SmartKem (SMTK) 10-Q/A23 Aug 222021 Q3 Quarterly report (amended)Financial data

Company Profile

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2021	Nov. 11, 2021
Document and Entity Information [Abstract]
Document Type	10-Q/A
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2021
Document Transition Report	false
Entity File Number	000-56181
Entity Registrant Name	SmartKem, Inc.
Entity Address State Or Province	DE
Entity Tax Identification Number	85-1083654
Entity Address, Address Line One	Manchester Technology Centre, Hexagon Tower.
Entity Address, Address Line Two	Delaunays Road
Entity Address, Address Line Three	Blackley
Entity Address, City or Town	Manchester
Entity Incorporation, State or Country Code	X0
Entity Address, Postal Zip Code	M9 8GQ
City Area Code	011-44-161
Local Phone Number	721-1514
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		25,541,809
Entity Central Index Key	0001817760
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Amendment Flag	true
Amendment Description	SmartKem, Inc. (the "Company") hereby amends its Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed with the Securities and Exchange Commission (the "SEC") on November 12, 2021 (the "Original Quarterly Report"), as set forth in this Amendment No. 1 on Form 10-Q/A (the "Form 10-Q/A" or "Amended Quarterly Report"), to restate its financial statements and related disclosures as of and for the quarter ended September 30, 2021.Restatement BackgroundThe Company has determined that it made an error in the presentation and accounting of its consolidated statement of cash flows in the Company's annual and interim consolidated financial statements during 2021 and 2022. The management of the Company has assessed its accounting policies as well as the presentation and accounting for gain and loss on foreign currency and has concluded that it was necessary to restate its previously issued financial statements for the correction of this error related to incorrect classification of gain and loss on foreign currency in effect of exchange rate changes on cash instead of including such non-cash unrealized gains and losses in cash flows from operating activities. The effect of this error was to overstate net cash used in operating activities and effect of exchange rate changes on cash by $799 thousand for the nine months ended September 30, 2021. The error and the required restatement had no effect on the Company's cash flows from investing activities, financing activities, net changes in cash or cash and cash equivalents as of September 30, 2021 and also had no impact on the Company's consolidated balance sheet, statements of operations and comprehensive loss and stockholders' equity for the three and nine-month periods ended September 30, 2021. This Amended Quarterly Report sets forth the Original Quarterly Report, as modified and superseded where necessary to reflect the restatement and the related internal control considerations. Accordingly, the following items included in the Original Quarterly Report have been amended: · Part I, Item 1, Financial Statements · Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations · Part I, Item 4, Controls and Procedures· Part II, Item 1A, Risk Factors · Part II, Item 6, ExhibitsIn accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Company is also including with this Amended Quarterly Report currently dated certifications of the Company's Chief Executive Officer and Principal Financial Officer (attached as Exhibits 31.1, 31.2, 32.1 and 32.2). Except as discussed above and as further described in Note 1 in the Notes to Condensed Financial Statements, the Company has not modified or updated disclosures presented in this Amended Quarterly Report. Accordingly, the Amended Quarterly Report does not reflect events occurring after the Original Quarterly Report or modify or update those disclosures affected by subsequent events. Information not affected by the restatement is unchanged and reflects disclosures made at the time of the filing of the Original Quarterly Report. As a result of the restatement, the Company has concluded there was a material weakness in its internal control over financial reporting as of September 30, 2021, and its disclosure controls and procedures were not effective. See additional discussion included in Part I, Item 4 of this Amended Quarterly Report.

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets $ in Thousands, $ in Millions	Sep. 30, 2021 USD ($)	Dec. 31, 2020 USD ($)
Current assets:
Cash and cash equivalents	$ 14,719	$ 764
Accounts receivable		18
Research and development tax credit receivable	921	982
Prepaid expenses and other current assets	937	259
Total current assets	16,577	2,023
Property, plant equipment, net of accumulated depreciation of $1,041 and $908	805	682
Right-of-use assets, net	170	236
Other assets	6	8
Total assets	17,558	2,949
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses	1,323	861
Current lease liabilities	125	217
Total current liabilities	1,448	1,078
Non-current lease liabilities	16	20
Total liabilities	1,464	1,098
Stockholders' Equity:
Common stock, par value $0.0001 per share, 300,000,000 shares authorized, 25,541,809 and 13,627,887 shares issued and outstanding, at September 30, 2021 and December 31, 2020, respectively*	3	1
Additional paid-in capital	89,831	61,276
Accumulated other comprehensive loss	(1,365)	(1,480)
Accumulated deficit	(72,375)	(57,946)
Total Stockholders' equity	16,094	1,851
Total Liabilities and Stockholders' Equity	$ 17,558	$ 2,949

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Condensed Consolidated Balance Sheets
Property, plant equipment, net of accumulated depreciation	$ 1,041	$ 908
Common shares, par value	$ 0.0001	$ 0.0001
Common Stock, Shares Authorized	300,000,000	300,000,000
Common Stock, Shares Issued	25,541,809	13,627,887
Common Stock, Shares Outstanding	25,541,809	13,627,887

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Condensed Consolidated Statements of Operations and Comprehensive Loss
Revenue		$ 50		$ 71
Cost of revenue		26		38
Gross profit		24		33
Other operating income	$ 447	747	$ 1,135	1,125
Operating Expenses:
Research and development	1,356	1,102	6,725	3,213
Selling, general and administrative	1,368	292	6,695	1,061
Transaction expenses			1,329
Total operating expenses	2,724	1,394	14,749	4,274
Loss from operations	(2,277)	(623)	(13,614)	(3,116)
Non-operating (Expense)/Income
(Loss)/Gain on foreign currency transactions	(386)	1	(799)
Interest expense			(19)	(6,835)
Interest income	1		3	3
Change in fair value of derivative asset				(6,282)
Loss on conversion of convertible notes payable		(9,344)		(5,470)
Total non-operating (expense)/income	(385)	1	(815)	(18,584)
Loss before income taxes	(2,662)	(622)	(14,429)	(21,700)
Net loss	(2,662)	(622)	(14,429)	(21,700)
Other comprehensive loss:
Foreign currency translation	82	156	115	(405)
Total comprehensive loss	$ (2,580)	$ (466)	$ (14,314)	$ (22,105)
Basic net loss per common share	$ (0.10)	$ (0.05)	$ (0.59)	$ (1.73)
Diluted net loss per common share	$ (0.10)	$ (0.05)	$ (0.59)	$ (1.73)
Basic weighted average shares outstanding	27,671,646	13,596,438	24,397,327	12,551,073
Diluted weighted average shares outstanding	27,671,646	13,596,438	24,397,327	12,551,073

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, 2019		$ 30,926	$ (1,196)	$ (34,813)	$ (5,083)
Beginning Balance (in shares) at Dec. 31, 2019	2,183,885
Foreign currency translation adjustment			(405)		(405)
Net loss				(21,700)	(21,700)
Issuance of common stock		4,592			4,592
Issuance of common stock (in shares)	2,548,877
Conversion of notes and interest	$ 1	25,758			25,759
Conversion of notes and interest (in shares)	8,895,125
Ending Balance at Sep. 30, 2020	$ 1	61,276	(1,601)	(56,513)	3,163
Ending Balance (in shares) at Sep. 30, 2020	13,627,887
Beginning Balance at Jun. 30, 2020	$ 1	60,963	(1,757)	(55,891)	3,316
Beginning Balance (in shares) at Jun. 30, 2020	13,447,057
Foreign currency translation adjustment			156		156
Net loss				(622)	(622)
Issuance of common stock		313			313
Issuance of common stock (in shares)	180,830
Ending Balance at Sep. 30, 2020	$ 1	61,276	(1,601)	(56,513)	3,163
Ending Balance (in shares) at Sep. 30, 2020	13,627,887
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		6,097			$ 6,097
Repurchase of common stock (in shares)	(2,307,700)
Effect of reverse capitalization (in shares)	2,500,000
Issuance of common shares to vendor		256			256
Issuance of common shares to vendor (in shares)	135,000
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			115		115
Net loss				(14,429)	(14,429)
Ending Balance at Sep. 30, 2021	$ 3	89,831	(1,365)	(72,375)	16,094
Ending Balance (in shares) at Sep. 30, 2021	25,541,809
Beginning Balance at Jun. 30, 2021	$ 3	89,722	(1,447)	(69,713)	18,565
Beginning Balance (in shares) at Jun. 30, 2021	25,462,000
Issuance of common shares due to exercise of stock-options (in shares)	19,809
Stock-based compensation expense		2			2
Issuance of common shares to vendor		107			107
Issuance of common shares to vendor (in shares)	60,000
Foreign currency translation adjustment			82		82
Net loss				(2,662)	(2,662)
Ending Balance at Sep. 30, 2021	$ 3	$ 89,831	$ (1,365)	$ (72,375)	$ 16,094
Ending Balance (in shares) at Sep. 30, 2021	25,541,809

