Document and Entity Information
Document and Entity Information | 3 Months Ended |
Mar. 31, 2023 | |
Document and Entity Information [Abstract] | |
Document Type | S-1 |
Entity Registrant Name | SmartKem, Inc. |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | true |
Entity Emerging Growth Company | true |
Entity Ex Transition Period | false |
Entity Central Index Key | 0001817760 |
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets $ in Thousands, $ in Thousands | Mar. 31, 2023 USD ($) | Mar. 31, 2023 USN ($) | Dec. 31, 2022 USD ($) | Mar. 31, 2022 USD ($) | Mar. 31, 2022 USN ($) | Dec. 31, 2021 USD ($) | Dec. 31, 2020 USD ($) |
Current assets | |||||||
Cash and cash equivalents | $ 1,700 | $ 4,235 | $ 12,226 | ||||
Accounts receivable, net | 1 | 30 | |||||
Research and development tax credit receivable | 1,366 | 1,121 | 1,070 | ||||
Prepaid expenses and other current assets | 1,211 | 1,056 | 802 | ||||
Total current assets | 4,278 | 6,442 | 14,098 | ||||
Property, plant and equipment, net | 576 | 602 | 802 | ||||
Right-of-use assets, net | 431 | $ 431 | 475 | $ 475 | 154 | ||
Other assets, non-current | 6 | 6 | 6 | ||||
Total assets | 5,291 | 7,525 | 15,060 | ||||
Current liabilities | |||||||
Accounts payable and accrued expenses | 1,048 | 931 | 1,423 | ||||
Lease liabilities, current | 225 | 225 | 206 | 206 | 87 | ||
Income taxes payable | 1 | 22 | |||||
Other current liabilities | 102 | 244 | |||||
Total current liabilities | 1,376 | 1,403 | 1,510 | ||||
Lease liabilities, non-current | 188 | $ 188 | 239 | $ 239 | 28 | ||
Total liabilities | 1,564 | 1,642 | 1,538 | ||||
Commitments and contingencies (Note 8) | |||||||
Stockholders' Equity | |||||||
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, zero shares issued and outstanding, at December 31, 2022 and December 31, 2021, respectively | |||||||
Common stock, par value $0.0001 per share, 300,000,000 shares authorized, 26,984,996 and 25,554,309 shares issued and outstanding, at December 31, 2022 and December 31, 2021, respectively | 3 | 3 | 3 | ||||
Additional paid-in capital | 93,278 | 92,930 | 89,954 | ||||
Accumulated other comprehensive loss | (939) | (483) | (1,363) | ||||
Accumulated deficit | (88,615) | (86,567) | (75,072) | ||||
Total stockholders' equity | 3,727 | 5,883 | $ 12,897 | 13,522 | $ 1,851 | ||
Total liabilities and stockholders' equity | $ 5,291 | $ 7,525 | $ 15,060 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
Condensed Consolidated Balance Sheets | |||
Preferred shares, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 |
Preferred stock, Shares Authorized | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Issued | 0 | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 | 0 |
Common shares, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 |
Common Stock, Shares Authorized | 300,000,000 | 300,000,000 | 300,000,000 |
Common Stock, Shares Issued | 27,087,773 | 26,984,996 | 25,554,309 |
Common Stock, Shares Outstanding | 27,087,773 | 26,984,996 | 25,554,309 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Condensed Consolidated Statements of Operations and Comprehensive Loss | ||||
Revenue | $ 16 | $ 30 | $ 40 | $ 18 |
Cost of revenue | 16 | 23 | 33 | 8 |
Gross profit | 7 | 7 | 10 | |
Other operating income | 269 | 284 | 1,172 | 1,285 |
Operating expenses | ||||
Research and development | 1,279 | 1,459 | 5,802 | 8,199 |
Selling, general and administrative | 1,433 | 1,240 | 5,071 | 8,069 |
Transaction expenses | 1,329 | |||
Total operating expenses | 2,823 | 2,699 | 10,873 | 17,597 |
Loss from operations | (2,554) | (2,408) | (9,694) | (16,302) |
Non-operating income/(expense) | ||||
Loss on foreign currency transactions | 502 | (354) | (1,782) | (808) |
Interest expense | (19) | |||
Interest income | 4 | 5 | 3 | |
Total non-operating income/(expense) | 506 | (354) | (1,777) | (824) |
Loss before income taxes | (2,048) | (2,762) | (11,471) | (17,126) |
Income tax expense | (24) | |||
Net loss | (2,048) | (2,762) | (11,495) | (17,126) |
Other comprehensive gain/(loss) | ||||
Foreign currency translation | (456) | 156 | 880 | 117 |
Total comprehensive loss | $ (2,504) | $ (2,606) | $ (10,615) | $ (17,009) |
Basic net loss per common share | $ (0.07) | $ (0.10) | $ (0.40) | $ (0.68) |
Diluted net loss per common share | $ (0.07) | $ (0.10) | $ (0.40) | $ (0.68) |
Basic weighted average shares outstanding | 29,248,150 | 28,438,003 | 28,861,789 | 25,233,384 |
Diluted weighted average shares outstanding | 29,248,150 | 28,438,003 | 28,861,789 | 25,233,384 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Common stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total |
Beginning Balance at Dec. 31, 2020 | $ 1 | $ 61,276 | $ (1,480) | $ (57,946) | $ 1,851 |
Beginning Balance (in shares) at Dec. 31, 2020 | 13,627,887 | ||||
Issuance of common shares due to exercise of stock-options | $ 1 | 19 | $ 20 | ||
Issuance of common shares due to exercise of stock-options (in shares) | 1,424,622 | 1,424,622 | |||
Stock-based compensation expense | 6,196 | $ 6,196 | |||
Repurchase of common stock (in shares) | (2,307,700) | ||||
Effect of reverse capitalization (in shares) | 2,500,000 | ||||
Issuance of common stock to vendor | 280 | 280 | |||
Issuance of common stock to vendor (in shares) | 147,500 | ||||
Issuance of common stock and warrants in private placement | $ 1 | 24,637 | 24,638 | ||
Issuance of common stock and warrants in private placement (in shares) | 10,162,000 | ||||
Issuance costs related to common stock and warrants in private placement | (2,454) | (2,454) | |||
Foreign currency translation adjustment | 117 | 117 | |||
Net loss | (17,126) | (17,126) | |||
Ending Balance at Dec. 31, 2021 | $ 3 | 89,954 | (1,363) | (75,072) | 13,522 |
Ending Balance (in shares) at Dec. 31, 2021 | 25,554,309 | ||||
Stock-based compensation expense | 98 | 98 | |||
Issuance of common stock to vendor | 43 | 43 | |||
Issuance of common stock to vendor (in shares) | 12,500 | ||||
Issuance of common stock in private placement | 2,000 | 2,000 | |||
Issuance of common stock in private placement (in shares) | 1,000,000 | ||||
Issuance costs related to common stock and warrants in private placement | (160) | (160) | |||
Foreign currency translation adjustment | 156 | 156 | |||
Net loss | (2,762) | (2,762) | |||
Ending Balance at Mar. 31, 2022 | $ 3 | 91,935 | (1,207) | (77,834) | 12,897 |
Ending Balance (in shares) at Mar. 31, 2022 | 26,566,809 | ||||
Beginning Balance at Dec. 31, 2021 | $ 3 | 89,954 | (1,363) | (75,072) | $ 13,522 |
Beginning Balance (in shares) at Dec. 31, 2021 | 25,554,309 | ||||
Issuance of common shares due to exercise of stock-options (in shares) | 0 | ||||
Stock-based compensation expense | 488 | $ 488 | |||
Issuance of common stock to vendor | 658 | 658 | |||
Issuance of common stock to vendor (in shares) | 430,687 | ||||
Issuance of common stock in private placement | 2,000 | 2,000 | |||
Issuance of common stock in private placement (in shares) | 1,000,000 | ||||
Issuance costs related to common stock and warrants in private placement | (170) | (170) | |||
Foreign currency translation adjustment | 880 | 880 | |||
Net loss | (11,495) | (11,495) | |||
Ending Balance at Dec. 31, 2022 | $ 3 | 92,930 | (483) | (86,567) | 5,883 |
Ending Balance (in shares) at Dec. 31, 2022 | 26,984,996 | ||||
Stock-based compensation expense | 293 | 293 | |||
Issuance of common stock to vendor | 55 | 55 | |||
Issuance of common stock to vendor (in shares) | 102,777 | ||||
Foreign currency translation adjustment | (456) | (456) | |||
Net loss | (2,048) | (2,048) | |||
Ending Balance at Mar. 31, 2023 | $ 3 | $ 93,278 | $ (939) | $ (88,615) | $ 3,727 |
Ending Balance (in shares) at Mar. 31, 2023 | 27,087,773 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Cash flows from operating activities: | ||||
Net loss | $ (2,048) | $ (2,762) | $ (11,495) | $ (17,126) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Depreciation expense | 42 | 54 | 198 | 209 |
Common shares issued to vendor for services | 55 | 43 | 391 | 263 |
Amortization of right of use asset | 56 | 63 | 264 | 234 |
Stock option compensation expense | 293 | 98 | 488 | 6,196 |
Loss on foreign currency transactions | (502) | 354 | 1,782 | 808 |
Change in assets and liabilities: | ||||
Accounts receivable, net | 29 | (30) | (32) | 19 |
Research & development tax credit receivable | (211) | (284) | (213) | (104) |
Prepaid expenses and other current assets | (340) | (471) | (42) | (532) |
Accounts payable and accrued expenses | 293 | (240) | (385) | 579 |
Lease liabilities | (43) | (40) | (265) | (276) |
Other assets | 2 | |||
Income taxes payable | (22) | 22 | ||
Other current liabilities | (146) | 238 | ||
Net cash used in operating activities | (2,433) | (3,215) | (9,049) | (9,728) |
Cash flows from investing activities: | ||||
Purchases of property, plant and equipment | (41) | (79) | (341) | |
Net cash used by investing activities | (41) | (79) | (341) | |
Cash flows from financing activities: | ||||
Proceeds from term loan payable | 738 | |||
Repayment of term loan payable | (738) | |||
Proceeds from the issuance of common stock and warrants in private placement | 24,638 | |||
Proceeds from the issuance of common stock in private placement | 2,000 | 2,000 | ||
Payment of issuance costs | (160) | (170) | (2,454) | |
Proceeds from the exercise of stock options | 20 | |||
Net cash provided by financing activities | 1,840 | 1,830 | 22,204 | |
Foreign currency effects on cash | (102) | (163) | (693) | (673) |
Net change in cash | (2,535) | (1,579) | (7,991) | 11,462 |
Cash, beginning of year | 4,235 | 12,226 | 12,226 | 764 |
Cash, end of year | 1,700 | 10,647 | 4,235 | 12,226 |
Supplemental disclosure of cash and non-cash investing and financing activities | ||||
Cash paid for interest | 19 | |||
Right of use asset and lease liability additions | 583 | 136 | ||
Issuance of common shares for consulting services | $ 55 | $ 43 | $ 633 | $ 256 |
BUSINESS
BUSINESS | 12 Months Ended |
Dec. 31, 2022 | |
GENERAL | |
BUSINESS | 1. BUSINESS Organization & Reverse Recapitalization SmartKem, Inc. (“SmartKem” or the “Company”) a Delaware corporation, formerly known as Parasol Investments Corporation (“Parasol”), was formed on May 13, 2020, and is the successor, as discussed below, of SmartKem Limited, which was formed under the Laws of England and Wales. The Company was founded as a “shell” company registered under the Exchange Act, with no specific business plan or purpose until it began operating the business of SmartKem Limited following the closing of the Exchange described below. On February 23, 2021, Parasol entered into a Securities Exchange Agreement (“the Exchange Agreement”), with SmartKem Limited. Pursuant to the Exchange Agreement all of the equity interests in SmartKem Limited, except certain deferred shares which had no economic or voting rights (the “Deferred Shares”) and which were purchased by Parasol for an aggregate purchase price of $1.40, were exchanged for shares of Parasol common stock, par value $0.0001 per share (“common stock”), and SmartKem Limited became a wholly owned subsidiary of Parasol (the “Exchange”). As a result of the Exchange, Parasol legally acquired the business of SmartKem Limited, and continues as the existing business operations of SmartKem Limited as a public reporting company under the name SmartKem, Inc. Under ASC 805, Business Combinations, SmartKem Limited was deemed the accounting acquirer based on the following predominate factors: Parasol was created as a “shell” company to effect a business combination and had no operations, the former shareholders of SmartKem Limited own more than a majority of the outstanding voting stock of the Company, the Company’s board of directors and management consists of the former board of directors and management of SmartKem Limited, SmartKem Limited was the largest entity by assets at the time of the Exchange, and the principal operating location of the Company is SmartKem Limited’s premises which are located in Manchester, United Kingdom. The Exchange was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Under this method of accounting, Parasol was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Exchange was treated as the equivalent of SmartKem Limited issuing stock for the net assets of Parasol, accompanied by a recapitalization. The net assets of Parasol are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities, and results of operations prior to the Exchange are those of SmartKem Limited. Reported shares and earnings per share available to holders of the Company’s common stock, prior to the Exchange, have been retroactively restated as shares reflecting the exchange ratios established in the Exchange. At the closing of the Exchange (the “Closing”), each SmartKem Limited ordinary share issued and outstanding immediately prior to the Closing (other than the Deferred Shares) was exchanged for 0.0111907 of a share of the Company’s common stock and each SmartKem Limited A ordinary share issued and outstanding immediately prior to the Closing was exchanged for 0.0676668 of a share of the Company’s common stock, with the maximum number of shares of our common stock issuable to the former holders of SmartKem Limited’s ordinary shares and A ordinary shares equal to 12,725,000. This includes enterprise management incentive options to purchase 124,497,910 SmartKem Limited ordinary shares (the “SmartKem Limited EMI Options”) issued and outstanding immediately prior to the Closing that were accelerated and exercised by the holders thereof for a like number of ordinary shares and exchanged for shares of the Company’s common stock pursuant to the Exchange. In aggregate 1,127,720,477 SmartKem Ltd shares were exchanged for 12,725,000 of the Company’s common stock, an average exchange ratio of 0.011283825. Immediately prior to the Closing, an aggregate of 2,500,000 shares of the Company’s common stock owned by the stockholders of Parasol prior to the Exchange were forfeited and cancelled (the “Stock Forfeiture”). Business The Company is seeking to reshape the world of electronics with our proprietary organic semiconductor platform that we believe has the potential to affect the form and function of the next generation of low-cost displays and sensors. The Company’s patented TRUFLEX® inks are solution deposited at a low temperature, on low-cost substrates to make OTFT circuits. SmartKem’s organic semiconductor platform can be used in a number of applications including mini- and micro-LED displays, AMOLED displays, AR and VR headsets, fingerprint sensors and integrated logic circuits. The Company has a research and development facility in Manchester, UK, and manufactures product protypes for prospective customers using its semiconductor manufacturing processes housed at the Centre for Process Innovation (CPI) at Sedgefield, UK. The Company has an extensive IP portfolio including over 125 issued patents across 19 patent families. COVID-19 Pandemic In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic (the “Pandemic”). The Pandemic has had a widespread and detrimental effect on the global economy and has adversely impacted the Company’s business and results of operations. The Company has experienced travel bans, states of emergency, quarantines, lockdowns, “shelter in place” orders, business restrictions and shutdowns in the countries where it operates. The Company’s containment measures have impacted its day-to-day operations and disrupted its business. Because the severity, magnitude and duration of the Pandemic and its economic consequences are highly uncertain, rapidly changing and difficult to predict, the ultimate impact of the Pandemic on the Company’s business, financial condition and results of operations is currently unknown. The additional costs incurred by the Company related to COVID-19 for the years ended December 31, 2022, and 2021, respectively were deemed to be immaterial to the consolidated financial statements. The Company anticipates there may be additional costs relating to the Pandemic incurred in the upcoming months that will be attributable to fiscal year 2023 and thereafter. These costs are not expected to be material. The consolidated entity presented is referred to herein as “SmartKem”, “we”, “us”, “our”, or the “Company”, as the context requires and unless otherwise noted. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis for Presentation These consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and accounting principles generally accepted in the United States of America (“US GAAP”) as defined by the Financial Accounting Standards Board (FASB) within the FASB Accounting Standards Codification (“ASC”) and are presented in thousands, except number of shares and per share data. Going Concern The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities, and commitments in the ordinary course of business. We have incurred recurring losses including net losses of $11.5 million and $17.1 million for the years ended December 31, 2022, and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $86.6 million. 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. We expect that our cash and cash equivalents of $4.2 million as of December 31, 2022, will be sufficient to fund our operating expenses and capital expenditure requirements through the end of May 2023. 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. 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. Until such time, if ever, as we can generate sufficient cash through revenue, management’s plans are to finance our working capital requirements through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. If we raise additional funds by issuing equity securities, our existing security holders will likely experience dilution. 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. There can be no assurance however that such financing will be available in sufficient amounts, when and if needed, on acceptable terms or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the market demand for the Company’s products and services, the quality of product development efforts, management of working capital, and continuation of normal payment terms and conditions for purchase of services. 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 to continue as a going concern. There is substantial doubt that the Company will be able to pay its obligations as they fall due, and this substantial doubt is not alleviated by management plans. The consolidated financial statements as of December 31, 2022 have been prepared assuming that the Company will continue as a going concern. Accordingly, the consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. Basis of Consolidation The consolidated financial statements include the accounts of SmartKem, Inc. and its wholly-owned subsidiaries, SmartKem Delaware, Inc. and SmartKem Limited. The Company does not have any nonconsolidated subsidiaries. All intercompany balances and transactions have been eliminated on consolidation, including unrealized gains and losses on transactions between the companies. The Company’s formerly wholly owned subsidiary, SmartKem Delaware Inc. was dissolved on May 13, 2021. Comprehensive loss Comprehensive loss of all periods presented is comprised primarily of net loss and foreign currency translation adjustments. Management’s Use of Estimates The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities, at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates in the Company’s consolidated financial statements relates to the valuation of common share, fair value of share options, fair value of embedded conversion features in the convertible notes, and the valuation allowance of deferred tax assets. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the consolidated financial statements, actual results may materially vary from these estimates. Certain Risk and Uncertainties The Company’s activities are subject to significant risks and uncertainties including the risk of failure to secure additional funding to properly execute the Company’s business plan. The Company is subject to risks that are common to companies in the growth stage, including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, reliance on third party manufacturers, protection of proprietary technology, and compliance with regulatory requirements. The Company has access under a framework agreement to equipment which is used in the manufacturing of demonstrator products employing the Company’s inks. If the Company lost access to this fabrication facility, it would materially and adversely affect the Company’s ability to manufacture prototypes and demonstrate products for potential customers. The loss of this access could significantly impede the Company’s ability to engage in product development and process improvement activities. Alternative providers of similar services exist, but would take effort and time to bring into the Company’s operations. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. As of December 31, 2022 and 2021, the Company did not have any cash equivalents. Accounts Receivable Accounts receivable are stated at the amount the Company expects to collect and do not bear interest. The Company considers the following factors when determining the collectability of specific customer accounts: customer creditworthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. These receivables have historically been paid timely. Due to the nature of the accounts receivable balance, the Company believes there is no significant risk of non-collection. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, allowances for doubtful accounts would be required. There was no allowance for doubtful accounts recorded as of December 31, 2022, and 2021. Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. Periodically, the Company maintains deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality and the Company has not experienced any losses in these deposits. Property, Plant and Equipment Property, plant and equipment is stated at cost, less accumulated depreciation. Maintenance and repairs are expensed when incurred. Additions and improvements that extend the economic useful life of the asset are capitalized and depreciated over the remaining useful lives of the assets. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any resulting gain or loss is reflected in current earnings. Depreciation and amortization are provided using the accelerated declining balance method in amounts considered to be sufficient to amortize the cost of the assets to operations over their estimated useful lives. Property, plant and equipment is depreciated over an estimated useful life of approximately 4 years. Impairment of Long-Lived Assets Management continually evaluates whether events or changes in circumstances might indicate that the remaining estimated useful life of long-lived assets may warrant revision, or that the remaining balance may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the related undiscounted cash flows in measuring whether the long-lived asset should be written down to fair value. Measurement of the amount of impairment would be based on generally accepted valuation methodologies, as deemed appropriate. If the carrying amount is greater than the undiscounted cash flows, the carrying amount of the asset is reduced to the asset’s fair value. An impairment loss is recognized immediately as an operating expense in the consolidated statements of operations. Reversal of previously recorded impairment losses are prohibited. As of December 31, 2022, and 2021, Company’s management believed that no revision to the remaining useful lives or impairment of the Company’s long-lived assets was required. Derivative Asset for Embedded Conversion Features The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates convertible notes to determine if those contracts or embedded components of those contracts qualify as derivatives to be accounted for separately. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. The result of this accounting treatment is that the fair value of the embedded derivative is recorded as a liability and marked-to-market each balance sheet date, with the change in fair value recorded in the statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. The fair value of the embedded conversion features is estimated using a Monte Carlo simulation model, in which possible outcomes and their values are simulated repeatedly and randomly. Under the Monte Carlo method the Company estimated the fair value of the convertible notes conversion feature at the time of issuance and subsequent remeasurement dates, utilizing the with-and without method, where the value of the derivative feature is the difference in values between a note simulated with the embedded conversion feature and the value of the same note simulated without the embedded conversion feature. Estimating fair values of embedded conversion features requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. Fair Value of Financial Instruments ASC 820, Fair Value Measurements The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace. Level 3: Unobservable inputs which are supported by little, or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the years ended December 31, 2022, and 2021. The carrying value of the Company’s cash, accounts receivable, other receivables, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value because of the short-term maturity of these financial instruments. Convertible Notes The Company accounts for its convertible notes in accordance with ASC 470-20, Debt with Conversion and Other Options Debt discount created by the bifurcation of embedded feature in the convertible notes are reflected as a reduction to the related debt liability. The discount is amortized to interest expense over the term of the debt using the effective-interest method. Warrants The accounting treatment of warrants issued is determined pursuant to the guidance provided by ASC 480, Distinguishing Liabilities from Equity Derivatives and Hedging forced conversions, dividends, and exercise are assessed with determinations made regarding the proper classification in the Company’s consolidated financial statements. The Company determined that all warrants meet the criteria to be classified as equity. Non-retirement Post-employment Benefits The company records employee severance benefits as non-retirement post-employment benefits that are accounted for under ASC 712-10. A liability is accrued when it becomes probable that a payment will be made, and the amount is estimable. In most cases, a payment is not deemed probable until the employer makes the decision to terminate the employee. All severance payments identified were paid and expensed in the period incurred. Leases Operating lease assets are included within operating lease right-of-use assets, and the corresponding operating lease obligation on the consolidated balance sheets as of December 31, 2022 and 2021. The Company has elected not to present short-term leases as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of the Company’s leases do not provide an implicit rate of return, the Company used an incremental borrowing rate based on the information available at adoption date of ASC 842 (January 1, 2019) in determining the present value of lease payments. Revenue The Company applies the provisions of ASC 606, Revenue from Contracts with Customers The Company’s current contracts with customers do not contain significant estimates or judgments. All of the Company’s revenue contains a single performance obligation that is recognized upon fulfilment of the sales order. The Company derives its revenues primarily from sales of TRUFLEX® inks and of demonstrator units to customers evaluating organic semiconductor technology. The transaction price is stated in each customer agreement and is allocated to a single performance obligation. Revenue is recognized upon shipment of each TRULFEX® ink or demonstrator, at a point in time. The Company does not have any significant financing components as payment is received at or shortly after the point of sale. Costs incurred to obtain a contract will be expensed as incurred when the amortization period is less than a year. Collaboration Arrangements The company entered into several joint development agreements during the year. The business arrangement between the two parties is not accounted for as a Collaborative Arrangement, as defined within the guidance under ASC 808, as both parties are not exposed to significant risks and rewards dependent on the commercial success of the activity. It has also determined that other party is a vendor and not a customer, as defined within the guidance under ASC 606, as the other party did not primarily contract with SmartKem to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration. It was SmartKem that contracted with the other party to obtain design services from it. These agreements are accounted for under the guidance of ASC 705, Cost of Sales and Service. Within ASC 705–20, Accounting for Consideration Received from a Vendor, the section discusses the accounting for consideration received by an entity from a vendor or supplier. Consideration from a vendor includes cash amounts that an entity receives or expects to receive from a vendor (or from other parties that sell the goods or services to the vendor). Consideration from a vendor also includes credit or other items (e.g., a coupon or voucher) that the entity can apply against amounts owed to the vendor (or to other parties that sell the goods or services to the vendor). Consideration from a vendor should be accounted for as a reduction of the purchase price of the goods or services acquired from the vendor unless the consideration from the vendor is one of the following, a) in exchange for a distinct good or service; b) a reimbursement of costs incurred by the entity to sell the vendor’s products; or c) consideration for sales incentives offered to customers by manufacturers. Research and Development Expenses The Company expenses research and development costs as incurred. Research and development costs include salaries, employee benefit costs, direct project costs, supplies and other related costs. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. Patent and Licensing Costs Patent and licensing costs are expensed as incurred because their realization is uncertain. These costs are classified as research and development expenses in the accompanying consolidated statements of operations and comprehensive loss. Other Operating Income The Company’s other operating income includes government grants received for qualifying research and development projects, and research and development tax credits related to the United Kingdom’s Research and Development tax relief for small and medium-sized enterprises, which is a government tax incentive designed to reward innovative companies for investing in research and development. Such incentives are recorded as other income when it is probable the amounts are collectible and can be reasonably estimated. For the year ended December 31, 2022 and 2021, the Company recorded grant income and research & development tax credits of $1,172 thousand and $1,285 thousand, respectively, which are recorded as other operating income in the accompanying consolidated statements of operations. As of December 31, 2022, and December 31, 2021, the Company had receivables related to research & development tax credits for payments not yet received of $1,121 thousand and $1,070 thousand, respectively. Ordinary Shares Valuation Due to the absence of public trading market for the Company’s common stock before February 2022, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its ordinary shares. In determining the exercise prices for options to be issued, the estimated fair value of the Company’s common stock on each grant date was estimated based upon a variety of factors, including: ● the issuance prices of shares of common stock; ● the rights and preferences of holders of preferred stock; ● the progress of the Company’s research and development programs; ● the Company’s stage of development and business strategy; ● external market conditions affecting the technology industry and trends within the technology industry; ● the Company’s financial position, including cash on hand; ● the Company’s historical and forecasted performance and operating results; ● the lack of active public market for the Company’s ordinary shares; ● the likelihood of achieving a liquidity event, such as a securities offering, initial public offering or a sale of the Company’s common stock From February 2022, the Company’s common stock is publicly traded, and the Company no longer has to estimate the fair value of the common stock, rather the value is determined based on quoted market prices. Significant changes to the key assumptions underlying the factors used could result in different fair values of ordinary shares at each valuation date. Shares of common stock are classified in stockholders’ equity and represent issued share capital. Share-based compensation All share-based payments, including grants of stock options, are measured based on the fair value of the share-based awards at the grant date and recognized over their respective vesting periods. Outstanding options generally expire 10 years after the grant date. The Company has issued options that vest based on service requirements and issued options that vest based on performance requirements. Options become exercisable when service requirements are met. In the case of performance-based options, options become exercisable when there is a liquidity event, such as a change in control or sale or admission (listing as a public company or initial public offering (“IPO”)), and the employee, or consultant, must be providing services to the Company at the time of the event. Due to the Exchange, all options outstanding immediately prior to the event with a performance obligation requirement became vested and exercisable. Non-cash stock-based compensation expense for the year ended December 31, 2022 and 2021were The estimated fair value of stock options at the grant date is determined using the Black-Scholes pricing model. The Black-Scholes option pricing model requires inputs such as the fair value of common stock on date of grant, expected term, expected volatility, dividend yield, and risk-free interest rate. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. The Company records forfeitures when they occur. Functional Currency and Operations Prior to the Exchange, SmartKem Limited’s (“the predecessor’s”) functional currency was the British Pound Sterling (“GBP”), and the consolidated financial statements were presented in United States dollars (“USD”). The predecessor’s functional currency was the respective local currency of the primary economic environment in which an entity’s operations are conducted. The predecessor translated the consolidated financial statements into the presentation currency using exchange rates in effect on the balance sheet date for assets and liabilities and average exchanges rates for the period for statement of operations accounts, with the difference recognized in accumulated other comprehensive income/ (loss). The Company’s functional currency is the U.S. dollar (“USD”). The functional currency of the Company’s foreign operation is the respective local currency. Assets and liabilities of foreign operations denominated in local currencies are translated at the spot rate in effect at the applicable reporting date. The consolidated statements of operations and comprehensive loss are translated at the weighted average rate of exchange during the applicable period. The resulting unrealized gain/loss is recognized as foreign currency translation as a component of other comprehensive income. Income Taxes Valuation allowance of deferred tax assets Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We considered the positive and negative evidence bearing upon its ability to realize the deferred tax assets. In addition to the Company’s history of cumulative losses, the Company cannot be certain that future taxable income will be sufficient to realize its deferred tax assets. Accordingly, a full valuation allowance has been provided against its net deferred tax assets at both December 31, 2022 and 2021. Should the Company change its determination, based on the evidence available as to the amount of its deferred tax assets that can be realized, the valuation allowance will be adjusted with a corresponding impact to the provision for income taxes in the period in which such determination is made and which may be material. As of December 31, 2022, and 2021, there were no material uncertain tax positions. Contingent Liabilities A provision for contingent liabilities is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. The Company is a party to certain litigation and disputes arising in the normal course of business. As of December 31, 2022, the Company does not expect that such matters will have a material adverse effect on the Company’s business, financial position, results of operations, or cash flows. Issuance Costs Direct and incremental legal and accounting costs associated with the Company’s issuance of common stock and warrants are deferred and classified as a component of other assets on the consolidated balance sheet until completion of the issuance. Upon completion of the issuance, deferred offering costs are reclassified from other assets to equity in additional paid-in capital and recorded against the net proceeds received in the issuance. For the year ended December 31, 2022, For the year ended December 31, 2021, $1.3 million of direct and incremental costs associated with the Exchange were recorded as Transaction Expenses in the Consolidated Statement of Operations and Comprehensive Loss. Segment Information The Company has determined that it operates and reports in one segment Basic and Diluted Loss Per Share Basic and diluted net loss per share is determined by dividing net loss by the weighted average ordinary shares outstanding during the period. For all periods presented with a net loss, the shares underlying the ordinary share options and warrants have been excluded from the calculation because their effect would be anti-dilutive. Therefore, the weighted-average shares outstanding used to calculate both basic and diluted loss per share are the same for periods with a net loss. The loss per share information in these consolidated financial statements is reflected and calculated as if the Company had existed since January 1, 2021. Accordingly, loss per share for all periods was calculated based on the number of shares retroactively adjusted for the exchange ratio determined in the reverse recapitalization (see also note 1). The Company has 2,168,000 pre-funded common stock warrants outstanding as of December 31, 2022, which became exercisable on April 23, 2021 based on terms and conditions of the agreements. As the pre-funded common stock warrants are exercisable for $0.01, these shares are considered outstanding common shares and included in computation of basic and diluted Earnings Per Share as the exercise of the pre-funded common stock warrants is virtually assured. The Company included these pre-funded common stock warrants in basic and diluted earnings per share when all conditions were met on April 23, 2021. The following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive: December 31, 2022 2021 Options 2,829,756 1,953,882 Warrants 985,533 985,533 Total 3,815,289 2,939,415 Recent Accounting Pronouncements In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments: Credit Losses (Topic 326) |
PREPAID EXPENSES AND OTHER CURR
PREPAID EXPENSES AND OTHER CURRENT ASSETS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | ||
PREPAID EXPENSES AND OTHER CURRENT ASSETS | 2. PREPAID EXPENSES AND OTHER CURRENT ASSETS: Prepaid expenses and other current assets consist of the following: March 31, December 31, (in thousands) 2023 2022 Prepaid service charges and property taxes $ 108 $ 55 Prepaid utilities 96 51 Prepaid insurance 589 358 Prepaid administrative expenses 76 35 Prepaid consulting fees 177 304 Prepaid technical fees 13 22 Research grant receivable 61 — VAT receivable 41 195 Other receivable and other prepaid expenses 50 36 Total prepaid expenses and other current assets $ 1,211 $ 1,056 As of March 31, 2023 and December 31, 2022, there was $160 thousand and $169 thousand respectively, of non-current prepaid insurance related to directors’ and officers’ liability insurance that was included in the amounts above. | 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS: Prepaid expenses and other current assets consist of the following: December 31, December 31, 2022 2021 Prepaid service charges and property taxes $ 55 $ 58 Prepaid utilities 51 51 Prepaid insurance 358 412 Prepaid administrative expenses 35 63 Prepaid technical fees 22 141 Prepaid consulting fees 304 27 VAT receivable 195 50 Other receivable and other prepaid expenses 36 — Total prepaid expenses and other current assets $ 1,056 $ 802 As of December 31, 2022 and 2021, there was $169 thousand and $217 thousand, respectively, of non-current prepaid insurance related to directors’ and officers’ liability insurance that was included in the amounts above. |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
PROPERTY, PLANT AND EQUIPMENT | ||
PROPERTY, PLANT AND EQUIPMENT | 3. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consist of the following: March 31, December 31, (in thousands) 2023 2022 Plant and equipment $ 1,519 $ 1,478 Furniture and fixtures 224 218 Computer hardware and software 24 24 1,767 1,720 Less: Accumulated depreciation (1,191) (1,118) Property, plant and equipment, net $ 576 $ 602 Depreciation expense was $42 thousand and $54 thousand for the three months ended March 31, 2023 and March 31, 2022, respectively, and is classified as research and development expense. | 4. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consist of the following: December 31, December 31, 2022 2021 Plant and equipment $ 1,478 $ 1,633 Furniture and fixtures 218 245 Computer hardware and software 24 26 1,720 1,904 Less: Accumulated depreciation (1,118) (1,102) Property, plant and equipment, net $ 602 $ 802 Depreciation expense was $198 thousand and $209 thousand for the year ended December 31, 2022 and 2021, respectively, and is classified as research and development expense. |
ACCOUNTS PAYABLE AND ACCRUED EX
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | ||
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following: March 31, December 31, (in thousands) 2023 2022 Accounts payable $ 456 $ 250 Accrued expenses – lab refurbishments 120 117 Accrued expenses – technical fees 84 130 Accrued expenses – audit & accounting fees 156 128 Accrued expenses – other 40 95 Payroll and social security liabilities 192 211 Total accounts payable and accrued expenses $ 1,048 $ 931 | 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following: December 31, December 31, 2022 2021 Accounts payable $ 230 $ 510 Accrued expenses – lab refurbishments 117 131 Accrued expenses – technical fees 130 66 Accrued expenses – variable rent & utilities 15 20 Accrued expenses – audit & accounting fees 128 191 Accrued expenses – other 80 112 Credit card liabilities 20 10 Payroll and social security liabilities 211 383 Total accounts payable and accrued expenses $ 931 $ 1,423 |
LEASES
LEASES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
LEASES | ||
LEASES | 5. LEASES: The Company has operating leases consisting of office space, lab space, and equipment with remaining lease terms of 1 to 3 years, subject to certain renewal options as applicable. There was no sublease rental income for the three months ended March 31, 2023 and 2022. The Company is not the lessor in any lease agreement, and no related party transactions for lease arrangements have occurred. The table below presents certain information related to the lease costs for the Company’s operating leases for the periods ended: Three Months Ended March 31, (in thousands) 2023 2022 Operating lease cost $ 64 $ 63 Short-term lease cost 4 2 Variable lease cost 45 54 Total lease cost $ 113 $ 119 The total lease cost is included in the unaudited condensed consolidated statements of operations as follows: March 31, (in thousands) 2023 2022 Research and development $ 104 $ 113 Selling, general and administrative 9 6 Total lease cost $ 113 $ 119 Right of use lease assets and lease liabilities for our operating leases were recorded in the unaudited condensed consolidated balance sheet as follows: March 31, December 31, (in thousands) 2023 2022 Assets Right of use assets - Operating Leases $ 431 $ 475 Total lease assets $ 431 $ 475 Liabilities Current liabilities: Lease liability, current - Operating Leases $ 225 $ 206 Noncurrent liabilities: Lease liability, non-current - Operating Leases 188 239 Total lease liabilities $ 413 $ 445 The Company had no right of use lease assets and lease liabilities for financing leases as of March 31, 2023 and December 31, 2022. The table below presents certain information related to the cash flows for the Company’s operating leases for the periods ended: March 31, (in thousands) 2023 2022 Operating cash outflows from operating leases $ 43 $ 40 Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets — — $ 43 $ 40 The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating leases as of the period ended: March 31, 2023 2022 Weighted average remaining lease term (in years) – operating leases 2.15 1.42 Weighted average discount rate – operating leases 7.77% 6.03% Undiscounted operating lease liabilities as of March 31, 2023 and December 31, 2022, by year and in the aggregate, having non-cancelable lease terms in excess of one year were as follows: March 31, December 31, (in thousands) 2023 2022 2023 $ 188 $ 234 2024 241 234 2025 18 19 Total undiscounted lease payments 447 487 Less imputed interest (34) (42) Total net lease liabilities $ 413 $ 445 | 6. LEASES: The Company has operating leases consisting of office space, lab space, and equipment with remaining lease terms of 1 to 3 years, subject to certain renewal options as applicable. There was no sublease rental income for the year ended December 31, 2022 and 2021. The Company is not the lessor in any lease agreement, and no related party transactions for lease arrangements have occurred. The table below presents certain information related to the lease costs for the Company’s operating leases for the periods ended: For the Year Ended December 31, 2022 2021 Operating lease cost $ 262 $ 225 Short-term lease cost 10 32 Variable lease cost 186 140 Total lease cost $ 458 $ 397 The total lease cost is included in the consolidated statements of operations as follows: For the Year Ended December 31, 2022 2021 Research and development $ 430 $ 373 Selling, general and administrative 28 24 Total lease cost $ 458 $ 397 Right of use lease assets and lease liabilities for our operating leases were recorded in the consolidated balance sheets as follows: December 31, December 31, 2022 2021 Assets Operating lease right of use assets $ 475 $ 154 Total lease assets $ 475 $ 154 Liabilities Current liabilities: Operating lease liability – current portion $ 206 $ 87 Noncurrent liabilities: Operating lease liability, net of current portion 239 28 Total lease liabilities $ 445 $ 115 The Company had no right of use lease assets and lease liabilities for financing leases as of December 31, 2022 and 2021. The table below presents certain information related to the cash flows for the Company’s operating leases for the periods ended: For the Year Ended December 31, 2022 2021 Operating cash outflows from operating leases $ 265 $ 276 Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets $ 583 $ 136 The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating leases as of the period ended: For the Year Ended December 31, 2022 2021 Weighted average remaining lease term (in years) – operating leases 2.19 1.40 Weighted average discount rate – operating leases 7.73 % 6.07 % Undiscounted operating lease liabilities as of December 31, 2022, by year and in the aggregate, having non-cancelable lease terms in excess of one year were as follows: As of December 31, 2022 2023 $ 234 2024 234 2025 19 Total undiscounted lease payments 487 Less imputed interest (42) Total net lease liabilities $ 445 |
NOTES PAYABLE
NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2022 | |
NOTES PAYABLE. | |
NOTES PAYABLE | 7. NOTES PAYABLE: On January 26, 2021, the Company entered into a term loan facility agreement for the amount of $738 thousand. The funds were available to be drawn on from the effective date of the agreement through to January 27, 2021. The Company drew down the full loan amount on January 26, 2021. The Company’s research and development tax credit was to be utilized as collateral. The Lender was to be paid immediately following payment of research and development tax credit from the United Kingdom’s HM Revenue and Customs. The final repayment was due six months from the agreement date, if the loan and any interest was not repaid in full prior to this date. The loan carried a monthly interest rate of 1.25%. The interest accrued daily and compounded monthly on the monthly anniversary of the draw down date of the loan. For the year ended December 31, 2021, the Company incurred an effective interest rate of 26.20% relating to notes payable. The interest expense recognized based on the debt’s effective interest rate for the year ended December 31, 2022 and 2021, was zero and $19 thousand, respectively, relating to notes payable. The Company repaid the note payable in full on March 2, 2021. There were no notes payable outstanding at the years ended December 31, 2022 and 2021. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
