT.):
| Capitalization of development cost | Purchased license | Core Technology License | Total | |||||||||||||
| COST | ||||||||||||||||
| As of January 1, 2023 | ||||||||||||||||
| Capitalized development cost | ||||||||||||||||
| Currency translation adjustments | ( | ) | ||||||||||||||
| As of December 31, 2023 | ||||||||||||||||
| Accumulated amortization | ||||||||||||||||
| As of January 1, 2023 | ||||||||||||||||
| Currency translation adjustments | ( | ) | ( | ) | ||||||||||||
| As of December 31, 2023 | ||||||||||||||||
| Net book value as of December 31, 2023 | ||||||||||||||||
Intangible assets as of December 31, 2024 and 2023 consist of capitalized development costs of the Group’s technology,
the cost of the exclusive license intellectual property and core technology license raised from the TrueGold business combination that
reflects the existence of underlying technology that has value through its continued use or re-use in many products or many generations
of a singular product (that is, a product family). See also note 3.
Goodwill and impairment
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount is determined based on value in use calculations. The use of this method requires an estimation of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows.
During the year, the Group did not meet its revenue forecast. This had an adverse impact on the projected value in
use of the operation and consequently resulted in an impairment to goodwill of $
The carrying amount of
goodwill is $
The recoverable amount has been determined from value in use calculations based on cash flow projections from Company approved budgets.
| F-26 |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 8 - CONVERTIBLE NOTES:
| A. | On January 25, 2023, the Company received an amount of $
As part of the LP Convertible Note transaction, the LP was granted two types of warrants: |
| (i) | Bonus Warrants –
warrants to purchase ordinary shares of the Company at an exercise price of $ |
| (ii) | Redeemable Warrants – warrants
to purchase ordinary shares of the Company at a purchase price of $ per
share. The Redeemable Warrants term is |
The LP Convertible Note is recorded in accordance with its fair value. The Redeemable Warrants are accounted as a derivative financial liability measured at fair value through profit or loss. Management utilized a third-party appraiser to assist them in valuing the LP Convertible Note and Redeemable Warrants.
The fair value of the Redeemable Warrants was calculated using the Monte-Carlo simulation model. As of December 31, 2024 and 2023, the expected volatility that was used was % and %, respectively, and the risk-free interest rate used was % and %, respectively.
As of December 31, 2024, and 2023 the
fair value of the Redeemable Warrants was $
In order to calculate the fair
value of the LP Convertible Note, the Company discounted the payment schedule by a discount rate of
As of December 31, 2024, and 2023 the fair value of the LP Convertible Note was $
| B. | In May 2022, Security Matters PTY Ltd. issued |
| F-27 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 8 - CONVERTIBLE NOTES (CONT.):
| C. | On September 6, 2023, the Company entered into a Securities Purchase Agreement to issued and sold to an
institutional investor, Generating Alpha Ltd. (“Alpha”), a convertible promissory note (the “Alpha September 2023 Note”) with a fixed conversion price of $ |
The Alpha September 2023 Note was recognized in accordance with the amortized cost method.
As of December 31, 2024, the investor converted all of the principal amount of the Alpha September 2023 Note into an aggregate of Ordinary Shares and exercised all warrant A’s and B’s into Ordinary Shares of the Company.
As of December 31, 2023, the Alpha September 2023 Note’s
principal amounted to $
| D. | On
February 24, 2024, the Company issued to Steven Wallitt (“SW”) a convertible security with a face value of $
On
August 24, 2024, the Company extended the previous convertible security
Accordingly, following a private placement transaction on October 28, 2024, the Company adjusted the conversion price to $.
On
September 16, 2024, the SW converted $
The
convertible security is accounted in accordance with the amortized cost model, and amounted to $
The conversion option was accounted as a derivative financial liability and measured at fair value through profit or loss.
As
of December 31, 2024, the fair value of the conversion option was estimated at $
As of the date of these financial statements the principal and accrued interest payments according to the SW convertible security agreement are due and owing. |
| F-28 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 8 - CONVERTIBLE NOTES (CONT.):
| E. | On April 11, 2024, the Company entered into Securities Purchase Agreements for the issuance of promissory note and warrants to Alpha, as follows: |
| 1. | Unsecured note (the “Alpha April Note”) in the principal amount of $ | |
| 2. | A | |
| 3. | Inducement offer which amends the Company’s existing warrants B’s held by Alpha issued in September 2023 (see note 8.C) to a reduced exercise price of $ per share. Alpha immediately exercised these warrants B’s in full. | |
| 4. | The Alpha April Note is a financial liability which is measured in accordance with the amortized cost method and its conversion option is a derivative financial liability measured at fair value through profit or loss. | |
| As of April 11, 2024, the Alpha April Note amounted to $ | ||
| As of April 11, 2024 the fair value of the conversion option was calculated by estimating the Alpha April Note using Monte Carlo model with expected volatility of % and the risk-free interest rate used is %. | ||
| During the period, the investor converted approximately $ | ||
| As of December 31, 2024, the Alpha April Note amounted to $ |
The
April Warrants were classified as a derivative financial liability measured at fair value through profit or loss. After initial recognition,
at each cut off, the April Warrants will be measured in accordance with their fair value and all changes in fair value will be recognized
through profit or loss. As of April 11, 2024, the April Warrants’ fair value amounted to $
As of April 11, 2024, the fair value of the April Warrants was calculated using the Black-Scholes model with expected volatility of % and the risk-free interest rate used is %.
As of December 31, 2024, Alpha exercised all the April Warrants into Ordinary Shares of the Company.
| F-29 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 8 - CONVERTIBLE NOTES (CONT.):
| F. | On July 10, 2024, the Company entered into a Letter of
Intent with PMB Partners, LP (“PMB”), as part of the Company’s ongoing efforts to satisfy its existing liabilities
while conserving cash. Although the Letter of Intent was binding, the Letter of Intent provided that the Company and PMB negotiate
in good faith the drafting and execution of the exchange of a $ |
The Definitive Agreements, consisting of a Subscription Agreement,
a Notes Exchange Agreement, a Share Exchange Agreement, the $
The $
The conversion option meet the conditions for equity classification according to IAS 32 and recorded as equity instrument.
