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What changed in SmartKem, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SmartKem, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+281 added−259 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-27)

Top changes in SmartKem, Inc.'s 2024 10-K

281 paragraphs added · 259 removed · 190 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

100 edited+40 added−18 removed49 unchanged
Biggest changeWe have three employees supporting this work in Taiwan in addition to support from SmartKem staff in the UK. ​ Intellectual Property ​ Our commercial success depends in part on our ability to obtain and maintain intellectual property protection for our active organic semiconductors, formulated OSC and passive dielectric interlayer inks, processes and know-how that collectively comprise our TRUFLEX® technology, to operate without infringing the proprietary rights of third parties, and to prevent others from infringing our proprietary rights.
Biggest changeA few months later we signed a multi-year agreement with FlexiIC to develop a new generation of CMOS for smart sensors. ​ In March 2024, we entered into a technology collaboration agreement with ITRI to enable product prototyping on ITRI's Gen 2.5 equipment using our technology. ​ 16 Table of Contents In September 2024, we entered into a joint development agreement with Chip Foundation to co-develop a new generation of MicroLED backlight technology for Liquid Crystal Displays. ​ In November 2024, we partnered with AUO to develop a new generation of rollable, transparent MicroLED displays using our technology. ​ Intellectual Property ​ Our commercial success depends in part on our ability to obtain and maintain intellectual property protection for our active organic semiconductors, formulated OSC and passive dielectric interlayer inks, processes and know-how that collectively comprise our TRUFLEX® technology, to operate without infringing the proprietary rights of third parties, and to prevent others from infringing our proprietary rights.
The goal of our agreement with ITRI is to develop robust commercial scale manufacturing processes that will enable potential customers to develop prototypes on ITRI’s Gen2.5 line using our OTFT technology before transferring the manufacturing process to their own lines or to a third-party foundry, including ITRI.
The goal of our agreement with ITRI is to develop robust commercial scale manufacturing processes that will enable potential customers to develop prototypes on ITRI’s Gen2.5 line using our OTFT technology before transferring the manufacturing process to their own lines or to a third-party foundry, including ITRI.
Our active materials generally require high levels of process and product control, and therefore these are synthesized from start to end by us or a third party that has met certain certification requirements and then formulated by us into the organic semiconductor inks. We validate active components internally before use.
Our active materials generally require high levels of process and product control, and therefore these are synthesized from start to end by us or a third party that has met certain certification requirements and then formulated by us into organic semiconductor inks. We validate active components internally before use.
Our materials are organic and polymer-like and hence can withstand the strains experienced in severe bending such as a fold of a display. In addition, the substrate does not require the degree of protection from the edges as glass displays do which can eliminate the weight and cost associated with aluminum frames.
Our materials are organic and polymer-like and hence can withstand the mechanical strains experienced in severe bending such as a fold of a display. In addition, the substrate does not require the degree of protection from the edges as glass displays do, which can eliminate the weight and cost associated with aluminum frames.
We supply our products as a set of stable liquid inks, with each ink forming a separate layer of the device. Each of the inks forming these layers has been carefully designed to result in the device performance and electrical stability specified by the customer.
We supply our products as a set of stable liquid inks, with each ink forming separate layers of the device. Each of the inks forming these layers has been carefully designed to result in the device performance and electrical stability specified by the customer.
Because most polymer substrates melt at these high temperatures, TFTs are mainly manufactured on special glass that can withstand such high temperatures resulting in the production of mainly rigid products. ​ Our OTFT technology comprises predominantly organic materials (such as polymers and organic small molecules) that can be solution coated at low temperature (as low as 80°C) using existing manufacturing infrastructure onto a wide range of low-cost plastic substrates, as well as onto traditional substrate materials.
Because most polymer substrates melt or degrade at these high temperatures, TFTs are mainly manufactured on special glass that can withstand such high temperatures resulting in the production of mainly rigid products. ​ Our OTFT technology comprises predominantly organic materials (such as polymers and organic small molecules) that can be solution coated at low temperature (as low as 80°C) using existing manufacturing infrastructure onto a wide range of low-cost plastic substrates, as well as onto traditional substrate materials.
However, we believe our products have the potential to compete with many of our competitors’ offerings through product performance, product reliability and satisfaction of customer qualifications and standards. ​ ​ ​ ​ 16 Table of Contents Government Regulation ​ In addition to customer specific requirements for safety health and the environment, our formulated materials also may be subject to government regulation during their use in the country of device manufacture and from regulations covering the materials in the finished device.
However, we believe our products have the potential to compete with many of our competitors’ offerings through product performance, product reliability and satisfaction of customer qualifications and standards. ​ Government Regulation ​ In addition to customer specific requirements for safety health and the environment, our formulated materials may also be subject to government regulation during their use in the country of device manufacture and from regulations 18 Table of Contents covering the materials in the finished device.
We supply the ink set with a detailed process of record (“POR”) for making the desired device. In addition to supplying our OTFT stack materials as a package, prospective customers also evaluate the use of our range of interlayer materials as single layers in new and existing chip and display products (in so-called Advanced Electronics packaging).
We supply the ink set with a detailed process of record (“POR”) for making the desired device. In addition to supplying our OTFT stack materials as a package, prospective customers also evaluate the use of our range of interlayer materials as single layers in new and existing chip and display products (in so-called advanced semiconductor packaging).
The similarity in stretchability and coefficient of thermal expansion between the substrate and our TRUFLEX® materials permits production of robust, bendable/flexible and lightweight devices.
The similarity in the coefficient of thermal expansion between the substrate and our TRUFLEX® materials permits production of robust, bendable/flexible and lightweight devices.
None of the information posted on our website is incorporated by reference into this Report. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding us and other companies that file materials with the SEC electronically. ​ ​ 18 Table of Contents ​
None of the information posted on our website is incorporated by reference into this Report. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding us and other companies that file materials with the SEC electronically. ​ ​ 20 Table of Contents ​
We have 14 employees at the CPI facility who operate or support operations and OTFT developments using the CPI equipment on our behalf. Pursuant to the terms of this agreement, we utilize an online booking system to book equipment for immediate use, subject to availability.
We have 11 employees at the CPI facility who operate or support operations and OTFT developments using the CPI equipment on our behalf. Pursuant to the terms of this agreement, we utilize an online booking system to book equipment for immediate use, subject to availability.
At this time, our circuit layout work is done by hand by skilled engineers. ​ Once we have identified a specific application requirement, we expect to proceed with development work through an understanding of the product specifications and engineering work to calculate the size and capabilities of pixel TFTs and storage capacitors.
At this time, our circuit layout work is done by hand by skilled engineers. 11 Table of Contents Once we have identified a specific application requirement, we expect to proceed with development work through an understanding of the product specifications and engineering work to calculate the size and capabilities of pixel TFTs and storage capacitors.
Furthermore, the solubility of our inks would permit customers to digitally print the features of the OTFT device, which we believe may be attractive to potential customers seeking to lower manufacturing costs. ​ Advantages of Our TRUFLEX® Technology ​ The most widespread display backplane technology currently in use is a-Si which is principally used in the manufacture of LCDs.
Furthermore, the solubility of our inks enables customers to digitally print the features of the OTFT device, which we believe may be attractive to potential customers seeking to lower manufacturing costs. ​ Advantages of Our TRUFLEX® Technology ​ The most widespread display backplane technology currently in use is a-Si which is principally used in the manufacture of LCDs.
The goal of our agreement with ITRI is to develop robust commercial scale manufacturing 14 Table of Contents processes that will enable potential customers to develop prototypes on ITRI’s Gen2.5 line using our OTFT technology before transferring the manufacturing process to their own lines or to a third-party foundry, including ITRI.
The goal of our agreement with ITRI is to develop robust commercial scale manufacturing processes that will enable potential customers to develop prototypes on ITRI’s Gen2.5 line using our OTFT technology before transferring the manufacturing process to their own lines or to a third-party foundry, including ITRI.
We believe that our scientists and technical experts are significant assets of our business, and we value and support hiring exceptional talent to further develop our TRUFLEX® technology and drive our business growth. ​ Corporate History ​ We were originally incorporated as Parasol Investments Corporation (“Parasol”) in the State of Delaware in May 2020.
We believe that our scientists and technical experts are significant assets of our business, and we value and support hiring exceptional talent to further develop our TRUFLEX® technology and drive our business growth. ​ 19 Table of Contents Corporate History ​ We were originally incorporated as Parasol Investments Corporation (“Parasol”) in the State of Delaware in May 2020.
The PDK contains information such as design rules that are specific to our process equipment, and it will also incorporate models of OTFTs made using our materials set. This will be used for 10 Table of Contents digital device simulation and layout of circuit designs.
The PDK contains information such as design rules that are specific to our process equipment, and it will also incorporate models of OTFTs made using our materials set. This will be used for digital device simulation and layout of circuit designs.
Deposition and patterning of the low melting point metal for the bumping process typically uses thermal evaporation and lift-off processes, which are not typically used in display 8 Table of Contents backplane fabs, therefore creating uncertainty over the scale up of this approach.
Deposition and patterning of the low melting point metal for the bumping process typically uses thermal evaporation and lift-off processes, which are not typically used in display backplane fabs, therefore creating uncertainty over the scale up of this approach.
The existing manufacturing processes for creating micro-LED displays use physical transfer of LEDs from the wafer upon which they are manufactured to the TFT display backplane, where they must be laser welded to the contact pad of the transistor to make an electrical connection.
The existing manufacturing processes for creating MicroLED displays use physical transfer of LEDs from the wafer upon which they are manufactured to the TFT display backplane, where they must be laser welded to the contact pad of the transistor to make an electrical connection.
We believe that this new method of processing our thin-film transistor backplane on top of Gallium Nitride LEDs has the potential to accelerate the commercialization of micro-LED displays by demonstrating the ability to efficiently manufacture micro-LED displays by simplifying the process of connecting transistors to LEDs.
We believe that this new method of processing our thin-film transistor backplane on top of Gallium Nitride LEDs has the potential to accelerate the commercialization of MicroLED displays by demonstrating the ability to efficiently manufacture MicroLED displays by simplifying the process of connecting transistors to LEDs.
We publish technical papers that explain our products and technology to inform and engage with potential customers. We also have entered into a number of joint development agreements to demonstrate the capabilities of our materials and to show the feasibility of utilizing our products in specific applications.
We publish technical papers that explain our products and technology to inform and engage with potential customers. We have also entered into several joint development agreements to demonstrate the capabilities of our materials and to show the feasibility of utilizing our products in specific applications.
Our recent demonstration of monolithic integration (OTFT backplane processed on top of GaN mini/microLED arrays) proved the viability of using a monolithic manufacturing process that is more efficient that existing manufacturing techniques. ​ Our OSC materials combine a high mobility polycrystalline small molecule with a low molecular weight semiconducting polymer.
Our recent demonstration of monolithic integration (OTFT backplane processed on top of GaN mini/microLED arrays) proved the viability of using a monolithic manufacturing process that is more efficient than existing manufacturing techniques. ​ 7 Table of Contents Our OSC materials combine a high mobility polycrystalline small molecule with a low molecular weight semiconducting polymer.
Over the past 10 years, we have been building and are continuing to build the intellectual property portfolio relating to our TRUFLEX® technology.
Over the past 11 years, we have been building and are continuing to build the intellectual property portfolio relating to our TRUFLEX® technology.
Our TRUFLEX® materials fall into two main categories, “active” organic 15 Table of Contents semiconductor materials and “passive” interlayer materials.
Our TRUFLEX® materials fall into two main categories, “active” organic 17 Table of Contents semiconductor materials and “passive” interlayer materials.
This eliminates the mass transfer and laser welding process, and the fabrication of OTFTs can use existing low-cost manufacturing tools currently used for LCD backplane manufacturing.
This “chip first” approach eliminates the mass transfer and laser welding process, and the fabrication of OTFTs can use existing low-cost manufacturing tools currently used for LCD backplane manufacturing.
Some of the critical parameters for performance of an OTFT device include: ​ 12 Table of Contents ● Charge mobility – the ability of the material to conduct charge under an electric field. The higher the charge mobility number the greater the current that can be driven through the device for a given size.
Some critical OTFT device parameters include: ​ ● Charge mobility – the ability of the material to conduct charge under an electric field. The higher the charge mobility number the greater the current that can be driven through the device for a given size.
Plastics can also be processed in very thin sheets (tens of microns) which saves space within the final product that can be used instead for increased battery capacity. Thin plastic substrates also enable the device to conform very easily to non-planar surfaces such as the human body which makes them well suited for wearable sensor and display devices.
Plastics can also be processed in very thin sheets (tens of microns) which saves space within the final product, allowing for increased battery capacity. Thin plastic substrates also enable the device to conform very easily to non-planar surfaces such as the human body which makes them well suited for wearable sensors and display devices.
(FlexiIC) with the aim to configure open-source EDA tools for our OTFTs. ​ Development of Robust Commercial Manufacturing Processes ​ Our BL, SAM, OSC, OGI, SRL and PV inks can be deposited using standard coating techniques such as spin-coating or slot-die coating which are widely used for the lithography processes used in TFT manufacturing.