Condensed Consolidated Statem_3

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash flows from operating activities:
Net loss		$ (21,700)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		148
Amortization of right of use asset		131
Unrealized foreign currency losses	$ 799
Non-cash interest expense		6,835
Change in fair value of embedded conversion feature		6,282
Loss on conversion of convertible notes payable		5,470
Change in operating assets and liabilities:
Accounts receivable, net		(1)
Research & development tax credit receivable		871
Prepaid expenses and other current assets		(44)
Accounts payable and accrued expenses		(466)
Lease liabilities		(118)
Other assets		(1)
Net cash used in operating activities	(7,300)	(2,593)
Cash flows from investing activities:
Purchases of property, plant and equipment		(90)
Net cash used by investing activities		(90)
Cash flows from financing activities:
Proceeds from the issuance of common stock		4,592
Net cash provided by financing activities		4,592
Effect of exchange rate changes on cash		(116)
Net change in cash		1,909
Cash, beginning of period		412
Cash, end of period		2,205
Supplemental disclosure of cash and non-cash investing and financing activities
Right of use asset and lease liability additions	86
Conversion of debt and accrued interest into common shares		$ 25,759
As restated
Cash flows from operating activities:
Net loss	(14,429)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	147
Common shares issued to vendor for services	186
Amortization of right of use asset	164
Stock-based compensation	6,097
Unrealized foreign currency losses	799
Change in operating assets and liabilities:
Accounts receivable, net	19
Research & development tax credit receivable	46
Prepaid expenses and other current assets	(614)
Accounts payable and accrued expenses	478
Lease liabilities	(196)
Other assets	2
Net cash used in operating activities	(7,301)
Cash flows from investing activities:
Purchases of property, plant and equipment	(282)
Net cash used by investing activities	(282)
Cash flows from financing activities:
Proceeds from Credit Facility Loan Payable	738
Repayment of Credit Facility Loan Payable	(738)
Proceeds from the issuance of common stock and warrants in private placement	24,638
Payment of issuance costs	(2,454)
Proceeds from the exercise of stock options	20
Net cash provided by financing activities	22,204
Effect of exchange rate changes on cash	(666)
Net change in cash	14,621
Cash, beginning of period	764
Cash, end of period	14,719
Supplemental disclosure of cash and non-cash investing and financing activities
Cash paid for interest	19
Right of use asset and lease liability additions	$ 86

BUSINESS AND LIQUIDITY

BUSINESS AND LIQUIDITY	9 Months Ended
BUSINESS AND LIQUIDITY	Sep. 30, 2021
BUSINESS AND BASIS OF PREPARATION
BUSINESS AND LIQUIDITY	1. BUSINESS AND LIQUIDITY Restatement Of Previously Filed Financial Statements The Company has determined that it made an error in the presentation and accounting of its consolidated statement of cash flows in the Company’s annual and interim consolidated financial statements during 2021 and 2022. The management of the company has assessed its accounting policies as well as the presentation and accounting for the gain and loss on foreign currency and has concluded that it was necessary to restate its previously issued financial statements for the correction of this error related to incorrect classification of gain and loss on foreign currency in effect of exchange rate changes on cash instead of including such non-cash unrealized gains and losses in cash flows from operating activities. The effect of this error was to overstate net cash used in operating activities and effect of exchange rate changes on cash by For the Nine Months Ended September 30, 2021 Net cash used in operating activities as previously reported $ (8,100) Adjustment for Loss/(Gain) on foreign currency transactions 799 Net cash used in operating activities as restated $ (7,301) Effect of exchange rate changes on cash as previously reported $ 133 Adjustment for Gain/(Loss) on foreign currency transactions (799) Effect of exchange rate changes on cash as restated $ (666) 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 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 U.S. 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 SmartKem, Inc. is seeking to reshape the world of electronics with a revolutionary semiconductor platform that enables a new generation of displays, sensors and logic. SmartKem’s patented TRUFLEX® inks are solution deposited at a low temperature, on low-cost substrates to make organic thin-film transistor (OTFT) circuits. The company’s semiconductor platform can be used in a number of applications including mini-LED displays, AMOLED displays, fingerprint sensors and logic circuits. SmartKem develops its materials at its research and development facility in Manchester, UK and its semiconductor manufacturing process at the Centre of Process Innovation (CPI) in Sedgefield, UK. The company has an extensive IP portfolio including approximately 120 issued patents. Liquidity and Going Concern The accompanying 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 normal course of business. The Company has financed its activities principally from the issuance of its equity securities. 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 three and nine months ended September 30, 2021 were deemed to be immaterial to the 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 2021 and thereafter. These costs are not expected to be material. The Company has incurred substantial and negative cash flows from operations in every fiscal period since inception. For three and nine months ended September 30, 2021, the Company incurred a net loss of $2.7 million and $14.4 million, respectively, and used $7.3 million in cash to fund operations for the nine months ended September 30, 2021 and had an accumulated deficit of $72.4 million as of September 30, 2021. The Company’s cash as of September 30, 2021 was $14.7 million. Management believes that the existing cash at September 30, 2021 will be sufficient to fund operations for at least the next twelve months following the issuance of these unaudited condensed consolidated financial statements. 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	9 Months Ended
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	Sep. 30, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis for Presentation These unaudited condensed 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 (“U.S. GAAP”) for interim reporting and are presented in thousands, except number of shares and per share data. Accordingly, certain notes or other information that are normally required by U.S. GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements. Accordingly, the unaudited condensed consolidated financial statements should be read in connection with the Company’s audited financial statements and related notes as of and for the year ended December 31, 2020. The accompanying condensed consolidated financial statements are unaudited; however, in the opinion of management, they include all normal and recurring adjustments necessary for a fair presentation of the Company’s unaudited condensed consolidated financial statements for the periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. Basis of Consolidation The condensed 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 dissolution of the Company's wholly-owned subsidiary, SmartKem Delaware Inc., was authorized by the Board of Directors and Stockholders on April 28, 2021. 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 condensed consolidated financial statements in conformity U.S. 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 financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates in the Company’s condensed 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 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 demonstration 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 September 30, 2021 and December 31, 2020, 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 credit-worthiness, 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 September 30, 2021 and December 31, 2020. 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 at 25 percent of net book value on an annual basis, resulting in an estimated useful life of approximately 15 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 condensed consolidated statements of operations. Reversal of previously recorded impairment losses are prohibited. As of September 30, 2021 and December 31, 2020, 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 are 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. Convertible Notes The Company accounts for its convertible notes in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”), which requires the liability and equity components of convertible debt instruments to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. 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 Leases Operating lease assets are included within operating lease right-of-use assets, and the corresponding operating lease obligation on the unaudited condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020. 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 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 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 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 expenses as incurred when the amortization period is less than a year. 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 condensed consolidated statements of operations and comprehensive loss. Other Operating Income The Company’s other operating income is related to government grant incentives received for qualifying research and development projects, and research and development tax credits related to the United Kingdom’s Research and Development Expenditure Credit scheme, 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 three months ended September 30, 2021 and 2020, the Company recorded grant income and research & development tax credits of $447 thousand and $747 thousand, respectively, and $1,135 thousand and $1,125 thousand for the nine months ended September 30, 2021 and 2020, respectively which are recorded as other operating income in the accompanying condensed consolidated statements of operations. As of September 30, 2021, and December 31, 2020, the Company had receivables related to research & development tax credits for payments not yet received of $921 thousand and $982 thousand, respectively. 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. 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 financial statements into the presentation currency using exchanges 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). From the date of the Exchange forward, 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 operation denominated in local currencies are translated at the spot rate in effect at the applicable reporting date. The condensed 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 are recorded in accordance with ASC 740, Income Taxes The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. As of September 30, 2021 and December 31, 2020, there were no accruals for 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 September 30, 2021, 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. Offering 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 and recorded against the net proceeds received in the issuance. The deferred offering costs incurred as of December 31, 2020 were immaterial and no offering costs were capitalized. For the nine months ended September 30, 2021 $2,454 thousand of offering costs were recorded in additional paid-in capital. 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 condensed consolidated financial statements is reflected and calculated as if the Company had existed since January 1, 2020. 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 September 30, 2021, 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: September 30, 2021 2020 Options 2,036,882 1,681,239 Warrants 985,533 — Total 3,022,415 1,681,239 Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments: Credit Losses (Topic 326) companies. The standards update is effective prospectively for annual and interim periods beginning after December 15, 2022. Management is currently evaluating the impact of these changes on the Financial Statements. In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The amendments in this update affect all entities that issue freestanding written call options (for example warrants) that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance in Topic 260, Earnings Per Share. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Management is currently evaluating the impact of this guidance but does not expect this update to have a material impact on the Company's financial statements.