The $
As of December 31, 2024, the $
| F-30 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 8 - CONVERTIBLE NOTES (CONT.):
| G. | A. | On July 19, 2024 the Company entered into Securities Purchase Agreement issued and sold to Alpha, a promissory note (the “Alpha
July Note”) and warrants (the “July Warrants”), for gross proceeds of $ | |
| According to the purchase agreement, the Company issued to the Alpha the July Warrants, to purchase up to Ordinary Shares, with
an exercise price of $ per share, subject to customary adjustments and certain price-based anti-dilution protections, and may be exercised
at any time for | |||
| The July Warrants were classified as a derivative financial liability measured at fair value through profit or loss. After initial recognition, at each cut-off, the July Warrants will be measured in accordance with its fair value and all changes in fair value will be recognized through profit or loss. | |||
| As of July 19, 2024, the July Warrants fair value amounted to $ | |||
| As of December 31, 2024, all of the July Warrants were converted to ordinary shares. | |||
| The Alpha July Note is a financial liability which will be measured in accordance with the amortized cost method and its conversion option is a derivative financial liability measured at fair value through profit or loss. | |||
| As of July 19, 2024, the Alpha July Note amounted to $ | |||
| As of July 19, 2024, the fair value of the conversion option was calculated by estimating the Alpha July Note using Monte Carlo model with expected volatility of % and the risk-free interest rate used is %. | |||
| As of December 31, 2024, the Alpha July Note amounted to $ |
| H. | On August 30, 2024, the Company entered into a Securities Purchase Agreement
with 1800 Diagonal Lending LLC (“1800 Diagonal”), to issue and sell a promissory note, for gross proceeds to the Company of
$, before deducting fees and other offering expenses payable by the Company (“the 1800 Diagonal Promissory Note”). The
1800 Diagonal Promissory Note is in the principal amount of $
On July 10, 2024, the Company entered into a Letter of Intent with PMB Partners, LP “PMB”), as part of the Company’s ongoing efforts to satisfy its existing liabilities while conserving cash. Although the Letter of Intent was binding, the Letter of Intent provided that the Company and PMB negotiate in good faith the drafting and execution exchange a $ |
The Definitive Agreements, consisting of
a Subscription Agreement, a Notes Exchange Agreement, a Share Exchange Agreement, the Convertible Note and the Senior Promissory Note,
with terms consistent with the Letter of Intent were all dated as of September 4, 2024.. The convertible note and the non-convertible
promissory note carries an annual intertest of
The $
The conversion option meet the conditions for equity classification according to IAS 32 and recorded as equity instrument.
The $
As of December 31, 2024, the
$
| F-31 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 9 - BRIDGE LOANS LIABILITIES:
| A. | Between August 2022 to January 2023, Security Matters PTY Ltd. entered into bridge loan agreements (the “Bridge
Loans”) with eleven lenders, which lent Security Matters PTY Ltd. an aggregate amount of $ |
Part of the lender received also bonus warrants and redeemable warrants as described above.
The Bridge Loans have a maturity date of
up to
The loan components were accounted in accordance with the amortized cost method.
As of December 31, 2024 and December 31,
2023, the principal and the accumulated interest of the bridge loans were amounted to $
As part of the Bridge Loans agreements, some of the lenders were granted two types of warrants:
| (i) | Bonus Warrants - warrants to purchase ordinary shares of the Company at an exercise price of $ per share and a first priority security interest in the shares of Security Matters PTY’s interest in TrueGold Consortium Pty Ltd. |
The Bonus Warrants term is five years
commencing upon the BCA.
Management valuing the Bonus Warrants using the Black and Scholes model.
As of December 31, 2024 and December 31, 2023, the fair value of the Bonus Warrants was .
| (ii) | Redeemable Warrants Type 1 – warrants to purchase ordinary shares of SMX PLC at a purchase
price of $ per share. The Redeemable Warrants Type 1 term is |
| ● |
| ● |
| ● |
Management utilized a third-party appraiser to assist them in valuing the Redeemable Warrants Type 1. The fair value of the Redeemable Warrants Type 1 was calculated using the Monte-Carlo simulation model.
As of December 31, 2024 and December
31, 2023, the fair value of the Redeemable Warrants Type 1 was $
| (iii) | Redeemable Warrants Type 2 – warrants to purchase ordinary shares of SMX PLC at a purchase
price of $ per share. The Redeemable Warrants Type 2 term is |
| ● |
| ● |
Management utilized a third-party appraiser to assist them in valuing the Redeemable Warrants Type 2. The fair value of the Redeemable Warrants Type 2 was calculated using Monte-Carlo simulation model.
As of December 31, 2024 and December
31, 2023, the fair value of the Redeemable Warrants Type 2 was $
| F-32 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 9 - BRIDGE LOANS LIABILITIES (CONT.):
The main assumptions used in the three valuation models as of December 31, 2024 described above were:
| (1) | risk free rate %; (2) volatility of assets %; and (3) expected terms of the warrants
All warrants were classified as a derivative financial liability and are re-measured each reporting date, with changes in fair value recognized in finance expense (income), net. |
The main assumptions used in the three valuation models as of December 31, 2023 described above were:
(1) risk free rate %; (2) volatility
of assets %; and (3) excepted terms of the warrants
All warrants were classified as a derivative financial liability and are re-measured each reporting date, with changes in fair value recognized
in finance expense (income), net.
Conversions during the reporting period:
| 1. | In March 2023, the Company signed an addendum to the Bridge Loans agreements which convert principal amount
of $ |
| 2. | On December 31, 2023, the Company signed an addendum to the Bridge Loans agreements which convert principal
amount of $ |
The warrants include a cashless exercise mechanism, according to the terms specified in the addendum and it’s according to the lender election (the “Cashless Warrants”).
Therefore, the Company accounted the Cashless Warrants as financial liability instruments that measured at fair value and recognized financial expenses or income through profit and loss.
As of December 31, 2023, the Cashless Warrants fair
value was $
The Company valued each Cashless Warrants at $ per warrant by using the Black-Scholes option-pricing model. The key inputs that were used in the Cashless Warrants fair value as of December 31, 2023 were:
| ● | risk-free interest rate % | |
| ● | expected volatility % | |
| ● | expected dividend yield of % | |
| ● | expected term of warrants – |
| 3. | During the twelve-month period ended December 31, 2024 all the Cashless Warrants were fully exercised in cashless and converted into ordinary shares. In addition, the company issued another ordinary shares according to an amendment to the agreement with those investors. |
| 4. | On June 27, 2024, the Company converted $ |
| 5. | On September 4, 2024, the Company converted $ |
NOTE 10 – ALPHA SPA
On April 19, 2024, the Company entered into a
Stock Purchase Agreement (“SPA”) with Alpha, committing Alpha to
| F-33 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 11 – WARRANTS – DERIVATIVE FINANCIAL LIABILITY
On September 11, 2024, the Company entered
into a private placement transaction (the “Private Placement”), pursuant to a Securities Purchase Agreement and a
Registration Rights Agreement with certain institutional investors (the “Purchasers”), which under certain circumstances
could result in an aggregate gross proceeds of up to $
The offering consisted of the sale of Common Units, each consisting of one Ordinary Share or Pre-Funded Warrant, two Series A Common Warrants each to purchase one Ordinary Share per warrant at an exercise price of $, subject to adjustment, and one Series B Common Warrants to purchase such number of Ordinary Shares as determined in the Series B Warrant. The public offering price per Common Unit was $ (or $ for each Pre-Funded Unit, which is equal to the public offering price per Common Unit to be sold in the offering minus an exercise price of $ per Pre-Funded Warrant).