(FlexiIC) with the aim of configuring open-source or low-cost paid for EDA tools for our OTFTs. ​ Development of Robust Commercial Manufacturing Processes ​ Our BL, SAM, OSC, OGI, SRL and PV inks can be deposited using standard coating techniques such as spin-coating or slot-die coating which are widely used for the lithography processes used in TFT manufacturing.
Through our agreement with the United Kingdom’s CPI, we have access to a 300mm x 300mm foundry that we use for creating prototypes for evaluation by potential customers. In 2022 we began process characterization using a maskless aligner at CPI to reduce the time from CAD layout to prototype for new designs.
Through our current agreement, expiring on March 31, 2025, with the United Kingdom’s CPI, we have access to a 300mm x 300mm foundry that we use for creating prototypes for evaluation by potential customers. In 2022, we began process characterization using a maskless aligner at CPI to reduce the time from CAD layout to prototype for new designs.
We have an extensive IP portfolio including 125 granted patents across 19 patent families, 15 pending patents and 40 codified trade secrets. ​ Our Technology ​ The invention and development of OTFT devices has enabled the rapid expansion of the electronics industry, particularly with the advent of the planar process essential for integrated circuitry.
We have an extensive IP portfolio including 138 granted patents across 17 patent families, 16 pending patents and 40 codified trade secrets. ​ Our Technology ​ The invention and development of OTFT devices has enabled the rapid expansion of the electronics industry, particularly with the advent of the planar process essential for integrated circuitry.
As a result, our OTFT process can be integrated into existing manufacturing lines using standard industrial techniques without the need for additional large capital investment.
As a result, our OTFT process is intended to be integrated into existing manufacturing lines using standard industrial techniques without the need for additional large capital investment.
Thin plastic sheets are also conformable, allowing electronics to be formed around irregular surfaces, for example, curved pillars in buildings. ​ Our BL, SAM, OSC, OGI, SRL and PV inks can be deposited using standard coating techniques such as spin-coating or slot-die coating which are widely used for the lithography processes used in TFT manufacturing.
Thin plastic sheets are also conformable, allowing electronics to be formed around irregular surfaces, for example, curved pillars in buildings. ​ Our unique materials set comprising BL, SAM, OSC, OGI, SRL and PV inks can be deposited using standard coating techniques such as spin-coating which is widely used for the lithography processes used in TFT manufacturing.
These can be obtained through the U.K.’s SPIRE system. ​ To the extent our products are or become subject to U.K. export controls and regulations, these regulations may limit the export of our products and technology, and provision of our services outside of the U.K., or may require export authorizations, including by license, a license exception, or other appropriate government authorizations and conditions, including annual or semi-annual reporting.
To the extent our products are or become subject to U.K. export controls and regulations, these regulations may limit the export of our products and technology, and provision of our services outside of the U.K., or may require export authorizations, including by license, a license exception, or other appropriate government authorizations and conditions, including annual or semi-annual reporting.
The polymer controls the morphology, phase segregation and uniformity of the 7 Table of Contents semiconducting layer and a solvent is included to deliver inks that are used to fabricate devices with mobilities of approximately 4 cm2/Vs.
The polymer controls the morphology, phase segregation and uniformity of the semiconducting layer and a solvent is included to deliver inks that are used to fabricate devices with mobilities of approximately 4 cm 2 /Vs.
Using these plastics at temperatures above this level causes significant distortion and, in some instances, may even result in melting or thermal breakdown of the polymer. Our OTFTs can be processed at temperatures as low as 80°C, enabling the use of polymer substrates that are optically clear and low-cost.
Using these plastics at temperatures above this level causes significant distortion and, in some instances, may even result in melting or thermal breakdown of the polymer. Our OTFTs can be processed at temperatures as low as 80°C, enabling the use of polymer substrates that are optically clear, flexible and less expensive than glass or temperature resistant polymers.
This adds to the overall cost of production of a bendable or foldable device. ​ Our ability to employ TRUFLEX® materials at temperatures as low as 80°C enables manufacturers to use low-cost plastic substrates and the polymeric nature of our materials allows the transistors to be truly flexible.
This adds to the overall cost of production of a bendable or foldable device . ​ We believe that our ability to employ TRUFLEX® materials at temperatures as low as 80°C will enable manufacturers to use low-cost plastic substrates and the polymeric nature of our materials will allow the transistors to be truly flexible.
We believe that robust and lightweight display screens which are capable of being bent or folded would enable manufacturers of mobile devices to create products more tailored to customer demand and that our TRUFLEX® OTFTs are uniquely suited for this application.
We believe that robust and lightweight display screens, which are capable of being curved, flexed or folded to tight bend radii, would enable manufacturers of mobile devices to create products more tailored to customer demand and that our TRUFLEX® OTFTs are well suited for this application.
Any material present on the display manufacturers banned list would not be used in formulated product. ​ We work with a third-party service provider to create safety data sheets for our formulated products that are shipped to customers and other end users.
Any material present on the display manufacturers banned list would not be used in formulated product. We work with a third-party service provider to create safety data sheets for our formulated products that are shipped to customers and other end users. Our formulated products contain no materials that are restricted in the U.K. and no permissions or exemptions are required.
We could also engage in a pilot-scale level of manufacturing for the products developed for the customer as part of that process. ​ After the satisfactory completion of development work and any related pilot project, an interested customer would then enter into a sales agreement with us under which we would either agree to manufacture products to the customer’s specifications from time to time as requested by the customer, including potential minimum quantity requirements, or we would agree to license our process to the customer for a fee based on a royalty of sales and enter into a supply agreement for our proprietary inks, utilizing a process developed by ITRI and owned and qualified by us, formulated into inks either in our own facilities or by third-party formulators and shipped directly to customers. ​ We expect that the sales cycle described above will take approximately 12-24 months.
After the satisfactory completion of development work and any related pilot project, an interested customer would then enter into a sales agreement with us under which we would either agree to manufacture products to the customer’s specifications from time to time as requested by the customer, including potential minimum quantity requirements, or we would agree to license our process to the customer for a fee based on a royalty of sales and enter into a supply agreement for our proprietary inks, utilizing a process developed by ITRI and owned and qualified by us, formulated into inks either in our own facilities or by third-party formulators and shipped directly to customers.
Because millions of tiny LEDs 9 Table of Contents need to be transferred from one place to another and welded into place, error rates from misplacement reduce the efficiency of these processes. ​ Our low temperature process makes it possible for OTFT transistors to be processed directly on top of the micro-LEDs.
Because millions of tiny LEDs need to be transferred from one place to another and welded into place, error rates from misplacement reduce the efficiency of these processes leading to significant and costly rework and low yields. Our low temperature process makes it possible for OTFT transistors to be processed directly on top of the MicroLEDs.
Our chip-first integration route makes use of photolithography and/or dry etching to form vias through one of our dielectric layers and then a metal contact is deposited through the via to connect to the micro-LED pads.
Our chip-first integration route makes use of high precision and well-established photolithography processing and/or dry etching to form vias through one of our dielectric layers and then a metal contact is deposited through the via to connect to the MicroLED pads.
Changes in export or import laws or sanctions policies, may adversely impact our operations, delay the introduction and sale of our products in international markets, or, in some cases, prevent the export or import of our products and technology to certain countries, regions, governments, persons, or entities altogether, which could adversely affect our business, financial condition and results of operations. ​ ​ ​ ​ ​ ​ 17 Table of Contents Employees ​ As of December 31, 2023, we had 29 full-time employees and two part-time employees of which 26 are based in the United Kingdom. 21 of our employees hold advanced degrees, including 7 Ph.Ds.
Changes in export or import laws or sanctions policies may adversely impact our operations, delay the introduction and sale of our products in international markets, or, in some cases, prevent the export or import of our products and technology to certain countries, regions, governments, persons, or entities altogether, which could adversely affect our business, financial condition and results of operations. ​ Employees ​ As of December 31, 2024, we had 27 full-time employees and two part-time employees of which 23 are based in the United Kingdom.
We also believe that our ability to build the backplane in-situ over the micro-LED array — which would eliminate the critical front and backplane hybridization step — has the potential to increase the yield of the display fabrication process.
We also believe that our ability to build the backplane in-situ over the MicroLED array (the ‘chip-first’ approach) — which would eliminate the critical front and backplane hybridization step — has the potential to increase the yield of the display fabrication process while also reducing manufacturing cost.
Generally, patents have a term of twenty years from the earliest priority date, assuming that all maintenance fees are paid, no portion of the patent has been terminally disclaimed, and the patent has not been invalidated.
Generally, patents have a term of twenty years from the earliest priority date, assuming that all maintenance fees are paid, no portion of the patent has been terminally disclaimed, and the patent has not been invalidated. In certain jurisdictions, and in certain circumstances, patent terms can be extended or reduced.
Low temperature processing enables a wider range of plastic substrates to be used, allowing properties such as optical clarity to be optimized. ​ There are also opportunities to process the OTFT on top of other display elements, such as a micro-LED array since the low process temperature would not damage the emissive components.
Low temperature processing enables a wider range of plastic substrates to be used, allowing properties such as optical clarity to be optimized. Our low-temperature OTFTs also permit them to be poured on top of other display elements, such as a MicroLED array, since the low process temperature would not damage the emissive components.
We are working to integrate our process into the ITRI facility in Taiwan at Gen 2.5 scale, which should permit commercial-scale processing compared with CPI at a lower defectivity.
In addition, the Company has successfully integrated OTFT and OLED (AMOLED) in a 200ppi display. We are working to integrate our process into the ITRI facility in Taiwan at Gen 2.5 scale, which should permit commercial-scale processing compared with CPI at a lower defectivity.
Consumer electronics companies are actively developing micro-LED displays because such displays promise higher brightness, lower power consumption and longer lifetime.
Consumer electronics companies are actively developing MicroLED displays because such displays promise higher brightness, lower power consumption and longer lifetime than current display technology.
We believe that these companies are continually seeking to create novel, higher added value electronics products that cannot be manufactured using a-Si glass backplanes.
Many of these target companies are already seeking to develop MicroLED technology. We believe that these customers are seeking to create novel, higher added value electronics products that cannot be manufactured using a-Si glass backplanes.
This collaboration is expected to lead to the development of a roll-to-roll process for the manufacture of large format LED displays. ​ In 2023, we entered into a joint development agreement with a company in Taiwan for the development of a microLED-based display using our OTFT backplane. ​ In 2024, we entered into a joint development agreement with Tianma Microelectronics, Co, Ltd. to integrate Smartkem’s organic thin-film transistor technology with Tianma’s oxide transistors to develop OTFT-based microarray biochips. ​ In July 2023, we entered into a three-year technical services agreement with ITRI.
This collaboration is expected to lead to the development of a roll-to-roll process for the manufacture of large format LED displays. In 2023, we entered into a joint development agreement with a company in Taiwan for the development of a microLED-based display using our OTFT backplane. ​ In July 2023, we entered into a three-year technical services agreement with ITRI.
The TRUFLEX® trademark is granted and registered to the Company in its 10 commercially interesting jurisdictions including USA, China, Korea, Taiwan, Japan, and Europe. ​ We own substantive rights to the chemistry, process, and stack design rules necessary to implement our technology in all jurisdictions of commercial interest. ​ Manufacturing and Supply ​ We obtain strategic intermediates and final products from multiple sources who produce our active semiconductor materials to our specifications.
We own substantive rights to the chemistry, process, and stack design rules necessary to implement our technology in all jurisdictions of commercial interest. ​ Manufacturing and Supply ​ We obtain strategic intermediates and final products from multiple sources who produce our active semiconductor materials to our specifications.
Our CEO and management team are also actively engaged in developing customer and partner relationships. We believe 11 Table of Contents that our initial customers will be located in Taiwan, Japan and China but we are also directly working with OEMs located in North America, Europe and Asia who have the ability to require their suppliers to use our materials.
We believe that our initial customers will be located in Taiwan, South Korea, Japan and China but we are also directly working with OEMs located in North America, Europe and elsewhere in Asia who have the ability to require their suppliers to use our materials.
In 2023, we entered into a transfer technology agreement with ITRI pursuant to which ITRI is developing Gen 2.5 scale (370mm x 470mm) commercial manufacturing processes for a range of our OTFT materials.
Additionally, in partnership with ITRI, we have successfully demonstrated the direct patterning of one of our interlayer dielectric materials using digital lithography technology (“DLT”). In 2023, we entered into a transfer technology agreement with ITRI pursuant to which ITRI is developing Gen 2.5 scale (370mm x 470mm) commercial manufacturing processes for a range of our OTFT materials.
In certain instances, a potential customer may contact us seeking a generic sample of our materials for evaluation. In other instances, a customer may come to us with specific performance specifications and inquire about our ability to provide products meeting their specifications after which we provide samples of materials or specific data for evaluation.
In other instances, a customer may come to us with specific performance specifications and inquire about our ability to provide products meeting their specifications after which we provide samples of materials or specific data for evaluation. After the initial evaluation, the prospective customer may request a prototype of a specific design as proof-of-concept.