COMMITMENTS AND CONTINGENCIES. | ||
COMMITMENTS AND CONTINGENCIES | 6. COMMITMENTS AND CONTINGENCIES Legal proceedings In the normal course of business, the Company may become involved in legal disputes regarding various litigation matters. In the opinion of management, any potential liabilities resulting from such claims would not have a material effect on the interim condensed consolidated financial statements. Commitments Capital expenditure commitments and unconditional purchase obligations contracted for but not yet incurred as of March 31, 2023, totaled $540 thousand and primarily consists of purchase commitments in the normal course of business for research & development services, communications infrastructure and administrative services. | 8. COMMITMENTS AND CONTINGENCIES: Legal proceedings In the normal course of business, the Company may become involved in legal disputes regarding various litigation matters. In the opinion of management, any potential liabilities resulting from such claims would not have a material effect on the consolidated financial statements. Commitments Expenditure commitments contracted for but not yet incurred totaled $681 thousand and primarily consists of purchase commitments in the normal course of business for research & development services, communications infrastructure and administrative services. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
STOCKHOLDERS' EQUITY | ||
STOCKHOLDERS' EQUITY | 7. STOCKHOLDERS’ EQUITY Common Stock Voting Rights Each holder of common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. The Company’s amended and restated certificate of incorporation and the Company’s amended and restated bylaws do not provide for cumulative voting rights. The holders of one-third of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, constitutes a quorum for the transaction of business at all meetings of the stockholders. Dividends The Company has never paid any cash dividends to stockholders and do not anticipate paying any cash dividends to stockholders in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant. Market Information Quotations on our common stock on the OTC Market Group’s OTCQB® Market quotation system (“OTCQB”) commenced under the ticker symbol “SMTK” in February 2022. There was no trading of our common stock on the OTCQB or any other over-the-counter market prior to February 2022. Common Stock Issued to Vendors for Services On January 6, 2023, the Company issued 50,000 shares of common stock, as payment for investor relations and other financial consulting services. On February 27, 2023, the Company issued 52,777 shares of common stock as payment for investor relations services. Preferred Stock The Company currently has no shares of preferred stock outstanding. The board of directors has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences, and privileges could include dividend rights, conversion rights, voting rights, redemption rights, liquidation preferences, sinking fund terms, and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock. Common Stock Warrants On February 23, 2021, a total of 985,533 fully vested common stock warrants were issued to a vendor for financial advisory services provided in connection with the sale of the Company’s common stock. The common stock warrants are exercisable at a per share price of $2.00 until they expire on February 23, 2026. During the three months ended March 31, 2023 and March 31, 2022, respectively, no warrants issued to vendors for financial advisory services were exercised. The grant date fair value for these warrants of $0.91 per warrant for a total fair value of $896 thousand, was determined using the Black-Scholes options valuation model. There were no warrants issued during the three months ended March 31, 2023. A summary of the Company’s warrants to purchase common stock activity is as follows: Weighted- Average Weighted- Remaining Average Contractual Number of Exercise Term Shares Price (Years) Warrants outstanding at January 1, 2023 985,533 $ 2.00 3.15 Forfeited — Cancelled — Granted — Warrants outstanding at March 31, 2023 985,533 $ 2.00 2.90 On February 23, 2021, a total of 2,168,000 pre-funded common stock warrants were issued to investors with an exercise price of $0.01 per share for total proceeds to the Company of $4.3 million. During the three months ended March 31, 2023, no warrants A summary of the Company’s pre-funded warrants to purchase common stock activity is as follows: Weighted- Average Number of Exercise Shares Price Pre-funded warrants outstanding at January 1, 2023 2,168,000 $ 0.01 Forfeited — Cancelled — Granted — Pre-funded warrants outstanding at March 31, 2023 2,168,000 $ 0.01 The grant date fair value of common stock warrants is determined using the Black Scholes option-pricing model. There was no public trading market for our shares before February 2022 and the Company estimates its expected stock volatility based on historical volatility of publicly traded peer companies. | 9. STOCKHOLDERS’ EQUITY: Common Stock Voting Rights Each holder of common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. The Company’s amended and restated certificate of incorporation and the Company’s amended and restated bylaws do not provide for cumulative voting rights. The holders of one-third of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. Dividends The Company has never paid any cash dividends to shareholders and does not anticipate paying any cash dividends to shareholders in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant. Market Information Our common stock is traded on the OTC Market Group’s OTCQB® Market (“OTCQB”) under the ticker symbol “SMTK”. Preferred Stock The Company currently has no shares of preferred stock outstanding. The board of directors has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences, and privileges could include dividend rights, conversion rights, voting rights, redemption rights, liquidation preferences, sinking fund terms, and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock. Common Stock Warrants On February 23, 2021, a total of 985,533 fully vested common stock warrants were issued to a vendor for financial advisory services provided in connection with the sale of the Company’s common stock. The common stock warrants are exercisable at a per share price of $2.00 until they expire on February 23, 2026. During the years ended December 31, 2021 and December 31, 2022, no warrants issued to vendors for financial advisory services were exercised. The grant date fair value for these warrants of $0.91 per warrant for a total fair value of $896 thousand, was determined using the Black-Scholes options valuation model. The Company recorded the warrants at fair value, as both an increase and decrease in additional paid-in capital during the year ended December 31, 2021. A summary of the Company’s warrants to purchase common stock activity is as follows: Weighted- Average Weighted- Remaining Average Contractual Number of Exercise Term Shares Price (Years) Warrants outstanding at January 1, 2021 — $ — — Exercised — — — Forfeited or Expired — — — Granted 985,533 2.00 5.00 Warrants outstanding at January 1, 2022 985,533 $ 2.00 4.15 Exercised — — — Forfeited or Expired — — — Granted — — — Warrants outstanding at December 31, 2022 985,533 $ 2.00 3.15 On February 23, 2021, a total of 2,168,000 pre-funded common stock warrants were issued to investors with an exercise price of $0.01 per share for total proceeds to the Company of $4,314 thousand. During the years ended December 31, 2021, and December 31, 2022, no warrants issued to investors were exercised. The grant date fair value for these warrants of $1.99 is based on the stock price at issuance date of $2.00 less the exercise price of $0.01. The pre-funded common stock warrants have no expiration date and terminate upon exercise. A summary of the Company’s pre-funded warrants to purchase common stock activity is as follows: Weighted- Average Number of Exercise Shares Price Pre-funded warrants outstanding at January 1, 2021 — $ — Exercised — — Forfeited or Expired — — Granted 2,168,000 0.01 Pre-funded warrants outstanding at January 1, 2022 2,168,000 $ 0.01 Exercised — — Forfeited or Expired — — Granted — — Pre-funded warrants outstanding at December 31, 2022 2,168,000 $ 0.01 The grant date fair value of common stock warrants is determined using the Black-Scholes option-pricing model. There was no public trading market for our shares before February 2022 and the Company estimated its expected stock volatility based on historical volatility of publicly traded peer companies. The Company did not issue any warrants in the year ended December 31, 2022. Common Stock Issued to Vendors for Services On February 23, 2021, the Company issued 50,000 shares of common stock for advisory services. On May 27, 2021, and November 29, 2021, the Company issued 25,000 and 12,500 shares of common stock, respectively, as payment for investor relations services. On August 13, 2021, the company issued 60,000 shares of common stock for advisory services. On February 28, 2022, May 27, 2022, and November 29, 2022, the Company issued 12,500, 22,473 and 35,714 shares of common stock, respectively, as payment for investor relations services. On June 29, 2022, the Company issued 360,000 shares of common stock as payment for a one-year internet advertising contract. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
SHARE-BASED COMPENSATION | ||
SHARE-BASED COMPENSATION | 8. SHARE-BASED COMPENSATION: On February 23, 2021, the Company approved the 2021 Equity Incentive Plan (“2021 Plan”), in which a maximum aggregate number of shares of common stock that may be issued under the 2021 Plan is 4,376,571 Determining the appropriate fair value of share-based awards requires the input of subjective assumptions, including the fair value of the Company’s common stock, and for share options, the expected life of the option, and expected share price volatility. The Company uses the Black-Scholes option pricing model to value its share option awards. The assumptions used in calculating the fair value of share-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, the share-based compensation expense could be materially different for future awards. There were no options granted under the 2021 Plan for the three months ended March 31, 2023 or March 31, 2022. Prior to February 2022, in the absence of a public trading market for the common stock, on each grant date, the Company developed an estimate of the fair value of the shares of common stock underlying the option grants. The Company estimated the fair value of the shares of common stock by referencing arms-length transactions inclusive of the shares of common stock underlying which occurred on or near the valuation date(s). The Company determined the fair value of the common stock using methodologies, approaches and assumptions consistent with the AICPA Practice Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation and based in part on input from an independent third-party valuation firm. From February 2022, the Company’s common stock is publicly traded, and the Company no longer has to estimate the fair value of the shares of common stock, rather the value is determined based on quoted market prices. The Company estimates its expected volatility by using a combination of historical share price volatilities of similar companies within our industry. The risk-free interest rate assumption is based on observed interest rates for the appropriate term of the Company’s options on a grant date. The contractual term is 10 years, and the expected option term is lower. The following table reflects share activity under the share option plans for three months ended March 31, 2023: Weighted- Average Weighted- Remaining Weighted- Aggregate Average Contractual Average Intrinsic Number of Exercise Term Fair Value at Value (in thousands) Shares Price (Years) Grant Date (in thousands) Options outstanding at January 1,2023 2,829,756 $ 1.81 8.77 $ 0.98273 Exercised — — Cancelled/Forfeited — — Expired (28,036) 0.12 Granted — — Options outstanding at March 31, 2023 2,801,720 $ 1.83 7.60 $ 0.97345 Options exercisable at March 31, 2023 1,252,870 $ 1.61 6.04 $ 63 Stock-based compensation, including stock options and warrants is included in the unaudited interim condensed consolidated statements of operations as follows: Three Months Ended March 31, (in thousands) 2023 2022 Research and development $ 70 $ 40 Selling, general and administration 223 58 Total $ 293 $ 98 Total compensation cost related to non-vested stock option awards not yet recognized as of March 31, 2023 was $1.1 million and will be recognized on a straight-line basis through the end of the vesting periods in July 2026. The amount of future stock option compensation expense could be affected by any future option grants or by any forfeitures. | 10. SHARE-BASED COMPENSATION: On February 23, 2021, the Company approved the 2021 Equity Incentive Plan (“2021 Plan”), in which a maximum aggregate number of shares of common stock that may be issued under the 2021 Plan is 2,275,000 shares. Subject to the adjustment provisions of the 2021 Plan, the number of shares of the Company’s common stock available for issuance under the 2021 Plan will also include an annual increase on the first day of each fiscal year beginning with 2022 fiscal year and ending on the Company’s 2031 fiscal year in an amount equal to the least of: 1) 2,275,000 shares of the Company’s common stock; 2) four percent (4%) of the outstanding shares of the Company’s common stock on the last day of the immediately preceding fiscal year; or 3) such number of shares of the Company’s common stock as the administrator may determine. As of January 1, 2021, there were 1,810,749 SmartKem Limited options that were outstanding. Of these options 1,424,622 were accelerated and exercised by the holders thereof for a like number of ordinary shares of SmartKem Limited and exchanged for shares of the Company’s common stock pursuant to the Exchange. As a result of the reverse merger and recapitalization, an aggregate of 402,586 options were issued during February 2021 under the 2021 Plan in consideration for the cancellation of the SmartKem Limited options that were outstanding. Of these options, 336,557 had an exercise price of $0.001 per share and 66,029 had an exercise price of $2.00 per share and all expire on the ten-year anniversary of the grant date. These options were fully vested on the grant date. During the year ended December 31, 2022, the Company issued additional options exercisable for 918,000 shares of common stock to employees, directors and consultants. The options vest over a period of three ten-year Determining the appropriate fair value of share-based awards requires the input of subjective assumptions, including the fair value of the Company’s common shares, and for share options, the expected life of the option, and expected share price volatility. The Company uses the Black-Scholes option pricing model to value its share option awards. The assumptions used in calculating the fair value of share-based awards represent management’s best estimates and involves inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, the share-based compensation expense could be materially different for future awards. Options granted under the 2021 Plan for year ended December 31, 2022, and December 31, 2021, were valued using the Black-Scholes option-pricing model with the following assumptions: Year Ended Year Ended December 31, 2022 December 31, 2021 Expected term (years) 6 years - 6.3 years 5 years - 6 years Risk-free interest rate 3.1% - 3.6% 0.3% - 1.2% Expected volatility 64% 54% - 58% Expected dividend yield 0% 0% Prior to February 2022, in the absence of a public trading market for the common stock, on each grant date, the Company developed an estimate of the fair value of the shares of common stock underlying the option grants. The Company estimated the fair value of the shares of common stock by referencing arms-length transactions inclusive of the shares of common stock underlying which occurred on or near the valuation date(s). The Company determined the fair value of the common stock using methodologies, approaches and assumptions consistent with the AICPA Practice Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation and based in part on input from an independent third-party valuation firm. From February 2022, the Company’s common stock is publicly traded, and the Company no longer has to estimate the fair value of the shares of common stock, rather the value is determined based on quoted market prices. The Company estimates its expected volatility by using a combination of historical share price volatilities of similar companies within our industry. The risk-free interest rate assumption is based on observed interest rates for the appropriate term of the Company’s options on a grant date. The following table reflects share activity under the option plans for the years ended December 31, 2022, and 2021: Weighted- Average Weighted- Remaining Weighted- Aggregate Average Contractual Average Intrinsic Number of Exercise Term Fair Value at Value Shares Price (Years) Grant Date (in thousands) Options outstanding at January 1, 2021 1,810,749 $ 0.06143 9.70 $ 3.46867 Exercised (1,424,622) 0.01447 Cancelled (405,936) 0.06452 Forfeited (136,221) 0.00100 Granted 2,109,912 1.68113 Options outstanding at December 31, 2021 1,953,882 $ 1.72323 9.31 $ 1.12355 Exercised — — Cancelled — — Forfeited (42,126) 2.00000 Granted 918,000 2.00000 Options outstanding at December 31, 2022 2,829,756 $ 1.80889 8.77 $ 0.98273 Options exercisable at December 31, 2022 986,636 $ 1.45189 8.26 $ 162 Vested and expected to vest after December 31, 2022 2,829,756 $ 1.80889 8.77 The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of our common stock at the end of the year for those options that had exercise prices lower than the fair value of our common stock. No options were exercised in the year end December 31, 2022. The aggregate intrinsic value of options exercised during the year ended December 31, 2021, was $2.4 million. The total fair value of options vesting in the year ended December 31, 2022 was $690 thousand. The total fair value of options vesting in the year ended December 31, 2021 was $6.6 million. The weighted-average grant date fair value per option granted for the year ended December 31, 2022 and 2021 was Stock-based compensation, including stock options is included in the consolidated statements of operations as follows: For the Year Ended December 31, 2022 2021 Research and development $ 216 $ 2,982 Selling, general and administrative 272 3,214 Total $ 488 $ 6,196 As of December 31, 2022, there was $1.4 million of compensation cost related to non-vested stock option awards not yet recognized that will be recognized on a straight-line basis through the end of the vesting periods in July 2026. The amount of future stock option compensation expense could be affected by any future option grants or by any forfeitures. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2022 | |
INCOME TAXES | |
INCOME TAXES | 11. INCOME TAXES United States and foreign profit/(loss) from operations before income taxes was as follows: For the Year Ended December 31, 2022 2021 United States $ 584 $ (5,039) Foreign (12,055) (12,087) Loss before income taxes $ (11,471) $ (17,126) A reconciliation of the statutory income tax rate to the Company’s effective tax rate consists of the following: Year Ended December 31, 2022 2021 Taxes at domestic rate 21.0 % 21.0 % State and local income taxes — % — % Non-US statutory rates 2.9 % (0.8) % Permanent items (6.3) % (7.3) % Change in valuation allowance (17.9) % (22.4) % Statutory Rate Change — % 9.6 % Other 0.1 % (0.1) % Effective tax rate (0.2) % (0.0) % The components of income tax provision/(benefit) are as follows: December 31, 2022 2021 Current Federal — — State 2 — Foreign 22 — Total Current $ 24 $ — Deferred Federal — — State — — Foreign — — Total Deferred — — Total $ 24 $ — Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The temporary differences that give rise to deferred tax assets and liabilities are as follows: December 31, 2022 2021 Deferred tax assets/(liabilities): Net operating loss carryforwards $ 9,151 $ 7,506 Property plant and equipment (150) (190) Other 68 229 9,069 7,545 Valuation allowance (9,069) (7,545) Deferred tax assets, net of allowance $ — $ — The Company recorded a full valuation allowance against its net deferred tax assets as of December 31, 2022, and 2021. The Company considered the positive and negative evidence bearing upon its ability to realize the deferred tax assets. In addition to the Company’s history of cumulative losses, the Company cannot be certain that future taxable income will be sufficient to realize its deferred tax assets. Accordingly, a full valuation allowance has been provided against its net deferred tax assets. When the Company changes its determination as to the amount of its deferred tax assets that can be realized, the valuation allowance is adjusted with a corresponding impact to the provision for income taxes in the period in which such determination is made. As of December 31, 2022, and 2021, the Company had net operating loss carry-forwards of approximately $39.5 million and $30.7 million, respectively. The net operating loss carry-forwards were generated in the tax years from 2009 to 2022 with an unlimited carry-forward period. The Company has no uncertain tax positions, or penalties and interest accrued, that if recognized would reduce net operating loss carry-forwards or affect tax expense. The Company files tax returns as prescribed by the tax laws in the Unites States and United Kingdom in which they operate. In the normal course of business, the Company is subject to examination by the federal jurisdiction based on the statute of limitations. As of December 31, 2022, open years related to the United States and United Kingdom are 2019 to 2021. The Company has no open tax audits with any taxing authority as of December 31, 2022. As of December 31, 2022, and December 31, 2021, the Company had no accrued interest and penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations. |
DEFINED CONTRIBUTION PENSION
DEFINED CONTRIBUTION PENSION | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
DEFINED CONTRIBUTION PENSION | ||
DEFINED CONTRIBUTION PENSION | 9. DEFINED CONTRIBUTION PENSION: The Company operates a defined contribution pension scheme for its UK employees. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund. Pension cost is included in the unaudited interim condensed consolidated statements of operations as follows: Three Months Ended March 31, (in thousands) 2023 2022 Research and development $ 22 $ 27 Selling, general and administration 18 14 Total $ 40 $ 41 As of March 31, 2023 there was a liability of $7 thousand owed to the plan, and December 31, 2022 there were no amounts owed to the pension scheme. | 12. DEFINED CONTRIBUTION PENSION: The Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund. Pension cost is included in the consolidated statements of operations as follows: For the Years End December 31, 2022 2021 Research and development $ 108 $ 98 Selling, general and administrative 52 42 Total pension cost $ 160 $ 140 As of December 31, 2022, there was $1 thousand owed to the pension scheme that is recorded under accounts payable and accrued expenses on the consolidated balances sheets. As of December 31, 2021, there were no amounts owed to the pension scheme. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
RELATED PARTY TRANSACTIONS | ||