The Pre-Funded Warrants were immediately exercisable and may be exercised at any time until exercised in full. For each Pre-Funded Unit sold in the offering, the number of Common Units in the offering will be decreased on a one-for-one basis. During the offering the company issued ordinary shares and Pre-Funded Warrants.
The initial exercise price of each Series A Common Warrant is $ per Ordinary Share. The Series A Common Warrants are exercisable immediately subject to registration and expire by March 12, 3030. Post-adjustment, the number of securities issuable under the Series A Common Warrants in the aggregate is . The post-adjustment exercise price of each Series A Common Warrant is $.
The initial exercise price of each Series B Common Warrant is $ per Ordinary Share. The number of Ordinary Shares issuable under the Series B Warrant, if any, is subject to adjustment to be determined pursuant to the trading price of the Ordinary Shares following the effectiveness of a resale registration statement that the Company has undertaken to file on behalf the Purchasers. Post-adjustment, the number of securities issuable under the Series B Common Warrant is . As of the date of the financial statements all the Series B Common Warrants have been exercised into ordinary shares.
The Pre-Funded Warrants, Series B Common Warrants and Series A Common Warrant all meets the definition of a derivative financial liability and measured at fair value through profit and loss on initial recognition and subsequent.
As of October 28, 2024, the fair value of the Pre-Funded
Warrants was $
As of December 31, 2024, all the Pre-Funded warrants were converted into ordinary shares.
As of October 28, 2024, the fair value of the Series B Common Warrant was $ regarding the share price as of October 28, 2024, that represents the Series B Common Warrant fair value.
As of December 31, 2024, all the Series B Common Warrant were converted into ordinary shares
As of October 28, 2024, the fair value of the Series A Common Warrant was $ which is recognized on a systematic basis over the period the time-value of Warrant A decays, on a straight-line basis – the Company expects this period to be approximately five years.
Management utilized a third-party appraiser to assist them in valuing the Series A Common Warrant by using the Black-Scholes model. The key inputs that were used to estimate the fair value as of October 28, 2024, were:
| ● | risk-free interest rate % | |
| ● | expected volatility % | |
| ● | expected dividend yield of % | |
| ● | expected term of warrants – years |
As of December 31, 2024, Series A Common Warrants have been exercised.
| F-34 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 11 – WARRANTS – DERIVATIVE FINANCIAL LIABILITY (CONT.):
The outstanding Series A Common Warrants have been valued at the fair value of $, by using the Black-Scholes model and the balance as of December 31, 2024, was $. The key inputs that were used to estimate the fair value as of December 31, 2024, were:
| ● | risk-free interest rate % | |
| ● | expected volatility % | |
| ● | expected dividend yield of % | |
| ● | expected term of warrants – years |
The Company also entered into a Placement Agent Agreement
with Aegis as the lead placement agent, The Company agreed to pay Aegis a cash placement fee equal to
The transaction cost amounted to $
The placement agent fee includes liable to pay % of the proceeds from the cash exercise of Series A Common Warrants (“the % Provision”). The % Provision accounted for financial liability at fair value through profit and loss on initial recognition and subsequent.
Management utilized a third-party appraiser to assist
them in valuing the
| ● | risk-free interest rate % | |
| ● | expected volatility % | |
| ● | expected dividend yield of % | |
| ● | expected term of warrants – |
As of October 28, 2024, the fair value of the
The key inputs that were used to estimate the fair value as of December 31, 2024, were:
| ● | risk-free interest rate % | |
| ● | expected volatility % | |
| ● | expected dividend yield of % | |
| ● | expected term of warrants – |
As of December 31, 2024, the fair value of the
NOTE 12 - SHORT TERM LOAN
On December 28, 2024, the Company
entered into a Loan Agreement, dated as of December 27, 2024 (the “Abri Loan Agreement”), with Arbi Advisors Ltd.
(“Abri”), pursuant to which the Company borrowed $
The Abri Loan Agreement contains
customary Events of Default for transactions similar to the transactions contemplated by the Abri Loan Agreement. In the event of an
Event of Default, subject to a three-day cure period, the loan balance due plus any Refinancing Repayment that may be due, then
multiplied by
| F-35 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 13 - PRE-PAID ADVANCE:
In February 2023 the Company entered in into a Standby
Equity Purchase Agreement (“SEPA”) to raise up to $ in consideration of the issuance of ordinary shares over the course
of 36 months with YA II PN, Ltd. (Yorkville”).
According to the SEPA, the Company may issue Yorkville the ordinary shares at a purchase
price as one of two options Yorkville advanced to the Company an aggregate principal amount of $
On July 27,
2023, the Company amended the promissory note evidencing the remaining Pre-Paid Advance to decrease the Floor Price to $ (as adjusted
for reverse stock split which occurred on August 21, 2023), after the Company was required to repay in cash $
In February 2024, the Company entered into a Letter
Agreement with Yorkville dated February 1, 2024 (the “Letter Agreement”), which amends the SEPA. Pursuant to the Letter Agreement,
the Company agreed to make payments to Yorkville, which include proceeds of Advances under the SEPA, to repay the amounts outstanding
under the Pre-Paid Advance plus payment premium. The Company agreed to pay a fee to Yorkville equal to $
| F-36 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands, except share and per share data) |
NOTE 14 - LEASES:
The Group has lease contracts for office facilities
(including a lab) and motor vehicles used in its operations. Leases of office and lab facilities generally have lease terms of
Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period:
Office and lab facilities | Motor vehicles | Total | ||||||||||
| As of January 1, 2023, | ||||||||||||
| Additions | ||||||||||||
| Foreign currency translation | ( | ) | ( | ) | ||||||||
| Depreciation expense | ( | ) | ( | ) | ( | ) | ||||||
| As of December 31, 2023 | ||||||||||||
| Foreign currency translation | ( | ) | ( | ) | ||||||||
| Depreciation expense | ( | ) | ( | ) | ( | ) | ||||||
| As of December 31, 2024 | ||||||||||||
Information on leases:
| Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Interest expense on lease liabilities | ||||||||
| Total cash outflow for leases | ||||||||
For an analysis of maturity dates of lease liabilities, see Note 22 on liquidity risk.