The interlayer materials are being tested as redistribution layers, pixel definition layers, permanent resists and organic dielectric layers due to their favorable processability, patternability, planarity and other properties of our materials when compared with existing materials.
The interlayer materials are being tested as redistribution layers, pixel definition layers, permanent resists and organic dielectric layers due to their favorable processability, patternability, planarity and other properties of our materials when compared with existing materials. During 2023, we began developing a range of customized dielectric inks for customers’ advanced electronics packaging applications.
We manufacture prototypes for prospective customers at the Centre for Process Innovation (“CPI”) in Sedgefield, UK. We also operate a field application office in Taiwan. With our collaboration partners, we are developing a commercial-scale production process and EDA tools for our materials to demonstrate the commercial viability of manufacturing a new generation of displays using our materials.
We also operate a field application office in Hsinchu, Taiwan, close to our collaboration partner, The Industrial Technology Research Institute of Taiwan (“ITRI”). With our collaboration partners, we are developing a commercial-scale production process and EDA tools for our materials to demonstrate the commercial viability of manufacturing a new generation of displays using our materials.
For commercial supply quantities, to avoid the shipping costs associated with large quantities of locally available solvents, we expect to supply fully formulated ink to customers from a formulation facility located close to the customer’s manufacturing facility.
For commercial supply quantities, to avoid the shipping costs associated with large quantities of locally available solvents, we expect to supply fully formulated ink to customers from a formulation facility located close to the customer’s manufacturing facility. We may also outsource the ink manufacture to an accredited third-party local formulator subject to our final QC testing of the formulated inks.
In 2023, we entered into a technology transfer with RiTdisplay commencing a joint project to develop the world’s first commercially ready active-matrix OLED display using OTFT technology.
Under this agreement the two parties are collaborating on the production of a full color demonstration AMOLED display. In 2023, we entered into a technology transfer agreement with RiTdisplay commencing a joint project to develop the world’s first commercially ready active-matrix OLED display using OTFT technology.
We cannot be certain that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our technology. ​ Our strategy for the protection of our proprietary technology is to file international (Patent Cooperation Treaty) patent applications and pursue these in national jurisdictions that represent significant market opportunities.
We cannot be certain that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our technology.
In addition, we have not experienced scheduling delays in obtaining access to CPI’s foundry equipment. ​ Competition ​ We believe that competition in our targeted markets is based on a variety of factors, including capability, functionality, performance, reliability, ease of use and ability to supply in sufficient quantities.
We have not experienced any supply shortages with respect to the materials used to formulate our proprietary inks. ​ Competition ​ We believe that competition in our targeted markets is based on a variety of factors, including capability, functionality, performance, reliability, ease of use and ability to supply in sufficient quantities.
If successful, we believe the project with RiTdisplay will result in the development of the world’s first commercially ready active-matrix OLED display using OTFT technology. ​ In 2022, we entered into a joint development agreement with a Taiwan-based company for the development of a new generation of miniLEDs signage.
If successful, we believe the project with RiTdisplay will result in the development of the world’s first commercially ready active-matrix OLED display using OTFT technology.
Bias voltage shifts of ​ During 2023, in response to requests from potential customers, our chemistry team has focused on the development of a range of specialized dielectric polymer interlayers. Some of these materials are intended for use in the display industry as redistribution layers, interlayer dielectrics and as pixel definition layers.
Bias voltage shifts of ​ Since 2023, our chemistry team has switched its focus from the development of organic semiconductors to the development of a range of specialized photoimageable dielectric polymers. Some of these dielectric materials are intended for use in the display industry as redistribution layers, passivation layers, MicroLED interlayers and as pixel definition layers.
Because our patent portfolio covers all material aspects of our TRUFLEX® technology, we believe we have strong protection for our technology and a competitive advantage over potential competitors who may seek to duplicate our ability to create flexible transistors. ​ We also rely on trade-secret protection for our confidential and proprietary information, and we typically use non-disclosure agreements when commencing a relationship with a potential customer or partner.
Because our patent portfolio covers all material aspects of our TRUFLEX® technology, we believe we have strong protection for our technology and a competitive advantage over potential competitors who may seek to duplicate our ability to create flexible transistors.
During that period, we will be required to incur significant expenses without any assurance that a customer order will be obtained.
We expect that the sales cycle described above will take approximately 12-24 months. During that period, we will be required to incur significant expenses without any assurance that a customer order will be obtained.
We also have numerous patent claims and pending patent applications covering a variety of electronic devices including a novel dual gate application that enables enhanced Vto control and recent applications include Micro-LED devices and improved processes.
Our patents cover the active organic semiconductor materials, passive interlayer formulations, and deposition processes comprising our TRUFLEX® technology. We also have numerous patent claims and pending patent applications covering a variety of electronic devices including a novel dual gate application that enables enhanced Vto control and recent applications include MicroLED devices and improved processes.
We believe that the successful development of commercial manufacturing processes will help to accelerate the adoption of our technology by display manufacturers in Taiwan and other areas of Asia. ​ Sales and Marketing ​ A large sector of our target customers are large consumer electronics companies based in Asia (Taiwan, South Korea, Japan and China) that already own or have access to display backplane manufacturing lines and engage in large scale production of display products for TV or mobile/tablet markets using a-Si process lines.
For additional information, see “Cautionary Note on Forward-Looking Statements” and “Risk Factors” elsewhere in this report. ​ Sales and Marketing ​ The majority of our target customers are large consumer electronics companies based in Asia (Taiwan, South Korea, Japan and China) that already own or have access to display backplane manufacturing lines and engage in large scale production of display products for TV or mobile/tablet markets using a-Si process lines.
Our dielectric inks are currently being evaluated by six end users. Initial work is also being done to scale up routes and identify potential supply chains for our materials in anticipation of customer needs. ​ The generation of fabrication processes and the integration of new materials is carried out at CPI under the direction of our Chief Technology Officer.
At any given time, our dielectric inks are under evaluation by a number of potential end users. Initial work is also being done to scale up routes and identify potential supply chains for our materials in anticipation of customer needs.
Business ​ Unless otherwise stated or the context otherwise indicates, references to “SmartKem” the “Company,” “we,” “our,” “us,” or similar terms refer to SmartKem, Inc. and its subsidiaries. ​ Overview ​ We are seeking to reshape the world of electronics with our disruptive organic thin-film transistors (“OTFTs”) that we believe have the potential to drive the next generation of displays.
Business ​ Unless otherwise stated or the context otherwise indicates, references to “SmartKem” the “Company,” “we,” “our,” “us,” or similar terms refer to SmartKem, Inc. and its subsidiaries. ​ Overview ​ We are seeking to change the world of electronics with a new class of transistor developed using our proprietary advanced semiconductor materials that we believe has the potential to revolutionize the display industry.
Additional specialty dielectric polymer formulations are being designed for use in advanced mobile communications operating at frequencies in excess of 5GigaHz (5G applications and beyond). Interlayer inks are also being provided to potential customers for evaluation across a wide range of advanced electronics packaging applications.
In response to requests from potential customers, our chemistry team has focused on the development of a range of specialized dielectric polymer interlayers. Additional specialty dielectric polymer formulations are being designed for use in advanced mobile communications operating at frequencies in excess of 5GigaHz (5G applications and beyond).
In addition, we make presentations at trade events to showcase our technology and familiarize potential customers with the value we believe our technology adds to various applications.
In addition, we make presentations at trade events to showcase our technology and familiarize potential customers with the value we believe our technology adds to various applications. We also publish press releases and other announcements relating to our technical capabilities or achievements and include product information and related technical materials on our website.
We believe our proprietary technology, which combines a polycrystalline molecule with a matched semiconducting polymer, provides higher mobility, particularly at short channel lengths and better processability over these technologies. ​ Many of our potential competitors could have substantial competitive advantages such as greater name recognition, longer operating histories, broader and deeper product portfolios, larger customer bases, substantially greater financial and other resources, and larger scale manufacturing operations.
Many of our potential competitors could have substantial competitive advantages such as greater name recognition, longer operating histories, broader and deeper product portfolios, larger customer bases, substantially greater financial and other resources, and larger scale manufacturing operations.
We believe that the successful development of commercial manufacturing processes will help to accelerate the adoption of our technology by display manufacturers in Taiwan and other areas of Asia. ​ We do not have the in-house capability to produce our flexible transistors at commercial scale and intend to seek relationships with existing foundries to provide us with the ability to meet full production orders for customers that do not have their own facilities.
We do not have the in-house capability to produce our flexible transistors at commercial scale and intend to partner with existing foundries to provide us with the ability to meet full production orders for customers that do not have their own facilities. We use product prototyping services to demonstrate applications enabled by OTFT to prospective customers.
As a result, current practice is to attach the micro-LEDs after the backplane is fabricated. Using our process, we have demonstrated active-matrix backplanes driving micro-LEDs using 13 Table of Contents OTFT at high brightness (>100,000 nits). We have sought patent protection for our processes. In addition, the Company has successfully integrated OTFT and OLED (AMOLED) in a 200ppi display.
We believe that the use of higher temperature materials, such as a-Si, LTPS and IGZO, would damage the LED devices. As a result, current practice is to attach the MicroLEDs after the backplane is fabricated. Using our process, we have demonstrated active-matrix backplanes driving MicroLEDs using OTFT at high brightness (>100,000 nits). We have sought patent protection for our processes.
We believe that the improvements available through the adoption of our process will be particularly important for portable powered displays such as smartwatches and AR/VR displays which cannot readily accommodate large, heavy batteries. ​ Market Opportunity ​ According to Precedence Research, the global display market size was estimated at $158 billion in 2022 and is expected to grow to around $315 billion by 2032, an expected compound annual growth rate of 7.20% during the forecast period.
We believe that the improvements available through the adoption of our process will be particularly important for portable powered displays such as smartwatches and AR/VR displays which cannot readily accommodate large, heavy batteries. ​ Market Opportunity ​ The main market for our technology is in the display industry.
As a result, our OTFT process can be integrated into existing manufacturing lines using standard industrial techniques without the need for additional large capital investment.
As a result, our OTFT process can be integrated into existing manufacturing lines using standard industrial techniques without the need for additional large capital investment. Furthermore, the solubility of our inks would permit customers to digitally print the features of the OTFT device, which we believe may be attractive to potential customers seeking to lower manufacturing costs.
A significant proportion of all work done during this phase of our sales cycle would be done at our expense, with customers making a contribution in some cases. ​ Assuming successful prototyping is completed, we expect that we would negotiate and enter into a development agreement with an interested customer under which we would, in collaboration with the potential customer, engage in further engineering and design work.
Assuming successful prototyping is completed, we expect that we would negotiate and enter into a development agreement with an interested customer under which we would, in collaboration with the potential customer, engage 13 Table of Contents in further engineering and design work. We expect that we will receive compensation for those services.
We believe that many customers will produce circuits using our OTFT materials either directly or through their existing third-party foundry arrangements.
While we can provide prototype foundry services for potential customers through our access to CPI and ITRI we do not have the capability to provide commercial-scale foundry services. We believe that many customers will produce circuits using our OTFT materials either directly or through their existing third-party foundry arrangements, including ITRI.
We believe that the low cost of prototyping and our ability to rapidly transition from design to device will help drive the development of these technologies. ​ Commercialization Strategy ​ Our commercialization strategy rests on three pillars: continuous improvement of our polymer materials, development of EDA tools, and development of robust commercial manufacturing processes. ​ Continued Development of Our Materials ​ We design and develop our materials at our research and development facility in Manchester, UK.
We believe that our strategy of targeting low cost of prototyping and an ability to rapidly transition from design to device will help drive the development of these technologies with our customers. ​ Commercialization Strategy ​ Our commercialization strategy rests on three pillars: continuous improvement of our polymer materials, development of EDA tools, and development of robust commercial manufacturing processes. ​ We intend to seek to work with leading display makers, end users and chip packaging players to undertake joint validation programs and support, through a structured technology transfer process and the development of a scalable manufacturing capability with our partners.
The small size of micro-LED’s and tight pixel pitches makes it challenging to ensure each micro-LED aligns perfectly with the corresponding pixel driver on the backplane. Electrical connection of the micro-LEDs on top of the display backplane requires the use of eutectic bonds through a metal junction containing at least one low melting point metal.
Electrical connection of the MicroLEDs on top of the display backplane requires the use of eutectic bonds through a metal junction containing at least one low melting point metal.
We use product prototyping services to demonstrate applications enabled by OTFT to prospective customers. This allows potential customers to evaluate physical samples of our materials prior to committing to purchase. ​ During 2023, we announced the successful creation of the first monolithic micro-LED display using OTFTs, which was the result of our collaboration with Prof.
This allows potential customers to evaluate physical samples of our materials prior to committing to final design and long-term supply agreements. During 2023, we announced the successful creation of the first monolithic MicroLED display using OTFTs, which was the result of our collaboration with Prof. Xiaojun Guo’s group at Shanghai Jiao Tong University, China.
We believe these potential customers will be attracted to our TRUFLEX® technology which would enable them to create novel, plastic-based products with improved robustness, higher flexibility and lighter weight using their existing production lines. ​ We have a direct sales force consisting of three employees located in Taiwan, and sales representation in China.