PREPAID EXPENSES AND OTHER CURR

PREPAID EXPENSES AND OTHER CURRENT ASSETS	9 Months Ended
PREPAID EXPENSES AND OTHER CURRENT ASSETS	Sep. 30, 2021
PREPAID EXPENSES AND OTHER CURRENT ASSETS
PREPAID EXPENSES AND OTHER CURRENT ASSETS	3. PREPAID EXPENSES AND OTHER CURRENT ASSETS: Prepaid expenses and other current assets consist of the following: September 30, December 31, 2021 2020 Prepaid rent $ 77 $ 65 Prepaid utilities 30 30 Prepaid insurance 557 41 Prepaid administrative expenses 101 69 Prepaid consulting fees 80 — VAT receivable 92 54 Total prepaid expenses and other current assets $ 937 $ 259 As of September 30, 2021 and December 31, 2020, there was $226 thousand and $0, 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	9 Months Ended
PROPERTY, PLANT AND EQUIPMENT	Sep. 30, 2021
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT	4. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consist of the following: September 30, December 31, 2021 2020 Plant and equipment $ 1,575 $ 1,316 Furniture and fixtures 245 248 Computer hardware and software 26 26 1,846 1,590 Less: Accumulated depreciation (1,041) (908) Property, plant and equipment, net $ 805 $ 682 Depreciation expense was $52 thousand and $50 thousand for three months ended September 30, 2021 and 2020, respectively, and $147 thousand and $148 thousand for the nine months ended September 30, 2021 and 2020, respectively, and is classified as research and development expense.

ACCOUNTS PAYABLE AND ACCRUED EX

ACCOUNTS PAYABLE AND ACCRUED EXPENSES	9 Months Ended
ACCOUNTS PAYABLE AND ACCRUED EXPENSES	Sep. 30, 2021
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES	5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following: September 30, December 31, 2021 2020 Accounts payable $ 506 $ 227 Accrued expenses – lab refurbishments 131 132 Accrued expenses – technical fees 81 45 Accrued expenses – variable rent & utilities 13 67 Accrued expenses – audit & accounting fees 185 250 Accrued expenses – other 31 6 Credit card liabilities 21 6 Payroll liabilities 355 128 Total accounts payable and accrued expenses $ 1,323 $ 861

LEASES

LEASES	9 Months Ended
LEASES	Sep. 30, 2021
LEASES
LEASES	6. LEASES: The Company has operating leases consisting of office space, lab space, and equipment with remaining lease terms of 1 There was no sublease rental income for three and nine months ended September 30, 2021 and 2020. 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 and finance leases for the periods ended: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Operating lease cost $ 60 $ 45 $ 159 $ 132 Short-term lease cost 3 2 29 15 Variable lease cost 7 95 105 221 Total lease cost $ 70 $ 142 $ 293 $ 368 For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 64 $ 130 $ 271 $ 336 Selling, general and administrative 6 12 22 32 Total lease cost $ 70 $ 142 $ 293 $ 368 Right of use lease assets and lease liabilities for our operating leases were recorded in the consolidated balance sheet as follows: September 30, December 31, 2021 2020 Assets Operating lease right of use assets $ 170 $ 236 Total lease assets $ 170 $ 236 Liabilities Current liabilities: Operating lease liability – current portion $ 125 $ 217 Noncurrent liabilities: Operating lease liability, net of current portion 16 20 Total lease liabilities $ 141 $ 237 The Company had no right of use lease assets and lease liabilities for financing leases as of September 30, 2021 and December 31, 2020. The table below presents certain information related to the cash flows for the Company’s operating leases for the periods ended: Nine Months Ended September 30, 2021 2020 Operating cash outflows from operating leases $ 196 $ 118 Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets $ 86 $ — 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 and finance leases as of the period ended: September 30, 2021 Weighted average remaining lease term (in years) – operating leases 0.89 Weighted average discount rate – operating leases 6.07 % Undiscounted operating lease liabilities as of September 30, 2021, by year and in the aggregate, having non-cancelable lease terms in excess of one year were as follows: As of September 30, 2021 2021 $ 73 2022 75 2023 8 2024 — 2025 — Thereafter — Total undiscounted lease payments 156 Less imputed interest (15) Total net lease liabilities $ 141