NOTE 15 - OTHER PAYABLES:
| December 31, 2024 | December 31, 2023 | |||||||
| Excise Tax | ||||||||
| Accrued expenses | ||||||||
| Employees, salaries and related liabilities | ||||||||
| Liabilities for grants received (see also note 24) | ||||||||
| Related party | ||||||||
| Total | ||||||||
| F-37 |
|
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands, except share and per share data) |
NOTE 16 - BORROWINGS FROM RELATED PARTIES:
A. In 2015, the Group signed an agreement to receive a loan of ILS million (approximately $) from certain shareholders. These loan bears interest at an annual rate of %.
| 2024 | 2023 | |||||||
| Balance at January 1, | ||||||||
| Payment of borrowings | ( | ) | ||||||
| Exchange rate differences | ( | ) | ||||||
| Balance at December 31, | ||||||||
In consideration of providing funding as a seed capitalist,
the Company agreed to provide, as additional consideration, a bonus payments (the “Bonus Payments”) on the occurrence of an
exit or major liquidity event. In any way, the Bonus Payments are capped at ILS
The Bonus Payments are intended to operate in one of the two trigger events:
| (i) | dividend distributions paid by the Company; or |
| (ii) | the sale of shares by a lender in Security Matters Ltd. (either in the event of a takeover or otherwise) |
Only if the aggregate amounts of one of the two trigger events exceeds the investment of the lenders in the Company (in a way of loan or shares), then the lender would be entitled the Bonus Payments based on a formula set forth in the agreement.
The amount of the Bonus Payments is the amount that exceeds the aggregate sum invested in the Company (in a way of loan or shares) by the lender divided by several factors according to the formula as set forth in the agreement.
There is no time limit to pay the Bonus Payments.
Once the Company has paid each Bonus Payment in its entirety (i.e., the cap of ILS
In August 2022 the loan from related party has been
fully repaid and the Company signed an addendum to the loan agreement that reduces the total amount of the Bonus Payments to ILS
On September 19, 2023, the Company
amended its loan agreements dated September 7, 2015, by and between the Company, its shareholders and Kamea Fund (the “Kamea
Loan Agreements”). Pursuant to the amendment to the Kamea Loan Agreements, Kamea agreed to convert $
| F-38 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands, except share and per share data) |
| A. | Share capital: |
| Number of shares | ||||||||||||||||
| December 31, 2024 | December 31, 2023 | |||||||||||||||
| Authorized | Issued and outstanding | Authorized | Issued and outstanding | |||||||||||||
Preferred shares USD par value | ||||||||||||||||
Deferred shares Euro par value | ||||||||||||||||
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have a par value per share of $ and the Company does not have a limited amount of authorized capital.
Preferred shares
Preferred shares with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors.
Deferred shares
Deferred Ordinary Shares are non-voting shares and do not convey upon the holder the right to be paid a dividend or to receive notice of or to attend, vote or speak at a general meeting. The Deferred Shares confer the right on a return of capital, on winding-up or otherwise, only to the repayment of the nominal value paid up on the Deferred Shares after repayment of the nominal value of the Ordinary Shares.
| B. | Changes in Share capital |
| 1. | On March 7, 2023 (the “Closing Date”), the Company consummated the Business Combination as described in Note 1B. Beginning on the day immediately prior to the Closing Date and ending on the day immediately after the Closing Date, the following transactions occurred: |
| a) | The AUD |
| b) | Security Matters PTY Ltd. performed acceleration of vesting for all unvested warrants and options, the expense for the acceleration amounted to $. |
| c) | warrants and options have been exercised on a cashless basis to shares in Security Matters PTY Ltd. |
| d) | (post reverse stock split) ordinary shares of the Company have been issued to Security Matters PTY Ltd.’s shareholders in return for their ordinary shares in Security Matters PTY Ltd. that were cancelled. Security Matters PTY Ltd.’s . |
| e) | The Company issued ordinary shares, private warrants and public warrants to Lionheart’s stockholders, in exchange for their existing Lionheart shares and warrants. The warrants exercise price is $per share, expiring in March 2028. The warrants are considered to be a derivative financial |
| f) | liability and measured at fair value, which is the market price as of the end of the period, amounted to $ per warrant. | |
| g) | The Company issued ordinary shares for an aggregate of $ net proceeds. |
| h) | The Company issued ordinary shares for the conversion of bridge loan at principal amount of $ |
| 2. | During 2023, the Company issued ordinary shares ( shares as commitment fees) to Yorkville for an aggregate of $ net proceeds (see also note 13). |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 17 - SHAREHOLDERS’ EQUITY (CONT.):
| 3. | On June 22, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with EF Hutton, LLC (the “Underwriter”) relating to the public offering of (i) ordinary shares of the Company, at a subscription price per share of $ (the “Firm Shares”), (ii) warrants in the form of Warrant A to subscribe for ordinary shares, at an exercise price of $ per share (“Warrant As”), and (iii) warrants in the form of Warrant B to subscribe for ordinary shares, at an exercise price of $ per share (“Warrant Bs” and together with Warrant A, the “Firm Warrants” and, collectively with the Firm Shares, the “Firm Securities”). |
The Company also granted the Underwriter a 45-day option to subscribe for, in the aggregate, . The Option Shares and the Option Warrants are referred to as the “Option Securities”.
The offering closed on June 27, 2023. The
Company delivered the Firm Shares (or Firm Share equivalents in the form of Pre-Funded Warrants), the Firm Warrants and the Option Warrants
to the Underwriter on the same day.
The Warrant A terms specify that the warrants may be exercised at any time on or before June 27, 2028. On or after the earlier of
Warrants A and B expire in June 2028.
Warrant As were accounted as a derivative financial liability. As of December 31, 2024, all Warrant As warrants were exercised cashless into ordinary shares.
Warrant Bs were accounted as a derivative financial liability and valued at $ per warrant by using the Black-Scholes option-pricing model, with expected volatility of % and the risk-free interest rate used is %.