We believe display manufacturers will be attracted to our TRUFLEX® technology which would enable them to create novel, plastic-based products with improved robustness, higher flexibility and lighter weight using their existing production lines. The same region is also a source of new inquiries for evaluation of use of our unique dielectrics in the advanced chip packaging sector.
We also publish press releases and other announcements relating to our technical capabilities or achievements and include product information and related technical materials on our website. ​ We expect that the time between the identification of a potential customer and the receipt of a purchase order or agreement for the sale of our products will be relatively long.
We expect that the time between the identification of a potential customer and the receipt of a purchase order or agreement for the sale of our products will be relatively long. In certain instances, a potential customer may contact us seeking a generic sample of our materials for evaluation.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are not able to maintain successful strategic distributor and reseller relationships with our international channel partners or recruit additional channel partners, our future success in these international markets could be limited. ​ We are subject to risks associated with international operations. ​ We have operations in the United Kingdom and Asia and expect that most of our sales revenue will result from sales to customers in Asia.
Biggest changeIf we are not able to maintain successful strategic distributor and reseller relationships with our international channel partners or recruit additional channel partners, our future success in these international markets could be limited . ​ 29 Table of Contents We are subject to economic, political and other risks that could have a materially adverse effect on our business, financial condition and results of operations. ​ Our operations and our financial results, including our ability to execute our business strategy, can be adversely affected by changes in global economic conditions as well as the potential impacts of geopolitical uncertainties and international conflicts. ​ We have operations in the United Kingdom and Asia and certain of our partners, including ITRI, are located in Taiwan.
Our reliance on these third-party fabricators reduces our control over the manufacturing process and exposes us to risks, including reduced control over quality assurance, product costs, and product supply and timing. Any manufacturing disruption by these third-party fabricators could severely impair our ability to fulfill orders.
Our reliance on these third-party fabricators reduces our control over the manufacturing process and exposes us to risks, including reduced control over quality assurance, product costs, product supply and timing. Any manufacturing disruption by these third-party fabricators could severely impair our ability to fulfill orders.
These provisions: ● establish a classified board of directors so that not all members of our board are elected at one time; ● provide that directors may only be removed “for cause”; ● authorize the issuance of “blank check” preferred stock that our board of directors could issue from time to time to increase the number of outstanding shares and discourage a takeover attempt; ● eliminate the ability of our stockholders to call special meetings of stockholders; ● prohibit stockholder action by written consent, which has the effect of requiring all stockholder actions to be taken at a meeting of stockholders; ● provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws; ● establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and ● require supermajority approvals to remove the protective provisions in our certificate of incorporation and bylaws listed above or to amend our bylaws. ​ Such provisions could impede any merger, consolidation, takeover or other business combination involving the Company or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company. ​ 37 Table of Contents Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit the ability of our stockholders to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees. ​ Our amended and restated certificate of incorporation requires that, unless we consent in writing to the selection of an alternative forum: ● any derivative action or proceeding brought on our behalf; ● any action asserting a claim of breach of any fiduciary duty owed by any current or former director, officer, other employee, or stockholder of ours to our company or our stockholders; ● any action asserting a claim arising pursuant to any provision of the Delaware General Corporate Law (the “DGCL”), our certificate of incorporation or bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; or ● any action asserting a claim governed by the internal affairs doctrine; ​ The Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the exclusive forum or if the Court of Chancery of the State of Delaware does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware. ​ Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions.
These provisions: ● establish a classified board of directors so that not all members of our board are elected at one time; ● provide that directors may only be removed “for cause”; ● authorize the issuance of “blank check” preferred stock that our board of directors could issue from time to time to increase the number of outstanding shares and discourage a takeover attempt; ● eliminate the ability of our stockholders to call special meetings of stockholders; ● prohibit stockholder action by written consent, which has the effect of requiring all stockholder actions to be taken at a meeting of stockholders; ● provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws; ● establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and ● require supermajority approvals to remove the protective provisions in our certificate of incorporation and bylaws listed above or to amend our bylaws. ​ Such provisions could impede any merger, consolidation, takeover or other business combination involving the Company or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company. ​ Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit the ability of our stockholders to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees. ​ Our amended and restated certificate of incorporation requires that, unless we consent in writing to the selection of an alternative forum: ● any derivative action or proceeding brought on our behalf; ● any action asserting a claim of breach of any fiduciary duty owed by any current or former director, officer, other employee, or stockholder of ours to our company or our stockholders; ● any action asserting a claim arising pursuant to any provision of the Delaware General Corporate Law (the “DGCL”), our certificate of incorporation or bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; or ● any action asserting a claim governed by the internal affairs doctrine; 39 Table of Contents ​ The Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the exclusive forum or if the Court of Chancery of the State of Delaware does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware. ​ Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions.
The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations. ​ 20 Table of Contents Our quarterly results of operations are likely to vary from period to period, which could cause the market price of our common stock to fluctuate or decline. ​ Our results of operations have varied from period to period, and we expect that our quarterly results of operations will continue to vary as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including: ● our ability to attract existing customers, including due to our perceived or actual financial condition; ● the budgeting cycles and purchasing practices of customers; ● the timing and length of our sales cycles, including the ability of our customers to design-in successfully with our technology; ● changes in customer requirements or market needs, including market acceptance of our technology; ● the timing and impact of new product introductions by us or our competitors or any other change in the competitive landscape of the semiconductor industry, including consolidation among our customers or competitors; ● deferral of orders from customers in anticipation of new products or product enhancements announced by us or our competitors; ● our ability to execute our growth strategy and operating plans; ● our ability to successfully expand our business domestically and internationally; ● our ability to successfully compete with other companies in our market; ● changes in our pricing policies or those of our competitors; ● any disruption in, or termination of, our relationship with channel partners; ● insolvency or credit difficulties confronting our customers, affecting their ability to purchase or pay for our products, or confronting our key suppliers, which could disrupt our supply chain; ● the cost and potential outcomes of potential future litigation; ● general economic conditions; and ● the amount and timing of operating costs and capital expenditures related to the expansion of our business. ​ Any of the above factors, individually or in the aggregate, may result in significant fluctuations in our quarterly operating results.
The perception that we may not be able to continue as a going 22 Table of Contents concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations. ​ Our quarterly results of operations are likely to vary from period to period, which could cause the market price of our common stock to fluctuate or decline. ​ Our results of operations have varied from period to period, and we expect that our quarterly results of operations will continue to vary as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including: ● our ability to attract existing customers, including due to our perceived or actual financial condition; ● the budgeting cycles and purchasing practices of customers; ● the timing and length of our sales cycles, including the ability of our customers to design-in successfully with our technology; ● changes in customer requirements or market needs, including market acceptance of our technology; ● the timing and impact of new product introductions by us or our competitors or any other change in the competitive landscape of the semiconductor industry, including consolidation among our customers or competitors; ● deferral of orders from customers in anticipation of new products or product enhancements announced by us or our competitors; ● our ability to execute our growth strategy and operating plans; ● our ability to successfully expand our business domestically and internationally; ● our ability to successfully compete with other companies in our market; ● changes in our pricing policies or those of our competitors; ● any disruption in, or termination of, our relationship with channel partners; ● insolvency or credit difficulties confronting our customers, affecting their ability to purchase or pay for our products, or confronting our key suppliers, which could disrupt our supply chain; ● the cost and potential outcomes of potential future litigation; ● general economic conditions; and ● the amount and timing of operating costs and capital expenditures related to the expansion of our business. ​ Any of the above factors, individually or in the aggregate, may result in significant fluctuations in our quarterly operating results.
These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. ​ We are also subject to other laws and regulations governing international operations, including regulations administered by the governments of the U.K and the U.S., and authorities in the European Union, including applicable export control regulations, economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws. ​ Any violation of the Bribery Act, FCPA or other applicable anti-bribery, anti-corruption laws and anti-money laundering laws including Trade Control laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, severe criminal or civil sanctions or suspension or debarment from government contracts, substantial diversion of management’s attention, drop in stock price or overall adverse consequences to our business, all of which may have an adverse effect on our reputation, business, financial condition, and results of operations. ​ In order to comply with environmental laws and regulations, we may need to modify our activities or incur substantial costs, and such laws and regulations, including any failure to comply with such laws and regulations, could subject us to substantial costs, liabilities, obligations and fines. ​ 27 Table of Contents We must comply with federal, state, local and foreign governmental regulations related to the use, storage, discharge and disposal of materials used in our products and manufacturing processes.
These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. ​ We are also subject to other laws and regulations governing international operations, including regulations administered by the governments of the U.K and the U.S., and authorities in the European Union, including applicable export control regulations, economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws. ​ Any violation of the Bribery Act, FCPA or other applicable anti-bribery, anti-corruption laws and anti-money laundering laws including Trade Control laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, severe criminal or civil sanctions or suspension or debarment from government contracts, substantial diversion of management’s attention, drop in stock 30 Table of Contents price or overall adverse consequences to our business, all of which may have an adverse effect on our reputation, business, financial condition, and results of operations. ​ In order to comply with environmental laws and regulations, we may need to modify our activities or incur substantial costs, and such laws and regulations, including any failure to comply with such laws and regulations, could subject us to substantial costs, liabilities, obligations and fines. ​ We must comply with federal, state, local and foreign governmental regulations related to the use, storage, discharge and disposal of materials used in our products and manufacturing processes.
The concentration of ownership might decrease the market price of our common stock by: ​ ● delaying, deferring, or preventing a change in control of the Company, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company or our assets and might affect the prevailing market price of our common stock; ● impeding a merger, consolidation, takeover, or other business combination involving us; or ● discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company. ​ The significant concentration of stock ownership may also adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise. ​ Provisions in our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock. ​ Our certificate of incorporation and bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous.
The concentration of ownership might decrease the market price of our common stock by: ​ ● delaying, deferring, or preventing a change in control of the Company, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company or our assets and might affect the prevailing market price of our common stock; ● impeding a merger, consolidation, takeover, or other business combination involving us; or ● discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company. ​ The significant concentration of stock ownership may also adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise. ​ Provisions in our amended and restated certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock. ​ Our amended and restated certificate of incorporation and bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous.
If we are unable to manage our relationships with third-party fabricators effectively, or if our third-party fabricators experience delays or disruptions for any reason, increased manufacturing lead-times, capacity constraints or quality control problems in their fabrication operations, or if they otherwise fail to meet our future requirements for 23 Table of Contents timely delivery, our ability to ship products to our customers would be severely impaired, and our business and results of operations would be seriously harmed. ​ We expect that our sales cycles will be long and unpredictable, and our sales efforts will require considerable time and expense.
If we are unable to manage our relationships with third-party fabricators effectively, or if our third-party fabricators experience delays or disruptions for any reason, increased manufacturing lead-times, capacity constraints or quality control problems in their fabrication operations, or if they otherwise fail to meet our future requirements for timely delivery, our ability to ship products to our customers would be severely impaired, and our business and results of operations would be seriously harmed. 26 Table of Contents ​ We expect that our sales cycles will be long and unpredictable, and our sales efforts will require considerable time and expense.
Among other things, we are required to: ● maintain and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404(a) of the Sarbanes-Oxley Act and the related rules and regulations of the Securities and Exchange Commission (the “SEC”) and the Public Company Accounting Oversight Board; ● maintain policies relating to disclosure controls and procedures; ● prepare and distribute periodic reports in compliance with our obligations under federal securities laws; ● institute a more comprehensive compliance function, including with respect to corporate governance; and ● involve, to a greater degree, our outside legal counsel, and accountants in the above activities. ​ The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders is expensive and compliance with these rules and regulations involves a material increase in regulatory, legal and accounting expenses and the attention of our board of directors and 30 Table of Contents management.
Among other things, we are required to: ● maintain and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404(a) of the Sarbanes-Oxley Act and the related rules and regulations of the Securities and Exchange Commission (the “SEC”) and the Public Company Accounting Oversight Board; ● maintain policies relating to disclosure controls and procedures; ● prepare and distribute periodic reports in compliance with our obligations under federal securities laws; ● institute a more comprehensive compliance function, including with respect to corporate governance; and ● involve, to a greater degree, our outside legal counsel, and accountants in the above activities. ​ The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders is expensive and compliance with these rules and regulations involves a material increase in regulatory, legal and accounting expenses and the attention of our board of directors and management.
The COVID-19 global pandemic adversely impacted us by disrupting our operations and increasing our costs as a result of, among other things, measures to address the health and safety of our employees, government work from home directives, quarantines, worker absenteeism as a result of illness, social distancing and travel restrictions that prevented face to face meetings with joint development partners, prospects and suppliers.