CONVERTIBLE NOTES AND NOTES PAY

CONVERTIBLE NOTES AND NOTES PAYABLE	9 Months Ended
CONVERTIBLE NOTES AND NOTES PAYABLE	Sep. 30, 2021
NOTES PAYABLE.
NOTES PAYABLE	7. CONVERTIBLE NOTES AND NOTES PAYABLE: Convertible Notes On January 24, 2020, a Qualified Financing Event (as defined below) occurred when the Company received cumulative investment proceeds in excess of $4,600 thousand from the sale and issuance of common shares. The fair value of the Company’s common shares were $1.807011 per share. The 2018 BASF Venture Capital and Entrepreneurs Fund L.P. Notes (as defined below), 2018 Octopus Investment Limited Notes (as defined below), and the 2019 Octopus, EF, and Other Notes (as defined below) in the aggregate principal amount of $11,796 thousand were converted into 8,159,977 of common shares (at the discounted price of $1.45 per share), and the related unpaid and accrued interest totaling $1,063 thousand were also converted into 735,148 of A Ordinary common shares of the Company (at the discounted price of $1.45 per share). The Company recognized a loss on conversion of $5,470 thousand for the nine months ended September 30, 2020 related to the conversion of notes measured as the difference in carrying value of debt and accrued interest and the fair value of shares converted on the conversion date. As a result of the conversion, the Company also recognized the unamortized debt discount related to the beneficial conversion feature of $6,767 thousand as interest expense for the nine months ended September 30, 2020. For the nine months ended September 30, 2020, the Company incurred an effective interest rate of 13.5% relating to convertible notes. There were no convertible notes outstanding during the three months ended September 30, 2020 and the three and nine months ended September 30, 2021. There was interest expense recognized based on the debt’s stated interest for the nine months ended September 30, 2021 and 2020 of zero and $43 thousand, respectively, relating to convertible notes. Additional interest expense related to the amortization of debt issuance cost was zero and $25 thousand for the nine months ended September 30, 2021 and 2020, respectively, for convertible notes. There was no interest expense or amortization of debt issuance cost recognized relating to convertible notes for the three months ended September 30, 2021 and 2020, Loss on the conversion of notes is included on the consolidated statements of operations and other comprehensive loss as loss on conversion of convertible notes payable. The amount displayed in the statements of operations and other comprehensive loss for the three months ended September 30, 2020 is inclusive of the loss on notes in the amount of $9,344 thousand, loss on accrued interest in the amount of $1,046 thousand and offset by the gain on the extinguishment of derivative liability in the amount of $4,920 thousand (Note 8). 2018 BASF Venture Capital and Entrepreneurs Fund L.P. Notes On April 18, 2018, the Company entered into a convertible note agreement (the “2018 BASF Venture Capital and Entrepreneurs Fund L.P. Notes”), with BASF Venture Capital (“BASF”) and Entrepreneurs Fund L.P. (“EF”) with an aggregate principal of $5,862 thousand. The 2018 BASF/EF Convertible Note was issued in three separate tranches on April 18, 2018, July 20, 2018 December 28, 2018 The 2018 BASF Venture Capital and Entrepreneurs Fund L.P. Notes and accrued but unpaid interest were convertible into the common share based on (i) fund raising at a price paid per Senior Share equal to the price paid per Senior Share by the investors on a Fund Raising at a discount to the per share price in the Fund Raising, (ii) sale of the company at a price per Senior Share of $16.39, or (iii) listing of the company on a publicly traded market at a price per Senior Share of $16.39. The principal amount shall accrue interest at a rate of 8% per annum, from the Issue Date up until the first anniversary of the Issue Date. Interest shall accrue on the principal amount at a rate of 15% per annum from, and including, the first anniversary of the Issue Date up until the notes are (i) converted, cancelled, repaid or redeemed or (ii) the longstop date. Accrued interest was to be calculated on the basis of a 365-day year for the actual number of days elapsed. 2018 Octopus Notes On July 20, 2018 the Company entered into a convertible note agreement (the “2018 Octopus Investment Limited Notes”) with Octopus Investment Limited (“Octopus”) with an aggregate nominal amount of $2,622 thousand. The 2018 Octopus Convertible Note was issued in two separate tranches on July 20, 2018 and December 28, 2018 The 2018 Octopus Notes and accrued but unpaid interest were convertible into the common shares based on (i) fund raising at a price paid per Senior Share equal to the price paid per Senior Share by the investors on a Fund Raising at a discount, (ii) sale of the company at a price per Senior Share of $15.10, or (iii) listing of the company on a publicly traded market at a price per Senior Share of $15.10. The principal amount shall accrue interest at a rate of 8% per annum, from the Issue Date up until the first anniversary of the Issue Date. Interest shall accrue on the principal amount at a rate of 12% per annum from, and including, the first anniversary of the Issue Date up until the notes are (i) converted, cancelled, repaid or redeemed or (ii) the longstop date. Accrued interest was to be calculated on the basis of a 365-day year for the actual number of days elapsed. 2019 Octopus, EF, and Other Notes On June 26, 2019 the Company entered into a convertible note agreement (the “2019 Octopus, EF, and Other Notes”) with Octopus, EF, and various private investors with an aggregate nominal amount of $3,681 thousand. The 2019 Octopus Convertible Note was issued in two separate tranches on June 26, 2019 and September 23, 2019 The 2018 Octopus, EF, and Other Notes and accrued but unpaid interest were convertible into the common shares based on (i) fund raising at a price paid per Senior Share equal to the price paid per Senior Share by the investors on a Fund Raising at a discount, (ii) sale of the company at a price per Senior Share of $0.001861, (iii) listing of the company on a publicly traded market at a price per Senior Share of $14.61, or (ii) any date following the first anniversary of the date the of the Instrument at a price per Senior Share of $11.19. The principal amount shall accrue interest at a rate of 10% per annum, from the Issue Date up until the notes are (i) converted, cancelled, repaid or redeemed or (ii) the longstop date. Accrued interest was to be calculated on the basis of a 365-day year for the actual number of days elapsed. The issuance of convertible notes with a beneficial redemption feature resulted in a debt discount of $2,608 thousand. 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 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 nine months ended September 30, 2021, the Company incurred an effective interest rate of 26.20% relating to notes payable. There were no notes payable outstanding during for the nine months ended September 30, 2020. The interest expense recognized based on the debt’s effective interest rate for nine months ended September 30, 2021 and 2020, was $19 thousand and zero, respectively, relating to notes payable. There were no notes payable outstanding during the three months ended September 30, 2021 and 2020, and no associated interest expense during the period. The Company repaid the note payable in full on March 2, 2021. There were no notes payable outstanding as of September 30, 2021 and December 31, 2020.

DERIVATIVE ASSET

DERIVATIVE ASSET	9 Months Ended
DERIVATIVE ASSET	Sep. 30, 2021
DERIVATIVE ASSET [Abstract]
DERIVATIVE ASSET	8. DERIVATIVE ASSET: The company recorded a derivative asset related to the convertible notes outstanding during the nine months ended September 30, 2020. The Company measured the derivative asset on a recurring basis using significant unobservable inputs (Level 3) for nine months ended September 30, 2020. The Embedded Conversion Features are separately measured at fair value, with changes in fair value recognized in current operations. The original values of the Embedded Conversion Features were recorded as a derivative asset with the offset as a debt premium to the Convertible Notes which is being amortized over the term of the Convertible Notes. During the nine months ended September 30, 2020, all outstanding convertible notes were converted into equity. The derivative asset was marked to market on the date of conversion and derecognized at conversion. The change in fair value of derivative asset included in earnings was $6,282 thousand for the nine months ended September 30, 2020. The gain on extinguishment of derivative asset upon conversion is $4,920 thousand and is recorded as an offset within the loss on conversion of convertible notes payable on the consolidated statements of operations and comprehensive loss. There were no convertible notes outstanding during the three and nine months ended September 30, 2021, and no associated derivative asset during the period.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	9 Months Ended
COMMITMENTS AND CONTINGENCIES	Sep. 30, 2021
COMMITMENTS AND CONTINGENCIES.
COMMITMENTS AND CONTINGENCIES	9. 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 financial statements.

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY	9 Months Ended
STOCKHOLDERS' EQUITY	Sep. 30, 2021
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY	10. 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 do 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 The Company’s common stock is not listed on a national securities exchange, an over-the-counter market or any other exchange. Therefore, there is no trading market, active or otherwise, for our common stock and the Company’s common stock may never be included for trading on any stock exchange, automated quotation system or any over-the-counter market. Preferred Stock The Company currently has no shares of preferred stock outstanding, and the Company has no present plan to issue any shares of preferred stock. 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 September 30, 2021, 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 nine months ended September 30, 2021. There were no warrants issued during the three months ended September 30, 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 September 30, 2021 985,533 $ 2.00 4.40 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 nine months ended September 30, 2021. During the three and nine months ended September 30, 2021, 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 September 30, 2021 2,168,000 $ 0.01 The grant date fair value of common stock warrants is determined using the Black Scholes option-pricing model. The Company is a private company and estimates its expected stock volatility based on historical volatility of publicly traded peer companies. The following assumptions were used during the nine months ended September 30, 2021: Nine Months Ended September 30, 2021 Expected term (years) 5 years Risk-free interest rate 0.60% Expected volatility 54% Expected dividend yield 0% There were no common stock warrants issued during the nine months ended September 30, 2020.