The net proceeds to the Company upon the
closing of this offering were approximately $
During December 2023, the company entered into inducement offer letter agreement with the holders regarding the Warrant Bs reset. Pursuant to the inducement letter, the holders agreed to exercise for cash the outstanding.
Warrant Bs an aggregate of shares of the Company’s Ordinary Shares at an exercise price of $ per share. According to the inducement offer letter agreement the Company issued two types of new warrants:
(i) up to warrants to purchase up to shares of the Company’s Ordinary Shares at an exercise price of $ per share.
(ii) up to warrants to purchase up to shares of the Company’s Ordinary Shares at an exercise price of $ per share.
The Company received aggregate gross proceeds, before payment of transaction fees and expenses, of $ from the exercise of the Warrant Bs by the holders, and the carrying amount of those warrants, was classified to ordinary shares and premium together with the proceeds the Company received from the exercise price.
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 17 - SHAREHOLDERS’ EQUITY (CONT.):
In accordance with IAS 32, the Company measured the difference between the fair value of the consideration the holder receives on conversion of the instrument under the revised terms and the fair value of the consideration the holder would have received under the original terms, was recognized as a loss in profit or loss.
The Company utilized Black-Scholes valuation
model to calculate the fair values of the repriced warrants both before and after the repricing and recognized the incremental fair value
of $ as finance expense in the statement of comprehensive income against an increase in the carrying amount of the warrants (presented
within issued capital and additional paid-in capital). In addition, fair value was also calculated for the new issued new warrants
at the amount of $
During January 2024, pursuant to the inducement
letter of reset warrants, the holders exercised
| 4. | On August 8, 2023, at the Extraordinary General Meeting of Shareholders of the Company, the Company’s shareholders voted in favor of consolidating every twenty-two ordinary shares in the authorized but unissued and in the authorized and issued share capital of the Company into one ordinary share (22:1). |
On August 21, 2023, the Company’s ordinary shares began trading on the Nasdaq Global Market on a post-Reverse Stock Split basis under the current symbol “SMX”.
| 5. | On September 19, 2023, the Company amended the Kamea Loan Agreements. Pursuant to the amendment to the Kamea Loan Agreements, Kamea agreed to convert $657 of indebtedness under the Kamea Loan Agreements (the “Indebtedness Amount”) into 228 ordinary shares of the Company, as payment in full for the Indebtedness Amount; provided however, that in the event the proceeds received from Kamea with respect to any sales of such shares are not at least equal to the Indebtedness Amount, the Company will remain liable to Kamea for the balance of the Indebtedness Amount (see also note 16). |
| 6. | On December 31,2023, the Company also issued Ordinary Shares to a service provider as payment in full
for $ |
| 7. | On January 4, 2024, the Company issued ordinary shares to a service provider in connection with certain investor relations services. |
| 8. | Pursuant to Letter Agreement with Yorkville signed on February 2, 2024, the Company issued during the
first quarter of 2024, ordinary shares for an aggregate of $ net proceeds and in addition in June 21, 2024 the investor exercised
the |
| 9. | On February 1, 2024, the Company issued ordinary shares to EF Hutton pursuant to their agreement as an underwriter. |
| 10. | On February 20, 2024, the Company completed an underwritten public offering of Ordinary Shares and
pre-funded warrants at $ per share, generating gross proceeds of approximately $ |
As of December 31, 2024, the Company issued ordinary shares at a subscription price per share of $ and ordinary shares due to Pre-Funded Warrants exercise at a price per Pre-Funded Warrant of $.
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 17 - SHAREHOLDERS’ EQUITY (CONT.):
| 11. | Pursuant to a private placement binding term sheet dated February 28, 2024, the Company issued | |
| 12. | During 2024, Alpha converted $ | |
| 13. | On April 11, 2024 pursuant to a Securities Purchase
Agreement with Alpha, the Company issued | |
| Alpha converted
approximately $ | ||
| 14. | During the twelve-month period ended December 31, 2024 all the Cashless Warrants were fully exercised in cashless and converted into ordinary shares. In addition, the Company issued another ordinary shares according to an amendment to the agreement with certain former debtholders. (see note 9) | |
| 15. | During April 2024, a service provider exercised in a cashless transaction all its warrants and the Company issued ordinary shares. In addition, the Company issued another ordinary shares according to an amendment to the agreement with her. | |
| 16. | On April 24, 2024, the Company issued to Alpha Ordinary Shares as a | |
| 17. | During the second quarter of 2024, the Company converted $ of debt into ordinary shares. | |
| 18. | On June 27, 2024, the Company converted $ debt to ordinary shares and issued | |
| 19. | On July 10, 2024, the Company entered into a Letter of Intent (LOI) with PMB. Under the LOI, the Company
restructured $ | |
| 20. | On July 19, 2024, pursuant to a Securities Purchase
Agreement, the Company issued to Alpha |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 17 - SHAREHOLDERS’ EQUITY (CONT.):
| 21. | On September 11, 2024, pursuant to a Securities Purchase Agreement, the Company issued to investors an aggregate of ordinary shares, Pre-Funded Warrants and series A common warrants. On October 28, 2024, pursuant to the terms of the transaction, the Company further issued Series B Common Warrants and an additional Series A Common Warrant. |
As of 31 December 2024, the investors exercised all of Pre-Funded Warrants and Series B Common Warrants, and of the Series A Common Warrants. As of December 31, 2024, the outstanding Series A Common Warrant totaled at an exercise price of $ (see note 11).