For example, the COVID-19 global pandemic adversely impacted us by disrupting our operations and increasing our costs as a result of, among other things, measures to address the health and safety of our employees, government work from home directives, quarantines, worker absenteeism as a result of illness, social distancing and travel restrictions that prevented face to face meetings with joint development partners, prospects and suppliers.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of investors, resulting in a decline in the market price of our common stock. ​ 33 Table of Contents Changes in accounting rules and regulations, or interpretations thereof, could result in unfavorable accounting charges or require us to change our compensation policies. ​ Accounting methods and policies for companies such as ours, including policies governing revenue recognition, leases, research and development and related expenses, and accounting for stock-based compensation, are subject to review, interpretation and guidance from our auditors and relevant accounting authorities, including the SEC.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of investors, resulting in a decline in the market price of our common stock. ​ Changes in accounting rules and regulations, or interpretations thereof, could result in unfavorable accounting charges or require us to change our compensation policies. ​ Accounting methods and policies for companies such as ours, including policies governing revenue recognition, leases, research and development and related expenses, and accounting for stock-based compensation, are subject to review, interpretation and guidance from our auditors and relevant accounting authorities, including the SEC.
For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (2) reduced disclosure obligations regarding executive compensation in this Report and our periodic reports and proxy statements, and (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1) not being required to comply with the 35 Table of Contents auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (2) reduced disclosure obligations regarding executive compensation in this Report and our periodic reports and proxy statements, and (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
However, similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control 34 Table of Contents over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports and in a registration statement under the Exchange Act on Form 10.
However, similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports and in a registration statement under the Exchange Act on Form 10.
We cannot assure stockholders of a positive return on their investment when they sell their shares of our common stock, nor can we assure that stockholders will not lose the entire amount of their investment. ​ FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock. ​ The Financial Industry Regulatory Authority (“FINRA”) has adopted rules requiring that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.
We cannot assure stockholders of a positive return on their investment when they sell their shares of our common stock, nor can we assure that stockholders will not lose the entire amount of their investment. ​ 37 Table of Contents FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock. ​ The Financial Industry Regulatory Authority (“FINRA”) has adopted rules requiring that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.
The loss of access to the CPI facility and/or the ITRI facilities, or our inability to enter into agreements with third-party fabricators could have a material adverse effect on our business development. ​ We do not have our own fabrication facility and rely on CPI and ITRI for access to its facility for fabrication of prototypes and demonstration products.
The loss of access to a third-party facility, or our inability to enter into agreements with third-party fabricators could have a material adverse effect on our business development . ​ We do not have our own prototyping or fabrication facilities, and we rely on CPI for access to its facility for fabrication of prototypes and demonstration products.
The failure to receive research coverage or support in the market for shares of our common stock will have an adverse effect on our ability to develop a liquid market for our common stock, which will negatively impact the trading price of our common stock. ​ In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, or if our operating results fail to meet the expectations of analysts, our stock price 36 Table of Contents would likely decline.
The failure to receive research coverage or support in the market for shares of our common stock will have an adverse effect on our ability to develop a liquid market for our common stock, which will negatively impact the trading price of our common stock. ​ In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, or if our operating results fail to meet the expectations of analysts, our stock price would likely decline.
Moreover, any failure by us in the future to develop new technologies or timely react to changes in existing technologies could materially delay our development of new products, which could result in product obsolescence, decreased revenues and a loss of our market share to our competitors.
Moreover, any failure by us in the future to develop new technologies or timely reaction to changes in existing technologies could materially delay our development of new products, which could result in product obsolescence, decreased revenues and a loss of our market share to our competitors.
The loss of access to the CPI and/or the ITRI facilities, or our inability to enter into agreements with third-party fabricators could have a material adverse effect on our business development. ● Because we will depend on third-party fabricators to manufacture products for us, we will be susceptible to manufacturing delays and pricing fluctuations that could prevent us from shipping customer orders on time, if at all, or on a cost-effective basis, which may result in the loss of sales, income and customers. ● We rely on our management team and other key employees and will need additional personnel to grow our business.
The loss of access to a third-party facility, or our inability to enter into agreements with third-party fabricators could have a material adverse effect on our business development . ● Because we will depend on third-party fabricators to manufacture products for us, we will be susceptible to manufacturing delays and pricing fluctuations that could prevent us from shipping customer orders on time, if at all, or on a cost-effective basis, which may result in the loss of sales, income and customers. ● We rely on our management team and other key employees and will need additional personnel to grow our business.
In addition, investment banks may be less likely to agree to underwrite secondary offerings on our behalf than they might if we became a public reporting company by means of an underwritten initial public offering, because they may be less familiar with our company as a result of more limited coverage by analysts and the media, and because we became public at an early 38 Table of Contents stage in our development.
In addition, investment banks may be less likely to agree to underwrite secondary offerings on our behalf than they might if we became a public reporting company by means of an underwritten initial public offering, because they may be less familiar with our company as a result of more limited coverage by analysts and the media, and because we became public at an early stage in our development.
Our competitors may be successful in recruiting and hiring members of our management team or other key employees, and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms, or at all. ​ 24 Table of Contents If we fail to effectively manage our growth, our business, financial condition and results of operations would be harmed.
Our competitors may be successful in recruiting and hiring members of our management team or other key employees, and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms, or at all. ​ If we fail to effectively manage our growth, our business, financial condition and results of operations would be harmed.
If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. ​ Our principal stockholders and management have substantial control over us and could delay or prevent a change in corporate control. ​ Our executive officers and directors, together with holders of 5% or more of our outstanding common stock and their respective affiliates, beneficially own 58.4% of our common stock.
If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. ​ Our principal stockholders and management have substantial control over us and could delay or prevent a change in corporate control. ​ Our executive officers and directors, together with holders of 5% or more of our outstanding common stock and their respective affiliates, beneficially own 62.1% of our common stock.
Steps we take to protect our proprietary 29 Table of Contents information may not be adequate to prevent theft of our technology. We may not be able to prevent our competitors from independently developing technologies and products that are similar to or better than ours. ​ Vigorous protection and pursuit of intellectual property rights or positions characterize the semiconductor industry.
Steps we take to protect our proprietary information may not be adequate to prevent theft of our technology. We may not be able to prevent our competitors from independently developing technologies and products that are similar to or better than ours. ​ Vigorous protection and pursuit of intellectual property rights or positions characterize the semiconductor industry.
Nor can we predict with certainty which, if any, of these rights will or may be asserted against us by third parties. ​ To protect our product technology, documentation and other proprietary information, we enter into confidentiality agreements with our employees, customers, consultants and strategic partners.
Nor can we predict with certainty which, if any, of these rights will or may be asserted against us by third parties. ​ 32 Table of Contents To protect our product technology, documentation and other proprietary information, we enter into confidentiality agreements with our employees, customers, consultants and strategic partners.
Any future determination about the payment of dividends will be made at the 35 Table of Contents discretion of our board of directors and will depend upon our earnings, if any, capital requirements, operating and financial conditions, contractual restrictions, including any loan or debt financing agreements, and on such other factors as our board of directors deems relevant.
Any future determination about the payment of dividends will be made at the discretion of our board of directors and will depend upon our earnings, if any, capital requirements, operating and financial conditions, contractual restrictions, including any loan or debt financing agreements, and on such other factors as our board of directors deems relevant.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2023.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2024.
In addition, our software stores and transmits customers’ confidential business information in our facilities and on our equipment, networks, corporate systems and in the cloud. Security incidents could expose us to litigation, remediation 28 Table of Contents costs, increased costs for security measures, loss of revenue, damage to our reputation and potential liability.
In addition, our software stores and transmits customers’ confidential business information in our facilities and on our equipment, networks, corporate systems and in the cloud. Security incidents could expose us to litigation, remediation costs, increased costs for security measures, loss of revenue, damage to our reputation and potential liability.
See “Item 9A Controls and Procedures.” ​ Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports and to effectively prevent financial fraud. Pursuant to the Sarbanes-Oxley Act, we are required to periodically evaluate the effectiveness of the design and operation of our internal controls.
See “Item 9A Controls and Procedures.” ​ 34 Table of Contents Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports and to effectively prevent financial fraud. Pursuant to the Sarbanes-Oxley Act, we are required to periodically evaluate the effectiveness of the design and operation of our internal controls.
The markets in which we compete are highly competitive. We expect competition to intensify in the future as existing competitors and new market entrants introduce new products into our markets.
The markets in which we participate are highly competitive . We expect competition to intensify in the future as existing competitors and new market entrants introduce new products into our markets.
A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis. ​ In connection with our preparation of our financial statements for the second quarter of 2023, a material weakness in our internal control over financial reporting was identified relating to the complex financial reporting and accounting associated with the June 2023 PIPE (as defined below), a non-cash item.
A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis. ​ In connection with our preparation of our financial statements for the second quarter of 2023, a material weakness in our internal control over financial reporting was identified relating to the complex financial reporting and accounting associated with our private placement that closed in June of 2023. a non-cash item.
For the years ended December 31, 2023 and December 31, 2022 our total comprehensive loss was $9.6 million and $10.6 million, respectively. We expect our operating losses to continue for the foreseeable future as we continue to invest in our infrastructure and research and development of our technologies.
For the years ended December 31, 2024 and December 31, 2023 our total comprehensive loss was $9.9 million and $9.6 million, respectively. We expect our operating losses to continue for the foreseeable future as we continue to invest in our infrastructure and research and development of our technologies.
Potential customers may also prefer to purchase from their existing suppliers rather than a new supplier regardless of product performance or features. As a result, even if the features of our products are superior, customers may not purchase our products.
Potential customers may also prefer to purchase from their existing suppliers rather than a new supplier regardless of 24 Table of Contents product performance or features. As a result, even if the features of our products are superior, customers may not purchase our products.
We also enter into strategic distributor and reseller relationships with companies in certain international markets where we do not have a local presence.
We may enter into strategic distributor and reseller relationships with companies in certain international markets where we do not have a local presence.
In addition, these stockholders, acting together, have the ability to significantly impact the management and affairs of our company. The interests of these stockholders may not be the same as or may even conflict with your interests.
In addition, these stockholders, acting together, have the ability to significantly impact the management and affairs of our 38 Table of Contents company. The interests of these stockholders may not be the same as or may even conflict with your interests.
In addition, the Nasdaq Stock Market (“Nasdaq”) listing requirements and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel are required to devote a substantial amount of time to these compliance initiatives.
In addition, Nasdaq listing requirements and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel are required to devote a substantial amount of time to these compliance initiatives.
If we cannot achieve or maintain profitability, stockholders could lose all or part of their investment . ​ Since our inception, we have generated substantial net losses as we have devoted our resources to the development of our technology, and our business model has not been proven. As of December 31, 2023, we had an accumulated deficit of $95.1 million.
If we cannot achieve or maintain profitability, stockholders could lose all or part of their investment . ​ Since our inception, we have generated substantial net losses as we have devoted our resources to the development of our technology, and our business model has not been proven. As of December 31, 2024, we had an accumulated deficit of $114.6 million.
The loss of one or more key employees or our inability to attract and retain qualified personnel could harm our business. ● Any failure by us to protect our proprietary technologies or maintain the right to use certain technologies may negatively affect our ability to compete. ● We incur significant costs as a result of operating as a public company. ● If we fail to maintain effective internal controls, we may not be able to report financial results accurately or on a timely basis, or to detect fraud, which could have a material adverse effect on our business or share price. ● An active trading market for our common stock may not develop or be sustained, which may make it difficult for investors to sell shares of our common stock and may make it difficult for us to raise capital. ● We do not anticipate paying dividends on our common stock, and investors may lose the entire amount of their investment. ​ 19 Table of Contents Risks Related to our Business and the Industry in Which We Operate ​ We have a history of losses, anticipate continued operating losses in the future, and may not be able to achieve or maintain profitability.
The loss of one or more key employees or our inability to attract and retain qualified personnel could harm our business. ● Any failure by us to protect our proprietary technologies or maintain the right to use certain technologies may negatively affect our ability to compete. ● We incur significant costs as a result of operating as a public company. ● If we fail to maintain effective internal controls, we may not be able to report financial results accurately or on a timely basis, or to detect fraud, which could have a material adverse effect on our business or share price. ● An active trading market for our common stock may not develop or be sustained, which may make it difficult for investors to sell shares of our common stock and may make it difficult for us to raise capital. ● If our common stock were to be delisted from Nasdaq due to our failure to meet all applicable Nasdaq listing requirements the market liquidity of our common stock would be adversely affected, the market price of our common stock could decrease and our ability to access the capital markets could be negatively impacted. ● We do not anticipate paying dividends on our common stock, and investors may lose the entire amount of their investment. ​ 21 Table of Contents Risks Related to our Business and the Industry in Which We Operate ​ We have a history of losses, anticipate continued operating losses in the future, and may not be able to achieve or maintain profitability.
A number of risks inherent in international operations could have a material adverse effect on our results of operations, including: ● fluctuations in U.S. dollar/U.K. pound value arising from transactions denominated in foreign currencies and the translation of certain foreign currency subsidiaries balances; ● difficulties in staffing and managing multi-national operations; ● adverse changes in economic and political conditions resulting from political instability, acts of terrorism, armed conflict, social unrest, and other circumstances impacting countries in which we or our customers operate, including as a result of any escalation of the current tensions between Taiwan and China; ● limitations on our ability to enforce legal rights and remedies; ● restrictions on the repatriation of funds; ● changes in trade policies, laws, regulations, political leadership and environment, and/or security risks; ● tariff regulations; ● difficulties in obtaining export and import licenses and compliance with export/import controls and regulations; ● the risk of government financed competition; ● compliance with a variety of international laws as well as U.K. regulations, rules and practices affecting the activities of companies abroad; and ● difficulties in managing and staffing international operations and the required infrastructure costs, including legal, tax, accounting, and information technology. ​ We face political and other risks conducting business in Taiwan, particularly due to its tense relationships with China.