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION	9 Months Ended
SHARE-BASED COMPENSATION	Sep. 30, 2021
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION	11. SHARE-BASED COMPENSATION: Prior to the Exchange discussed in Note 1, SmartKem Limited had stock option plans. SmartKem Limited had issued Enterprise Management Incentive options (“EMI Options”) and non-tax-advantaged options ( “Unapproved Options”) to eligible employees, officers, non-employee directors and other individual service providers as a means for them to develop a sense of proprietorship and personal involvement in the development and financial success of SmartKem Limited and to encourage them to devote their best efforts to the business of SmartKem Limited, thereby advancing the interests of SmartKem Limited and its shareholders. Options were issued to certain employees and service providers under the investment agreement dated July 15, 2014, which provided for the grant of up to 175,292 options. On December 14, 2018, the Company entered into a written resolution, which allowed SmartKem Limited to grant up to 458,316 options. SmartKem Limited adopted a new Investment Agreement (the “Agreement”) dated January 24, 2020, SmartKem Limited, by means of the Agreement, seeks to retain the services of such eligible persons and to provide incentives for such persons to exert maximum efforts for the success of SmartKem Limited. The Agreement commenced on the January 24, 2020 and the Agreement is administered by Board of Directors. The maximum aggregate number of shares of common shares which may be issued under all Awards granted to Participants under the Agreement shall be 15% of SmartKem Limited’s issued capital shares. In the event of a termination of continuous service (other than as a result of a change of control, as defined in the Agreement), unvested share options generally shall terminate and, with regard to vested share options, the exercise period shall be the lesser of the original expiration date or six months from the date continuous service terminates. The Company has granted these share option awards to employees and consultants. Outstanding options generally expire 10 years after the grant date. Options are subject to vesting and, grantees become fully vested and 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. During the nine months ended September 30, 2020, the Company granted 1,828,128 SmartKem Limited share options to employees and consultants. These options were either exercised or cancelled as a result of the reverse merger and recapitalization. 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 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 nine months ended 30 September 2021, the Company has issued a further 1,700,326 options for employees, directors and consultants. The options vest over a period of four years, have an exercise price of $2.00 per share and expire on the ten year anniversary of the grant date. 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 nine months ended September 30, 2021 were valued using the Black-Scholes option-pricing model with the following assumptions: Nine Months Ended September 30, 2021 Expected term (years) 5 years - 6 years Risk-free interest rate 0.3% - 1.2% Expected volatility 54% - 58% Expected dividend yield 0% In the absence of a public trading market of the common share, on each grant date, the Company develops an estimate of the fair value of the common shares underlying the option grants. The Company estimated the fair value of the common shares by referencing arms-length transactions inclusive of the common shares underlying which occurred on or near the valuation date(s). Once the Company’s common shares are publicly traded, the Company will no longer have to estimate the fair value of the common share, rather the value will be determined based on quoted market prices. The Company determined the fair value of common share 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. 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 expected option term assumption is the contractual term, as the service period is implied under the practical expedient, since the Company does not have sufficient exercise history to estimate expected term of its historical option awards. The following table reflects share activity under the share option plans for nine months ended September 30, 2021: Weighted- Average Weighted- Remaining Weighted- Average Contractual Average Number of Exercise Term Fair Value at Shares Price (Years) Grant Date 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 (46,221) 0.00100 Granted 2,102,912 1.68007 Options outstanding at September 30, 2021 2,036,882 $ 1.71781 9.57 $ 1.14162 As of September 30, 2021, there were 336,556 exercisable options outstanding. Stock-based compensation, including stock options and warrants is included in the unaudited condensed consolidated statements of operations as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ (2) $ — $ 2,930 $ — Selling, general and administrative 4 — 3,167 — Total $ 2 $ — $ 6,097 $ — Total compensation cost related to non-vested stock option awards not yet recognized as of September 30, 2021 was $1,506 thousand and will be recognized on a straight-line basis through the end of the vesting periods in September 2025. The amount of future stock option compensation expense could be affected by any future option grants or by any forfeitures.

SELLING, GENERAL AND ADMINISTRA

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	9 Months Ended
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	Sep. 30, 2021
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	12. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and administrative expenses are comprised of the following items: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Salaries and benefits $ 540 $ 192 $ 4,755 $ 666 Rent and property tax expense 6 12 22 32 Insurance 168 — 323 — Utilities 1 1 3 — Sales and marketing 309 38 415 72 Legal and professional fees 287 42 995 272 Other selling, general, and administrative expenses 57 7 182 19 Total $ 1,368 $ 292 $ 6,695 $ 1,061

DEFINED CONTRIBUTION PENSION

DEFINED CONTRIBUTION PENSION	9 Months Ended
DEFINED CONTRIBUTION PENSION	Sep. 30, 2021
DEFINED CONTRIBUTION PENSION
DEFINED CONTRIBUTION PENSION	13. 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 unaudited condensed consolidated statements of operations as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 25 $ 20 $ 73 $ 62 Selling, general and administrative 13 8 30 8 Total pension cost $ 38 $ 28 $ 103 $ 70 As of September 30, 2021 and December 31, 2020 there were no amounts owed to the pension scheme.

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	9 Months Ended
RELATED PARTY TRANSACTIONS	Sep. 30, 2021
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS	14. RELATED PARTY TRANSACTIONS: In addition to transactions and balances related share-based compensation to officers and directors, the Company incurred expenses of $18 thousand and $0, for the three months ended September 30, 2021 and 2020, respectively, and $43 thousand and $2 thousand, for the nine months ended September 30, 2021 and 2020, 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 condensed consolidated statements of operations. As of September 30, 2021 and December 31, 2020, there was $18 thousand and zero, respectively, payable to members of the Board of Directors that are recorded in accounts payable and accrued expenses on the condensed consolidated balance sheets. During the nine months ended September 30, 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 nine months ended September 30, 2021. The expense incurred during the three months ended September 30, 2021 was zero and there was zero payable as of September 30, 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 zero and $35 thousand for the three and nine months ended September 30, 2021. There was zero payable as of September 30, 2021.

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	9 Months Ended
SUBSEQUENT EVENTS	Sep. 30, 2021
SUBSEQUENT EVENTS.
SUBSEQUENT EVENTS	15. SUBSEQUENT EVENTS: The Company has evaluated subsequent events through the issuance of these financial statements and is not aware of any material items that would require disclosure in the notes to the financial statements or would be required to be recognized as of September 30, 2021.

SUMMARY OF SIGNIFICANT ACCOUN_2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	Sep. 30, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis for Preparation	Basis for Presentation These unaudited condensed 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 (“U.S. GAAP”) for interim reporting and are presented in thousands, except number of shares and per share data. Accordingly, certain notes or other information that are normally required by U.S. GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements. Accordingly, the unaudited condensed consolidated financial statements should be read in connection with the Company’s audited financial statements and related notes as of and for the year ended December 31, 2020. The accompanying condensed consolidated financial statements are unaudited; however, in the opinion of management, they include all normal and recurring adjustments necessary for a fair presentation of the Company’s unaudited condensed consolidated financial statements for the periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.
Basis of Consolidation	Basis of Consolidation The condensed 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 dissolution of the Company's wholly-owned subsidiary, SmartKem Delaware Inc., was authorized by the Board of Directors and Stockholders on April 28, 2021. 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 condensed consolidated financial statements in conformity U.S. 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 financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates in the Company’s condensed 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 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 demonstration 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 September 30, 2021 and December 31, 2020, 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 credit-worthiness, 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 September 30, 2021 and December 31, 2020.
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 at 25 percent of net book value on an annual basis, resulting in an estimated useful life of approximately 15 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 condensed consolidated statements of operations. Reversal of previously recorded impairment losses are prohibited. As of September 30, 2021 and December 31, 2020, 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 are 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.
Convertible Notes	Convertible Notes The Company accounts for its convertible notes in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”), which requires the liability and equity components of convertible debt instruments to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. 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
Leases	Leases Operating lease assets are included within operating lease right-of-use assets, and the corresponding operating lease obligation on the unaudited condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020. 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 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 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 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 expenses as incurred when the amortization period is less than a year.
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 condensed consolidated statements of operations and comprehensive loss.
Other Operating Income	Other Operating Income The Company’s other operating income is related to government grant incentives received for qualifying research and development projects, and research and development tax credits related to the United Kingdom’s Research and Development Expenditure Credit scheme, 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 three months ended September 30, 2021 and 2020, the Company recorded grant income and research & development tax credits of $447 thousand and $747 thousand, respectively, and $1,135 thousand and $1,125 thousand for the nine months ended September 30, 2021 and 2020, respectively which are recorded as other operating income in the accompanying condensed consolidated statements of operations. As of September 30, 2021, and December 31, 2020, the Company had receivables related to research & development tax credits for payments not yet received of $921 thousand and $982 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. 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 financial statements into the presentation currency using exchanges 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). From the date of the Exchange forward, 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 operation denominated in local currencies are translated at the spot rate in effect at the applicable reporting date. The condensed 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 Income taxes are recorded in accordance with ASC 740, Income Taxes The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. As of September 30, 2021 and December 31, 2020, there were no accruals for 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 September 30, 2021, 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.
Offering Costs	Offering 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 and recorded against the net proceeds received in the issuance. The deferred offering costs incurred as of December 31, 2020 were immaterial and no offering costs were capitalized. For the nine months ended September 30, 2021 $2,454 thousand of offering costs were recorded in additional paid-in capital.
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 condensed consolidated financial statements is reflected and calculated as if the Company had existed since January 1, 2020. 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 September 30, 2021, 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: September 30, 2021 2020 Options 2,036,882 1,681,239 Warrants 985,533 — Total 3,022,415 1,681,239
Recent Accounting Pronouncements	Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments: Credit Losses (Topic 326) companies. The standards update is effective prospectively for annual and interim periods beginning after December 15, 2022. Management is currently evaluating the impact of these changes on the Financial Statements. In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The amendments in this update affect all entities that issue freestanding written call options (for example warrants) that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance in Topic 260, Earnings Per Share. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Management is currently evaluating the impact of this guidance but does not expect this update to have a material impact on the Company's financial statements.