RELATED PARTY TRANSACTIONS | 10. RELATED PARTY TRANSACTIONS: There were no related party transactions during the three months ended March 31, 2023. | 13. RELATED PARTY TRANSACTIONS: In addition to transactions and balances related to share-based compensation to officers and directors, the Company incurred expenses of $110 thousand and $65 thousand, for the year ended December 31, 2022 and 2021, respectively, due to reimbursement of expenses and compensation for members of the Board of Directors. These expenses are recorded in selling, general & administrative in the consolidated statements of operations. As of December 31, 2022 and December 31, 2021, there was $16 thousand and $18 thousand, respectively, payable to members of the Board of Directors that are recorded in accounts payable and accrued expenses on the consolidated balance sheets. During the year ended December 31, 2021, the Company reimbursed an owner for legal fees and other expenses as a result of the Exchange (see Note 1). The reimbursement of these fees for services resulted in an expense of $66 thousand for the year ended December 31, 2021 and there was zero payable as of December 31, 2021. During the year ended December 31, 2021, the Company obtained consulting services from an individual who is a family member of a Director of the Company. The consulting services resulted in an expense of $35 thousand for the year ended December 31, 2021 and there was zero payable as of December 31, 2021. Octopus Share Purchase On January 27, 2022, we sold an aggregate of 1,000,000 shares of our common stock at a purchase price of $2.00 per share to Octopus Titan VCT plc and Octopus Investments Nominees Limited in accordance with the Letter Agreement, dated as of February 23, 2021, between the Company and Octopus Titan VCT plc and certain related parties. During the year ended December 31, 2022, the Company reimbursed an owner for legal fees and other expenses as a result of the Octopus Share Purchase. The reimbursement of these fees for services resulted in an expense of payable as of December 31, 2022. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
SUBSEQUENT EVENTS | ||
SUBSEQUENT EVENTS | 11. SUBSEQUENT EVENTS: There are no subsequent events to report as of the date of this filing. | 14. SUBSEQUENT EVENTS: Under the evergreen adjustment provisions of the 2021 Plan, on January 1, 2023 the number of shares of the Company’s common stock available for issuance under the 2021 Plan was increased by 1,079,399 or four percent (4%) of the total number of shares of Common Stock outstanding on December 31, 2022. After giving effect to increase, the total number of shares of Common Stock that may be issued under Plan will be 4,376,571. In January 2023, 50,000 shares of our common stock were issued to a vendor in consideration for services to be provided. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Basis of Presentation | Basis for Presentation These consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and accounting principles generally accepted in the United States of America (“US GAAP”) as defined by the Financial Accounting Standards Board (FASB) within the FASB Accounting Standards Codification (“ASC”) and are presented in thousands, except number of shares and per share data. | |
Basis of Consolidation | Basis of Consolidation The consolidated financial statements include the accounts of SmartKem, Inc. and its wholly-owned subsidiaries, SmartKem Delaware, Inc. and SmartKem Limited. The Company does not have any nonconsolidated subsidiaries. All intercompany balances and transactions have been eliminated on consolidation, including unrealized gains and losses on transactions between the companies. The Company’s formerly wholly owned subsidiary, SmartKem Delaware Inc. was dissolved on May 13, 2021. | |
Comprehensive Loss | Comprehensive loss Comprehensive loss of all periods presented is comprised primarily of net loss and foreign currency translation adjustments. | |
Management's Use of Estimates | Management’s Use of Estimates The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities, at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates in the Company’s consolidated financial statements relates to the valuation of common share, fair value of share options, fair value of embedded conversion features in the convertible notes, and the valuation allowance of deferred tax assets. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the consolidated financial statements, actual results may materially vary from these estimates. | |
Certain Risk and Uncertainties | Certain Risk and Uncertainties The Company’s activities are subject to significant risks and uncertainties including the risk of failure to secure additional funding to properly execute the Company’s business plan. The Company is subject to risks that are common to companies in the growth stage, including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, reliance on third party manufacturers, protection of proprietary technology, and compliance with regulatory requirements. The Company has access under a framework agreement to equipment which is used in the manufacturing of demonstrator products employing the Company’s inks. If the Company lost access to this fabrication facility, it would materially and adversely affect the Company’s ability to manufacture prototypes and demonstrate products for potential customers. The loss of this access could significantly impede the Company’s ability to engage in product development and process improvement activities. Alternative providers of similar services exist, but would take effort and time to bring into the Company’s operations. | |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. As of December 31, 2022 and 2021, the Company did not have any cash equivalents. | |
Accounts Receivable | Accounts Receivable Accounts receivable are stated at the amount the Company expects to collect and do not bear interest. The Company considers the following factors when determining the collectability of specific customer accounts: customer creditworthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. These receivables have historically been paid timely. Due to the nature of the accounts receivable balance, the Company believes there is no significant risk of non-collection. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, allowances for doubtful accounts would be required. There was no allowance for doubtful accounts recorded as of December 31, 2022, and 2021. | |
Concentrations of Credit Risk | Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. Periodically, the Company maintains deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality and the Company has not experienced any losses in these deposits. | |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment is stated at cost, less accumulated depreciation. Maintenance and repairs are expensed when incurred. Additions and improvements that extend the economic useful life of the asset are capitalized and depreciated over the remaining useful lives of the assets. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any resulting gain or loss is reflected in current earnings. Depreciation and amortization are provided using the accelerated declining balance method in amounts considered to be sufficient to amortize the cost of the assets to operations over their estimated useful lives. Property, plant and equipment is depreciated over an estimated useful life of approximately 4 years. | |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Management continually evaluates whether events or changes in circumstances might indicate that the remaining estimated useful life of long-lived assets may warrant revision, or that the remaining balance may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the related undiscounted cash flows in measuring whether the long-lived asset should be written down to fair value. Measurement of the amount of impairment would be based on generally accepted valuation methodologies, as deemed appropriate. If the carrying amount is greater than the undiscounted cash flows, the carrying amount of the asset is reduced to the asset’s fair value. An impairment loss is recognized immediately as an operating expense in the consolidated statements of operations. Reversal of previously recorded impairment losses are prohibited. As of December 31, 2022, and 2021, Company’s management believed that no revision to the remaining useful lives or impairment of the Company’s long-lived assets was required. | |
Derivative Asset for Embedded Conversion Features | Derivative Asset for Embedded Conversion Features The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates convertible notes to determine if those contracts or embedded components of those contracts qualify as derivatives to be accounted for separately. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. The result of this accounting treatment is that the fair value of the embedded derivative is recorded as a liability and marked-to-market each balance sheet date, with the change in fair value recorded in the statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. The fair value of the embedded conversion features is estimated using a Monte Carlo simulation model, in which possible outcomes and their values are simulated repeatedly and randomly. Under the Monte Carlo method the Company estimated the fair value of the convertible notes conversion feature at the time of issuance and subsequent remeasurement dates, utilizing the with-and without method, where the value of the derivative feature is the difference in values between a note simulated with the embedded conversion feature and the value of the same note simulated without the embedded conversion feature. Estimating fair values of embedded conversion features requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments ASC 820, Fair Value Measurements The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace. Level 3: Unobservable inputs which are supported by little, or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the years ended December 31, 2022, and 2021. The carrying value of the Company’s cash, accounts receivable, other receivables, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value because of the short-term maturity of these financial instruments. | |
Convertible Notes | Convertible Notes The Company accounts for its convertible notes in accordance with ASC 470-20, Debt with Conversion and Other Options Debt discount created by the bifurcation of embedded feature in the convertible notes are reflected as a reduction to the related debt liability. The discount is amortized to interest expense over the term of the debt using the effective-interest method. | |
Warrants | Warrants The accounting treatment of warrants issued is determined pursuant to the guidance provided by ASC 480, Distinguishing Liabilities from Equity Derivatives and Hedging forced conversions, dividends, and exercise are assessed with determinations made regarding the proper classification in the Company’s consolidated financial statements. The Company determined that all warrants meet the criteria to be classified as equity. | |
Non-retirement Post-employment Benefits | Non-retirement Post-employment Benefits The company records employee severance benefits as non-retirement post-employment benefits that are accounted for under ASC 712-10. A liability is accrued when it becomes probable that a payment will be made, and the amount is estimable. In most cases, a payment is not deemed probable until the employer makes the decision to terminate the employee. All severance payments identified were paid and expensed in the period incurred. | |
Leases | Leases Operating lease assets are included within operating lease right-of-use assets, and the corresponding operating lease obligation on the consolidated balance sheets as of December 31, 2022 and 2021. The Company has elected not to present short-term leases as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of the Company’s leases do not provide an implicit rate of return, the Company used an incremental borrowing rate based on the information available at adoption date of ASC 842 (January 1, 2019) in determining the present value of lease payments. | |
Revenue | Revenue The Company applies the provisions of ASC 606, Revenue from Contracts with Customers The Company’s current contracts with customers do not contain significant estimates or judgments. All of the Company’s revenue contains a single performance obligation that is recognized upon fulfilment of the sales order. The Company derives its revenues primarily from sales of TRUFLEX® inks and of demonstrator units to customers evaluating organic semiconductor technology. The transaction price is stated in each customer agreement and is allocated to a single performance obligation. Revenue is recognized upon shipment of each TRULFEX® ink or demonstrator, at a point in time. The Company does not have any significant financing components as payment is received at or shortly after the point of sale. Costs incurred to obtain a contract will be expensed as incurred when the amortization period is less than a year. | |
Collaboration Arrangements | Collaboration Arrangements The company entered into several joint development agreements during the year. The business arrangement between the two parties is not accounted for as a Collaborative Arrangement, as defined within the guidance under ASC 808, as both parties are not exposed to significant risks and rewards dependent on the commercial success of the activity. It has also determined that other party is a vendor and not a customer, as defined within the guidance under ASC 606, as the other party did not primarily contract with SmartKem to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration. It was SmartKem that contracted with the other party to obtain design services from it. These agreements are accounted for under the guidance of ASC 705, Cost of Sales and Service. Within ASC 705–20, Accounting for Consideration Received from a Vendor, the section discusses the accounting for consideration received by an entity from a vendor or supplier. Consideration from a vendor includes cash amounts that an entity receives or expects to receive from a vendor (or from other parties that sell the goods or services to the vendor). Consideration from a vendor also includes credit or other items (e.g., a coupon or voucher) that the entity can apply against amounts owed to the vendor (or to other parties that sell the goods or services to the vendor). Consideration from a vendor should be accounted for as a reduction of the purchase price of the goods or services acquired from the vendor unless the consideration from the vendor is one of the following, a) in exchange for a distinct good or service; b) a reimbursement of costs incurred by the entity to sell the vendor’s products; or c) consideration for sales incentives offered to customers by manufacturers. | |
Research and Development Expenses | Research and Development Expenses The Company expenses research and development costs as incurred. Research and development costs include salaries, employee benefit costs, direct project costs, supplies and other related costs. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. | |
Patent and Licensing Costs | Patent and Licensing Costs Patent and licensing costs are expensed as incurred because their realization is uncertain. These costs are classified as research and development expenses in the accompanying consolidated statements of operations and comprehensive loss. | |
Other Operating Income | Other Operating Income The Company’s other operating income includes government grants received for qualifying research and development projects, and research and development tax credits related to the United Kingdom’s Research and Development tax relief for small and medium-sized enterprises, which is a government tax incentive designed to reward innovative companies for investing in research and development. Such incentives are recorded as other income when it is probable the amounts are collectible and can be reasonably estimated. For the year ended December 31, 2022 and 2021, the Company recorded grant income and research & development tax credits of $1,172 thousand and $1,285 thousand, respectively, which are recorded as other operating income in the accompanying consolidated statements of operations. As of December 31, 2022, and December 31, 2021, the Company had receivables related to research & development tax credits for payments not yet received of $1,121 thousand and $1,070 thousand, respectively. | |
Share-based Compensation | Share-based compensation All share-based payments, including grants of stock options, are measured based on the fair value of the share-based awards at the grant date and recognized over their respective vesting periods. Outstanding options generally expire 10 years after the grant date. The Company has issued options that vest based on service requirements and issued options that vest based on performance requirements. Options become exercisable when service requirements are met. In the case of performance-based options, options become exercisable when there is a liquidity event, such as a change in control or sale or admission (listing as a public company or initial public offering (“IPO”)), and the employee, or consultant, must be providing services to the Company at the time of the event. Due to the Exchange, all options outstanding immediately prior to the event with a performance obligation requirement became vested and exercisable. Non-cash stock-based compensation expense for the year ended December 31, 2022 and 2021were The estimated fair value of stock options at the grant date is determined using the Black-Scholes pricing model. The Black-Scholes option pricing model requires inputs such as the fair value of common stock on date of grant, expected term, expected volatility, dividend yield, and risk-free interest rate. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. The Company records forfeitures when they occur. | |
Functional Currency and Operations | Functional Currency and Operations Prior to the Exchange, SmartKem Limited’s (“the predecessor’s”) functional currency was the British Pound Sterling (“GBP”), and the consolidated financial statements were presented in United States dollars (“USD”). The predecessor’s functional currency was the respective local currency of the primary economic environment in which an entity’s operations are conducted. The predecessor translated the consolidated financial statements into the presentation currency using exchange rates in effect on the balance sheet date for assets and liabilities and average exchanges rates for the period for statement of operations accounts, with the difference recognized in accumulated other comprehensive income/ (loss). The Company’s functional currency is the U.S. dollar (“USD”). The functional currency of the Company’s foreign operation is the respective local currency. Assets and liabilities of foreign operations denominated in local currencies are translated at the spot rate in effect at the applicable reporting date. The consolidated statements of operations and comprehensive loss are translated at the weighted average rate of exchange during the applicable period. The resulting unrealized gain/loss is recognized as foreign currency translation as a component of other comprehensive income. | |
Income Taxes | Income Taxes Valuation allowance of deferred tax assets Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We considered the positive and negative evidence bearing upon its ability to realize the deferred tax assets. In addition to the Company’s history of cumulative losses, the Company cannot be certain that future taxable income will be sufficient to realize its deferred tax assets. Accordingly, a full valuation allowance has been provided against its net deferred tax assets at both December 31, 2022 and 2021. Should the Company change its determination, based on the evidence available as to the amount of its deferred tax assets that can be realized, the valuation allowance will be adjusted with a corresponding impact to the provision for income taxes in the period in which such determination is made and which may be material. As of December 31, 2022, and 2021, there were no material uncertain tax positions. | |
Contingent Liabilities | Contingent Liabilities A provision for contingent liabilities is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. The Company is a party to certain litigation and disputes arising in the normal course of business. As of December 31, 2022, the Company does not expect that such matters will have a material adverse effect on the Company’s business, financial position, results of operations, or cash flows. | |
Issuance Costs | Issuance Costs Direct and incremental legal and accounting costs associated with the Company’s issuance of common stock and warrants are deferred and classified as a component of other assets on the consolidated balance sheet until completion of the issuance. Upon completion of the issuance, deferred offering costs are reclassified from other assets to equity in additional paid-in capital and recorded against the net proceeds received in the issuance. For the year ended December 31, 2022, For the year ended December 31, 2021, $1.3 million of direct and incremental costs associated with the Exchange were recorded as Transaction Expenses in the Consolidated Statement of Operations and Comprehensive Loss. | |
Segment Information | Segment Information The Company has determined that it operates and reports in one segment | |
Basic and Diluted Loss Per Share | Basic and Diluted Loss Per Share Basic and diluted net loss per share is determined by dividing net loss by the weighted average ordinary shares outstanding during the period. For all periods presented with a net loss, the shares underlying the ordinary share options and warrants have been excluded from the calculation because their effect would be anti-dilutive. Therefore, the weighted-average shares outstanding used to calculate both basic and diluted loss per share are the same for periods with a net loss. The loss per share information in these consolidated financial statements is reflected and calculated as if the Company had existed since January 1, 2021. Accordingly, loss per share for all periods was calculated based on the number of shares retroactively adjusted for the exchange ratio determined in the reverse recapitalization (see also note 1). The Company has 2,168,000 pre-funded common stock warrants outstanding as of December 31, 2022, which became exercisable on April 23, 2021 based on terms and conditions of the agreements. As the pre-funded common stock warrants are exercisable for $0.01, these shares are considered outstanding common shares and included in computation of basic and diluted Earnings Per Share as the exercise of the pre-funded common stock warrants is virtually assured. The Company included these pre-funded common stock warrants in basic and diluted earnings per share when all conditions were met on April 23, 2021. The following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive: December 31, 2022 2021 Options 2,829,756 1,953,882 Warrants 985,533 985,533 Total 3,815,289 2,939,415 | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments: Credit Losses (Topic 326) periods beginning after December 15, 2022. The adoption of this guidance did not have a material impact in the interim condensed consolidated financial statements of the Company. | Recent Accounting Pronouncements In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments: Credit Losses (Topic 326) |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of Antidilutive Securities | December 31, 2022 2021 Options 2,829,756 1,953,882 Warrants 985,533 985,533 Total 3,815,289 2,939,415 |
PREPAID EXPENSES AND OTHER CU_2
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | ||
Schedule of Prepaid Expenses and Other Current Assets | March 31, December 31, (in thousands) 2023 2022 Prepaid service charges and property taxes $ 108 $ 55 Prepaid utilities 96 51 Prepaid insurance 589 358 Prepaid administrative expenses 76 35 Prepaid consulting fees 177 304 Prepaid technical fees 13 22 Research grant receivable 61 — VAT receivable 41 195 Other receivable and other prepaid expenses 50 36 Total prepaid expenses and other current assets $ 1,211 $ 1,056 | December 31, December 31, 2022 2021 Prepaid service charges and property taxes $ 55 $ 58 Prepaid utilities 51 51 Prepaid insurance 358 412 Prepaid administrative expenses 35 63 Prepaid technical fees 22 141 Prepaid consulting fees 304 27 VAT receivable 195 50 Other receivable and other prepaid expenses 36 — Total prepaid expenses and other current assets $ 1,056 $ 802 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