A number of risks inherent in international operations could have a material adverse effect on our results of operations, including: ● fluctuations in U.S. dollar/U.K. pound value arising from transactions denominated in foreign currencies and the translation of certain foreign currency subsidiaries balances; ● difficulties in staffing and managing multinational operations; ● adverse changes in economic and political conditions resulting from political instability, acts of terrorism, armed conflict, social unrest, and other circumstances impacting countries in which we or our customers operate, including as a result of any escalation of the current tensions between Taiwan and China; ● limitations on our ability to enforce legal rights and remedies; ● restrictions on the repatriation of funds; ● changes in trade policies, laws, regulations, political leadership and environment, and/or security risks; ● tariff regulations; ● difficulties in obtaining export and import licenses and compliance with export/import controls and regulations; ● the risk of government-financed competition; ● compliance with a variety of international laws as well as U.K. regulations, rules and practices affecting the activities of companies abroad; and ● difficulties in managing and staffing international operations and the required infrastructure costs, including legal, tax, accounting, and information technology. ​ In addition, we have small teams that are engaged in marketing, selling and supporting our products internationally.
If we cannot achieve or maintain profitability, stockholders could lose all or part of their investment. ● Our quarterly results of operations are likely to vary from period to period, which could cause the market price of our common stock to fluctuate or decline. ● We may not be able to develop technologies and products to satisfy changes in customer demand or industry standards, and our competitors could develop products that decrease the demand for our products. ● We compete in highly competitive markets characterized by rapid technological changes, and existing and new companies may introduce products that compete with ours, which may adversely affect our business and operating results. ● If we are unable to establish sales capabilities on our own or through third parties, we may not be able to market and sell our existing or future products - or generate product revenue. ● We rely on the CPI and ITRI for access to fabrication and expect to enter into arrangements with third-party fabricators to produce our products at commercial scale.
If we cannot achieve or maintain profitability, stockholders could lose all or part of their investment. ● Our quarterly results of operations are likely to vary from period to period, which could cause the market price of our common stock to fluctuate or decline. ● We may not be able to develop technologies and products to satisfy changes in customer demand or industry standards, and our competitors could develop products that decrease the demand for our products. ● If MicroLED technology is not widely adopted by display manufacturers, our business would be harmed. ● We compete in highly competitive markets characterized by rapid technological changes, and existing and new companies may introduce products that compete with ours, which may adversely affect our business and operating results. ● If we are unable to establish sales capabilities on our own or through third parties, we may not be able to market and sell our existing or future products - or generate product revenue. ● We rely on access to third-party facilities for prototyping and commercial process development and expect to enter into arrangements with third parties to fabricate our products at commercial scale.
Moreover, these rules and regulations significantly increase our legal and financial compliance costs and make some activities more time-consuming and costly.
Moreover, these rules and regulations significantly increase our legal and 33 Table of Contents financial compliance costs and make some activities more time-consuming and costly.
We have also incurred higher costs to secure available inventory or have extended our purchase commitments or placed non-cancellable orders with suppliers, which introduces inventory risk if our forecasts and assumptions are inaccurate.
We also incurred higher costs to secure available inventory or had extended our purchase commitments or placed non-cancellable orders with suppliers, which introduced inventory risk if our forecasts and assumptions were inaccurate.
Our financial performance depends, in part, on our ability to design, develop, manufacture, assemble, test, market and support new products and enhancements on a timely and cost-effective basis. ​ We have not commercialized any of our products.
Our financial performance depends, in part, on our ability to design, develop, manufacture, assemble, test, market and support new products and enhancements on a timely and cost-effective basis. ​ We have not sold our products at commercial scale.
If we are unable to build an effective sales organization and/or if we are unable to secure relationships with third-party distributors, we will not be able to successfully commercialize our products, our future product revenue will suffer, and we would incur significant additional losses. ​ 22 Table of Contents We rely on CPI and ITRI for access to fabrication and expect to enter into arrangements with third-party fabricators to produce our products at commercial scale.
If we are unable to build an effective sales organization and/or if we are unable to secure relationships with third-party distributors, we will not be able to successfully commercialize our products, our future product revenue will suffer, and we would incur significant additional losses. ​ We rely on access to third-party facilities for prototyping and commercial process development and expect to enter into arrangements with third parties to fabricate our products at commercial scale.
We expect to enter into arrangements with third-party fabricators to produce products for customers for demonstration products or for commercial product sale, other than for our formulated materials. The third-party fabricators are often located in Asia but could also be in the United States.
Accordingly, the loss of access to ITRI’s facility could delay our commercialization efforts. ​ We expect to enter into arrangements with third-party fabricators to produce products for customer demonstration and for commercial product sale, other than for our formulated materials. The third-party fabricators are often located in Asia but could also be in the United States.
If this were to occur, our stockholders could lose all or part of their investment. ​ We have recorded recurring losses from operations and will likely require additional capital to support our business and objectives. ​ We have incurred recurring losses since inception and, as of December 31, 2023, had an accumulated deficit of $95.1 million.
If this were to occur, our stockholders could lose all or part of their investment. ​ Our recurring losses from operations have raised substantial doubt regarding our ability to continue as a going concern and will likely require additional capital to support our business and objectives . ​ We have incurred recurring losses since inception and, as of December 31, 2024, had an accumulated deficit of $114.6 million.
A disruption or failure of these systems or in those of our external service providers, in the event of a major storm, earthquake, fire, telecommunications failure, cyber-attack, terrorist attack or other catastrophic event could cause system interruptions, reputational harm, delays in our product development and loss of critical data and could materially and adversely affect our ability to operate our business.
A disruption or failure of these systems or in those of our external service providers, in the event of a major storm, earthquake, fire, telecommunications failure, cyber-attack, terrorist attack or other catastrophic event could cause system interruptions, reputational harm, delays in our product development and loss of critical data and could materially and adversely affect our ability to operate our business. 31 Table of Contents We may experience disruptions, data loss, outages and other performance problems on our systems due to service attacks, unauthorized access or other security related incidents.
We cannot assure you that brokerage firms will provide analyst coverage of our company in the future or continue such coverage if started.
We do not currently have and may never obtain research coverage by securities and industry analysts. We cannot assure you that brokerage firms will provide analyst coverage of our company in the future or continue such coverage if started.
We believe the global supply chain challenges and their adverse impact on our business will persist and the degree to which the future pandemics and similar events ultimately impact our business and results of operations will depend on future developments beyond our control. ​ We are subject to a number of risks associated with international sales and operations. ​ We have small teams that are engaged in marketing, selling and supporting our products internationally.
The degree to which the future pandemics and similar events ultimately impact our business and results of operations will depend on future developments beyond our control. ​ We are subject to risks associated with international sales and operations. ​ We have operations in the United Kingdom and Asia and expect that most of our sales revenue will result from sales to customers in Asia.
We anticipate operating losses to continue for the foreseeable future due to, among other things, costs related to research funding, further development of our technology and products and expenses related to the commercialization of our products, and it is possible we will never achieve profitability. ​ We believe that our existing cash will be sufficient to fund our operations through the end of April 2025 and that we will require additional capital to continue our operations and research and development activity thereafter.
We anticipate operating losses to continue for the foreseeable future due to, among other things, costs related to research funding, further development of our technology and products and expenses related to the commercialization of our products, and it is possible we will never achieve profitability. ​ These efforts may be more costly than we expect, and we may not be able to generate revenue to offset our increased operating expenses.
At the same time, and to some extent relatedly, the global silicon semiconductor industry is experiencing a shortage in supply and difficulties in ability to meet customer demand and led to an increase in lead-times of the production of semiconductor chips and components. ​ 25 Table of Contents In 2023 we experienced, and expect to continue to experience, disruption to parts of our semiconductor supply chain, including procuring necessary components and inputs, such as wafers and substrates, in a timely fashion, with suppliers increasing lead times or placing products on allocation and raising prices.
From 2020 - 2023, we experienced disruption to parts of our semiconductor supply chain, including procuring necessary components and inputs, such as wafers and substrates, in a timely fashion, with suppliers increasing lead times or placing products on allocation and raising prices.
No assurance can be given that an active trading market for our common stock will develop or be sustained. The lack of an active market for our common stock may make it difficult for investors to sell shares of our common stock and may make it difficult for us to raise capital.
No assurance can be given that an active 36 Table of Contents trading market for our common stock will develop or be sustained.
The restrictions on our ability to incur debt or grant liens on our assets may prevent us from acquiring equipment or other assets using purchase price financing or leasing even if the acquisition of such equipment or other assets is in the best interests of our stockholders. ​ The terms and restrictions summarized above may have a material adverse effect on our business, financial condition and results of operations. ​ If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below the expectations of investors, resulting in a decline in the market price of our common stock. ​ The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our financial statements.
Failure to maintain effective internal control over financial reporting also could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities or stockholder lawsuits, which could require additional financial and management resources. ​ If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below the expectations of investors, resulting in a decline in the market price of our common stock. ​ The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our financial statements.
It is not possible to predict the broader consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, the availability and cost of materials, supplies, labor, currency exchange rates and financial markets, all of which could negatively impact our business, financial condition and results of operations. ​ Failure to comply with anti-bribery, anti-corruption and anti-money laundering laws as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations could subject us to penalties and other adverse consequences. ​ We are subject to anti-bribery, anti-corruption and anti-money laundering laws and regulations including the U.K.
It is not possible to predict the broader consequences of these conflicts, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, the availability and cost of materials, supplies, labor, currency exchange rates and financial markets, all of which could negatively impact our business, financial condition and results of operations. ​ In addition, recently there has been a significant increase in the imposition of tariffs and other trade restrictions around the world.
If we fail to implement these improvements effectively, our ability to manage growth and ensure ongoing operation of key business systems would be impaired, and our business, financial condition and results of operations would be harmed. ​ The COVID-19 global pandemic and resulting adverse economic conditions adversely impacted our business.
If we fail to implement these improvements effectively, our ability to manage growth and ensure ongoing operation of key business systems would be impaired, and our business, financial condition and results of operations would be harmed. ​ Public health crises, such as pandemics, epidemics, or widespread outbreaks of infectious disease, have had, and could in the future have, an adverse effect on our business, financial condition and results of operations .
The duration of any such impacts cannot be predicted, and such impacts may also have the effect of heightening many of the other material risks we face. ​ The COVID-19 pandemic and a supply shortage experienced by the semiconductor industry disrupted normal business activity and similar events may have an adverse effect on our results of operations.
The duration of any such impacts cannot be predicted, and such impacts may also have the effect of heightening many of the other material risks we face . 28 Table of Contents Disruptions in global supply chains have impacted, and may in the future, impact, our business, results of operations and financial condition.
However, in the event of an accident or incident at these facilities, we cannot assure you that the amounts or coverage of insurance will be sufficient to satisfy any damages and losses. ​ We rely on our management team and other key employees and will need additional personnel to grow our business.
However, in the event of an accident or incident at these facilities, we cannot assure you that the amounts or coverage of insurance will be sufficient to satisfy any damages and losses. ​ Certain of our partners are and many of our potential customers will be located in Taiwan, which increases the risk that a natural disaster, epidemic, labor strike, war or political unrest could have a material adverse effect on our business, financial condition and results of operations.
Because of the penny stock rules, there may be less trading activity in penny stocks in any market that develops for our common stock in the future and stockholders are likely to have difficulty selling their shares of our common stock. ​ We do not anticipate paying dividends on our common stock, and investors may lose the entire amount of their investment. ​ Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future.
Thus, delisting from Nasdaq could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly impact the ability of investors to trade our securities and would negatively impact the value and liquidity of our common stock . ​ We do not anticipate paying dividends on our common stock, and investors may lose the entire amount of their investment. ​ Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future.
Further, if our products are not in compliance with prevailing industry standards, such non-compliance could materially and adversely affect our financial condition, cash flows and results of operations. ​ 21 Table of Contents We compete in highly competitive markets characterized by rapid technological changes, and existing and new companies may introduce products that compete with ours, which may adversely affect our business and operating results.
Further, if our products are not in compliance with prevailing industry 23 Table of Contents standards, such non-compliance could materially and adversely affect our financial condition, cash flows and results of operations. ​ If MicroLED technology is not widely adopted by display manufacturers, our business would be harmed. ​ A significant share of our growth is dependent on the adoption by display manufacturers of MicroLED technology.
COVID-19 measures adversely impacted our operations and those of our customers, contract manufacturers, suppliers and logistics providers.
An interruption within our supply chain may increase costs or otherwise impact our business, results of operations and financial condition. For example, the COVID-19 pandemic adversely impacted our operations and those of our customers, contract manufacturers, suppliers and logistics providers.
The remediation actions included the enhancement of control activity evidence, improvement of management review controls, and recording of the fair value of the warrant liability. ​ Our management evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15 and 15d-15(e) under the Exchange Act, as of December 31, 2023.
