Business Context and Reporting Period
Company: SMX (Security Matters) Public Limited Company (SMX)
Filing Type: Annual Report on Form 20-F
Reporting Period: Fiscal year ended December 31, 2024
Jurisdiction: Ireland (Foreign Private Issuer)
Accounting Standard: International Financial Reporting Standards (IFRS)
SMX provides authentication and track-and-trace technology using sub-molecular markers, readers, and blockchain ledgers to ensure supply chain integrity and support the circular economy. The company operates primarily through subsidiaries in Israel, Australia, and other jurisdictions. As of December 31, 2024, the company had 1,163,365 ordinary shares outstanding.
Key Financial Metrics
| Metric (USD in thousands) | 2024 | 2023 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(35,401) | $(20,989) |
| Operating Loss | $(27,865) | $(36,741) |
| Cash and Cash Equivalents (Year End) | $2,343 | $168 |
| Net Cash Used in Operating Activities | $(11,314) | $(12,479) |
| Total Current Liabilities | $20,800 | $18,022 |
| Convertible Notes & Bridge Loans | $4,553 | $1,130 |
Note: The company has not generated substantial revenue to date. The 2023 results included a one-time gain of $22,164 thousand from the remeasurement of an investment in an associated company (trueGold) upon gaining control.
Material Changes vs. Prior Period
- Net Loss Increase: Net loss increased by approximately 69% to $35.4 million in 2024 compared to $21.0 million in 2023. This increase is primarily due to the absence of the one-time $22.2 million gain recorded in 2023 and the recognition of $11.1 million in impairment and amortization charges in 2024.
- Impairment Charges: The company recognized $9.0 million in impairment of goodwill and intangible assets and $2.1 million in amortization in 2024, as intangible assets reached the commercial stage. No such charges were recorded in 2023.
- Operating Expenses: General and administrative expenses decreased by 23% to $12.7 million, driven by a reduction in transaction costs. However, research and development expenses increased by 13% to $3.1 million.
- Debt Structure: Significant restructuring of debt occurred in 2024, including the conversion of various bridge loans and convertible notes into equity, and the issuance of new short-term loans (e.g., Abri Loan Agreement) to fund operations.
Guidance, Outlook, Risks, and Contingencies
Going Concern: The financial statements contain an explanatory paragraph regarding substantial doubt about the company's ability to continue as a going concern. The company has incurred recurring losses, negative cash flows, and accumulated losses of $82 million. It relies on external financing to continue operations.
Liquidity and Capital Resources:
- Cash balance at year-end was $2.3 million, insufficient to fund operations for the foreseeable future.
- The company has outstanding payables of approximately $13.7 million and other liabilities related to the business combination and lenders.
- Subsequent to year-end, the company entered into a $5.5 million promissory note agreement (RBW Note) and other financing arrangements to address liquidity needs.
Material Risks and Contingencies:
- Legal Proceedings: The company is engaged in arbitration with R&I Trading regarding a terminated $5 million contract. R&I Trading demands restitution of amounts paid, while SMX alleges breach of contract and seeks damages.
- Nasdaq Compliance: The company has received deficiency letters regarding the minimum bid price requirement and annual general meeting requirements, though it has regained compliance as of the filing date.
- Intellectual Property: The company's core technology relies on a license from Isorad Ltd. (State of Israel). Termination of this agreement would materially harm the business.
- Geopolitical Risks: Operations in Israel are subject to risks related to regional conflicts, military reserve duty call-ups for employees, and potential boycotts.
Investor Verification Checklist
- Going Concern Status: Verify the company's ability to secure additional financing to meet its $13.7 million in current liabilities and fund ongoing operations.
- Debt Conversion Terms: Review the terms of recent convertible notes and bridge loans, specifically the conversion prices and potential for significant dilution to existing shareholders.
- Arbitration Outcome: Monitor the status of the arbitration with R&I Trading, as an adverse outcome could result in significant cash outflows or asset seizures.
- Revenue Recognition: Confirm the timeline for commercializing the technology and generating revenue, given the company has reported $0 revenue for the past three years.
- Impairment Validity: Assess the assumptions used in the $11.1 million impairment charge regarding goodwill and intangible assets.