PROPERTY, PLANT AND EQUIPMENT | ||
Schedule of Property, Plant and Equipment | March 31, December 31, (in thousands) 2023 2022 Plant and equipment $ 1,519 $ 1,478 Furniture and fixtures 224 218 Computer hardware and software 24 24 1,767 1,720 Less: Accumulated depreciation (1,191) (1,118) Property, plant and equipment, net $ 576 $ 602 | December 31, December 31, 2022 2021 Plant and equipment $ 1,478 $ 1,633 Furniture and fixtures 218 245 Computer hardware and software 24 26 1,720 1,904 Less: Accumulated depreciation (1,118) (1,102) Property, plant and equipment, net $ 602 $ 802 |
ACCOUNTS PAYABLE AND ACCRUED _2
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | ||
Schedule of Accounts Payable and Accrued Expenses | March 31, December 31, (in thousands) 2023 2022 Accounts payable $ 456 $ 250 Accrued expenses – lab refurbishments 120 117 Accrued expenses – technical fees 84 130 Accrued expenses – audit & accounting fees 156 128 Accrued expenses – other 40 95 Payroll and social security liabilities 192 211 Total accounts payable and accrued expenses $ 1,048 $ 931 | December 31, December 31, 2022 2021 Accounts payable $ 230 $ 510 Accrued expenses – lab refurbishments 117 131 Accrued expenses – technical fees 130 66 Accrued expenses – variable rent & utilities 15 20 Accrued expenses – audit & accounting fees 128 191 Accrued expenses – other 80 112 Credit card liabilities 20 10 Payroll and social security liabilities 211 383 Total accounts payable and accrued expenses $ 931 $ 1,423 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
LEASES | ||
Schedule of Lease Costs | Three Months Ended March 31, (in thousands) 2023 2022 Operating lease cost $ 64 $ 63 Short-term lease cost 4 2 Variable lease cost 45 54 Total lease cost $ 113 $ 119 March 31, (in thousands) 2023 2022 Research and development $ 104 $ 113 Selling, general and administrative 9 6 Total lease cost $ 113 $ 119 | For the Year Ended December 31, 2022 2021 Operating lease cost $ 262 $ 225 Short-term lease cost 10 32 Variable lease cost 186 140 Total lease cost $ 458 $ 397 For the Year Ended December 31, 2022 2021 Research and development $ 430 $ 373 Selling, general and administrative 28 24 Total lease cost $ 458 $ 397 |
Schedule of Operating Lease Assets And Liabilities | March 31, December 31, (in thousands) 2023 2022 Assets Right of use assets - Operating Leases $ 431 $ 475 Total lease assets $ 431 $ 475 Liabilities Current liabilities: Lease liability, current - Operating Leases $ 225 $ 206 Noncurrent liabilities: Lease liability, non-current - Operating Leases 188 239 Total lease liabilities $ 413 $ 445 | December 31, December 31, 2022 2021 Assets Operating lease right of use assets $ 475 $ 154 Total lease assets $ 475 $ 154 Liabilities Current liabilities: Operating lease liability – current portion $ 206 $ 87 Noncurrent liabilities: Operating lease liability, net of current portion 239 28 Total lease liabilities $ 445 $ 115 |
Schedule of Operating Lease Cash Flow Information | March 31, (in thousands) 2023 2022 Operating cash outflows from operating leases $ 43 $ 40 Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets — — $ 43 $ 40 | For the Year Ended December 31, 2022 2021 Operating cash outflows from operating leases $ 265 $ 276 Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets $ 583 $ 136 |
Schedule of Weighted Average Remaining Lease Term and Weighted Average Discount Rate | March 31, 2023 2022 Weighted average remaining lease term (in years) – operating leases 2.15 1.42 Weighted average discount rate – operating leases 7.77% 6.03% | For the Year Ended December 31, 2022 2021 Weighted average remaining lease term (in years) – operating leases 2.19 1.40 Weighted average discount rate – operating leases 7.73 % 6.07 % |
Schedule of Operating Lease, Liability, Maturity | March 31, December 31, (in thousands) 2023 2022 2023 $ 188 $ 234 2024 241 234 2025 18 19 Total undiscounted lease payments 447 487 Less imputed interest (34) (42) Total net lease liabilities $ 413 $ 445 | As of December 31, 2022 2023 $ 234 2024 234 2025 19 Total undiscounted lease payments 487 Less imputed interest (42) Total net lease liabilities $ 445 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
Common Stock Warrants | ||
Schedule of Warrants | Weighted- Average Weighted- Remaining Average Contractual Number of Exercise Term Shares Price (Years) Warrants outstanding at January 1, 2023 985,533 $ 2.00 3.15 Forfeited — Cancelled — Granted — Warrants outstanding at March 31, 2023 985,533 $ 2.00 2.90 | Weighted- Average Weighted- Remaining Average Contractual Number of Exercise Term Shares Price (Years) Warrants outstanding at January 1, 2021 — $ — — Exercised — — — Forfeited or Expired — — — Granted 985,533 2.00 5.00 Warrants outstanding at January 1, 2022 985,533 $ 2.00 4.15 Exercised — — — Forfeited or Expired — — — Granted — — — Warrants outstanding at December 31, 2022 985,533 $ 2.00 3.15 |
Pre Funded Warrants | ||
Schedule of Warrants | Weighted- Average Number of Exercise Shares Price Pre-funded warrants outstanding at January 1, 2023 2,168,000 $ 0.01 Forfeited — Cancelled — Granted — Pre-funded warrants outstanding at March 31, 2023 2,168,000 $ 0.01 | Weighted- Average Number of Exercise Shares Price Pre-funded warrants outstanding at January 1, 2021 — $ — Exercised — — Forfeited or Expired — — Granted 2,168,000 0.01 Pre-funded warrants outstanding at January 1, 2022 2,168,000 $ 0.01 Exercised — — Forfeited or Expired — — Granted — — Pre-funded warrants outstanding at December 31, 2022 2,168,000 $ 0.01 |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
SHARE-BASED COMPENSATION | ||
Schedule of Black Scholes option-pricing model with assumptions used | Year Ended Year Ended December 31, 2022 December 31, 2021 Expected term (years) 6 years - 6.3 years 5 years - 6 years Risk-free interest rate 3.1% - 3.6% 0.3% - 1.2% Expected volatility 64% 54% - 58% Expected dividend yield 0% 0% | |
Summary of non-vested share option activity under the share option plans | Weighted- Average Weighted- Remaining Weighted- Aggregate Average Contractual Average Intrinsic Number of Exercise Term Fair Value at Value (in thousands) Shares Price (Years) Grant Date (in thousands) Options outstanding at January 1,2023 2,829,756 $ 1.81 8.77 $ 0.98273 Exercised — — Cancelled/Forfeited — — Expired (28,036) 0.12 Granted — — Options outstanding at March 31, 2023 2,801,720 $ 1.83 7.60 $ 0.97345 Options exercisable at March 31, 2023 1,252,870 $ 1.61 6.04 $ 63 | Weighted- Average Weighted- Remaining Weighted- Aggregate Average Contractual Average Intrinsic Number of Exercise Term Fair Value at Value Shares Price (Years) Grant Date (in thousands) Options outstanding at January 1, 2021 1,810,749 $ 0.06143 9.70 $ 3.46867 Exercised (1,424,622) 0.01447 Cancelled (405,936) 0.06452 Forfeited (136,221) 0.00100 Granted 2,109,912 1.68113 Options outstanding at December 31, 2021 1,953,882 $ 1.72323 9.31 $ 1.12355 Exercised — — Cancelled — — Forfeited (42,126) 2.00000 Granted 918,000 2.00000 Options outstanding at December 31, 2022 2,829,756 $ 1.80889 8.77 $ 0.98273 Options exercisable at December 31, 2022 986,636 $ 1.45189 8.26 $ 162 Vested and expected to vest after December 31, 2022 2,829,756 $ 1.80889 8.77 |
Schedule of stock-based compensation | Three Months Ended March 31, (in thousands) 2023 2022 Research and development $ 70 $ 40 Selling, general and administration 223 58 Total $ 293 $ 98 | For the Year Ended December 31, 2022 2021 Research and development $ 216 $ 2,982 Selling, general and administrative 272 3,214 Total $ 488 $ 6,196 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
INCOME TAXES | |
Schedule of loss from operations before income taxes | For the Year Ended December 31, 2022 2021 United States $ 584 $ (5,039) Foreign (12,055) (12,087) Loss before income taxes $ (11,471) $ (17,126) |
Schedule of reconciliation of the statutory income tax rate to company's effective tax rate | Year Ended December 31, 2022 2021 Taxes at domestic rate 21.0 % 21.0 % State and local income taxes — % — % Non-US statutory rates 2.9 % (0.8) % Permanent items (6.3) % (7.3) % Change in valuation allowance (17.9) % (22.4) % Statutory Rate Change — % 9.6 % Other 0.1 % (0.1) % Effective tax rate (0.2) % (0.0) % |
Schedule of components of income tax provision/(benefit) | December 31, 2022 2021 Current Federal — — State 2 — Foreign 22 — Total Current $ 24 $ — Deferred Federal — — State — — Foreign — — Total Deferred — — Total $ 24 $ — |
Schedule of deferred tax assets and liabilities | December 31, 2022 2021 Deferred tax assets/(liabilities): Net operating loss carryforwards $ 9,151 $ 7,506 Property plant and equipment (150) (190) Other 68 229 9,069 7,545 Valuation allowance (9,069) (7,545) Deferred tax assets, net of allowance $ — $ — |
DEFINED CONTRIBUTION PENSION (T
DEFINED CONTRIBUTION PENSION (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
DEFINED CONTRIBUTION PENSION | ||
Schedule of pension cost | Three Months Ended March 31, (in thousands) 2023 2022 Research and development $ 22 $ 27 Selling, general and administration 18 14 Total $ 40 $ 41 | For the Years End December 31, 2022 2021 Research and development $ 108 $ 98 Selling, general and administrative 52 42 Total pension cost $ 160 $ 140 |
BUSINESS - Organization and Rev
BUSINESS - Organization and Reverse Recapitalization (Details) | Feb. 23, 2021 $ / shares shares | Mar. 31, 2023 $ / shares | Dec. 31, 2022 $ / shares | Dec. 31, 2021 $ / shares |
Common shares, par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |
Securities Exchange Agreement, Smartkem Limited | ||||
Purchase price (in dollars per share) | $ / shares | $ 1.40 | |||
Common shares, par value | $ / shares | $ 0.0001 | |||
Share exchange ratio | 0.0676668 | |||
Securities Exchange Agreement, Smartkem Limited | Common stock A Shares | ||||
Share exchange ratio | 0.0111907 | |||
Share exchange, number of shares issued or issuable | 12,725,000 | |||
Shares exchange, number of shares exchanged | 1,127,720,477 | |||
Management incentive options to purchase | 124,497,910 | |||
Average share exchange ratio | 0.011283825 | |||
Effect of reverse capitalization (in shares) | 2,500,000 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2023 USD ($) $ / shares shares | Mar. 31, 2022 USD ($) | Dec. 31, 2022 USD ($) segment $ / shares shares | Dec. 31, 2021 USD ($) $ / shares shares | Feb. 23, 2021 $ / shares | |
Class of Warrant or Right [Line Items] | |||||
Net loss | $ 2,048 | $ 2,762 | $ 11,495 | $ 17,126 | |
Accumulated deficit | 88,615 | 86,567 | 75,072 | ||
Cash and cash equivalents | 1,700 | 4,235 | 12,226 | ||
Cash equivalents | 0 | 0 | |||
Allowance for doubtful accounts | $ 0 | 0 | |||
Estimated useful life | 4 years | ||||
Other operating income | 269 | 284 | $ 1,172 | 1,285 | |
Research & development tax credits | 1,366 | 1,121 | 1,070 | ||
Share based compensation | 293 | 98 | $ 488 | 6,196 | |
Expiration term | 10 years | ||||
Number of operating segments | segment | 1 | ||||
Number of reportable segments | segment | 1 | ||||
Offering costs recorded in additional paid-in capital | 160 | $ 170 | 2,454 | ||
Transaction Expenses | 1,329 | ||||
Loss on foreign currency transactions | $ 502 | $ (354) | $ (1,782) | $ (808) | |
Pre Funded Warrants | |||||
Class of Warrant or Right [Line Items] | |||||
Common stock warrants outstanding | shares | 2,168,000 | 2,168,000 | 2,168,000 | ||
Warrants exercisable price | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Dilutive Securities (Details) - shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share | 3,815,289 | 2,939,415 |
Options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share | 2,829,756 | 1,953,882 |
Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share | 985,533 | 985,533 |
PREPAID EXPENSES AND OTHER CU_3
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | |||
Prepaid service charges and property taxes | $ 108 | $ 55 | $ 58 |
Prepaid utilities | 96 | 51 | 51 |
Prepaid insurance | 589 | 358 | 412 |
Prepaid administrative expenses | 76 | 35 | 63 |
Prepaid technical fees | 13 | 22 | 141 |
Prepaid consulting fees | 177 | 304 | 27 |
VAT receivable | 41 | 195 | 50 |
Other receivable and other prepaid expenses | 50 | 36 | |
Total prepaid expenses and other current assets | 1,211 | 1,056 | 802 |
Prepaid Insurance Noncurrent | $ 160 | $ 169 | $ 217 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment, Gross | $ 1,767 | $ 1,720 | $ 1,904 | |
Less: Accumulated depreciation | (1,191) | (1,118) | (1,102) | |
Property, plant and equipment, net | 576 | 602 | 802 | |
Depreciation expense | 42 | $ 54 | 198 | 209 |
Plant and equipment | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment, Gross | 1,519 | 1,478 | 1,633 | |
Furniture and fixtures | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment, Gross | 224 | 218 | 245 | |
Computer hardware and software | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment, Gross | 24 | 24 | 26 | |
Research and development | ||||
Property, Plant and Equipment [Line Items] | ||||
Depreciation expense | $ 42 | $ 54 | $ 198 | $ 209 |
ACCOUNTS PAYABLE AND ACCRUED _3
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | |||
Accounts payable | $ 456 | $ 250 | $ 510 |
Accrued expenses - lab refurbishments | 120 | 117 | 131 |
Accrued expenses - technical fees | 84 | 130 | 66 |
Accrued expenses - variable rent & utilities | 15 | 20 | |
Accrued expenses - audit & accounting fees | 156 | 128 | 191 |
Accrued expenses - other | 40 | 95 | 112 |
Credit card liabilities | 20 | 10 | |
Payroll and social security liabilities | 192 | 211 | 383 |
Total accounts payable and accrued expenses | $ 1,048 | $ 931 | $ 1,423 |
LEASES - Lease Costs (Details)
LEASES - Lease Costs (Details) $ in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2023 USD ($) | Mar. 31, 2023 USN ($) | Mar. 31, 2022 USD ($) | Mar. 31, 2022 USN ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
Operating lease cost | $ 64 | $ 63 | $ 262 | $ 225 | ||
Short-term lease cost | 4 | 2 | 10 | 32 | ||
Variable lease cost | 45 | 54 | 186 | 140 | ||
Total lease cost | 113 | $ 113 | 119 | $ 119 | 458 | 397 |
Research and development | ||||||
Total lease cost | 104 | 113 | 430 | 373 | ||
Selling, general and administrative | ||||||
Total lease cost | $ 9 | $ 6 | $ 28 | $ 24 |
LEASES - Lease Assets And Liabi
LEASES - Lease Assets And Liabilities (Details) $ in Thousands, $ in Thousands | Mar. 31, 2023 USD ($) | Mar. 31, 2023 USN ($) | Dec. 31, 2022 USD ($) | Mar. 31, 2022 USN ($) | Dec. 31, 2021 USD ($) |
Assets | |||||
Right of use assets - Operating Leases | $ 431 | $ 431 | $ 475 | $ 475 | $ 154 |
Total lease assets | 431 | 475 | 475 | 154 | |
Current liabilities | |||||
Lease liability, current - Operating Leases | 225 | 225 | 206 | 206 | 87 |
Noncurrent liabilities: | |||||
Lease liability, non-current - Operating Leases | 188 | 188 | 239 | 239 | 28 |
Total lease liabilities | $ 413 | $ 413 | $ 445 | $ 445 | $ 115 |
LEASES - Operating And Finance
LEASES - Operating And Finance Leases (Details) $ in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 USN ($) | Mar. 31, 2022 USN ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
LEASES | ||||
Operating cash flows from operating leases | $ 43 | $ 40 | $ 265 | $ 276 |
Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets | $ 583 | $ 136 |
LEASES - Weighted Average (Deta
LEASES - Weighted Average (Details) | Mar. 31, 2023 | Dec. 31, 2022 | Mar. 31, 2022 | Dec. 31, 2021 |
LEASES | ||||
Weighted average remaining lease term (in years) - operating leases | 2 years 1 month 24 days | 2 years 2 months 8 days | 1 year 5 months 1 day | 1 year 4 months 24 days |
Weighted average discount rate - operating leases | 7.77% | 7.73% | 6.03% | 6.07% |
LEASES - Undiscounted Operating
LEASES - Undiscounted Operating Lease Liabilities (Details) $ in Thousands, $ in Thousands | Mar. 31, 2023 USD ($) | Mar. 31, 2023 USN ($) | Dec. 31, 2022 USD ($) | Mar. 31, 2022 USN ($) | Dec. 31, 2021 USD ($) |
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | |||||
2023 | $ 188 | $ 234 | |||
2024 | 241 | 234 | |||
2025 | 18 | 19 | |||
Total undiscounted lease payments | 447 | 487 | |||
Less imputed interest | (34) | (42) | |||
Total net lease liabilities | $ 413 | $ 413 | $ 445 | $ 445 | $ 115 |
LEASES - Additional Information
LEASES - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Sublease rental income | $ 0 | $ 0 | $ 0 | $ 0 |
Finance lease, right-of-use assets | 0 | 0 | ||
Finance lease, liabilities | $ 0 | $ 0 | ||
Minimum | ||||
Operating leases terms | 1 year | 1 year | ||
Maximum | ||||
Operating leases terms | 3 years | 3 years |
NOTES PAYABLE - Additional Info
NOTES PAYABLE - Additional Information (Details) - Term Loan Facility Agreement - USD ($) $ in Thousands | 12 Months Ended | ||
Jan. 26, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Debt Instrument [Line Items] | |||
Effective interest rate | 26.20% | ||
Aggregate principal | $ 738 | ||
Debt term | 6 months | ||
Monthly interest rate | 1.25% | ||
Notes payable | $ 0 | $ 0 | |
Interest expense of notes payable | $ 0 | $ 19 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
COMMITMENTS AND CONTINGENCIES. | ||
Capital expenditures to be paid in the future | $ 540 | $ 681 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) | 3 Months Ended | 12 Months Ended | |||||||||||
Feb. 27, 2023 shares | Jan. 06, 2023 shares | Nov. 29, 2022 shares | Jun. 29, 2022 shares | May 27, 2022 shares | Feb. 28, 2022 shares | Nov. 29, 2021 shares | Aug. 13, 2021 shares | May 27, 2021 shares | Feb. 23, 2021 shares | Mar. 31, 2023 Vote shares | Dec. 31, 2022 Vote shares | Dec. 31, 2021 shares | |
STOCKHOLDERS' EQUITY | |||||||||||||
Number of votes, common shares | Vote | 1 | 1 | |||||||||||
Preferred shares, outstanding (in shares) | 0 | 0 | 0 | ||||||||||
Preferred stock available for issuance | 10,000,000 | 10,000,000 | |||||||||||
Issuance of common stock to vendor (in shares) | 52,777 | 50,000 | 35,714 | 360,000 | 22,473 | 12,500 | 12,500 | 60,000 | 25,000 | 50,000 | |||
Term Of Internet Advertising Agreement | 1 year |
STOCKHOLDERS' EQUITY - Common S
STOCKHOLDERS' EQUITY - Common Stock Warrants (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Feb. 23, 2021 | Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Common Stock Warrants | |||||
Number of shares | |||||
Warrants outstanding at beginning of the year | 985,533 | 985,533 | 985,533 | ||
Exercised | 0 | 0 | 0 | 0 | |
Granted | 985,533 | ||||
Warrants outstanding at end of the year | 985,533 | 985,533 | 985,533 | ||
Weighted-Average Exercise Price | |||||
Warrants outstanding at beginning of the year | $ 2 | $ 2 | $ 2 | ||
Granted | $ 2 | ||||
Warrants outstanding at end of the year | $ 2 | $ 2 | $ 2 | ||
Weighted Average Remaining Contractual Term (years) | |||||
Warrants outstanding at beginning of the year | 3 years 1 month 24 days | 4 years 1 month 24 days | 4 years 1 month 24 days | ||
Granted | 5 years | ||||
Warrants outstanding at end of the year | 2 years 10 months 24 days | 3 years 1 month 24 days | 4 years 1 month 24 days | ||
Warrants issued | 985,533 | 0 | |||
Warrants exercisable price | $ 2 | $ 0.91 | $ 0.91 | $ 0.91 | |
Fair value of warrant | $ 896 | $ 896 | $ 896 | ||
Warrants | |||||
Number of shares | |||||
Granted | 0 | ||||
Pre Funded Warrants | |||||
Number of shares | |||||
Warrants outstanding at beginning of the year | 2,168,000 | 2,168,000 | 2,168,000 | ||
Granted | 2,168,000 | ||||
Warrants outstanding at end of the year | 2,168,000 | 2,168,000 | 2,168,000 | ||
Weighted-Average Exercise Price | |||||
Warrants outstanding at beginning of the year | $ 0.01 | $ 0.01 | $ 0.01 | ||
Granted | $ 0.01 | ||||
Warrants outstanding at end of the year | $ 0.01 | $ 0.01 | $ 0.01 | ||
Weighted Average Remaining Contractual Term (years) | |||||
Warrants issued | 2,168,000 | 0 | 0 | 0 | |
Warrants exercisable price | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | |
Fair value of per warrant | 1.99 | 1.99 | |||
Exercise less amount | $ 2 | $ 2 | |||
Proceeds from Warrant | $ 4,314 |
SHARE-BASED COMPENSATION - Assu
SHARE-BASED COMPENSATION - Assumptions (Details) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Black-Scholes option-pricing model, Assumptions: | ||
Risk-free interest rate, minimum | 3.10% | 0.30% |
Risk-free interest rate, maximum | 3.60% | 1.20% |
Expected volatility | 64% | |
Expected dividend yield | 0% | 0% |
Minimum | ||
Black-Scholes option-pricing model, Assumptions: | ||
Expected term (years) | 6 years | 5 years |
Expected volatility | 54% | |
Maximum | ||
Black-Scholes option-pricing model, Assumptions: | ||
Expected term (years) | 6 years 3 months 18 days | 6 years |
Expected volatility | 58% |
SHARE-BASED COMPENSATION - Shar
SHARE-BASED COMPENSATION - Share option activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Number of Shares | ||||
Options outstanding at beginning | 2,829,756 | 1,953,882 | 1,810,749 | |
Exercised | 0 | (1,424,622) | ||
Cancelled | (405,936) | |||
Forfeited | (28,036) | (42,126) | (136,221) | |
Granted | 918,000 | 2,109,912 | ||
Options outstanding at end | 2,801,720 | 2,829,756 | 1,953,882 | 1,810,749 |
Options exercisable at March 31, 2023 | 1,252,870 | 986,636 | ||
Vested and expected to vest after December 31, 2022 | 2,829,756 | |||
Weighted-Average Exercise Price | ||||
Options outstanding at beginning | $ 1.80889 | $ 1.72323 | $ 0.06143 | |
Exercised | 0.01447 | |||
Cancelled | 0.06452 | |||
Forfeited | 0.12 | 2 | 0.00100 | |
Granted | 2 | 1.68113 | ||
Options outstanding at end | 1.83 | 1.80889 | $ 1.72323 | $ 0.06143 |
Options exercisable at December 31, 2022 | $ 1.61 | 1.45189 | ||
Vested and expected to vest after December 31, 2022 | $ 1.80889 | |||
Weighted-Average Remaining Contractual Term : | ||||
Weighted-Average Remaining Contractual Term (in Years) | 7 years 7 months 6 days | 8 years 9 months 7 days | 9 years 3 months 21 days | 9 years 8 months 12 days |
Options exercisable weighted average remaining contractual term | 6 years 14 days | 8 years 3 months 3 days | ||
Vested and expected to vest outstanding weighted average remaining contractual term | 8 years 9 months 7 days | |||
Weighted- Average Fair Value at Grant Date : | ||||
Weighted- Average Fair Value at Grant Date at beginning (in dollars) | $ 0.98273 | $ 1.12355 | $ 3.46867 | |
Weighted- Average Fair Value at Grant Date at end (in dollars) | $ 0.97345 | $ 0.98273 | $ 1.12355 | $ 3.46867 |
Aggregate Intrinsic Value, Options exercisable | $ 63 | $ 162 |
SHARE-BASED COMPENSATION - Stoc
SHARE-BASED COMPENSATION - Stock Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share based compensation | $ 293 | $ 98 | $ 488 | $ 6,196 |
Research and development | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share based compensation | 70 | 40 | 216 | 2,982 |
Selling, general and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share based compensation | $ 223 | $ 58 | $ 272 | $ 3,214 |
SHARE-BASED COMPENSATION - Addi
SHARE-BASED COMPENSATION - Additional information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||
Feb. 28, 2021 | Feb. 23, 2021 | Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options granted (in shares) | 918,000 | 2,109,912 | |||||
Exercisable options (in shares) | 1,252,870 | 986,636 | |||||
Granted | $ 2 | $ 1.68113 | |||||
Expiration term | 10 years | ||||||
Options outstanding | 2,801,720 | 2,829,756 | 1,953,882 | 1,810,749 | |||
Exercised (in shares) | 0 | 1,424,622 | |||||
Intrinsic value of options exercised | $ 2,400 | ||||||
Option vested in fair value | $ 690 | $ 6,600 | |||||
Weighted-average grant-date fair value (in dollars per share) | $ 0.68 | $ 1.14 | |||||
Unrecognized compensation costs | $ 1,100 | $ 1,400 | |||||
Options | Exercise Price Range One | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options granted (in shares) | 336,557 | ||||||
Granted | $ 0.001 | ||||||
Options | Exercise Price Range Two | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options granted (in shares) | 66,029 | ||||||
Granted | $ 2 | ||||||
Options | Employees, Directors and Consultants | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Exercisable options (in shares) | 918,000 | ||||||
Granted | $ 2 | ||||||
Expiration term | 10 years | 10 years | |||||
Options | Employees, Directors and Consultants | Minimum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period | 3 years | ||||||
Options | Employees, Directors and Consultants | Maximum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period | 4 years | ||||||
2021 Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options granted (in shares) | 2,275,000 | 0 | 0 | ||||
Percentage of outstanding shares | 4% | ||||||