Business and Liquidity (Tables)

Business and Liquidity (Tables)	9 Months Ended
Business and Liquidity (Tables)	Sep. 30, 2021
BUSINESS AND BASIS OF PREPARATION
Restatement Of Previously Filed Financial Statements	For the Nine Months Ended September 30, 2021 Net cash used in operating activities as previously reported $ (8,100) Adjustment for Loss/(Gain) on foreign currency transactions 799 Net cash used in operating activities as restated $ (7,301) Effect of exchange rate changes on cash as previously reported $ 133 Adjustment for Gain/(Loss) on foreign currency transactions (799) Effect of exchange rate changes on cash as restated $ (666)

SUMMARY OF SIGNIFICANT ACCOUN_3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	9 Months Ended
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	Sep. 30, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Schedule of Antidilutive Securities	September 30, 2021 2020 Options 2,036,882 1,681,239 Warrants 985,533 — Total 3,022,415 1,681,239

PREPAID EXPENSES AND OTHER CU_2

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)	9 Months Ended
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)	Sep. 30, 2021
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Schedule of Prepaid Expenses and Other Current Assets	September 30, December 31, 2021 2020 Prepaid rent $ 77 $ 65 Prepaid utilities 30 30 Prepaid insurance 557 41 Prepaid administrative expenses 101 69 Prepaid consulting fees 80 — VAT receivable 92 54 Total prepaid expenses and other current assets $ 937 $ 259

PROPERTY, PLANT AND EQUIPMENT (

PROPERTY, PLANT AND EQUIPMENT (Tables)	9 Months Ended
PROPERTY, PLANT AND EQUIPMENT (Tables)	Sep. 30, 2021
PROPERTY, PLANT AND EQUIPMENT
Schedule of Property, Plant and Equipment	September 30, December 31, 2021 2020 Plant and equipment $ 1,575 $ 1,316 Furniture and fixtures 245 248 Computer hardware and software 26 26 1,846 1,590 Less: Accumulated depreciation (1,041) (908) Property, plant and equipment, net $ 805 $ 682

ACCOUNTS PAYABLE AND ACCRUED _2

ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)	9 Months Ended
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)	Sep. 30, 2021
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Schedule of Accounts Payable and Accrued Expenses	September 30, December 31, 2021 2020 Accounts payable $ 506 $ 227 Accrued expenses – lab refurbishments 131 132 Accrued expenses – technical fees 81 45 Accrued expenses – variable rent & utilities 13 67 Accrued expenses – audit & accounting fees 185 250 Accrued expenses – other 31 6 Credit card liabilities 21 6 Payroll liabilities 355 128 Total accounts payable and accrued expenses $ 1,323 $ 861

LEASES (Tables)

LEASES (Tables)	9 Months Ended
LEASES (Tables)	Sep. 30, 2021
LEASES
Schedule of Lease Costs	For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Operating lease cost $ 60 $ 45 $ 159 $ 132 Short-term lease cost 3 2 29 15 Variable lease cost 7 95 105 221 Total lease cost $ 70 $ 142 $ 293 $ 368 For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 64 $ 130 $ 271 $ 336 Selling, general and administrative 6 12 22 32 Total lease cost $ 70 $ 142 $ 293 $ 368
Schedule of Operating Lease Assets And Liabilities	September 30, December 31, 2021 2020 Assets Operating lease right of use assets $ 170 $ 236 Total lease assets $ 170 $ 236 Liabilities Current liabilities: Operating lease liability – current portion $ 125 $ 217 Noncurrent liabilities: Operating lease liability, net of current portion 16 20 Total lease liabilities $ 141 $ 237
Schedule of Operating Lease Cash Flow Information	Nine Months Ended September 30, 2021 2020 Operating cash outflows from operating leases $ 196 $ 118 Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets $ 86 $ —
Schedule of Weighted Average Remaining Lease Term and Weighted Average Discount Rate	September 30, 2021 Weighted average remaining lease term (in years) – operating leases 0.89 Weighted average discount rate – operating leases 6.07 %
Schedule of Operating Lease, Liability, Maturity	As of September 30, 2021 2021 $ 73 2022 75 2023 8 2024 — 2025 — Thereafter — Total undiscounted lease payments 156 Less imputed interest (15) Total net lease liabilities $ 141

STOCKHOLDERS' EQUITY (Tables)

STOCKHOLDERS' EQUITY (Tables)	9 Months Ended
STOCKHOLDERS' EQUITY (Tables)	Sep. 30, 2021
Common Stock Warrants
Schedule of Warrants	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 September 30, 2021 985,533 $ 2.00 4.40
Schedule of Fair Value of Common Stock Warrants Assumptions	Nine Months Ended September 30, 2021 Expected term (years) 5 years Risk-free interest rate 0.60% Expected volatility 54% Expected dividend yield 0%
Pre Funded Warrants
Schedule of Warrants	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 September 30, 2021 2,168,000 $ 0.01

SHARE-BASED COMPENSATION (Table

SHARE-BASED COMPENSATION (Tables)	9 Months Ended
SHARE-BASED COMPENSATION (Tables)	Sep. 30, 2021
SHARE-BASED COMPENSATION
Schedule of Black Scholes option-pricing model with assumptions used	Nine Months Ended September 30, 2021 Expected term (years) 5 years - 6 years Risk-free interest rate 0.3% - 1.2% Expected volatility 54% - 58% Expected dividend yield 0%
Summary of non-vested share option activity under the share option plans	Weighted- Average Weighted- Remaining Weighted- Average Contractual Average Number of Exercise Term Fair Value at Shares Price (Years) Grant Date 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 (46,221) 0.00100 Granted 2,102,912 1.68007 Options outstanding at September 30, 2021 2,036,882 $ 1.71781 9.57 $ 1.14162
Schedule of stock-based compensation	For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ (2) $ — $ 2,930 $ — Selling, general and administrative 4 — 3,167 — Total $ 2 $ — $ 6,097 $ —

SELLING, GENERAL AND ADMINIST_2

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Tables)	9 Months Ended
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Tables)	Sep. 30, 2021
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Schedule of Selling, general and administrative expenses	For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Salaries and benefits $ 540 $ 192 $ 4,755 $ 666 Rent and property tax expense 6 12 22 32 Insurance 168 — 323 — Utilities 1 1 3 — Sales and marketing 309 38 415 72 Legal and professional fees 287 42 995 272 Other selling, general, and administrative expenses 57 7 182 19 Total $ 1,368 $ 292 $ 6,695 $ 1,061

DEFINED CONTRIBUTION PENSION (T

DEFINED CONTRIBUTION PENSION (Tables)	9 Months Ended
DEFINED CONTRIBUTION PENSION (Tables)	Sep. 30, 2021
DEFINED CONTRIBUTION PENSION
Schedule of pension cost	For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 25 $ 20 $ 73 $ 62 Selling, general and administrative 13 8 30 8 Total pension cost $ 38 $ 28 $ 103 $ 70

