SMX (Security Matters) Public Limited Company — Form 6-K Summary
Filing date: April 22, 2024. The filing presents audited consolidated financial statements and MD&A for the fiscal year ended December 31, 2023, prepared under IFRS. The auditor issued an unqualified opinion on the financial statements. SMX is an Irish holding company whose accounting acquirer is Security Matters PTY following the March 2023 SPAC transaction.
Business context and reporting period
SMX develops molecular marking, reader and algorithm technology intended to authenticate, track and trace materials across supply chains, including plastics, rubber, metals, textiles, food, beverages and precious metals. Its platform is designed to support recycling, circular-economy initiatives, brand protection and ESG reporting. The Company states that it has nearly 100 patents.
SMX has not generated significant revenue from technology sales and remains focused on proof-of-concept projects, customer onboarding, technology development and commercialization. In October 2023, SMX increased its ownership of TrueGold Consortium Pty Ltd. from 44.4% to 51.9% and obtained control.
Financial performance and position
| US$ in thousands, except per-share data | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | No significant technology-sales revenue | No significant technology-sales revenue | Not meaningful |
| Research and development expense | 2,711 | 1,898 | +42.8% |
| Selling and marketing expense | 661 | 569 | +16.1% |
| General and administrative expense | 16,567 | 2,723 | +508.4% |
| Listing expense | 16,802 | — | New in 2023 |
| Operating loss | (36,741) | (5,190) | Increase of 608% |
| Finance expense | 7,891 | 1,128 | +599.6% |
| Gain on remeasurement of investment | 22,164 | — | Related to gaining control of TrueGold |
| Net loss | (20,989) | (6,184) | Increase of 240% |
| Net loss attributable to Company shareholders | (20,914) | Not separately presented in the comparable statement | — |
| Basic and diluted loss per share | (7.82) | (8.47) | Restated for the SPAC transaction and reverse split |
Operating expenses increased primarily because of $7.278 million of Business Combination costs, $5.128 million of public-company expenses, higher share-based compensation, increased payroll and travel costs. The $16.802 million listing expense reflected the accounting cost of obtaining the Nasdaq listing and was not a recurring operating cash expense. The $22.164 million TrueGold remeasurement gain was also a non-recurring accounting item.
Cash flow, liquidity and capital structure
| US$ in thousands | 2023 | 2022 |
|---|---|---|
| Cash used in operating activities | (12,479) | (5,223) |
| Cash used in investing activities | (1,036) | (1,127) |
| Cash provided by financing activities | 11,954 | 3,846 |
| Net change in cash | (1,561) | (2,504) |
| Cash and cash equivalents at year-end | 168 | 1,398 |
| Total assets | 51,160 | 11,288 |
| Total liabilities | 18,916 | 9,132 |
| Total equity | 32,244 | 2,156 |
At December 31, 2023, current assets were $0.802 million versus current liabilities of $18.022 million. Trade payables were $10.515 million, and total financial liabilities were approximately $18.755 million, including convertible instruments, bridge loans, derivatives, lease liabilities and payables. Management also disclosed approximately $13 million of existing payables and other liabilities related to Business Combination expenses.
After year-end, the Company reported approximately $3.307 million of gross February 2024 financing proceeds and approximately $2.0 million of gross proceeds from an April 2024 promissory note and warrant transaction. The filing also states that approximately $5.557 million was raised after December 31, 2023, although the detailed transactions and stated aggregate amounts are not fully consistent throughout the filing.
Material changes versus the prior comparable period
- Operating loss increased from $5.190 million to $36.741 million, primarily because of Business Combination, listing and public-company costs.
- Net loss increased from $6.184 million to $20.989 million despite the $22.164 million TrueGold remeasurement gain.
- Operating cash use increased from $5.223 million to $12.479 million.
- Cash declined from $1.398 million to $0.168 million at year-end.
- TrueGold became a consolidated majority-owned subsidiary, resulting in $32.957 million of goodwill, a $10.449 million core technology license and $20.768 million of noncontrolling interest at year-end.
- SMX completed its SPAC transaction and Nasdaq listing in March 2023, and its ordinary shares underwent a 1-for-22 reverse stock split effective August 21, 2023.
Guidance, outlook, risks and unusual items
Management expects continuing net losses and negative operating cash flow for the foreseeable future. It expects existing cash, proceeds from the Alpha equity facility and customer receivables to fund operations for the foreseeable future, potentially at a delayed or reduced scope. Management cautions that additional capital may be needed sooner than expected and that funding may not be available on acceptable terms.
- On April 19, 2024, SMX terminated its Yorkville SEPA and entered into a new agreement with Generating Alpha Ltd. for up to $30 million of ordinary-share purchases over time. Purchases are discretionary, subject to registration and other conditions, and are generally priced at discounts to recent trading prices. The facility may create substantial dilution.
- The Company may need additional equity, convertible debt or other financing to fund operations and approximately $13 million of disclosed payables and other liabilities.
- Commercial sales cycles can take several quarters, and delays in customer deployments, proof-of-concept conversions or creation of an industry standard could materially affect revenue prospects.
- The reported $5 million R&I Trading contract, announced in January 2024, is intended to support supply-chain transparency for a NATO member state, with potential expansion to other NATO members. The filing does not establish the timing or certainty of revenue recognition.
- SMX remains exposed to foreign-exchange risk in the ILS, AUD, EUR and SGD and does not currently hedge these exposures.
- The Company has a contingent government-grant liability of $153,000, repayable through royalties on relevant revenues, and owes future royalties under its Isorad technology license, including 2.2% of gross sales and certain transaction-related fees.
- TrueGold’s valuation and resulting goodwill depend on significant assumptions, including a 24.8% discount rate, a 4.59 terminal-value multiple, 3% terminal growth and a 25.2% lack-of-marketability discount.
Most important facts for investors to verify
- Whether SMX has begun generating material recurring revenue and the extent to which announced contracts have converted into recognized revenue and cash collections.
- Actual cash available after the February and April 2024 financings, including transaction fees, debt repayments and dilution from issued shares, warrants and convertible securities.
- The amount, maturity and settlement status of the approximately $13 million of Business Combination-related payables and other liabilities.
- The terms, registration status, utilization and potential dilution of the $30 million Alpha equity facility.
- Current outstanding ordinary shares, warrants, convertible securities and equity awards after the numerous 2024 conversions and issuances.
- Whether the TrueGold business supports the recorded goodwill and technology-license values and whether impairment testing identifies any write-down risk.
- The timing and commercial milestones for the R&I Trading/NATO project, Plastic Cycle Token initiative and other proof-of-concept programs.