2021 Plan | Options | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options granted (in shares) | 402,586 |
INCOME TAXES - Loss from operat
INCOME TAXES - Loss from operations before income taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
INCOME TAXES | ||||
United States | $ 584 | $ (5,039) | ||
Foreign | (12,055) | (12,087) | ||
Loss before income taxes | $ (2,048) | $ (2,762) | $ (11,471) | $ (17,126) |
INCOME TAXES - Reconciliation o
INCOME TAXES - Reconciliation of effective tax rate (Details) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Reconciliation of the statutory income tax rate to effective tax rate | ||
Taxes at domestic rate | 21% | 21% |
Non-US statutory rates | 2.90% | (0.80%) |
Permanent items | (6.30%) | (7.30%) |
Change in valuation allowance | (17.90%) | (22.40%) |
Statutory Rate Change | 9.60% | |
Other | 0.10% | (0.10%) |
Effective tax rate | (0.20%) | 0% |
INCOME TAXES - Components of in
INCOME TAXES - Components of income tax (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Current | |
State | $ 2 |
Foreign | 22 |
Total Current | 24 |
Deferred | |
Total | $ 24 |
INCOME TAXES - Deferred tax ass
INCOME TAXES - Deferred tax assets and liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred tax assets/(liabilities): | ||
Net operating loss carryforwards | $ 9,151 | $ 7,506 |
Property plant and equipment | (150) | (190) |
Other | 68 | 229 |
Total | 9,069 | 7,545 |
Valuation allowance | (9,069) | (7,545) |
Net operating loss carryforwards | 39,500 | 30,700 |
Accrued interest and penalties | 0 | 0 |
Unrecognized tax benefits | $ 0 | $ 0 |
DEFINED CONTRIBUTION PENSION (D
DEFINED CONTRIBUTION PENSION (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
DEFINED CONTRIBUTION PENSION | |||
Amounts owed to the pension scheme | $ 7 | $ 1 | $ 0 |
DEFINED CONTRIBUTION PENSION -
DEFINED CONTRIBUTION PENSION - Pension cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
DEFINED CONTRIBUTION PENSION | ||||
Total pension cost | $ 40 | $ 41 | $ 160 | $ 140 |
Research and development | ||||
DEFINED CONTRIBUTION PENSION | ||||
Total pension cost | 22 | 27 | 108 | 98 |
Selling, general and administrative | ||||
DEFINED CONTRIBUTION PENSION | ||||
Total pension cost | $ 18 | $ 14 | $ 52 | $ 42 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Jan. 27, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Accounts payable and accrued expenses | |||
Related Party Transaction [Line Items] | |||
Related party payable | $ 16 | $ 18 | |
Selling, general and administrative | |||
Related Party Transaction [Line Items] | |||
Related party expenses | 110 | 65 | |
Owner | Securities Exchange | |||
Related Party Transaction [Line Items] | |||
Reimbursement expenses incurred | 11 | 66 | |
Related party payable | $ 0 | 0 | |
Family member of a Director | Consulting services | |||
Related Party Transaction [Line Items] | |||
Reimbursement expenses incurred | 35 | ||
Related party payable | $ 0 | ||
Octopus share purchase | |||
Related Party Transaction [Line Items] | |||
Sale of Stock, Number of Shares Issued in Transaction | 1,000,000 | ||
Sale of Stock, Price Per Share | $ 2 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - shares | 1 Months Ended | |||||||||||
Feb. 27, 2023 | Jan. 06, 2023 | Jan. 01, 2023 | Nov. 29, 2022 | Jun. 29, 2022 | May 27, 2022 | Feb. 28, 2022 | Nov. 29, 2021 | Aug. 13, 2021 | May 27, 2021 | Feb. 23, 2021 | Jan. 31, 2023 | |
Subsequent Event [Line Items] | ||||||||||||
Issuance of common stock to vendor (in shares) | 52,777 | 50,000 | 35,714 | 360,000 | 22,473 | 12,500 | 12,500 | 60,000 | 25,000 | 50,000 | ||
2021 Plan | ||||||||||||
Subsequent Event [Line Items] | ||||||||||||
Percentage of outstanding shares | 4% | |||||||||||
Subsequent events | ||||||||||||
Subsequent Event [Line Items] | ||||||||||||
Issuance of common stock to vendor (in shares) | 50,000 | |||||||||||
Subsequent events | 2021 Plan | ||||||||||||
Subsequent Event [Line Items] | ||||||||||||
Number of shares increased | 1,079,399 | |||||||||||
Percentage of outstanding shares | 4% | |||||||||||
Reserved for future issuance | 4,376,571 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets $ in Thousands, $ in Thousands | Mar. 31, 2023 USD ($) | Mar. 31, 2023 USN ($) | Dec. 31, 2022 USD ($) | Mar. 31, 2022 USD ($) | Mar. 31, 2022 USN ($) | Dec. 31, 2021 USD ($) | Dec. 31, 2020 USD ($) |
Current assets | |||||||
Cash and cash equivalents | $ 1,700 | $ 4,235 | $ 12,226 | ||||
Accounts receivable, net | 1 | 30 | |||||
Research and development tax credit receivable | 1,366 | 1,121 | 1,070 | ||||
Prepaid expenses and other current assets | 1,211 | 1,056 | 802 | ||||
Total current assets | 4,278 | 6,442 | 14,098 | ||||
Property, plant equipment, net | 576 | 602 | 802 | ||||
Right-of-use assets, net | 431 | $ 431 | 475 | $ 475 | 154 | ||
Other assets, non-current | 6 | 6 | 6 | ||||
Total assets | 5,291 | 7,525 | 15,060 | ||||
Current liabilities | |||||||
Accounts payable and accrued expenses | 1,048 | 931 | 1,423 | ||||
Lease liabilities, current | 225 | 225 | 206 | 206 | 87 | ||
Income tax payable | 1 | 22 | |||||
Other current liabilities | 102 | 244 | |||||
Total current liabilities | 1,376 | 1,403 | 1,510 | ||||
Lease liabilities, non-current | 188 | $ 188 | 239 | $ 239 | 28 | ||
Total liabilities | 1,564 | 1,642 | 1,538 | ||||
Commitments and contingencies (Note 7) | |||||||
Stockholders' equity | |||||||
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, zeroshares issued and outstanding, at March 31, 2023 and December 31, 2022, respectively | |||||||
Common stock, par value $0.0001 per share, 300,000,000 shares authorized, 27,087,773 and 26,984,996 shares issued and outstanding, at March 31, 2023 and December 31, 2022, respectively | 3 | 3 | 3 | ||||
Additional paid-in capital | 93,278 | 92,930 | 89,954 | ||||
Accumulated other comprehensive loss | (939) | (483) | (1,363) | ||||
Accumulated deficit | (88,615) | (86,567) | (75,072) | ||||
Total stockholders' equity | 3,727 | 5,883 | $ 12,897 | 13,522 | $ 1,851 | ||
Total liabilities and stockholders' equity | $ 5,291 | $ 7,525 | $ 15,060 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
Condensed Consolidated Balance Sheets | |||
Preferred shares, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 |
Preferred stock, Shares Authorized | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Issued | 0 | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 | 0 |
Common shares, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 |
Common Stock, Shares Authorized | 300,000,000 | 300,000,000 | 300,000,000 |
Common Stock, Shares Issued | 27,087,773 | 26,984,996 | 25,554,309 |
Common Stock, Shares Outstanding | 27,087,773 | 26,984,996 | 25,554,309 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Loss $ in Thousands | 3 Months Ended |
Mar. 31, 2023 USD ($) $ / shares shares | |
Condensed Consolidated Statements of Operations and Comprehensive Loss | |
Revenue | $ 16 |
Cost of revenue | 16 |
Other operating income | 269 |
Operating expenses | |
Research and development | 1,279 |
Selling, general and administrative | 1,433 |
(Gain)/loss foreign currency transactions | 111 |
Total operating expenses | 2,823 |
Loss from operations | (2,554) |
Non-operating income/(expense) | |
(Gain)/loss foreign currency transactions | 502 |
Interest income | 4 |
Total non-operating income/(expense) | 506 |
Loss before income taxes | (2,048) |
Net loss | (2,048) |
Other comprehensive loss: | |
Foreign currency translation | (456) |
Total comprehensive loss | $ (2,504) |
Basic net loss per common share | $ / shares | $ (0.07) |
Diluted net loss per common share | $ / shares | $ (0.07) |
Basic weighted average shares outstanding | shares | 29,248,150 |
Diluted weighted average shares outstanding | shares | 29,248,150 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders Equity - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total |
Beginning Balance at Dec. 31, 2020 | $ 1 | $ 61,276 | $ (1,480) | $ (57,946) | $ 1,851 |
Beginning Balance (in shares) at Dec. 31, 2020 | 13,627,887 | ||||
Issuance of common shares due to exercise of stock-options | $ 1 | 19 | $ 20 | ||
Issuance of common shares due to exercise of stock-options (in shares) | 1,424,622 | 1,424,622 | |||
Stock-based compensation expense | 6,196 | $ 6,196 | |||
Repurchase of common stock (in shares) | (2,307,700) | ||||
Effect of reverse capitalization (in shares) | 2,500,000 | ||||
Issuance of common stock to vendor | 280 | 280 | |||
Issuance of common stock to vendor (in shares) | 147,500 | ||||
Issuance of common stock and warrants in private placement | $ 1 | 24,637 | 24,638 | ||
Issuance of common stock and warrants in private placement (in shares) | 10,162,000 | ||||
Issuance costs related to common stock and warrants in private placement | (2,454) | (2,454) | |||
Foreign currency translation adjustment | 117 | 117 | |||
Net loss | (17,126) | (17,126) | |||
Ending Balance at Dec. 31, 2021 | $ 3 | 89,954 | (1,363) | (75,072) | 13,522 |
Ending Balance (in shares) at Dec. 31, 2021 | 25,554,309 | ||||
Stock-based compensation expense | 98 | 98 | |||
Issuance of common stock to vendor | 43 | 43 | |||
Issuance of common stock to vendor (in shares) | 12,500 | ||||
Issuance of common stock in private placement | 2,000 | 2,000 | |||
Issuance of common stock in private placement (in shares) | 1,000,000 | ||||
Issuance costs related to common stock and warrants in private placement | (160) | (160) | |||
Foreign currency translation adjustment | 156 | 156 | |||
Net loss | (2,762) | (2,762) | |||
Ending Balance at Mar. 31, 2022 | $ 3 | 91,935 | (1,207) | (77,834) | 12,897 |
Ending Balance (in shares) at Mar. 31, 2022 | 26,566,809 | ||||
Beginning Balance at Dec. 31, 2021 | $ 3 | 89,954 | (1,363) | (75,072) | $ 13,522 |
Beginning Balance (in shares) at Dec. 31, 2021 | 25,554,309 | ||||
Issuance of common shares due to exercise of stock-options (in shares) | 0 | ||||
Stock-based compensation expense | 488 | $ 488 | |||
Issuance of common stock to vendor | 658 | 658 | |||
Issuance of common stock to vendor (in shares) | 430,687 | ||||
Issuance of common stock in private placement | 2,000 | 2,000 | |||
Issuance of common stock in private placement (in shares) | 1,000,000 | ||||
Issuance costs related to common stock and warrants in private placement | (170) | (170) | |||
Foreign currency translation adjustment | 880 | 880 | |||
Net loss | (11,495) | (11,495) | |||
Ending Balance at Dec. 31, 2022 | $ 3 | 92,930 | (483) | (86,567) | 5,883 |
Ending Balance (in shares) at Dec. 31, 2022 | 26,984,996 | ||||
Stock-based compensation expense | 293 | 293 | |||
Issuance of common stock to vendor | 55 | 55 | |||
Issuance of common stock to vendor (in shares) | 102,777 | ||||
Foreign currency translation adjustment | (456) | (456) | |||
Net loss | (2,048) | (2,048) | |||
Ending Balance at Mar. 31, 2023 | $ 3 | $ 93,278 | $ (939) | $ (88,615) | $ 3,727 |
Ending Balance (in shares) at Mar. 31, 2023 | 27,087,773 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Cash flows from operating activities: | ||
Net loss | $ (2,048) | $ (2,762) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 42 | 54 |
Stock option expense | 293 | 98 |
Services settled in common stock | 55 | 43 |
Right of use asset amortization | 56 | 63 |
(Gain) loss on foreign currency exchange rate | (391) | 354 |
Change in operating assets and liabilities: | ||
Accounts receivable | 29 | (30) |
Research & development tax credit receivable | (211) | (284) |
Prepaids and other assets | (340) | (471) |
Accounts payable & accrued expenses | 293 | (240) |
Lease liabilities | (43) | (40) |
Income tax payables | (22) | |
Other current liabilities | (146) | |
Net cash used in operating activities | (2,433) | (3,215) |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (41) | |
Net cash used by investing activities | (41) | |
Cash flow from financing activities: | ||
Proceeds from the issuance of common stock in private placement | 2,000 | |
Payment of issuance costs | (160) | |
Net cash provided by financing activities | 1,840 | |
Effect of exchange rate changes on cash | (102) | (163) |
Net change in cash | (2,535) | (1,579) |
Cash, beginning of year | 4,235 | 12,226 |
Cash, end of year | 1,700 | 10,647 |
Supplemental disclosure of cash and non-cash investing and financing activities | ||
Professional services settled in common stock issuance | $ 55 | $ 43 |
GENERAL
GENERAL | 3 Months Ended |
Mar. 31, 2023 | |
GENERAL | |
GENERAL | 1. GENERAL The unaudited interim condensed consolidated financial statements of SmartKem, Inc. (“SmartKem” or the “Company”) as of March 31, 2023 and December 31, 2022 and for the three months ended March 31, 2023 and 2022 should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “Annual Report”), which was filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2023 and may also be found on the Company’s website (www.smartkem.com). In these notes to the interim condensed consolidated financial statements the terms “us”, “we” or “our” refer to SmartKem and its consolidated subsidiaries. Organization SmartKem, formerly known as Parasol Investments Corporation (“Parasol”), was formed on May 13, 2020, and is the successor of SmartKem Limited, which was formed under the Laws of England and Wales. The Company was founded as a “shell” company registered under the Exchange Act, with no specific business plan or purpose until it began operating the business of SmartKem Limited following the closing of the Exchange. Business The Company is seeking to reshape the world of electronics with our proprietary organic semiconductor platform that we believe has the potential to affect the form and function of the next generation of low-cost displays and sensors. The Company’s patented TRUFLEX® inks are solution deposited at a low temperature, on low-cost substrates to make organic thin-film transistor ( Risk and Uncertainties The Company’s activities are subject to significant risks and uncertainties including the risk of failure to secure additional funding to properly execute the Company’s business plan. The Company is subject to risks that are common to companies in the growth stage, including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, reliance on third party manufacturers, protection of proprietary technology, and compliance with regulatory requirements. The Company has access under a framework agreement to equipment which is used in the manufacturing of demonstrator products employing the Company’s inks. If the Company lost access to this fabrication facility, it would materially and adversely affect the Company’s ability to manufacture prototypes and demonstrate products for potential customers. The loss of this access could significantly impede the Company’s ability to engage in product development and process improvement activities. Alternative providers of similar services exist but would take effort and time to bring into the Company’s operations. Liquidity and Going Concern The accompanying unaudited interim condensed consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. We have incurred continuing losses including net losses of $2.0 million for the three months ended March 31, 2023. As of March 31, 2023 we had an accumulated deficit of $88.6 million. The Company’s cash as of March 31, 2023 was $1.7 million. 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. Management believes that the Company’s existing cash as of March 31, 2023 will be sufficient to fund the operations of the Company through the end of May 2023 and that the Company will require additional capital funding to continue its operations and research and development activity thereafter. 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. Until such time, if ever, as we can generate sufficient cash through revenue, management’s plans are to finance our working capital requirements through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. If we raise additional funds by issuing equity securities, our existing security holders will likely experience dilution. 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. There can be no assurance however that such financing will be available in sufficient amounts, when and if needed, on acceptable terms or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the market demand for the Company’s products and services, the quality of product development efforts, management of working capital, and continuation of normal payment terms and conditions for purchase of services. 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 to continue as a going concern. There is substantial doubt that the Company will be able to pay its obligations as they fall due, and this substantial doubt is not alleviated by management plans. The condensed consolidated financial statements as of March 31, 2023 have been prepared assuming that the Company will continue as a going concern. Accordingly, the consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. Basis of Presentation These interim condensed consolidated financial statements are unaudited and were prepared by the Company in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim reporting and with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. They include the accounts of all wholly owned subsidiaries and all significant inter-company accounts and transactions have been eliminated in consolidation. Amounts are presented in thousands, except number of shares and per share data. The preparation of interim condensed consolidated financial statements requires management to make assumptions and estimates that impact the amounts reported. These interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company’s results of operations, financial position and cash flows for the interim periods ended March 31, 2023 and 2022; however, certain information and footnote disclosures normally included in our audited consolidated financial statements included in our Annual Report on Form 10-K have been condensed or omitted as permitted by GAAP. It is important to note that the Company’s results of operations and cash flows for interim periods are not necessarily indicative of the results of operations and cash flows to be expected for a full fiscal year or any interim period. Significant Accounting Policies There have been no material changes to our significant accounting policies as set forth in Note 3 Summary of Significant Accounting Policies to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments: Credit Losses (Topic 326) periods beginning after December 15, 2022. The adoption of this guidance did not have a material impact in the interim condensed consolidated financial statements of the Company. |
PREPAID EXPENSES AND OTHER CU_4
PREPAID EXPENSES AND OTHER CURRENT ASSETS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | ||
PREPAID EXPENSES AND OTHER CURRENT ASSETS | 2. PREPAID EXPENSES AND OTHER CURRENT ASSETS: Prepaid expenses and other current assets consist of the following: March 31, December 31, (in thousands) 2023 2022 Prepaid service charges and property taxes $ 108 $ 55 Prepaid utilities 96 51 Prepaid insurance 589 358 Prepaid administrative expenses 76 35 Prepaid consulting fees 177 304 Prepaid technical fees 13 22 Research grant receivable 61 — VAT receivable 41 195 Other receivable and other prepaid expenses 50 36 Total prepaid expenses and other current assets $ 1,211 $ 1,056 As of March 31, 2023 and December 31, 2022, there was $160 thousand and $169 thousand respectively, of non-current prepaid insurance related to directors’ and officers’ liability insurance that was included in the amounts above. | 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS: Prepaid expenses and other current assets consist of the following: December 31, December 31, 2022 2021 Prepaid service charges and property taxes $ 55 $ 58 Prepaid utilities 51 51 Prepaid insurance 358 412 Prepaid administrative expenses 35 63 Prepaid technical fees 22 141 Prepaid consulting fees 304 27 VAT receivable 195 50 Other receivable and other prepaid expenses 36 — Total prepaid expenses and other current assets $ 1,056 $ 802 As of December 31, 2022 and 2021, there was $169 thousand and $217 thousand, respectively, of non-current prepaid insurance related to directors’ and officers’ liability insurance that was included in the amounts above. |
PROPERTY, PLANT AND EQUIPMENT_3
PROPERTY, PLANT AND EQUIPMENT | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
PROPERTY, PLANT AND EQUIPMENT | ||
PROPERTY, PLANT AND EQUIPMENT | 3. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consist of the following: March 31, December 31, (in thousands) 2023 2022 Plant and equipment $ 1,519 $ 1,478 Furniture and fixtures 224 218 Computer hardware and software 24 24 1,767 1,720 Less: Accumulated depreciation (1,191) (1,118) Property, plant and equipment, net $ 576 $ 602 Depreciation expense was $42 thousand and $54 thousand for the three months ended March 31, 2023 and March 31, 2022, respectively, and is classified as research and development expense. | 4. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consist of the following: December 31, December 31, 2022 2021 Plant and equipment $ 1,478 $ 1,633 Furniture and fixtures 218 245 Computer hardware and software 24 26 1,720 1,904 Less: Accumulated depreciation (1,118) (1,102) Property, plant and equipment, net $ 602 $ 802 Depreciation expense was $198 thousand and $209 thousand for the year ended December 31, 2022 and 2021, respectively, and is classified as research and development expense. |
ACCOUNTS PAYABLE AND ACCRUED _4
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | ||
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following: March 31, December 31, (in thousands) 2023 2022 Accounts payable $ 456 $ 250 Accrued expenses – lab refurbishments 120 117 Accrued expenses – technical fees 84 130 Accrued expenses – audit & accounting fees 156 128 Accrued expenses – other 40 95 Payroll and social security liabilities 192 211 Total accounts payable and accrued expenses $ 1,048 $ 931 | 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following: December 31, December 31, 2022 2021 Accounts payable $ 230 $ 510 Accrued expenses – lab refurbishments 117 131 Accrued expenses – technical fees 130 66 Accrued expenses – variable rent & utilities 15 20 Accrued expenses – audit & accounting fees 128 191 Accrued expenses – other 80 112 Credit card liabilities 20 10 Payroll and social security liabilities 211 383 Total accounts payable and accrued expenses $ 931 $ 1,423 |
LEASES_2
LEASES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
LEASES | ||