BUSINESS AND BASIS OF PREPARATI

BUSINESS AND BASIS OF PREPARATION - Going Concern and Reverse Recapitalization (Details) $ / shares in Units, $ in Thousands, $ in Millions		3 Months Ended		9 Months Ended
	Feb. 23, 2021 $ / shares shares	Sep. 30, 2021 USD ($) patent $ / shares	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) patent $ / shares	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USN ($) patent	Dec. 31, 2020 USD ($) $ / shares
Net cash used in operating activities				$ (7,300)	$ (2,593)
Gain (loss) on foreign currency transactions		$ 386	$ (1)	799
(Loss)/Gain on foreign currency transactions		(386)	1	(799)
Effect of exchange rate changes on cash					(116)
Net loss		2,662	$ 622	14,429	$ 21,700
Accumulated deficit		72,375		72,375		$ 72.4	$ 57,946
Cash and cash equivalents		$ 14,719		$ 14,719			$ 764
Common shares, par value \| $ / shares		$ 0.0001		$ 0.0001			$ 0.0001
Number of issued patents \| patent		120		120		120
As restated
Net cash used in operating activities				$ (7,301)
Gain (loss) on foreign currency transactions				799
(Loss)/Gain on foreign currency transactions				(799)
Effect of exchange rate changes on cash				(666)
Previously reported
Net cash used in operating activities				(8,100)
Effect of exchange rate changes on cash				$ 133
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 \| shares	12,725,000
Shares exchange, number of shares exchanged \| shares	1,127,720,477
Management incentive options to purchase \| shares	124,497,910
Average share exchange ratio	0.011283825
Effect of reverse capitalization (in shares) \| 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		9 Months Ended
	Sep. 30, 2021 USD ($) $ / shares shares	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) segment $ / shares shares	Sep. 30, 2020 USD ($)	Feb. 23, 2021 $ / shares	Dec. 31, 2020 USD ($)
Class of Warrant or Right [Line Items]
Cash equivalents	$ 0		$ 0			$ 0
Allowance for doubtful accounts	$ 0		$ 0			0
Percentage of depreciated of net book value	25%		25%
Estimated useful life			15 years
Other operating income	$ 447	$ 747	$ 1,135	$ 1,125
Foreign currency gains (losses)	(386)	$ 1	(799)
Uncertain tax positions	0		0			0
Research & development tax credits	$ 921		$ 921			982
Expiration term			10 years
Deferred offering costs						$ 0
Number of operating segments \| segment			1
Number of reportable segments \| segment			1
Offering costs recorded in additional paid-in capital			$ 2,454
Pre Funded Warrants
Class of Warrant or Right [Line Items]
Common stock warrants outstanding \| shares	2,168,000		2,168,000
Warrants exercisable price \| $ / shares	$ 0.01		$ 0.01		$ 0.01

SUMMARY OF SIGNIFICANT ACCOUN_5

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Dilutive Securities (Details) - shares	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	3,022,415	1,681,239
Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	2,036,882	1,681,239
Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	985,533

PREPAID EXPENSES AND OTHER CU_3

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid rent	$ 77	$ 65
Prepaid utilities	30	30
Prepaid insurance	557	41
Prepaid administrative expenses	101	69
Prepaid consulting fees	80
VAT receivable	92	54
Total prepaid expenses and other current assets	937	259
Prepaid Insurance Noncurrent	$ 226	$ 0

PROPERTY, PLANT AND EQUIPMENT_2

PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	$ 1,846		$ 1,846		$ 1,590
Less: Accumulated depreciation	(1,041)		(1,041)		(908)
Property, plant and equipment, net	805		805		682
Depreciation				$ 148
Plant and equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	1,575		1,575		1,316
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	245		245		248
Computer hardware and software
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Gross	26		26		$ 26
Research and development
Property, Plant and Equipment [Line Items]
Depreciation	$ 52	$ 50	$ 147	$ 148

ACCOUNTS PAYABLE AND ACCRUED _3

ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable	$ 506	$ 227
Accrued expenses - lab refurbishments	131	132
Accrued expenses - technical fees	81	45
Accrued expenses - variable rent & utilities	13	67
Accrued expenses - audit & accounting fees	185	250
Accrued expenses - other	31	6
Credit card liabilities	21	6
Payroll and social security liabilities	355	128
Total accounts payable and accrued expenses	$ 1,323	$ 861

LEASES - Lease Costs (Details)

LEASES - Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
LEASES - Lease Costs (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Operating lease cost	$ 60	$ 45	$ 159	$ 132
Short-term lease cost	3	2	29	15
Variable lease cost	7	95	105	221
Total lease cost	70	142	293	368
Research and development
Total lease cost	64	130	271	336
Selling, general and administrative
Total lease cost	$ 6	$ 12	$ 22	$ 32

LEASES - Lease Assets And Liabi

LEASES - Lease Assets And Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Assets
Operating lease right of use assets	$ 170	$ 236
Total lease assets	170	236
Current liabilities:
Operating lease liability - current portion	125	217
Noncurrent liabilities:
Operating lease liability, net of current portion	16	20
Total lease liabilities	$ 141	$ 237

LEASES - Operating And Finance

LEASES - Operating And Finance Leases (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
LEASES
Operating cash flows from operating leases	$ 196	$ 118
Supplemental non-cash amounts of operating lease liabilities arising from obtaining right of use assets	$ 86

LEASES - Weighted Average (Deta

LEASES - Weighted Average (Details)	Sep. 30, 2021
LEASES
Weighted average remaining lease term (in years) - operating leases	10 months 20 days
Weighted average discount rate - operating leases	6.07%

LEASES - Undiscounted Operating

LEASES - Undiscounted Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
2021	$ 73
2022	75
2023	8
Total undiscounted lease payments	156
Less imputed interest	(15)
Total net lease liabilities	$ 141	$ 237

LEASES - Additional Information

LEASES - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Sublease rental income	$ 0	$ 0	$ 0	$ 0
Finance lease, right-of-use assets	0		0		$ 0
Finance lease, liabilities	$ 0		$ 0		$ 0
Minimum
Operating leases terms	1 year		1 year
Maximum
Operating leases terms	2 years		2 years

CONVERTIBLE NOTES AND NOTES P_2

CONVERTIBLE NOTES AND NOTES PAYABLE - Additional Information (Details) $ / shares in Units, $ in Thousands								3 Months Ended		9 Months Ended
	Jan. 26, 2021 USD ($)	Jan. 24, 2020 USD ($) $ / shares shares	Sep. 23, 2019 tranche	Jun. 26, 2019 USD ($) tranche $ / shares	Dec. 28, 2018 tranche	Jul. 20, 2018 USD ($) tranche $ / shares	Apr. 18, 2018 USD ($) tranche $ / shares	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Debt Instrument [Line Items]
Cumulative investment proceeds, excess limit		$ 4,600
Fair value of common shares \| $ / shares		$ 1.807011
Aggregate principal, converted		$ 11,796
Conversion of debt, Shares issued \| shares		8,159,977
Discounted price of conversion (in dollars per share) \| $ / shares		$ 1.45
Unpaid interest, converted		$ 1,063
Conversion of debt interest, Shares issued \| shares		735,148
Loss on conversion of note									$ 9,344		$ 5,470
Unamortized debt discount due to beneficial conversion feature											$ 6,767
Effective interest rate									13.50%		13.50%
Interest expense, stated interest rate								$ 0	$ 0	$ 0	$ 43
Amortization of debt issuance cost								0	0	0	25
Loss on accrued interest									1,046
Gain on extinguishment of derivative liability									4,920
Convertible notes								$ 0	0	$ 0	0
2018 BASF Venture Capital and Entrepreneurs Fund L.P. Notes
Debt Instrument [Line Items]
Aggregate principal							$ 5,862
Number of tranches \| tranche					3	3	3
Share price trigger (in dollars per share) \| $ / shares							$ 16.39
Accrued interest rate trigger, first anniversary							8%
Accrued interest rate trigger, conversion period							15%
Threshold number of days for interest calculation							365 days
2018 Octopus Notes
Debt Instrument [Line Items]
Aggregate principal						$ 2,622
Number of tranches \| tranche					2	2
Share price trigger (in dollars per share) \| $ / shares						$ 15.10
Accrued interest rate trigger, first anniversary						8%
Accrued interest rate trigger, conversion period						12%
Threshold number of days for interest calculation						365 days
2019 Octopus, EF, and Other Notes
Debt Instrument [Line Items]
Aggregate principal				$ 3,681
Number of tranches \| tranche			2	2
Share price trigger (in dollars per share) \| $ / shares				$ 0.001861
Accrued interest rate trigger, conversion period				10%
Threshold number of days for interest calculation				365 days
Debt instrument price per senior share \| $ / shares				$ 11.19
Debt discount - bifurcation of redemption feature				$ 2,608
Term Loan Facility Agreement
Debt Instrument [Line Items]
Effective interest rate								26.20%		26.20%
Aggregate principal	$ 738
Debt term	6 months
Monthly interest rate	1.25%
Notes payable								$ 0	0	$ 0	0	$ 0
Interest expense of notes payable								$ 0	$ 0	$ 19	$ 0
Publicly Traded Market \| 2019 Octopus, EF, and Other Notes
Debt Instrument [Line Items]
Share price trigger (in dollars per share) \| $ / shares				$ 14.61