| 22. | On September 16, 2024, an investor converted $ | |
| 23. | During September 2024, a service provider exercised options into ordinary shares in cashless exercise. |
| B. | Share-Base Compensation: |
| 1. | In June 2018, Security Matters PTY Ltd. adopted a Share Option Plan (the “Plan”) to provide an incentive to retain, in the employment or service or directorship of the Group and provide the ability to attract new employees, directors or consultants whose services are considered valuable. The persons eligible to participate in the Share Option Plan include employees, directors and consultants of Security Matters PTY Ltd. or any subsidiary. On March 7, 2023, as part of the SPAC transaction, these options were exercised on a cashless basis and then after replaced with the Company’s shares. |
| 2. | On March 7, 2023, Security Matters PTY Ltd. performed acceleration of vesting for all unvested warrants and options, the expense for the acceleration amounted to $. |
| 3. | In April 25, 2023, the Company’s board of directors and its shareholders approved and adopted the SMX Public Limited Company 2022 Incentive Equity Plan, which was subsequently amended by the Company’s board of directors, subject to applicable Nasdaq requirements, which reserved for grant a number of ordinary shares equal to % of the number of issued and outstanding ordinary shares on a fully diluted basis immediately after the closing of the Business Combination, or authorized ordinary shares. |
| 4. | During
the year ended December 31, 2023, the Company granted options with vesting period up to
|
The options were valued using the Black-Scholes pricing model. The main parameters which were used are: (1) risk-free rate: -%;
(2) expected volatility: -%: (3) expected term: up to
| 5. | During the year ended December 31, 2023, the Company granted RSUs to employees, directors and service providers. The fair value at grant date of RSUs granted in the period were $-$. The related share-based expenses that were recognized as of December 31, 2024, and 2023 totaled $ and $, respectively. |
| 6. | On January 31, 2024, the Company granted RSUs to employees, directors and service providers. The fair value at grant date was $ per RSU. , with an acceleration clause that was effective within the year 2024. Related share-based expenses recognized for the period totaled $. |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 17 - SHAREHOLDERS’ EQUITY (CONT.):
| 7. | On July 21, 2024, the Company granted 241 RSUs to an advisor. The fair value at grant date was $ per RSU. The RSUs shall vest monthly in equal installment until December 20, 2024. Related share-based expenses recognized for the period totaled $. |
| 8. | On August 29, 2024, the Company amended its 2022 Incentive Equity Plan, to increase the number of authorized Ordinary Shares under the Incentive Plan to from . As a Foreign Private Issuer, Nasdaq Rule 5615(a)(3) allows the Company to rely on home country corporate governance practices in lieu of certain of the rules in the Nasdaq Rule 5600 Series and Rule 5250(d) and, accordingly, the Company so elected to approve the amendment without stockholder approval. |
| 9. | On August 29, 2024, the Company granted an aggregate of fully vested RSUs to its employees, executive officers and directors, and to certain consultants and advisors of the Company. The fair value at grant date was $ per RSU. The RSUs shall vest immediately. The related share-based expenses recognized for the period totaled $. |
| 10. | During the year ended December 31, 2024, the Company granted fully vested options with vesting period up to years from the grant date to employees and service providers. |
These options carry an exercise price of $ and the contractual life under the plan is years.
The fair value of the grant at grant date is $.
The related share-based expenses that were recognized in the year ended December 31, 2024, amounted to $.
The options were valued using
the Black-Scholes pricing model. The main parameters which were used are: (1) risk-free rate: %;
(2) expected volatility: %;
(3) expected term: up to
| 11.A | summary of the status of the Company’s Share Option Plan granted to employees and service providers (including performance-based awards) and changes during the relevant period are presented below: |
RSUs granted to employees, directors and service providers:
Year ended December 31, 2024 | Year ended December 31, 2023 | |||||||
| Outstanding at the beginning of the year | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ( | ) | ||||
| Forfeited | ( | ) | ( | ) | ||||
| Outstanding at the end of year | ||||||||
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 17 - SHAREHOLDERS’ EQUITY (CONT.):
Options granted to employees, directors and service providers:
Year ended
December 31, 2024 | Year ended
December 31, 2023 | |||||||||||||||
Number
of options
| Weighted average
Exercise price (USD$) | Number
of options
| Weighted average
Exercise price (USD$) | |||||||||||||
| Outstanding at beginning of year | ||||||||||||||||
| Issue of options | ||||||||||||||||
| Expired | ( | ) | ( | ) | ||||||||||||
| Outstanding at the end of year | ||||||||||||||||
| Exercisable options | ||||||||||||||||
NOTE 18 - GENERAL AND ADMINISTRATIVE EXPENSES:
Year Ended | ||||||||||||
| December 31, 2024 | December 31, 2023 | December 31, 2022 | ||||||||||
| Share based compensation | ||||||||||||
| Professional services | ||||||||||||
| Transaction cost | ||||||||||||
| Public company expenses | ||||||||||||
| Wages and salaries related | ||||||||||||
| Insurance | ||||||||||||
| Travel expenses | ||||||||||||
| Office and maintenance | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Other | ||||||||||||
| Total | ||||||||||||
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 19- RESEARCH AND DEVELOPMENT EXPENSES:
| Year Ended | Year Ended | Year Ended | ||||||||||
| December 31, 2024 | December 31, 2023 | December 31, 2022 | ||||||||||
| Salaries and related expenses | ||||||||||||
| Materials and laboratory expenses | ||||||||||||
| Share based compensation | ||||||||||||
| Travel expenses | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Subcontractors and consultants | ||||||||||||
| Freight | ||||||||||||
| Other | ||||||||||||
| Reimbursement from paid pilots and proof of concept projects | ( | ) | ( | ) | ( | ) | ||||||
| Total | ||||||||||||
NOTE 20 – SELLING AND MARKETING EXPENSES:
| Year Ended | Year Ended | Year Ended | ||||||||||
| December 31, 2024 | December 31, 2023 | December 31, 2022 | ||||||||||
| Marketing expenses | ||||||||||||
| Salaries and related expenses | ||||||||||||
| Share based compensation | ||||||||||||
| Travel expenses | ||||||||||||
| Other | ||||||||||||
| Total | ||||||||||||
NOTE 21 - TAXES ON INCOME:
| 1. | The Company is incorporated and domiciled in Ireland where the applicable tax rate is |
| 2. | Theoretical tax: |
| December 31, 2024 | December 31, 2023 | December 31, 2022 | ||||||||||
| Reconciliation of income tax at the statutory rate | ||||||||||||
| Loss before income tax | ( | ) | ( | ) | ( | ) | ||||||
| Theoretical tax rate of | ( | ) | ( | ) | ( | ) | ||||||
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
| Non-deductible expenditure and others | ||||||||||||
| Unrecognized temporary differences and tax losses for which deferred tax weren’t recognized | ( | ) | ||||||||||
| Income tax / (benefit) |
| 3. | As of December 31, 2024, the Group has estimated carry forward tax losses of approximately $ |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
| December 31, 2024 | December 31, 2023 | December 31, 2022 | ||||||||||
| Net loss attributable to the owners of the company | ( | ) | ( | ) | ( | ) | ||||||
| Basic and diluted loss per share | )(1) | )(1) | )(1)(2) | |||||||||
| Weighted average number of ordinary shares used in calculating basic and diluted loss per share | ||||||||||||
| (1) |
| (2) |
The calculation of the basic and diluted loss per share for all past periods presented have been adjusted retrospectively based on the new number of shares derived from the conversion ratio.