LEASES | 5. LEASES: The Company has operating leases consisting of office space, lab space, and equipment with remaining lease terms of 1 to 3 years, subject to certain renewal options as applicable. There was no sublease rental income for the three months ended March 31, 2023 and 2022. The Company is not the lessor in any lease agreement, and no related party transactions for lease arrangements have occurred. The table below presents certain information related to the lease costs for the Company’s operating leases for the periods ended: Three Months Ended March 31, (in thousands) 2023 2022 Operating lease cost $ 64 $ 63 Short-term lease cost 4 2 Variable lease cost 45 54 Total lease cost $ 113 $ 119 The total lease cost is included in the unaudited condensed consolidated statements of operations as follows: March 31, (in thousands) 2023 2022 Research and development $ 104 $ 113 Selling, general and administrative 9 6 Total lease cost $ 113 $ 119 Right of use lease assets and lease liabilities for our operating leases were recorded in the unaudited condensed consolidated balance sheet as follows: March 31, December 31, (in thousands) 2023 2022 Assets Right of use assets - Operating Leases $ 431 $ 475 Total lease assets $ 431 $ 475 Liabilities Current liabilities: Lease liability, current - Operating Leases $ 225 $ 206 Noncurrent liabilities: Lease liability, non-current - Operating Leases 188 239 Total lease liabilities $ 413 $ 445 The Company had no right of use lease assets and lease liabilities for financing leases as of March 31, 2023 and December 31, 2022. The table below presents certain information related to the cash flows for the Company’s operating leases for the periods ended: March 31, (in thousands) 2023 2022 Operating cash outflows from operating leases $ 43 $ 40 Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets — — $ 43 $ 40 The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating leases as of the period ended: March 31, 2023 2022 Weighted average remaining lease term (in years) – operating leases 2.15 1.42 Weighted average discount rate – operating leases 7.77% 6.03% Undiscounted operating lease liabilities as of March 31, 2023 and December 31, 2022, by year and in the aggregate, having non-cancelable lease terms in excess of one year were as follows: March 31, December 31, (in thousands) 2023 2022 2023 $ 188 $ 234 2024 241 234 2025 18 19 Total undiscounted lease payments 447 487 Less imputed interest (34) (42) Total net lease liabilities $ 413 $ 445 | 6. LEASES: The Company has operating leases consisting of office space, lab space, and equipment with remaining lease terms of 1 to 3 years, subject to certain renewal options as applicable. There was no sublease rental income for the year ended December 31, 2022 and 2021. The Company is not the lessor in any lease agreement, and no related party transactions for lease arrangements have occurred. The table below presents certain information related to the lease costs for the Company’s operating leases for the periods ended: For the Year Ended December 31, 2022 2021 Operating lease cost $ 262 $ 225 Short-term lease cost 10 32 Variable lease cost 186 140 Total lease cost $ 458 $ 397 The total lease cost is included in the consolidated statements of operations as follows: For the Year Ended December 31, 2022 2021 Research and development $ 430 $ 373 Selling, general and administrative 28 24 Total lease cost $ 458 $ 397 Right of use lease assets and lease liabilities for our operating leases were recorded in the consolidated balance sheets as follows: December 31, December 31, 2022 2021 Assets Operating lease right of use assets $ 475 $ 154 Total lease assets $ 475 $ 154 Liabilities Current liabilities: Operating lease liability – current portion $ 206 $ 87 Noncurrent liabilities: Operating lease liability, net of current portion 239 28 Total lease liabilities $ 445 $ 115 The Company had no right of use lease assets and lease liabilities for financing leases as of December 31, 2022 and 2021. The table below presents certain information related to the cash flows for the Company’s operating leases for the periods ended: For the Year Ended December 31, 2022 2021 Operating cash outflows from operating leases $ 265 $ 276 Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets $ 583 $ 136 The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating leases as of the period ended: For the Year Ended December 31, 2022 2021 Weighted average remaining lease term (in years) – operating leases 2.19 1.40 Weighted average discount rate – operating leases 7.73 % 6.07 % Undiscounted operating lease liabilities as of December 31, 2022, by year and in the aggregate, having non-cancelable lease terms in excess of one year were as follows: As of December 31, 2022 2023 $ 234 2024 234 2025 19 Total undiscounted lease payments 487 Less imputed interest (42) Total net lease liabilities $ 445 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
COMMITMENTS AND CONTINGENCIES. | ||
COMMITMENTS AND CONTINGENCIES | 6. COMMITMENTS AND CONTINGENCIES Legal proceedings In the normal course of business, the Company may become involved in legal disputes regarding various litigation matters. In the opinion of management, any potential liabilities resulting from such claims would not have a material effect on the interim condensed consolidated financial statements. Commitments Capital expenditure commitments and unconditional purchase obligations contracted for but not yet incurred as of March 31, 2023, totaled $540 thousand and primarily consists of purchase commitments in the normal course of business for research & development services, communications infrastructure and administrative services. | 8. COMMITMENTS AND CONTINGENCIES: Legal proceedings In the normal course of business, the Company may become involved in legal disputes regarding various litigation matters. In the opinion of management, any potential liabilities resulting from such claims would not have a material effect on the consolidated financial statements. Commitments Expenditure commitments contracted for but not yet incurred totaled $681 thousand and primarily consists of purchase commitments in the normal course of business for research & development services, communications infrastructure and administrative services. |
STOCKHOLDERS' EQUITY_2
STOCKHOLDERS' EQUITY | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
STOCKHOLDERS' EQUITY | ||
STOCKHOLDERS' EQUITY | 7. STOCKHOLDERS’ EQUITY Common Stock Voting Rights Each holder of common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. The Company’s amended and restated certificate of incorporation and the Company’s amended and restated bylaws do not provide for cumulative voting rights. The holders of one-third of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, constitutes a quorum for the transaction of business at all meetings of the stockholders. Dividends The Company has never paid any cash dividends to stockholders and do not anticipate paying any cash dividends to stockholders in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant. Market Information Quotations on our common stock on the OTC Market Group’s OTCQB® Market quotation system (“OTCQB”) commenced under the ticker symbol “SMTK” in February 2022. There was no trading of our common stock on the OTCQB or any other over-the-counter market prior to February 2022. Common Stock Issued to Vendors for Services On January 6, 2023, the Company issued 50,000 shares of common stock, as payment for investor relations and other financial consulting services. On February 27, 2023, the Company issued 52,777 shares of common stock as payment for investor relations services. Preferred Stock The Company currently has no shares of preferred stock outstanding. The board of directors has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences, and privileges could include dividend rights, conversion rights, voting rights, redemption rights, liquidation preferences, sinking fund terms, and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock. Common Stock Warrants On February 23, 2021, a total of 985,533 fully vested common stock warrants were issued to a vendor for financial advisory services provided in connection with the sale of the Company’s common stock. The common stock warrants are exercisable at a per share price of $2.00 until they expire on February 23, 2026. During the three months ended March 31, 2023 and March 31, 2022, respectively, no warrants issued to vendors for financial advisory services were exercised. The grant date fair value for these warrants of $0.91 per warrant for a total fair value of $896 thousand, was determined using the Black-Scholes options valuation model. There were no warrants issued during the three months ended March 31, 2023. A summary of the Company’s warrants to purchase common stock activity is as follows: Weighted- Average Weighted- Remaining Average Contractual Number of Exercise Term Shares Price (Years) Warrants outstanding at January 1, 2023 985,533 $ 2.00 3.15 Forfeited — Cancelled — Granted — Warrants outstanding at March 31, 2023 985,533 $ 2.00 2.90 On February 23, 2021, a total of 2,168,000 pre-funded common stock warrants were issued to investors with an exercise price of $0.01 per share for total proceeds to the Company of $4.3 million. During the three months ended March 31, 2023, no warrants A summary of the Company’s pre-funded warrants to purchase common stock activity is as follows: Weighted- Average Number of Exercise Shares Price Pre-funded warrants outstanding at January 1, 2023 2,168,000 $ 0.01 Forfeited — Cancelled — Granted — Pre-funded warrants outstanding at March 31, 2023 2,168,000 $ 0.01 The grant date fair value of common stock warrants is determined using the Black Scholes option-pricing model. There was no public trading market for our shares before February 2022 and the Company estimates its expected stock volatility based on historical volatility of publicly traded peer companies. | 9. STOCKHOLDERS’ EQUITY: Common Stock Voting Rights Each holder of common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. The Company’s amended and restated certificate of incorporation and the Company’s amended and restated bylaws do not provide for cumulative voting rights. The holders of one-third of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. Dividends The Company has never paid any cash dividends to shareholders and does not anticipate paying any cash dividends to shareholders in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant. Market Information Our common stock is traded on the OTC Market Group’s OTCQB® Market (“OTCQB”) under the ticker symbol “SMTK”. Preferred Stock The Company currently has no shares of preferred stock outstanding. The board of directors has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences, and privileges could include dividend rights, conversion rights, voting rights, redemption rights, liquidation preferences, sinking fund terms, and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock. Common Stock Warrants On February 23, 2021, a total of 985,533 fully vested common stock warrants were issued to a vendor for financial advisory services provided in connection with the sale of the Company’s common stock. The common stock warrants are exercisable at a per share price of $2.00 until they expire on February 23, 2026. During the years ended December 31, 2021 and December 31, 2022, no warrants issued to vendors for financial advisory services were exercised. The grant date fair value for these warrants of $0.91 per warrant for a total fair value of $896 thousand, was determined using the Black-Scholes options valuation model. The Company recorded the warrants at fair value, as both an increase and decrease in additional paid-in capital during the year ended December 31, 2021. A summary of the Company’s warrants to purchase common stock activity is as follows: Weighted- Average Weighted- Remaining Average Contractual Number of Exercise Term Shares Price (Years) Warrants outstanding at January 1, 2021 — $ — — Exercised — — — Forfeited or Expired — — — Granted 985,533 2.00 5.00 Warrants outstanding at January 1, 2022 985,533 $ 2.00 4.15 Exercised — — — Forfeited or Expired — — — Granted — — — Warrants outstanding at December 31, 2022 985,533 $ 2.00 3.15 On February 23, 2021, a total of 2,168,000 pre-funded common stock warrants were issued to investors with an exercise price of $0.01 per share for total proceeds to the Company of $4,314 thousand. During the years ended December 31, 2021, and December 31, 2022, no warrants issued to investors were exercised. The grant date fair value for these warrants of $1.99 is based on the stock price at issuance date of $2.00 less the exercise price of $0.01. The pre-funded common stock warrants have no expiration date and terminate upon exercise. A summary of the Company’s pre-funded warrants to purchase common stock activity is as follows: Weighted- Average Number of Exercise Shares Price Pre-funded warrants outstanding at January 1, 2021 — $ — Exercised — — Forfeited or Expired — — Granted 2,168,000 0.01 Pre-funded warrants outstanding at January 1, 2022 2,168,000 $ 0.01 Exercised — — Forfeited or Expired — — Granted — — Pre-funded warrants outstanding at December 31, 2022 2,168,000 $ 0.01 The grant date fair value of common stock warrants is determined using the Black-Scholes option-pricing model. There was no public trading market for our shares before February 2022 and the Company estimated its expected stock volatility based on historical volatility of publicly traded peer companies. The Company did not issue any warrants in the year ended December 31, 2022. Common Stock Issued to Vendors for Services On February 23, 2021, the Company issued 50,000 shares of common stock for advisory services. On May 27, 2021, and November 29, 2021, the Company issued 25,000 and 12,500 shares of common stock, respectively, as payment for investor relations services. On August 13, 2021, the company issued 60,000 shares of common stock for advisory services. On February 28, 2022, May 27, 2022, and November 29, 2022, the Company issued 12,500, 22,473 and 35,714 shares of common stock, respectively, as payment for investor relations services. On June 29, 2022, the Company issued 360,000 shares of common stock as payment for a one-year internet advertising contract. |
SHARE-BASED COMPENSATION_2
SHARE-BASED COMPENSATION | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
SHARE-BASED COMPENSATION | ||
SHARE-BASED COMPENSATION | 8. SHARE-BASED COMPENSATION: On February 23, 2021, the Company approved the 2021 Equity Incentive Plan (“2021 Plan”), in which a maximum aggregate number of shares of common stock that may be issued under the 2021 Plan is 4,376,571 Determining the appropriate fair value of share-based awards requires the input of subjective assumptions, including the fair value of the Company’s common stock, and for share options, the expected life of the option, and expected share price volatility. The Company uses the Black-Scholes option pricing model to value its share option awards. The assumptions used in calculating the fair value of share-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, the share-based compensation expense could be materially different for future awards. There were no options granted under the 2021 Plan for the three months ended March 31, 2023 or March 31, 2022. Prior to February 2022, in the absence of a public trading market for the common stock, on each grant date, the Company developed an estimate of the fair value of the shares of common stock underlying the option grants. The Company estimated the fair value of the shares of common stock by referencing arms-length transactions inclusive of the shares of common stock underlying which occurred on or near the valuation date(s). The Company determined the fair value of the common stock using methodologies, approaches and assumptions consistent with the AICPA Practice Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation and based in part on input from an independent third-party valuation firm. From February 2022, the Company’s common stock is publicly traded, and the Company no longer has to estimate the fair value of the shares of common stock, rather the value is determined based on quoted market prices. The Company estimates its expected volatility by using a combination of historical share price volatilities of similar companies within our industry. The risk-free interest rate assumption is based on observed interest rates for the appropriate term of the Company’s options on a grant date. The contractual term is 10 years, and the expected option term is lower. The following table reflects share activity under the share option plans for three months ended March 31, 2023: Weighted- Average Weighted- Remaining Weighted- Aggregate Average Contractual Average Intrinsic Number of Exercise Term Fair Value at Value (in thousands) Shares Price (Years) Grant Date (in thousands) Options outstanding at January 1,2023 2,829,756 $ 1.81 8.77 $ 0.98273 Exercised — — Cancelled/Forfeited — — Expired (28,036) 0.12 Granted — — Options outstanding at March 31, 2023 2,801,720 $ 1.83 7.60 $ 0.97345 Options exercisable at March 31, 2023 1,252,870 $ 1.61 6.04 $ 63 Stock-based compensation, including stock options and warrants is included in the unaudited interim condensed consolidated statements of operations as follows: Three Months Ended March 31, (in thousands) 2023 2022 Research and development $ 70 $ 40 Selling, general and administration 223 58 Total $ 293 $ 98 Total compensation cost related to non-vested stock option awards not yet recognized as of March 31, 2023 was $1.1 million and will be recognized on a straight-line basis through the end of the vesting periods in July 2026. The amount of future stock option compensation expense could be affected by any future option grants or by any forfeitures. | 10. SHARE-BASED COMPENSATION: On February 23, 2021, the Company approved the 2021 Equity Incentive Plan (“2021 Plan”), in which a maximum aggregate number of shares of common stock that may be issued under the 2021 Plan is 2,275,000 shares. Subject to the adjustment provisions of the 2021 Plan, the number of shares of the Company’s common stock available for issuance under the 2021 Plan will also include an annual increase on the first day of each fiscal year beginning with 2022 fiscal year and ending on the Company’s 2031 fiscal year in an amount equal to the least of: 1) 2,275,000 shares of the Company’s common stock; 2) four percent (4%) of the outstanding shares of the Company’s common stock on the last day of the immediately preceding fiscal year; or 3) such number of shares of the Company’s common stock as the administrator may determine. As of January 1, 2021, there were 1,810,749 SmartKem Limited options that were outstanding. Of these options 1,424,622 were accelerated and exercised by the holders thereof for a like number of ordinary shares of SmartKem Limited and exchanged for shares of the Company’s common stock pursuant to the Exchange. As a result of the reverse merger and recapitalization, an aggregate of 402,586 options were issued during February 2021 under the 2021 Plan in consideration for the cancellation of the SmartKem Limited options that were outstanding. Of these options, 336,557 had an exercise price of $0.001 per share and 66,029 had an exercise price of $2.00 per share and all expire on the ten-year anniversary of the grant date. These options were fully vested on the grant date. During the year ended December 31, 2022, the Company issued additional options exercisable for 918,000 shares of common stock to employees, directors and consultants. The options vest over a period of three ten-year Determining the appropriate fair value of share-based awards requires the input of subjective assumptions, including the fair value of the Company’s common shares, and for share options, the expected life of the option, and expected share price volatility. The Company uses the Black-Scholes option pricing model to value its share option awards. The assumptions used in calculating the fair value of share-based awards represent management’s best estimates and involves inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, the share-based compensation expense could be materially different for future awards. Options granted under the 2021 Plan for year ended December 31, 2022, and December 31, 2021, were valued using the Black-Scholes option-pricing model with the following assumptions: Year Ended Year Ended December 31, 2022 December 31, 2021 Expected term (years) 6 years - 6.3 years 5 years - 6 years Risk-free interest rate 3.1% - 3.6% 0.3% - 1.2% Expected volatility 64% 54% - 58% Expected dividend yield 0% 0% Prior to February 2022, in the absence of a public trading market for the common stock, on each grant date, the Company developed an estimate of the fair value of the shares of common stock underlying the option grants. The Company estimated the fair value of the shares of common stock by referencing arms-length transactions inclusive of the shares of common stock underlying which occurred on or near the valuation date(s). The Company determined the fair value of the common stock using methodologies, approaches and assumptions consistent with the AICPA Practice Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation and based in part on input from an independent third-party valuation firm. From February 2022, the Company’s common stock is publicly traded, and the Company no longer has to estimate the fair value of the shares of common stock, rather the value is determined based on quoted market prices. The Company estimates its expected volatility by using a combination of historical share price volatilities of similar companies within our industry. The risk-free interest rate assumption is based on observed interest rates for the appropriate term of the Company’s options on a grant date. The following table reflects share activity under the option plans for the years ended December 31, 2022, and 2021: Weighted- Average Weighted- Remaining Weighted- Aggregate Average Contractual Average Intrinsic Number of Exercise Term Fair Value at Value Shares Price (Years) Grant Date (in thousands) Options outstanding at January 1, 2021 1,810,749 $ 0.06143 9.70 $ 3.46867 Exercised (1,424,622) 0.01447 Cancelled (405,936) 0.06452 Forfeited (136,221) 0.00100 Granted 2,109,912 1.68113 Options outstanding at December 31, 2021 1,953,882 $ 1.72323 9.31 $ 1.12355 Exercised — — Cancelled — — Forfeited (42,126) 2.00000 Granted 918,000 2.00000 Options outstanding at December 31, 2022 2,829,756 $ 1.80889 8.77 $ 0.98273 Options exercisable at December 31, 2022 986,636 $ 1.45189 8.26 $ 162 Vested and expected to vest after December 31, 2022 2,829,756 $ 1.80889 8.77 The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of our common stock at the end of the year for those options that had exercise prices lower than the fair value of our common stock. No options were exercised in the year end December 31, 2022. The aggregate intrinsic value of options exercised during the year ended December 31, 2021, was $2.4 million. The total fair value of options vesting in the year ended December 31, 2022 was $690 thousand. The total fair value of options vesting in the year ended December 31, 2021 was $6.6 million. The weighted-average grant date fair value per option granted for the year ended December 31, 2022 and 2021 was Stock-based compensation, including stock options is included in the consolidated statements of operations as follows: For the Year Ended December 31, 2022 2021 Research and development $ 216 $ 2,982 Selling, general and administrative 272 3,214 Total $ 488 $ 6,196 As of December 31, 2022, there was $1.4 million of compensation cost related to non-vested stock option awards not yet recognized that will be recognized on a straight-line basis through the end of the vesting periods in July 2026. The amount of future stock option compensation expense could be affected by any future option grants or by any forfeitures. |
DEFINED CONTRIBUTION PENSION_2
DEFINED CONTRIBUTION PENSION | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
DEFINED CONTRIBUTION PENSION | ||
DEFINED CONTRIBUTION PENSION | 9. DEFINED CONTRIBUTION PENSION: The Company operates a defined contribution pension scheme for its UK employees. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund. Pension cost is included in the unaudited interim condensed consolidated statements of operations as follows: Three Months Ended March 31, (in thousands) 2023 2022 Research and development $ 22 $ 27 Selling, general and administration 18 14 Total $ 40 $ 41 As of March 31, 2023 there was a liability of $7 thousand owed to the plan, and December 31, 2022 there were no amounts owed to the pension scheme. | 12. DEFINED CONTRIBUTION PENSION: The Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund. Pension cost is included in the consolidated statements of operations as follows: For the Years End December 31, 2022 2021 Research and development $ 108 $ 98 Selling, general and administrative 52 42 Total pension cost $ 160 $ 140 As of December 31, 2022, there was $1 thousand owed to the pension scheme that is recorded under accounts payable and accrued expenses on the consolidated balances sheets. As of December 31, 2021, there were no amounts owed to the pension scheme. |
RELATED PARTY TRANSACTIONS_2
RELATED PARTY TRANSACTIONS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
RELATED PARTY TRANSACTIONS | ||
RELATED PARTY TRANSACTIONS | 10. RELATED PARTY TRANSACTIONS: There were no related party transactions during the three months ended March 31, 2023. | 13. RELATED PARTY TRANSACTIONS: In addition to transactions and balances related to share-based compensation to officers and directors, the Company incurred expenses of $110 thousand and $65 thousand, for the year ended December 31, 2022 and 2021, respectively, due to reimbursement of expenses and compensation for members of the Board of Directors. These expenses are recorded in selling, general & administrative in the consolidated statements of operations. As of December 31, 2022 and December 31, 2021, there was $16 thousand and $18 thousand, respectively, payable to members of the Board of Directors that are recorded in accounts payable and accrued expenses on the consolidated balance sheets. During the year ended December 31, 2021, the Company reimbursed an owner for legal fees and other expenses as a result of the Exchange (see Note 1). The reimbursement of these fees for services resulted in an expense of $66 thousand for the year ended December 31, 2021 and there was zero payable as of December 31, 2021. During the year ended December 31, 2021, the Company obtained consulting services from an individual who is a family member of a Director of the Company. The consulting services resulted in an expense of $35 thousand for the year ended December 31, 2021 and there was zero payable as of December 31, 2021. Octopus Share Purchase On January 27, 2022, we sold an aggregate of 1,000,000 shares of our common stock at a purchase price of $2.00 per share to Octopus Titan VCT plc and Octopus Investments Nominees Limited in accordance with the Letter Agreement, dated as of February 23, 2021, between the Company and Octopus Titan VCT plc and certain related parties. During the year ended December 31, 2022, the Company reimbursed an owner for legal fees and other expenses as a result of the Octopus Share Purchase. The reimbursement of these fees for services resulted in an expense of payable as of December 31, 2022. |