DERIVATIVE ASSET (Details)

DERIVATIVE ASSET (Details) - USD ($) $ in Thousands	9 Months Ended
DERIVATIVE ASSET (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 30, 2021
Changes in fair value of the derivative asset
Loss on fair value of derivative asset included in earnings	$ 6,282
Convertible notes	0	$ 0
Derivative asset		$ 0
Gain on extinguishment of derivative assets upon conversion	$ 4,920

STOCKHOLDERS' EQUITY (Details)

STOCKHOLDERS' EQUITY (Details)	9 Months Ended
STOCKHOLDERS' EQUITY (Details)	Sep. 30, 2021 Vote shares
STOCKHOLDERS' EQUITY
Number of votes, common shares \| Vote	1
Preferred shares, outstanding (in shares)	0
Preferred stock available for issuance	10,000,000

STOCKHOLDERS' EQUITY - Common S

STOCKHOLDERS' EQUITY - Common Stock Warrants (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended	9 Months Ended
	Feb. 23, 2021	Sep. 30, 2021	Sep. 30, 2021	Sep. 30, 2020
Weighted Average Remaining Contractual Term (years)
Warrants outstanding at end		5 years	5 years
Common Stock Warrants
Number of shares
Exercised (in shares)		0
Granted (in shares)			985,533
Warrants outstanding at end (in shares)		985,533	985,533
Weighted-Average Exercise Price
Granted (in dollars per share)			$ 2
Warrants outstanding at end (in dollars per share)		$ 2	$ 2
Weighted Average Remaining Contractual Term (years)
Warrants outstanding at beginning			0 years
Granted			5 years
Warrants outstanding at end		4 years 4 months 24 days	4 years 4 months 24 days
Warrants issued	985,533	0		0
Warrants exercisable price	$ 2	$ 0.91	$ 0.91
Fair value of warrant		$ 896	$ 896
Pre Funded Warrants
Number of shares
Granted (in shares)			2,168,000
Warrants outstanding at end (in shares)		2,168,000	2,168,000
Weighted-Average Exercise Price
Granted (in dollars per share)			$ 0.01
Warrants outstanding at end (in dollars per share)		$ 0.01	$ 0.01
Weighted Average Remaining Contractual Term (years)
Warrants issued	2,168,000		0
Warrants exercisable price	$ 0.01	$ 0.01	$ 0.01
Fair value of per warrant			1.99
Exercise less amount			$ 2
Proceeds from Warrant	$ 4,314

STOCKHOLDERS' EQUITY - Fair val

STOCKHOLDERS' EQUITY - Fair value assumptions (Details)	Sep. 30, 2021
Class of Warrant or Right [Line Items]
Warrants and Rights Outstanding, Term	5 years
Risk-free interest rate
Class of Warrant or Right [Line Items]
Warrants measurement input	0.0060
Expected volatility
Class of Warrant or Right [Line Items]
Warrants measurement input	0.54
Expected dividend yield
Class of Warrant or Right [Line Items]
Warrants measurement input	0

SHARE-BASED COMPENSATION - Assu

SHARE-BASED COMPENSATION - Assumptions (Details)	9 Months Ended
SHARE-BASED COMPENSATION - Assumptions (Details)	Sep. 30, 2021
Black-Scholes option-pricing model, Assumptions:
Risk-free interest rate, minimum	0.30%
Risk-free interest rate, maximum	1.20%
Expected dividend yield	0%
Minimum
Black-Scholes option-pricing model, Assumptions:
Expected term (years)	5 years
Expected volatility	54%
Maximum
Black-Scholes option-pricing model, Assumptions:
Expected term (years)	6 years
Expected volatility	58%

SHARE-BASED COMPENSATION - Shar

SHARE-BASED COMPENSATION - Share option activity (Details) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Number of Shares
Options outstanding at beginning (in shares)	1,810,749
Exercised (in shares)	(1,424,622)
Cancelled (in shares)	(405,936)
Forfeited (in shares)	(46,221)
Granted (in shares)	2,102,912
Options outstanding at end (in shares)	2,036,882	1,810,749
Weighted-Average Exercise Price
Options outstanding at beginning (in dollars per share)	$ 0.06143
Exercised (in dollars per share)	0.01447
Cancelled (in dollars per share)	0.06452
Forfeited (in dollars per share)	0.00100
Granted (in dollars per share)	1.68007
Options outstanding at end (in dollars per share)	$ 1.71781	$ 0.06143
Weighted-Average Remaining Contractual Term :
Weighted-Average Remaining Contractual Term (in Years)	9 years 6 months 25 days	9 years 8 months 12 days
Weighted- Average Fair Value at Grant Date :
Weighted- Average Fair Value at Grant Date at beginning (in dollars)	$ 3.46867
Weighted- Average Fair Value at Grant Date at end (in dollars)	$ 1.14162	$ 3.46867

SHARE-BASED COMPENSATION - Stoc

SHARE-BASED COMPENSATION - Stock Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total	$ 2	$ 6,097
Research and development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total	(2)	2,930
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total	$ 4	$ 3,167

SHARE-BASED COMPENSATION - Addi

SHARE-BASED COMPENSATION - Additional information (Details) - USD ($) $ / shares in Units, $ in Thousands			9 Months Ended
	Feb. 28, 2021	Feb. 23, 2021	Sep. 30, 2021	Sep. 30, 2020	Dec. 14, 2018	Jul. 15, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration term			10 years
Options granted (in shares)			2,102,912
Granted (in dollars per share)			$ 1.68007
Weighted-average grant-date fair value (in dollars per share)			$ 1.14
Exercisable options (in shares)			336,556
Unrecognized compensation costs			$ 1,506
Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration term	10 years
Options \| Exercise Price Range One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted (in shares)	336,557
Granted (in dollars per share)	$ 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 (in dollars per share)	$ 2
Options \| Employees and Consultants
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted (in shares)				1,828,128
Options \| Employees, Directors and Consultants
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration term			10 years
Options granted (in shares)			1,700,326
Granted (in dollars per share)			$ 2
Vesting period			4 years
Investment Agreement \| Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum aggregate number of shares under grant					458,316	175,292
Maximum percentage of shares to be granted			15%
Expiration term			10 years
2021 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted (in shares)		2,275,000
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

SELLING, GENERAL AND ADMINIST_3

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and benefits	$ 540	$ 192	$ 4,755	$ 666
Rent and property tax expense	6	12	22	32
Insurance	168		323
Utilities	1	1	3
Sales and marketing	309	38	415	72
Legal and professional fees	287	42	995	272
Other selling, general, and administrative expenses	57	7	182	19
Total	$ 1,368	$ 292	$ 6,695	$ 1,061

DEFINED CONTRIBUTION PENSION (D

DEFINED CONTRIBUTION PENSION (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
DEFINED CONTRIBUTION PENSION
Amounts owed to the pension scheme	$ 0	$ 0

DEFINED CONTRIBUTION PENSION -

DEFINED CONTRIBUTION PENSION - Pension cost (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
DEFINED CONTRIBUTION PENSION
Total pension cost	$ 38	$ 28	$ 103	$ 70
Research and development
DEFINED CONTRIBUTION PENSION
Total pension cost	25	20	73	62
Selling, general and administrative
DEFINED CONTRIBUTION PENSION
Total pension cost	$ 13	$ 8	$ 30	$ 8

RELATED PARTY TRANSACTIONS (Det

RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Accounts payable and accrued expenses [Member]
Related Party Transaction [Line Items]
Related party payable	$ 18		$ 18		$ 0
Selling, general and administrative
Related Party Transaction [Line Items]
Related party expenses	18	$ 0	43	$ 2
Owner \| Securities Exchange
Related Party Transaction [Line Items]
Reimbursement expenses incurred			66
Related party payable	0		0
Related party expenses	0
Family member of a Director \| Consulting services
Related Party Transaction [Line Items]
Reimbursement expenses incurred	0		35
Related party payable	$ 0		$ 0