SMX (Security Matters) Public Limited Company — Form 20-F Summary
Business context and reporting period
SMX develops marker, reader, algorithm and blockchain-based technologies for product authentication, supply-chain traceability and circular-economy applications across plastics, rubber, metals, gold, fashion, electronics, beverages and other materials. The filing is an annual report for the fiscal year ended December 31, 2023, prepared under IFRS as issued by the IASB. It is not a quarterly filing, although the request identifies the period as 2023 Q4.
The Company completed its SPAC business combination and Nasdaq listing on March 7, 2023. The financial statements are presented as a reverse acquisition, with Security Matters PTY treated as the accounting acquirer. On October 3, 2023, SMX increased its ownership of trueGold to 51.9% and began consolidating it.
Financial performance and key metrics
| US$ in thousands, except per-share data | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | No significant technology-sales revenue reported | No significant technology-sales revenue reported | 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) | Loss increased 608% |
| Net loss | (20,989) | (6,184) | Loss increased 240% |
| Loss attributable to shareholders per share | (7.82) | (8.47) | Restated for transaction and reverse split |
| Net cash used in operating activities | (12,479) | (5,223) | Cash burn increased |
| Net cash used in investing activities | (1,036) | (1,127) | Decrease |
| Net cash provided by financing activities | 11,954 | 3,846 | Increase |
| Cash and cash equivalents at year-end | 168 | 1,398 | Decrease of 88.0% |
The filing does not provide a meaningful revenue base, gross profit, gross margin or operating margin because the Company has not generated substantial revenue from technology sales. The reported net loss benefited from a non-recurring $22.164 million gain on remeasurement of the existing trueGold investment when control was obtained. The loss also included a $16.802 million non-cash listing expense related to the SPAC transaction.
At December 31, 2023, total assets were $51.160 million, including $16.486 million of intangible assets and $32.957 million of goodwill. Total liabilities were $18.916 million and total equity was $32.244 million, including $20.768 million of non-controlling interest. Current liabilities were $18.022 million versus current assets of $802 thousand, although the filing states that working capital was positive based on its broader presentation.
Material changes versus the prior comparable period
- General and administrative expense increased by $13.844 million, primarily from $7.278 million of business-combination costs, $5.128 million of public-company expenses, higher share-based compensation, payroll and travel.
- Research and development expense increased by $813 thousand, including higher share-based compensation and lower reimbursements from proof-of-concept projects.
- Operating cash use more than doubled to $12.479 million from $5.223 million.
- Cash declined to $168 thousand from $1.398 million despite $11.954 million of financing cash inflows.
- The Company obtained control of trueGold, recognized a $22.164 million remeasurement gain and recorded $32.957 million of goodwill and a $10.449 million core-technology license.
- Bridge loans, convertible instruments and warrants were converted, amended or repriced during the year, resulting in significant equity issuance and fair-value movements.
- The Company completed a 1-for-22 reverse stock split in August 2023.
Liquidity, debt and outlook
SMX has incurred losses and negative operating cash flow since inception and states that it has not yet generated significant recurring revenue. Year-end cash was only $168 thousand. The filing identifies approximately $13 million of payables and other liabilities related to business-combination expenses and states that additional capital will be needed to fund operations, liabilities and growth.
At December 31, 2023, reported obligations included $2.233 million of bridge-loan liabilities, $1.013 million of convertible promissory notes, $700 thousand of pre-paid advances, $1.143 million of derivative liabilities, $12.487 million of trade and other payables, $649 thousand of lease liabilities and $153 thousand owed under government-grant arrangements. The contractual maturity schedule showed $17.704 million of financial liabilities due within one year.
After year-end, the Company reported approximately $2.9 million of gross proceeds from a February 2024 offering, approximately $2.0 million from an April 2024 note and warrant transaction, and access to a potential $30 million equity purchase facility with Generating Alpha Ltd. Actual proceeds under the facility depend on future share sales, market prices and other conditions. Management expects continued net losses and may reduce or delay research, commercialization and other spending if financing is unavailable.
Guidance, management commentary, risks and unusual items
- The Company has not provided quantitative revenue, earnings or cash-flow guidance. Management expects continued losses for the foreseeable future.
- Management plans to emphasize U.S. sales and marketing, commercialize proof-of-concept projects, expand strategic partnerships and develop applications for circular-economy and traceability markets.
- A plastic-cycle-token initiative was targeted for launch in the third quarter of 2024; the filing does not establish that the launch or its commercial economics will occur.
- A reported $5 million contract with R&I Trading of New York was announced in January 2024 for supply-chain transparency involving a NATO member state. The filing does not provide recognized revenue or cash receipts from this contract.
- Key execution risks include limited operating history, minimal revenue, lengthy multinational sales cycles, customer adoption, manufacturing scalability, dependence on additional financing, competition, intellectual-property protection and potential termination of the Isorad license.
- SMX operates across multiple foreign jurisdictions and is exposed to foreign-exchange risk. It does not hedge currency exposure.
- Operations and personnel in Israel face risks from regional hostilities, military reserve duty, political instability and potential supply-chain disruption.
- Nasdaq notified the Company in January 2024 that its ordinary shares failed the $1.00 minimum bid-price requirement. The stated initial compliance deadline was July 24, 2024, with possible additional time or delisting procedures if compliance was not regained.
- Potential dilution is substantial because of equity-line financing, convertible notes, warrants, restricted stock units and other equity-linked obligations. The Alpha facility permits share sales at discounts to market prices, including larger discounts at lower share prices.
- The Isorad license generally requires royalties of 2.2% of gross sales, includes potential transaction and funding-related payments, and may be terminated for specified breaches or periods with no royalties.
- The Company reported no material litigation or material contingency reserves at December 31, 2023, although ordinary-course claims and the disclosed litigation involving the CEO’s prior employer remain risks.
- Management concluded that disclosure controls and internal control over financial reporting were effective at year-end. Because SMX is an emerging growth company, the auditor did not provide an attestation report on internal control effectiveness.
Most important facts for investors to verify
- Whether SMX has begun generating material recurring revenue and whether reported contracts have converted into cash receipts.
- Current cash, accounts payable, debt maturities, covenant compliance and the status of the approximately $30 million Alpha equity facility.
- Actual share count and fully diluted share count after 2024 offerings, conversions, warrant exercises, commitment shares and equity awards.
- Whether Nasdaq listing compliance was regained and whether any reverse split or delisting action occurred.
- The commercial status, remaining funding needs and valuation assumptions supporting trueGold, goodwill and capitalized development costs.
- Whether the Isorad license remains in good standing and the amount of accrued royalties, funding-related payments and potential exit fees.
- Whether the reported NATO-related and other proof-of-concept initiatives produce sustainable, high-margin commercial revenue.
- Future cash burn, dilution and financing requirements given the Company’s minimal year-end cash and continuing operating losses.