SUBSEQUENT EVENTS_2
SUBSEQUENT EVENTS | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
SUBSEQUENT EVENTS | ||
SUBSEQUENT EVENTS | 11. SUBSEQUENT EVENTS: There are no subsequent events to report as of the date of this filing. | 14. SUBSEQUENT EVENTS: Under the evergreen adjustment provisions of the 2021 Plan, on January 1, 2023 the number of shares of the Company’s common stock available for issuance under the 2021 Plan was increased by 1,079,399 or four percent (4%) of the total number of shares of Common Stock outstanding on December 31, 2022. After giving effect to increase, the total number of shares of Common Stock that may be issued under Plan will be 4,376,571. In January 2023, 50,000 shares of our common stock were issued to a vendor in consideration for services to be provided. |
GENERAL (Policies)
GENERAL (Policies) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
GENERAL | ||
Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments: Credit Losses (Topic 326) periods beginning after December 15, 2022. The adoption of this guidance did not have a material impact in the interim condensed consolidated financial statements of the Company. | Recent Accounting Pronouncements In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments: Credit Losses (Topic 326) |
PREPAID EXPENSES AND OTHER CU_5
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | ||
Schedule of Prepaid Expenses and Other Current Assets | March 31, December 31, (in thousands) 2023 2022 Prepaid service charges and property taxes $ 108 $ 55 Prepaid utilities 96 51 Prepaid insurance 589 358 Prepaid administrative expenses 76 35 Prepaid consulting fees 177 304 Prepaid technical fees 13 22 Research grant receivable 61 — VAT receivable 41 195 Other receivable and other prepaid expenses 50 36 Total prepaid expenses and other current assets $ 1,211 $ 1,056 | December 31, December 31, 2022 2021 Prepaid service charges and property taxes $ 55 $ 58 Prepaid utilities 51 51 Prepaid insurance 358 412 Prepaid administrative expenses 35 63 Prepaid technical fees 22 141 Prepaid consulting fees 304 27 VAT receivable 195 50 Other receivable and other prepaid expenses 36 — Total prepaid expenses and other current assets $ 1,056 $ 802 |
PROPERTY, PLANT AND EQUIPMENT_4
PROPERTY, PLANT AND EQUIPMENT (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
PROPERTY, PLANT AND EQUIPMENT | ||
Schedule of Property, Plant and Equipment | March 31, December 31, (in thousands) 2023 2022 Plant and equipment $ 1,519 $ 1,478 Furniture and fixtures 224 218 Computer hardware and software 24 24 1,767 1,720 Less: Accumulated depreciation (1,191) (1,118) Property, plant and equipment, net $ 576 $ 602 | December 31, December 31, 2022 2021 Plant and equipment $ 1,478 $ 1,633 Furniture and fixtures 218 245 Computer hardware and software 24 26 1,720 1,904 Less: Accumulated depreciation (1,118) (1,102) Property, plant and equipment, net $ 602 $ 802 |
ACCOUNTS PAYABLE AND ACCRUED _5
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | ||
Schedule of Accounts Payable and Accrued Expenses | March 31, December 31, (in thousands) 2023 2022 Accounts payable $ 456 $ 250 Accrued expenses – lab refurbishments 120 117 Accrued expenses – technical fees 84 130 Accrued expenses – audit & accounting fees 156 128 Accrued expenses – other 40 95 Payroll and social security liabilities 192 211 Total accounts payable and accrued expenses $ 1,048 $ 931 | December 31, December 31, 2022 2021 Accounts payable $ 230 $ 510 Accrued expenses – lab refurbishments 117 131 Accrued expenses – technical fees 130 66 Accrued expenses – variable rent & utilities 15 20 Accrued expenses – audit & accounting fees 128 191 Accrued expenses – other 80 112 Credit card liabilities 20 10 Payroll and social security liabilities 211 383 Total accounts payable and accrued expenses $ 931 $ 1,423 |
LEASES (Tables)_2
LEASES (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
LEASES | ||
Schedule of Lease Costs | Three Months Ended March 31, (in thousands) 2023 2022 Operating lease cost $ 64 $ 63 Short-term lease cost 4 2 Variable lease cost 45 54 Total lease cost $ 113 $ 119 March 31, (in thousands) 2023 2022 Research and development $ 104 $ 113 Selling, general and administrative 9 6 Total lease cost $ 113 $ 119 | For the Year Ended December 31, 2022 2021 Operating lease cost $ 262 $ 225 Short-term lease cost 10 32 Variable lease cost 186 140 Total lease cost $ 458 $ 397 For the Year Ended December 31, 2022 2021 Research and development $ 430 $ 373 Selling, general and administrative 28 24 Total lease cost $ 458 $ 397 |
Schedule of Operating Lease Assets And Liabilities | March 31, December 31, (in thousands) 2023 2022 Assets Right of use assets - Operating Leases $ 431 $ 475 Total lease assets $ 431 $ 475 Liabilities Current liabilities: Lease liability, current - Operating Leases $ 225 $ 206 Noncurrent liabilities: Lease liability, non-current - Operating Leases 188 239 Total lease liabilities $ 413 $ 445 | December 31, December 31, 2022 2021 Assets Operating lease right of use assets $ 475 $ 154 Total lease assets $ 475 $ 154 Liabilities Current liabilities: Operating lease liability – current portion $ 206 $ 87 Noncurrent liabilities: Operating lease liability, net of current portion 239 28 Total lease liabilities $ 445 $ 115 |
Schedule of Operating Lease Cash Flow Information | March 31, (in thousands) 2023 2022 Operating cash outflows from operating leases $ 43 $ 40 Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets — — $ 43 $ 40 | For the Year Ended December 31, 2022 2021 Operating cash outflows from operating leases $ 265 $ 276 Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets $ 583 $ 136 |
Schedule of Weighted Average Remaining Lease Term and Weighted Average Discount Rate | March 31, 2023 2022 Weighted average remaining lease term (in years) – operating leases 2.15 1.42 Weighted average discount rate – operating leases 7.77% 6.03% | For the Year Ended December 31, 2022 2021 Weighted average remaining lease term (in years) – operating leases 2.19 1.40 Weighted average discount rate – operating leases 7.73 % 6.07 % |
Schedule of Operating Lease, Liability, Maturity | March 31, December 31, (in thousands) 2023 2022 2023 $ 188 $ 234 2024 241 234 2025 18 19 Total undiscounted lease payments 447 487 Less imputed interest (34) (42) Total net lease liabilities $ 413 $ 445 | As of December 31, 2022 2023 $ 234 2024 234 2025 19 Total undiscounted lease payments 487 Less imputed interest (42) Total net lease liabilities $ 445 |
STOCKHOLDERS' EQUITY (Tables)_2
STOCKHOLDERS' EQUITY (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
Common Stock Warrants | ||
Schedule of Warrants | Weighted- Average Weighted- Remaining Average Contractual Number of Exercise Term Shares Price (Years) Warrants outstanding at January 1, 2023 985,533 $ 2.00 3.15 Forfeited — Cancelled — Granted — Warrants outstanding at March 31, 2023 985,533 $ 2.00 2.90 | Weighted- Average Weighted- Remaining Average Contractual Number of Exercise Term Shares Price (Years) Warrants outstanding at January 1, 2021 — $ — — Exercised — — — Forfeited or Expired — — — Granted 985,533 2.00 5.00 Warrants outstanding at January 1, 2022 985,533 $ 2.00 4.15 Exercised — — — Forfeited or Expired — — — Granted — — — Warrants outstanding at December 31, 2022 985,533 $ 2.00 3.15 |
Pre Funded Warrants | ||
Schedule of Warrants | Weighted- Average Number of Exercise Shares Price Pre-funded warrants outstanding at January 1, 2023 2,168,000 $ 0.01 Forfeited — Cancelled — Granted — Pre-funded warrants outstanding at March 31, 2023 2,168,000 $ 0.01 | Weighted- Average Number of Exercise Shares Price Pre-funded warrants outstanding at January 1, 2021 — $ — Exercised — — Forfeited or Expired — — Granted 2,168,000 0.01 Pre-funded warrants outstanding at January 1, 2022 2,168,000 $ 0.01 Exercised — — Forfeited or Expired — — Granted — — Pre-funded warrants outstanding at December 31, 2022 2,168,000 $ 0.01 |
SHARE-BASED COMPENSATION (Tab_2
SHARE-BASED COMPENSATION (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
SHARE-BASED COMPENSATION | ||
Summary of non-vested share option activity under the share option plans | Weighted- Average Weighted- Remaining Weighted- Aggregate Average Contractual Average Intrinsic Number of Exercise Term Fair Value at Value (in thousands) Shares Price (Years) Grant Date (in thousands) Options outstanding at January 1,2023 2,829,756 $ 1.81 8.77 $ 0.98273 Exercised — — Cancelled/Forfeited — — Expired (28,036) 0.12 Granted — — Options outstanding at March 31, 2023 2,801,720 $ 1.83 7.60 $ 0.97345 Options exercisable at March 31, 2023 1,252,870 $ 1.61 6.04 $ 63 | Weighted- Average Weighted- Remaining Weighted- Aggregate Average Contractual Average Intrinsic Number of Exercise Term Fair Value at Value Shares Price (Years) Grant Date (in thousands) Options outstanding at January 1, 2021 1,810,749 $ 0.06143 9.70 $ 3.46867 Exercised (1,424,622) 0.01447 Cancelled (405,936) 0.06452 Forfeited (136,221) 0.00100 Granted 2,109,912 1.68113 Options outstanding at December 31, 2021 1,953,882 $ 1.72323 9.31 $ 1.12355 Exercised — — Cancelled — — Forfeited (42,126) 2.00000 Granted 918,000 2.00000 Options outstanding at December 31, 2022 2,829,756 $ 1.80889 8.77 $ 0.98273 Options exercisable at December 31, 2022 986,636 $ 1.45189 8.26 $ 162 Vested and expected to vest after December 31, 2022 2,829,756 $ 1.80889 8.77 |
Schedule of stock-based compensation | Three Months Ended March 31, (in thousands) 2023 2022 Research and development $ 70 $ 40 Selling, general and administration 223 58 Total $ 293 $ 98 | For the Year Ended December 31, 2022 2021 Research and development $ 216 $ 2,982 Selling, general and administrative 272 3,214 Total $ 488 $ 6,196 |
DEFINED CONTRIBUTION PENSION _2
DEFINED CONTRIBUTION PENSION (Tables) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
DEFINED CONTRIBUTION PENSION | ||
Schedule of pension cost | Three Months Ended March 31, (in thousands) 2023 2022 Research and development $ 22 $ 27 Selling, general and administration 18 14 Total $ 40 $ 41 | For the Years End December 31, 2022 2021 Research and development $ 108 $ 98 Selling, general and administrative 52 42 Total pension cost $ 160 $ 140 |
GENERAL- Organization and Rever
GENERAL- Organization and Reverse Recapitalization (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Feb. 23, 2021 $ / shares shares | Mar. 31, 2023 USD ($) | Mar. 31, 2022 USD ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
Net loss | $ | $ 2,048 | $ 2,762 | $ 11,495 | $ 17,126 | |
Accumulated deficit | $ | 88,615 | 86,567 | 75,072 | ||
Cash and cash equivalents | $ | $ 1,700 | $ 4,235 | $ 12,226 | ||
Securities Exchange Agreement, Smartkem Limited | |||||
Purchase price (in dollars per share) | $ / shares | $ 1.40 | ||||
Share exchange ratio | 0.0676668 | ||||
Securities Exchange Agreement, Smartkem Limited | Common stock A Shares | |||||
Share exchange ratio | 0.0111907 | ||||
Share exchange, number of shares issued or issuable | 12,725,000 | ||||
Shares exchange, number of shares exchanged | 1,127,720,477 | ||||
Management incentive options to purchase | 124,497,910 | ||||
Average share exchange ratio | 0.011283825 | ||||
Effect of reverse capitalization (in shares) | 2,500,000 |
PREPAID EXPENSES AND OTHER CU_6
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | |||
Prepaid service charges and property taxes | $ 108 | $ 55 | $ 58 |
Prepaid utilities | 96 | 51 | 51 |
Prepaid insurance | 589 | 358 | 412 |
Prepaid administrative expenses | 76 | 35 | 63 |
Prepaid consulting fees | 177 | 304 | 27 |
Prepaid technical fees | 13 | 22 | 141 |
Research grant receivable | 61 | ||
VAT receivable | 41 | 195 | 50 |
Other receivable and other prepaid expenses | 50 | 36 | |
Total prepaid expenses and other current assets | 1,211 | 1,056 | 802 |
Prepaid Insurance Noncurrent | $ 160 | $ 169 | $ 217 |
PROPERTY, PLANT AND EQUIPMENT_5
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment, Gross | $ 1,767 | $ 1,720 | $ 1,904 | |
Less: Accumulated depreciation | (1,191) | (1,118) | (1,102) | |
Property, plant and equipment, net | 576 | 602 | 802 | |
Depreciation | 42 | $ 54 | 198 | 209 |
Plant and equipment | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment, Gross | 1,519 | 1,478 | 1,633 | |
Furniture and fixtures | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment, Gross | 224 | 218 | 245 | |
Computer hardware and software | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment, Gross | 24 | 24 | 26 | |
Research and development | ||||
Property, Plant and Equipment [Line Items] | ||||
Depreciation | $ 42 | $ 54 | $ 198 | $ 209 |
ACCOUNTS PAYABLE AND ACCRUED _6
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | |||
Accounts payable | $ 456 | $ 250 | $ 510 |
Accrued expenses - lab refurbishments | 120 | 117 | 131 |
Accrued expenses - technical fees | 84 | 130 | 66 |
Accrued expenses - variable rent & utilities | 15 | 20 | |
Accrued expenses - audit & accounting fees | 156 | 128 | 191 |
Accrued expenses - other | 40 | 95 | 112 |
Credit card liabilities | 20 | 10 | |
Payroll and social security liabilities | 192 | 211 | 383 |
Total accounts payable and accrued expenses | $ 1,048 | $ 931 | $ 1,423 |
LEASES - Lease Costs (Details_2
LEASES - Lease Costs (Details) $ in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2023 USD ($) | Mar. 31, 2023 USN ($) | Mar. 31, 2022 USD ($) | Mar. 31, 2022 USN ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
Operating lease cost | $ 64 | $ 63 | $ 262 | $ 225 | ||
Short-term lease cost | 4 | 2 | 10 | 32 | ||
Variable lease cost | 45 | 54 | 186 | 140 | ||
Total lease cost | 113 | $ 113 | 119 | $ 119 | 458 | 397 |
Research and development | ||||||
Total lease cost | 104 | 113 | 430 | 373 | ||
Selling, general and administrative | ||||||
Total lease cost | $ 9 | $ 6 | $ 28 | $ 24 |
LEASES - Lease Assets And Lia_2
LEASES - Lease Assets And Liabilities (Details) $ in Thousands, $ in Thousands | Mar. 31, 2023 USD ($) | Mar. 31, 2023 USN ($) | Dec. 31, 2022 USD ($) | Mar. 31, 2022 USN ($) | Dec. 31, 2021 USD ($) |
Assets | |||||
Right of use assets - Operating Leases | $ 431 | $ 431 | $ 475 | $ 475 | $ 154 |
Total lease assets | 431 | 475 | 475 | 154 | |
Current liabilities | |||||
Lease liability, current - Operating Leases | 225 | 225 | 206 | 206 | 87 |
Noncurrent liabilities: | |||||
Lease liability, non-current - Operating Leases | 188 | 188 | 239 | 239 | 28 |
Total lease liabilities | $ 413 | $ 413 | $ 445 | $ 445 | $ 115 |
LEASES - Operating And Financ_2
LEASES - Operating And Finance Leases (Details) $ in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 USN ($) | Mar. 31, 2022 USN ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
LEASES | ||||
Operating cash flows from operating leases | $ 43 | $ 40 | $ 265 | $ 276 |
Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets | $ 583 | $ 136 | ||
Total | $ 43 | $ 40 |
LEASES - Weighted Average (De_2
LEASES - Weighted Average (Details) | Mar. 31, 2023 | Dec. 31, 2022 | Mar. 31, 2022 | Dec. 31, 2021 |
LEASES | ||||
Weighted average remaining lease term (in years) - operating leases | 2 years 1 month 24 days | 2 years 2 months 8 days | 1 year 5 months 1 day | 1 year 4 months 24 days |
Weighted average discount rate - operating leases | 7.77% | 7.73% | 6.03% | 6.07% |
LEASES - Undiscounted Operati_2
LEASES - Undiscounted Operating Lease Liabilities (Details) $ in Thousands, $ in Thousands | Mar. 31, 2023 USD ($) | Mar. 31, 2023 USN ($) | Dec. 31, 2022 USD ($) | Mar. 31, 2022 USN ($) | Dec. 31, 2021 USD ($) |
LEASES | |||||
2023 | $ 188 | $ 234 | |||
2024 | 241 | 234 | |||
2025 | 18 | 19 | |||
Total undiscounted lease payments | 447 | 487 | |||
Less imputed interest | (34) | (42) | |||
Total net lease liabilities | $ 413 | $ 413 | $ 445 | $ 445 | $ 115 |
LEASES - Additional Informati_2
LEASES - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Sublease rental income | $ 0 | $ 0 | $ 0 | $ 0 |
Finance lease, right-of-use assets | 0 | 0 | ||
Finance lease, liabilities | $ 0 | $ 0 | ||
Minimum | ||||
Operating leases terms | 1 year | 1 year | ||
Maximum | ||||
Operating leases terms | 3 years | 3 years |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
COMMITMENTS AND CONTINGENCIES. | ||
Capital expenditures to be paid in the future | $ 540 | $ 681 |
STOCKHOLDERS' EQUITY (Details_2
STOCKHOLDERS' EQUITY (Details) | 3 Months Ended | 12 Months Ended | |||||||||||
Feb. 27, 2023 shares | Jan. 06, 2023 shares | Nov. 29, 2022 shares | Jun. 29, 2022 shares | May 27, 2022 shares | Feb. 28, 2022 shares | Nov. 29, 2021 shares | Aug. 13, 2021 shares | May 27, 2021 shares | Feb. 23, 2021 shares | Mar. 31, 2023 Vote shares | Dec. 31, 2022 Vote shares | Dec. 31, 2021 shares | |
STOCKHOLDERS' EQUITY | |||||||||||||
Number of votes, common shares | Vote | 1 | 1 | |||||||||||
Preferred shares, outstanding (in shares) | 0 | 0 | 0 | ||||||||||
Preferred stock available for issuance | 10,000,000 | 10,000,000 | |||||||||||
Issuance of common stock to vendor (in shares) | 52,777 | 50,000 | 35,714 | 360,000 | 22,473 | 12,500 | 12,500 | 60,000 | 25,000 | 50,000 | |||
Term Of Internet Advertising Agreement | 1 year |
STOCKHOLDERS' EQUITY - Common_2
STOCKHOLDERS' EQUITY - Common Stock Warrants (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Feb. 23, 2021 | Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Common Stock Warrants | |||||
Number of shares | |||||
Warrants outstanding at beginning of the year | 985,533 | 985,533 | 985,533 | ||
Exercised | 0 | 0 | 0 | 0 | |
Granted | 985,533 | ||||
Warrants outstanding at end of the year | 985,533 | 985,533 | 985,533 | ||
Weighted-Average Exercise Price | |||||
Warrants outstanding at beginning of the year | $ 2 | $ 2 | $ 2 | ||
Granted | $ 2 | ||||
Warrants outstanding at end of the year | $ 2 | $ 2 | $ 2 | ||
Weighted Average Remaining Contractual Term (years) | |||||
Warrants outstanding at beginning of the year | 3 years 1 month 24 days | 4 years 1 month 24 days | 4 years 1 month 24 days | ||
Granted | 5 years | ||||
Warrants outstanding at end of the year | 2 years 10 months 24 days | 3 years 1 month 24 days | 4 years 1 month 24 days | ||
Warrants issued | 985,533 | 0 | |||
Warrants exercisable price | $ 2 | $ 0.91 | $ 0.91 | $ 0.91 | |
Fair value of warrant | $ 896 | $ 896 | $ 896 | ||
Warrants | |||||
Number of shares | |||||
Granted | 0 | ||||
Pre Funded Warrants | |||||
Number of shares | |||||
Warrants outstanding at beginning of the year | 2,168,000 | 2,168,000 | 2,168,000 | ||
Granted | 2,168,000 | ||||
Warrants outstanding at end of the year | 2,168,000 | 2,168,000 | 2,168,000 | ||
Weighted-Average Exercise Price | |||||
Warrants outstanding at beginning of the year | $ 0.01 | $ 0.01 | $ 0.01 | ||
Granted | $ 0.01 | ||||
Warrants outstanding at end of the year | $ 0.01 | $ 0.01 | $ 0.01 | ||
Weighted Average Remaining Contractual Term (years) | |||||
Warrants issued | 2,168,000 | 0 | 0 | 0 | |
Warrants exercisable price | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | |
Fair value of per warrant | 1.99 | 1.99 | |||
Exercise less amount | $ 2 | $ 2 | |||
Proceeds from Warrant | $ 4,314 |
SHARE-BASED COMPENSATION - Sh_2
SHARE-BASED COMPENSATION - Share option activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Number of Shares | ||||
Options outstanding at beginning | 2,829,756 | 1,953,882 | 1,810,749 | |
Exercised | 0 | (1,424,622) | ||
Cancelled | (405,936) | |||
Forfeited | (28,036) | (42,126) | (136,221) | |
Granted | 918,000 | 2,109,912 | ||
Options outstanding at end | 2,801,720 | 2,829,756 | 1,953,882 | 1,810,749 |
Options exercisable at March 31, 2023 | 1,252,870 | 986,636 | ||
Options vested and expected to vest after March 31, 2023 | 2,829,756 | |||
Weighted-Average Exercise Price | ||||
Options outstanding at beginning | $ 1.80889 | $ 1.72323 | $ 0.06143 | |
Exercised | 0.01447 | |||
Cancelled | 0.06452 | |||
Forfeited | 0.12 | 2 | 0.00100 | |
Granted | 2 | 1.68113 | ||
Options outstanding at end | 1.83 | 1.80889 | $ 1.72323 | $ 0.06143 |
Options exercisable at March 31, 2023 | $ 1.61 | 1.45189 | ||
Options vested and expected to vest after March 31, 2023 | $ 1.80889 | |||
Weighted-Average Remaining Contractual Term : | ||||
Weighted-Average Remaining Contractual Term (in Years) | 7 years 7 months 6 days | 8 years 9 months 7 days | 9 years 3 months 21 days | 9 years 8 months 12 days |
Options exercisable weighted average remaining contractual term | 6 years 14 days | 8 years 3 months 3 days | ||
Vested and expected to vest outstanding weighted average remaining contractual term | 8 years 9 months 7 days | |||
Weighted- Average Fair Value at Grant Date : | ||||
Weighted- Average Fair Value at Grant Date at beginning (in dollars) | $ 0.98273 | $ 1.12355 | $ 3.46867 | |
Weighted- Average Fair Value at Grant Date at end (in dollars) | $ 0.97345 | $ 0.98273 | $ 1.12355 | $ 3.46867 |
Aggregate Intrinsic Value, Options exercisable | $ 63 | $ 162 |
SHARE-BASED COMPENSATION - St_2
SHARE-BASED COMPENSATION - Stock Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share based compensation | $ 293 | $ 98 | $ 488 | $ 6,196 |
Research and development | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share based compensation | 70 | 40 | 216 | 2,982 |
Selling, general and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share based compensation | $ 223 | $ 58 | $ 272 | $ 3,214 |
SHARE-BASED COMPENSATION - Ad_2
SHARE-BASED COMPENSATION - Additional information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | ||||
Feb. 28, 2021 | Feb. 23, 2021 | Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Options granted (in shares) | 918,000 | 2,109,912 | ||||
Granted | $ 2 | $ 1.68113 | ||||
Expiration term | 10 years | |||||
Exercised (in shares) | 0 | 1,424,622 | ||||
Intrinsic value of options exercised | $ 2,400 | |||||
Option vested in fair value | $ 690 | $ 6,600 | ||||
Weighted-average grant-date fair value (in dollars per share) | $ 0.68 | $ 1.14 | ||||
Unrecognized compensation costs | $ 1,100 | $ 1,400 | ||||
Options | Exercise Price Range One | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Options granted (in shares) | 336,557 | |||||
Granted | $ 0.001 | |||||
Options | Exercise Price Range Two | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Options granted (in shares) | 66,029 | |||||
Granted | $ 2 | |||||
Options | Employees, Directors and Consultants | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Granted | $ 2 | |||||
Expiration term | 10 years | 10 years | ||||
Options | Employees, Directors and Consultants | Minimum | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Vesting period | 3 years | |||||
Options | Employees, Directors and Consultants | Maximum | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Vesting period | 4 years | |||||
2021 Plan | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Options granted (in shares) | 2,275,000 | 0 | 0 | |||
Percentage of outstanding shares | 4% | |||||
Annual share increase | 2,275,000 | |||||
2021 Plan | Options | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Options granted (in shares) | 402,586 |
DEFINED CONTRIBUTION PENSION _3
DEFINED CONTRIBUTION PENSION (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
DEFINED CONTRIBUTION PENSION | |||
Amounts owed to the pension scheme | $ 7 | $ 1 | $ 0 |
DEFINED CONTRIBUTION PENSION _4
DEFINED CONTRIBUTION PENSION - Pension cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
DEFINED CONTRIBUTION PENSION | ||||
Total | $ 40 | $ 41 | $ 160 | $ 140 |
Research and development | ||||
DEFINED CONTRIBUTION PENSION | ||||
Total | 22 | 27 | 108 | 98 |
Selling, general and administrative | ||||
DEFINED CONTRIBUTION PENSION | ||||
Total | $ 18 | $ 14 | $ 52 | $ 42 |