NOTE 23 - RELATED PARTIES:
Key Management Personnel Compensation and other related party transactions and balances:
The key management personnel, among others, include board members, CEO and CFO.
The totals of remuneration paid to Key Management Personnel and related parties during the years are as follows:
| 1. Transactions with related parties: | December 31, 2024 | December 31, 2023 | ||||||
| Share based payments | ||||||||
| Short-term salary and fees | ||||||||
| Revaluation of financial liabilities at fair value | ||||||||
| Payments for legal services | ||||||||
| Post-employment retirement benefits | ||||||||
| Non-monetary benefits | ||||||||
| Payment for Administrative services | ||||||||
| Conversion of loan to ordinary shares | ||||||||
| Short-term salary until deletion | ||||||||
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 23 - RELATED PARTIES (CONT.):
| 2. Balance with related parties: | December 31, 2024 | December 31, 2023 | ||||||||
| Key management | Salary and related | ( | ) | ( | ) | |||||
| Directors | Consultant services | ( | ) | |||||||
| Joint Ventures | Investment in subsidiary | |||||||||
| Joint Ventures | Other receivables | |||||||||
| Shareholders | Other accounts payable | ( | ) | |||||||
| Shareholders | Trade payables | ( | ) | |||||||
| Shareholders | Derivatives | ( | ) | |||||||
| ( | ) | ( | ) | |||||||
NOTE 24 - GOVERNMENT GRANTS
The Government of Israel encourages research and development
projects oriented towards products for export or projects which will otherwise benefit the Israeli economy. This is conducted via the
Israel Innovation Authority (IIA), which replaced the former Office of the Chief Scientist (OCS). The Group has an approved project with
the IIA under which it received a total of $
Until October 25, 2023, the interest was calculated
at a rate based on 12-month London Interbank Offered Rate, or LIBOR applicable to US Dollar deposits. However, on October 25, 2023, the
IIA published a directive concerning changes in royalties to address the expiration of the LIBOR. Under such directive, regarding
| December 31, 2024 | December 31, 2023 | |||||||
| Short term liability at year end | ||||||||
| Total | ||||||||
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 25 - COMMITMENTS AND CONTINGENT LIABILITIES:
As part of the Board’s ongoing regulatory compliance process, the Board continues to monitor legal and regulatory developments and their potential impact on the Company. Management is not aware of any contingencies that may have a significant impact on the financial position of the Company.
A. In
January 2015, the Company entered an agreement with Isorad Ltd. (a company wholly owned by the State of Israel with rights to exclusively
commercialize the Soreq Research Center technology for civilian uses), according to which the Company was granted technological license
in return for future royalties based on
On January 2023, the Company signed an amendment to the agreement that determine the following:
(1) for the BCA with Lionheart, Isorad was issued (a) options to purchase shares of the Company, the options were issued in January 2023 and valued using the Black-Scholes pricing model. The main assumptions which were used are: (1) risk-free rate: %; (2) expected volatility: %; (3) expected term: up to years; and (4) expected dividend yield: %;
The fair value of these options was $ and recognized as a technology license intellectual property.
(2) Additionally, Isorad will be entitled
to
thereafter (to be paid after reaching
an aggregated received amount of
As of December 31, 2024 and 2023, based
on the funds the Company actually received, the Company recognized a technology license intellectual property at the amount of $
(3) Exit fee - in the occurrence of
the first M&A event (as such event is defined in such agreement to include mergers, sale of all or substantially all the assets of
the Company and similar event) after the closing of the BCA, the Company is to pay a cash amount equal to
B. On January 12, 2024,
the Company announced that it entered into a $
On March 7, 2025, the arbitrator approved the request, and on March 23, 2025, R&I Trading filed its affidavit. On May 11, 2025, the parties filed their statements of defense. At this preliminary stage, it is not possible to assess the chances of the Company’s claim and the outcome of the arbitration proceedings
| F-49 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 26 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT:
Composition of the Group’s financial assets and financial liabilities:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Financial assets at amortized cost: | ||||||||
| Cash and cash equivalents | ||||||||
| Other current receivables | ||||||||
| Total financial assets | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Financial liabilities at fair value through profit or loss: | ||||||||
| Short term loan | ||||||||
| Convertible notes | ||||||||
| Convertible Features | ||||||||
| Warrants - derivative financial liability | ||||||||
| Pre-paid advance | ||||||||
| Bridge loans liabilities | ||||||||
| Total financial liabilities at fair value through profit or loss | ||||||||
| Financial liabilities at amortized cost: | ||||||||
| Trade and other payables | ||||||||
| Convertible notes | ||||||||
| Lease liabilities | ||||||||
| Government grants | ||||||||
| Total financial liabilities at amortized cost | ||||||||
| Total financial liabilities | ||||||||
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks such as market risks (foreign currency risk), credit risk and liquidity risk. The Company’s management oversees the management of these risks, focusing on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Group. The Group uses different methods to monitor different types of risk to which it is exposed. These methods include sensitivity analysis in the case of foreign exchange, ageing analysis for credit risk and maturity analysis in respect of liquidity risk.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, which in the group’s case refers only to foreign currency risk. Financial instruments affected by this risk include, loans and borrowings and short-term payables and receivables.
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 26 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONT.):
Foreign currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the functional currency. The Group is exposed to foreign exchange risk arising from currency exposure primarily with respect to the NIS and Euro.
As of December 31, 2024, the Group has excess
financial liabilities over financial assets in foreign currencies in relation to the NIS, AUD, SGD and EUR totaling approximately
$
Foreign currency sensitivity analysis
The following table demonstrates the sensitivity test to a reasonably possible change of 10% in EUR and NIS exchange rates against the USD, with all other variables held constant. The impact on the Group’s net loss (tax effect is not relevant) and equity is due to changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives and embedded derivatives. The Company’s exposure to foreign currency changes for all other currencies is immaterial.
| Change in NIS rate | Effect on net loss | |||||||
| December 31, 2024 | % | |||||||
| December 31, 2023 | % | |||||||
| Change in AUD rate | Effect on net loss | |||||||
| December 31, 2024 | % | |||||||
| December 31, 2023 | % | |||||||
| Change in SGD rate | Effect on net loss | |||||||
| December 31, 2024 | % | |||||||
| December 31, 2023 | % | |||||||
| Change in EUR rate | Effect on net loss | |||||||
| December 31, 2024 | % | |||||||
| December 31, 2023 | % | |||||||
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations as a customer or under a financial instrument leading to a loss to the Group. The Group is exposed to credit risk from its operating activity (other receivables and cash balances). The Group’s main financial assets are cash and cash equivalents as well as other receivables and their carrying amounts represent the Group’s maximum exposure to credit risk. Credit risk from balances with banks and financial institutions is managed by the Group’s management in accordance with the Group’s policy. Wherever possible and commercially practical, the Group holds cash with major financial institutions in Israel and Australia which the Company’s management regards as financially solid.