Rather than using a calculated stock price in these models, the Company now uses the quoted stock price thereby reducing subjectivity and judgment in the fair value models and equity-based compensation calculations. ​ Our management evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15 and 15d-15(e) under the Exchange Act, as of December 31, 2024.
Certain of our partners are located in Taiwan, including ITRI, and we expect many of our customers will be located in Taiwan.
Certain of our partners, including ITRI, are located in Taiwan. In addition, we expect that many of our potential customers will be located in Taiwan. From time to time, Taiwan has been impacted by significant seismic activity in the area, including earthquakes and related aftershocks, and it is expected that similar events will happen in the future.
Removed
There can be no assurance, however, that such financing will be available by the end of April 2025, if at all, or on acceptable terms and conditions.
Added
We expect our cash and cash equivalents of $7.1 million as of December 31, 2024 to be insufficient to meet our operating expenses and capital expenditure requirements for at least 12 months from the filing of this Form 10-K.
Removed
If we lost access to CPI’s fabrication facility and/or ITRI’s fabrication facility, it could materially and adversely affect our ability to manufacture prototypes and demonstrate products for potential customers. The loss of access may also significantly impede our ability to engage in product development and process improvement activities.
Added
Our forecast of the period of time through which our current financial resources will be adequate to support our operations and the costs to support our general and administrative and research and development activities are forward-looking statements and involve risks and uncertainties.
Removed
Future pandemics or similar events could also have a material adverse impact on our business, financial condition, and results of operations .
Added
Our consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
Removed
Future pandemics and similar events could also materially and adversely affect our business, financial condition and results of operations. The COVID-19 global pandemic also resulted in severe disruptions and volatility in the global economy and financial markets.
Added
Our ability to continue as a going concern is dependent on our ability to raise additional working capital through public or private equity or debt financings or other sources, which may include collaborations with third parties. There can be no assurance, however, that such financing will be available, on acceptable terms and conditions, or at all.
Removed
At various times during the outbreak, the countries in which we operate and do business took dramatic action including, without limitation, ordering all nonessential workers to stay home, mandating the closure of schools and nonessential business premises and imposing isolation measures on large portions of the population.
Added
To date, MicroLED technology has not achieved widespread adoption because of the complexity and high cost of manufacturing MicroLED displays using existing materials, device architecture and processes.
Removed
The global spread of COVID-19 and the efforts to control disrupted, and reduced the efficiency of, normal business activities in much of the world. The pandemic resulted in authorities around the world implementing numerous unprecedented measures such as travel restrictions, quarantines, shelter in place orders, factory and office shutdowns and vaccine mandates.
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Given the high cost of manufacturing (resulting in approximately $100,000 sales price for a large high-definition display screen), it is unlikely that MicroLED technology will be adopted for use in consumer products unless significant efficiencies and fundamental process changes in the manufacturing of MicroLED displays occur.
Removed
In addition, disruptions to commercial transportation infrastructure have increased delivery times for materials and components to our facilities and, in some cases, our ability to timely ship our products to customers.
Added
For example, in 2024 Apple Inc. abandoned a project to manufacture its own MicroLED displays for its Apple Watch products.
Removed
Therefore, our business, financial condition and results of operations may be affected by changes in governmental and economic policies in Taiwan, social instability, and diplomatic and social developments in or 26 Table of Contents affecting Taiwan due to its international political status, including current tensions with China.
Added
While we believe our technology, including its use in chip-first architectures, has the potential to make manufacturing of MicroLED displays more efficient and cheaper, our technology has not been utilized commercially and there can be no assurance that our technology will reduce the cost and improve the efficiency of manufacturing MicroLEDs to the point where display manufacturers can profitably price MicroLED displays for mass market consumption.
Removed
Any deterioration in the relations between Taiwan and China, and other factors affecting military, political or economic conditions in Taiwan, could disrupt our business operations and materially and adversely affect our results of operations. ​ The ongoing conflict between Russia and Ukraine has negatively impacted and may continue to negatively impact the global economy and economic markets, which could have a materially adverse effect on our business, financial condition, and results of operations. ​ Russia’s military invasion of Ukraine had an immediate impact on the global economy and economic markets.
Added
In addition, even if our technology achieves its goals, there may be technical delays in implementing our technology that could affect the willingness of display manufacturers to manufacture MicroLEDs at commercial scale or could affect the timing and extent of such manufacturing. ​ It is also possible that, despite the advantages of MicroLED displays, other technologies that, while not having all of benefits of MicroLEDs, are less expensive or easier to manufacture, will emerge and be adopted by display manufacturers for similar applications. ​ If the market for MicroLED technology does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and operating results will be harmed. ​ We participate in highly competitive markets characterized by rapid technological changes, and existing and new companies may introduce products that compete with ours, which may adversely affect our business and operating results .
Removed
Financial and economic sanctions imposed on certain industry sectors and parties in Russia by the U.S., U.K. and European Union, as well as potential retaliatory actions by Russia, could also have a negative impact on the global economy.
Added
We also rely on access to ITRI’s facilities for the development of commercial processes for the future commercial manufacturing of our products. The current agreement with CPIIS expires on March 31, 2025, but has been extended as described below.
Removed
There can be no certainty regarding the impacts stemming from the conflict, including the imposition of additional sanctions, embargoes, asset freezes or other economic or military measures resulting from the invasion. The impact of these developments, and additional events that may occur as a result could adversely affect our business, supply chain, suppliers and customers and potential customers.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe seek to further mitigate cybersecurity risks through a combination of monitoring and detection activities, use of anti-malware applications, employee training, quality audits and communication and reporting structures, among other processes.
Biggest changeWe seek to further mitigate 40 Table of Contents cybersecurity risks through a combination of monitoring and detection activities, use of anti-malware applications, employee training, quality audits and communication and reporting structures, among other processes.
Our third-party consultant team is managed by our Chief Financial Officer who reports to the Audit Committee at the board-level, as appropriate. ​ As of December 31, 2023, we have not identified an indication of a cybersecurity incident that would have a material impact on our business and consolidated financial statements. ​
Our third-party consultant team is managed by our Chief Financial Officer who reports to the Audit Committee at the board level, as appropriate. ​ As of December 31, 2024, we have not identified an indication of a cybersecurity incident that would have a material impact on our business and consolidated financial statements. ​

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition, we lease two offices at CPI pursuant to leases which expire in 2024 and two offices at NetPark, Sedgefield pursuant to leases which expire in March 2024. On March 22, 2024 we executed a new Framework Agreement with CPIIS for a twelve-month term commencing on April 1, 2024.
Biggest changeIn addition, we lease office space at CPI pursuant to a license of office space which expires on March 31, 2026 and two offices at NetPark, Sedgefield pursuant to leases which expire in January and August 2027.
We also have a leased office in Hsinchu City Taiwan where we lease approximately 1,000 square feet of office space pursuant to a lease which expires in 2025. We use the CPI facility in Sedgefield, England for virtually all of our fabrication activities.
We also have a leased office in Hsinchu City Taiwan where we lease approximately 1,000 square feet of office space pursuant to a lease which expires in July 2025. We use the CPI facility in Sedgefield, England for virtually all of our fabrication activities.
Item 2. Properties ​ Our headquarters are located in Manchester, England, where we lease approximately 10,000 square feet of commercial space for research and development, engineering, testing and corporate offices pursuant to a lease that expires in 2025.
Item 2. Properties ​ Our headquarters are located in Manchester, England, where we lease approximately 10,000 square feet of commercial space for research and development, engineering, testing and corporate offices pursuant to a lease that expires in April 2025.
Removed
We also maintain access to additional office space on a temporary or as-needed basis. We believe that our facilities are suitable to meet our current needs and that suitable space will be available on acceptable terms as may be required to support the expected growth in our business. ​
Added
CPIIS is in the process of reviewing the operation of the clean room facility used by Smartkem and is seeking to reduce the facility’s operating costs by, among other things, consolidating its clean rooms and seeking to pass more of its operating costs to users including us.
Added
On March 28, 2025, we entered into an agreement with CPIIS pursuant to which the term of the current CPIIS agreement was extended until May 31, 2025. We intend to use the extension period to complete negotiations with CPIIS regarding a longer-term agreement.
Added
Under the terms of the extension, we have agreed to an increase in our share of the costs of the CPI facility and to increased minimum usage obligations during the extension period. We expect that any longer-term agreement with CPIIS will require us to bear additional costs.
Added
If we are unable to reach a new agreement with CPIIS on terms that are satisfactory to us, we intend to find an alternative facility. We believe that there are adequate alternative sites available at which we could conduct our prototyping operations.
Added
In the event that we decide to move our prototyping operation to an alternative facility, we believe that the move would take between two and nine months, depending on equipment availability and any required facility modifications, during which time we would incur additional costs to prepare the new facility and install any necessary equipment.
Added
In such event, we intend to schedule our prototyping activities to minimize any disruption to those operations and would use ITRI’s prototyping line as an interim facility for such work. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safety Disclosures Not Applicable. ​ 39 Table of Contents ​ PART II ​
Biggest changeRegardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safety Disclosures Not Applicable. ​ 41 Table of Contents ​ PART II ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMarket For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities ​ Market Information ​ Our common stock is traded on the OTC Market Group’s OTCQB® Market (“OTCQB”) under the ticker symbol “SMTK.” ​ Holders of Record As of March 27, 2024, there were 1,355,361 shares of our common stock outstanding which were held by 210 stockholders of record as reported by our transfer agent.
Biggest changeMarket For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities ​ Market Information ​ Our common stock has been trading on the Nasdaq Stock Market LLC under the symbol “SMTK” since May 31, 2024. ​ Holders of Record As of March 26, 2025, there were 3,620,217 shares of our common stock outstanding which were held by 215 stockholders of record as reported by our transfer agent.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

23 edited+9 added−15 removed29 unchanged
Biggest changeThe decrease is mainly the results of less unit sales in 2023 compared to 2022, reflecting the largely one-off nature of these sales, consistent with our current stage of commercialization. Other Operating Income ​ Other operating income was $0.8 million and $1.2 million for the years ended December 31, 2023 and 2022, respectively.
Biggest changeOther Operating Income ​ Other operating income was $1.0 million and $0.8 million for the years ended December 31, 2024 and 2023, respectively, and is comprised primarily of research grants and research and development tax credits.
Additionally, future commercial and other factors beyond our control will impact our development programs and plans. Selling, General and Administrative. Selling, general and administrative expenses consist primarily of allocated compensation and related costs for personnel, including share-based compensation, employee benefits and travel.
Additionally, future commercial and other factors beyond our control will impact our development programs and plans. General and Administrative. General and administrative expenses consist primarily of allocated compensation and related costs for personnel, including share-based compensation, employee benefits and travel.
If we borrow money, the incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations. If we enter into a collaboration, strategic alliance or other similar arrangement, we may be forced to give up valuable rights.
If we borrow money, the incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict its operations. If we enter into a collaboration, strategic alliance or other similar arrangement, it may be forced to give up valuable rights.
Foreign currency translation reflects adjustments made due to currency fluctuations. Transaction Costs. Costs for equity contracts that are classified as a liability. Fair Value of Warrant Liability. The fair value of equity contracts that are classified as a liability. 42 Table of Contents Interest Income. Interest income is interest on our cash deposits. Income Tax Expense.
Foreign currency translation reflects adjustments made due to currency fluctuations. Transaction Costs. Costs for equity contracts that are classified as a liability. Fair Value of Warrant Liability. The fair value of equity contracts that are classified as a liability. Interest Income. Interest income is interest on our cash deposits. Income Tax Expense.
We expect to fund these commitments from our cash balances and working capital. 44 Table of Contents Recently Issued Accounting Pronouncements For recently issued accounting announcements, see “Recently Issued Accounting Pronouncements” in Note 2, Significant Accounting Policies and Recent Accounting Pronouncements, in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
We expect to fund these commitments from our cash balances and working capital. 46 Table of Contents ​ Recently Issued Accounting Pronouncements For recently issued accounting announcements, see “Recently Issued Accounting Pronouncements” in Note 2, “Significant Accounting Policies and Recent Accounting Pronouncements” in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
Such action may be initiated by or against us and would require significant management time and expenses. Components of Results of Operations Revenue Revenue. Our revenue consists of revenue from the sale of TRUFLEX® inks and demonstration products. Cost of Revenues.
Such action may be initiated by or against us and would require significant management time and expenses. 43 Table of Contents Components of Results of Operations Revenue Revenue. Our revenue consists of revenue from the sale of TRUFLEX® inks and demonstration products. Cost of Revenues.
While we believe we have a strong patent portfolio and there is no actual or, to our knowledge, 41 Table of Contents threatened litigation against us for patent-related matters, litigation or threatened litigation is a common method to effectively enforce or protect intellectual property rights.
While we believe we have a strong patent portfolio and there is no actual or, to our knowledge, threatened litigation against us for patent-related matters, litigation or threatened litigation is a common method to effectively enforce or protect intellectual property rights.