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 26 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONT.):
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group has procedures to minimize such loss by maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities. As of the balance sheet date, the Group has a positive working capital.
The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.
As of December 31, 2024
| Less than one year | 1 to 2 years | 2 to 3 years | 3 to 4 years | 4 to 5 years | >5 years | Total | ||||||||||||||||||||||
| Trade and other payables | ||||||||||||||||||||||||||||
| Short term loan | ||||||||||||||||||||||||||||
| Bridge loans | ||||||||||||||||||||||||||||
| Government grants | ||||||||||||||||||||||||||||
| Lease liability | ||||||||||||||||||||||||||||
| Convertible note | ||||||||||||||||||||||||||||
| Financial derivatives | ||||||||||||||||||||||||||||
As of December 31, 2023
| Less than one year | 1 to 2 years | 2 to 3 years | 3 to 4 years | 4 to 5 years | > 5 years | Total | ||||||||||||||||||||||
| Trade and other payables | ||||||||||||||||||||||||||||
| Bridge loans | ||||||||||||||||||||||||||||
| Government grants | ||||||||||||||||||||||||||||
| Lease liability | ||||||||||||||||||||||||||||
| Convertible promissory note | ||||||||||||||||||||||||||||
| Pre-paid advance | ||||||||||||||||||||||||||||
| Convertible note | ||||||||||||||||||||||||||||
| Financial derivatives | ||||||||||||||||||||||||||||
| F-52 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 27 - FAIR VALUE MEASUREMENT:
Fair value hierarchy
The following tables detail the consolidated entity’s assets and liabilities, measured or disclosed at fair value, using a three-level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3: Unobservable inputs for the asset or liability.
| As of December 31, 2024 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| US$ in thousands | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Derivative financial liabilities | ||||||||||||||||
| Tradable warrants | ||||||||||||||||
| Total | ||||||||||||||||
| As of December 31, 2023 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| US$ in thousands | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Derivative financial liabilities | ||||||||||||||||
| Tradable warrants | ||||||||||||||||
| Total | ||||||||||||||||
NOTE 28 - SUBSEQUENT EVENTS:
Since the reporting date the following significant events have occurred:
| 1. | On December 30 and 31, 2024, some of the option warrant A holders as part of the September 11, 2024 Aegis
transaction submitted an exercise instruction to convert the option warrants into shares, in exchange for an exercise addition of $ |
| 2. | After
balance sheet date and until the date of the authorization of these financial statements
the Company repaid $ |
| 3. | On February 21, 2025, the Company filed a “shelf” registration statement on Form F-3 with the U.S. Securities and Exchange Commission, registering for sale from time to time, up to $45,000 of any combination of the securities described in the Form F-3, either individually or in units. The Company may also offer ordinary shares or preferred shares upon conversion of debt securities, ordinary shares upon conversion of preferred shares, or ordinary shares, preferred shares or debt securities upon the exercise of warrants or rights. |
| 4. | On February 24, 2025, the Company amended its 2022 Incentive Equity Plan (the “Incentive Plan”), to increase the number of authorized Ordinary Shares under the Incentive Plan to from (the “Amendment”). As a Foreign Private Issuer, Nasdaq Rule 5615(a)(3) allows the Company to rely on home country corporate governance practices in lieu of certain of the rules in the Nasdaq Rule 5600 Series and Rule 5250(d) and, accordingly, the Company so elected to approve the Amendment without stockholder approval. Thereafter, the Company granted an aggregate of restricted stock units and stock options to its executive officers and directors, and to certain consultants and advisors to the Company. |
| 5. | On March 17, 2025, the Company amended its 2022 Incentive Equity Plan (the “Incentive Plan”), to increase the number of authorized Ordinary Shares under the Incentive Plan to from (the “Amendment”). As a Foreign Private Issuer, Nasdaq Rule 5615(a)(3) allows the Company to rely on home country corporate governance practices in lieu of certain of the rules in the Nasdaq Rule 5600 Series and Rule 5250(d) and, accordingly, the Company so elected to approve the Amendment without stockholder approval. Thereafter, the Company granted half immediately and half vested on June 1, 2025, stock options to certain consultants and advisors to the Company. |
| F-53 |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (US$ in thousands) |
NOTE 28 - SUBSEQUENT EVENTS (CONT.):
| 6. | On March 26, 2025, the Company established a fully owned entity incorporated in Dubai Multi Commodities Centre Authority, United Arab Emirates with the name and style of “SMX Circular Economy FZCO”. |
| 7. | On March 28, 2025, the Company entered into a Securities
Purchase Agreement to issue and sold to 1800 Diagonal a promissory note, for gross proceeds to the Company of $ |
| 8. |
On May 2, 2025, the Company’s shareholders approved
the subdivision of its ordinary shares into |
| 9. | After the balance sheet date and until May 6, 2025, the Company issued to Alpha all agreed Ordinary Shares as follows: an aggregate of Ordinary Shares upon conversions of the Alpha April Note, and thereafter issued additional Ordinary Shares under the Alpha April Note pursuant to a settlement agreement dated April 2, 2025, with Alpha. Further, the Company issued an aggregate of Ordinary Shares to Alpha pursuant to conversion in full of the Alpha July Note. See also notes 8.C, 8.D and 8.F. |
| 10. | On May 9, 2025, the Company informed Alpha of the termination of the SPA (See note 10) |
| 11. | On May 8, 2025, the Company entered into Securities Purchase Agreements for the issuance of convertible promissory note to an institutional
investor, RBW Capital Markets LLC (the “RBW”), as follows: Unsecured note in the principal amount of $ |
| 12. | On May 13, 2025 and effective March 31, 2025, the Company entered into an Amendment #2 to Promissory Note (“Second Amendment”) and an Amendment #2 to Senior Note (“Senior Note Second Amendment”) with PMB. The Second Amendment and the Senior Note Second Amendment amended the maturity date of the Senior Promissory Notes to November 30, 2025 and amended the interest rates of the Senior Promissory Notes to 18% per annum. In addition, all accrued and unpaid interest was capitalized and added to the principal of the applicable Senior Promissory Note. |
| F-54 |