Research and development expense, which represents 51.3% and 53.4% of our total operating expenses for the twelve months ended December 31, 2023 and 2022, respectively, decreased by $0.2 million to $5.6 million for the year ended December 31, 2023, compared to $5.8 million for the same period of 2022.
Research and development expenses, which represented 44.3% and 51.3% of our total operating expenses for the twelve months ended December 31, 2024 and 2023, respectively, decreased by $0.5 million to $5.1 million for the year ended December 31, 2024, compared to $5.6 million for the same period of 2023.
Selling, general and administrative expense, which represents 47.9% and 46.6% of our total operating expenses for the twelve months ended December 31, 2023 and 2022, respectively, increased by $0.1 million to $5.2 million for year ended December 31, 2023 as compared to $5.1 million for the same period in 2022.
General and administrative expense, which represented 55.0% and 47.9% of our total operating expenses for the twelve months ended December 31, 2024 and 2023, respectively, increased by $1.1 million to $6.3 million for year ended December 31, 2024 as compared to $5.2 million for the same period in 2023. This increase was mainly due to increased professional service fees.
Our future viability is dependent on our ability to raise additional capital to fund our operations. We will need to obtain additional funds to satisfy our operational needs and to fund our sales and marketing efforts, research and development expenditures, and business development activities.
Additional expected cash payments beyond the next twelve months include $25 thousand of lease liabilities. ​ Our future viability is dependent on our ability to raise additional capital to fund our operations. We will need to obtain additional funds to satisfy our operational needs and to fund our sales and marketing efforts, research and development expenditures, and business development activities.
Cash Flow from Investing Activities Net cash used in investing activities was $18.0 thousand for the year ended December 31, 2023, compared to $79.0 thousand for the year ended December 31, 2022, a decrease of $61.0 thousand. The decrease resulted from a reduced level of investment in laboratory and capital equipment purchases in 2023.
Cash Flow from Investing Activities Net cash used in investing activities was $75.4 thousand for the year ended December 31, 2024, compared to $18.0 thousand for the year ended December 31, 2023, an increase of $57.4 thousand. The increase resulted from additional purchases of laboratory and capital equipment in 2024.
The decrease is mainly due to lower personnel costs related to reductions in force effected in December 2022 and September 2023 and lower technical research and development costs, including consulting, testing and lab supplies.
The decrease in research and development expenses was mainly due to lower personnel costs resulting from a reduction in force effected in September 2023, as well as lower technical research and development costs, including consulting, testing and lab supplies.
Non-Operating Income/(Expenses) and Net Loss ​ The increase of $3.0 million in gain on foreign currency transactions was due to fluctuations in U.S. dollar/U.K. pound value arising from transactions denominated in foreign currencies and the translation of foreign currency denominated balances on intra-group loans.
The increase in loss on foreign currency transactions resulted from fluctuations in U.S. dollar/British pound value affecting transactions denominated in foreign currencies and the translation of foreign currency denominated balances on intra-group loans. There was an increase of $0.2 million in non-operating income resulting from the change in the valuation of the warrant liability.
Results of Operations ​ Twelve months ended December 31, 2023 compared with the twelve months ended December 31, 2022 Revenue and Cost of Revenue ​ Our revenue and cost of revenue reflects sales of TRUFLEX® inks and demonstration products and the direct costs associated with those sales.
Income tax expense consists primarily of income taxes in jurisdictions in which we conduct business. 44 Table of Contents Results of Operations ​ Twelve months ended December 31, 2024 compared with the twelve months ended December 31, 2023 Revenue and Cost of Revenue ​ Our revenue and cost of revenue reflects sales of TRUFLEX® inks and demonstration products, and the direct costs associated with those sales.
Risk Factors” in this Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statement. ​ 40 Table of Contents Overview We are seeking to reshape the world of electronics with our disruptive organic thin-film transistors (“OTFTs”) that we believe have the potential to drive the next generation of displays.
Risk Factors” in this Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statement. ​ Overview ​ We are seeking to change the world of electronics with a new class of transistor developed using our proprietary advanced semiconductor materials that we believe has the potential to revolutionize the display industry.
The loss before income taxes was $8.5 million for the year ended December 31, 2023, a decrease of $3.0 million, compared to a loss before income taxes of $11.5 million for the year ended December 31, 2022.
Net Loss Net loss was $10.3 million for the year ended December 31, 2024, an increase of $1.8 million, compared to a net loss of $8.5 million for the year ended December 31, 2023.
Cash Flow from Financing Activities Net cash flows provided by financing activities was $12.7 million for the year ended December 31, 2023, compared to $1.8 million for the year ended December 31, 2022, an increase of $10.9 million.
Cash Flow from Financing Activities Net cash flows provided by financing activities was $6.5 million for the year ended December 31, 2024, compared to $12.7 million for the year ended December 31, 2023, a decrease of $6.2 million. The decrease in net cash provided by financing activities resulted primarily from lower proceeds from offering activities in 2024 compared to 2023.
Cash Flow from Operating Activities Net cash used in operating activities was $8.0 million for the year ended December 31, 2023, compared to $9.0 million for the year ended December 31, 2022, a decrease of $1.0 million.
Cash Flow from Operating Activities Net cash used in operating activities was $8.1 million for the year ended December 31, 2024 and $8.0 million for the year ended December 31, 2023. While our net loss increased by $1.8 million for the year ended December 31, 2024, the non-cash expenses decreased by $1.8 million.
If the Company is unable to substantially increase revenues, reduce expenditures, or otherwise generate cash flows for operations, then the Company will need to raise additional funding.
If the Company is unable to substantially increase revenues, reduce expenditures, or otherwise generate cash flows for operations, then the Company will need to raise additional funding. There is substantial doubt that we will be able to pay our obligations as they fall due, and this substantial doubt is not alleviated by management plans.
The decrease in the 2023 period was attributable increases in gains on foreign currency transactions and lower operating expenses as described in the preceding paragraphs. Liquidity and Capital Resources As of December 31, 2023, our cash and cash equivalents were $8.8 million compared with $4.2 million as of December 31, 2022.
The increase in net loss in the 2024 period was attributable to the factors described in the preceding paragraphs. 45 Table of Contents Liquidity and Capital Resources As of December 31, 2024, our cash and cash equivalents were $7.1 million compared with $8.8 million as of December 31, 2023.
Revenues were $27.0 thousand for the year ended December 31, 2023, compared to $40.0 thousand for the same period of 2022. Cost of revenue was $23.0 thousand for the twelve months ended December 31, 2023, compared to $33.0 thousand for the same period of 2022.
Cost of revenue was $32.0 thousand for the twelve months ended December 31, 2024, compared to $23.0 thousand for the same period of 2023, primarily as a result of a unit increase in the number of products sold during 2024.
Our patented TRUFLEX® semiconductor and dielectric inks, or electronic polymers, are used to make a new type of transistor that we believe have the capability to potentially revolutionize the display industry. Our inks enable low temperature printing processes that are compatible with existing manufacturing infrastructure to deliver low-cost displays that outperform existing technologies.
Our TRUFLEX® semiconductor polymers enable low temperature printing processes that are compatible with existing manufacturing infrastructure to deliver low-cost, high-performance displays.
The decrease is mostly attributable to a reduction in the allowable research and development expenses and a lowering of the tax credit rate to be applied to the allowable expenses of which both went into effect in 2023. ​ Operating Expenses ​ Operating expenses decreased by $0.1 million to $10.8 million for the year ended December 31, 2023, compared to $10.9 million for the comparable period of 2022.
The increase in other operating income during 2024 was largely attributable to additional grant revenue recognized in 2024. ​ Operating Expenses ​ Operating expenses increased by $0.7 million to $11.5 million for the year ended December 31, 2024, compared to $10.8 million for the comparable period of 2023.
Removed
Our electronic polymer platform can be used in a range of display technologies including microLED, miniLED and AMOLED displays for next generation televisions, laptops, augmented reality (“AR”) and virtual reality (“VR”) headsets, smartwatches and smartphones. Our loss before income taxes was $8.5 million and $11.5 million for the year ended December 31, 2023, and 2022, respectively.
Added
Our semiconductor platform can be used in a range of display technologies including MicroLED, miniLED and AMOLED, as well as in applications in advanced chip packaging, sensors, and logic. 42 Table of Contents We design and develop our materials at our research and development facility in Manchester, UK and provide prototyping services at the Centre for Process Innovation (“CPI”) in Sedgefield, UK.
Removed
As of December 31, 2023, our accumulated deficit was $95.1 million. Substantially all our operating losses have resulted from expenses incurred in connection with research and development activities and from general and administrative costs associated with our operations.
Added
We also operate a field application office in Hsinchu, Taiwan, close to our collaboration partner, The Industrial Technology Research Institute of Taiwan (“ITRI”), where we demonstrate the scalability of our technology using ITRI’s equipment.
Removed
Income tax expense consists primarily of income taxes in jurisdictions in which we conduct business.
Added
With our collaboration partners, we are developing a commercial-scale production process and EDA tools for our materials to demonstrate the commercial viability of manufacturing a new generation of displays using our materials. We have an extensive IP portfolio including 138 granted patents across 17 patent families, 17 pending patents and 40 codified trade secrets.
Removed
The primary sources of the other operating income in these periods were a research grant and research and development tax credits.
Added
Revenues were $82.0 thousand for the year ended December 31, 2024, compared to $27.0 thousand for the same period of 2023. The increase in revenues resulted primarily from an increase in the sale of demonstrator products to potential partners, as we sought to expand our marketing efforts.
Removed
There was an increase in personnel costs due to severance costs and the accrual of bonus payments in 2023. This was offset by a reduction in investor relations cost and other professional service fees.
Added
We expect that our research and development expense will increase in 2025 as a result of an expected increase in the cost of our prototyping activities. See “Item 1. Business – CPI Agreement” for additional information.
Removed
Issuance costs of $0.2 million allocated to the warrant liability were expensed in full during the year ended December 31, 2023. The majority of costs were legal, placement and consulting fees specifically related to the private placement transaction.
Added
Non-Operating Income/(Expenses) ​ Total non-operating income/(expense) was $0.1 million for the year ended December 31, 2024, compared to $1.5 million for the year ended December 31, 2023. The decrease in non-operating income resulted primarily from a loss on foreign currency transactions of $0.5 million in 2024, compared to a gain of $1.2 million for the comparable period of 2023.
Removed
There were no similar gains or losses recorded during the prior year. 43 Table of Contents A gain of $0.5 million related to the valuation of the warrant liability was recorded during the year ended December 31, 2023. There were no similar gains or losses recorded during the prior year.
Added
We anticipate operating losses to continue for the foreseeable future due to, among other things, costs related to research and development of our technology and products and expenses related to the marketing and commercialization of our products.
Removed
We believe this will be sufficient to fund our operating expenses and capital expenditure requirements through the end of April 2025. It is possible this period could be shortened if there are any significant increases in planned spending or development programs or more rapid progress of development programs than anticipated.
Added
We expect that our cash and cash equivalents of $7.1 million as of December 31, 2024 will not be sufficient to fund our operating expenses and capital expenditure requirements for the next 12 months and that we will require additional capital funding to continue our operations and research development activity thereafter. ​ Our expected cash payments over the next twelve months include (a) $1.8 million to satisfy accounts payable and accrued expenses and (b) $47 thousand to satisfy the lease liabilities.
Removed
The decrease resulted primarily from a decrease in our net loss of $3.0 million, partially offset by an increase of non-cash activities of $3.3 million and a net increase in operating assets and liabilities of $1.3 million.
Added
Although there are items within our financial statements that require management to make accounting estimates, we do not believe them to be critical, as defined above. JOBS Act Accounting Election We are an emerging growth company, as defined in the JOBS Act.
Removed
In June 2023, we completed a private placement of our preferred stock and warrants resulting in net proceeds of $12.4 million with an additional $1.8 million related to the issuance of warrants. We incurred $1.5 million in issuance costs in connection with this private placement.
Removed
Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors. In addition, there are other items within our financial statements that require estimation but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
Removed
Share-Based Compensation The Company determines the fair value of certain share-based awards using the Black-Scholes option-pricing model which uses both historical and current market data to estimate the fair value. This method incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield, and expected life of the options.
Removed
Prior to February 2022, the Company’s common stock was not traded on an over the counter or national securities exchange and consequently the Company developed estimates for the inputs to the option-pricing model. Warrant Liability The valuation of the warrant liability was determined using an option pricing model.
Removed
This model uses inputs such as the underlying price of the shares issued at the measurement date, expected volatility, risk free interest rate and expected life of the instrument. Since our common stock was not publicly traded until February 2022 there has been insufficient volatility data available.
Removed
Accordingly, we have used an expected volatility based on historical common stock volatility of our peers. In addition, we used the probability of uplisting as an input in the model to determine the fair value of the warrant liability. JOBS Act Accounting Election We are an emerging growth company, as defined in the JOBS Act.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. ​ We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act; therefore, pursuant to Item 301(c) of Regulation S-K, we are not required to provide the information required by this Item. 45 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. ​ We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act; therefore, pursuant to Item 301(c) of Regulation S-K, we are not required to provide the information required by this Item. ​ ​ ​ 47 Table of Contents

Other SMTK 10-K year-over-year comparisons