6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

For the month of November 2023

Commission File Number: 001-41639

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

(Exact Name of Registrant as Specified in Charter)

Mespil Business Centre, Mespil House

Sussex Road, Dublin 4, Ireland

Tel: +353-1-920-1000

(Address of Principal Executive Offices) (Zip Code)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐

This Report on Form 6-K of SMX (Security Matters) Public Limited Company (the “Company”) includes (1) a Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company for the six months ended June 30, 2023 and 2022 and (2) attaches as Exhibit 99.1 the unaudited interim condensed consolidated financial statements and related notes of the Company as and for the six months ended June 30, 2023.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Current Report on Form 6-K or attached as exhibits hereto may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Current Report on Form 6-K may include, for example, statements about:

● the Company’s need and ability to raise or access additional capital;

● the ability to maintain the Company’s listing of its Ordinary Shares on Nasdaq;

● changes in the Company’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

● the Company’s ability to develop and launch new products and services;

● the Company’s ability to successfully and efficiently integrate future expansion plans and opportunities;

● the Company’s ability to grow its business in a cost-effective manner;

● the Company’s product development timeline and estimated research and development costs;

● the implementation, market acceptance and success of the Company’s business model;

● developments and projections relating to the Company’s competitors and industry;

● the Company’s approach and goals with respect to technology;

● the Company’s expectations regarding its ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

● the impact of adverse public health developments on the Company’s business, including any lingering impact of the COVID-19 pandemic;

● changes in applicable laws or regulations; and

● the outcome of any known and unknown litigation and regulatory proceedings.

These forward-looking statements are based on information available as of the date of this Current Report on Form 6-K, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing views as of any subsequent date, and no obligation is undertaken to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

● the outcome of any legal proceedings that may be instituted against the Company;

● the ability to maintain the Company’s listing of its Ordinary Shares on Nasdaq;

● changes in applicable laws or regulations;

● lingering effects of the COVID-19 pandemic on the Company’s business;

● the ability to implement business plans, forecasts, and other expectations after the completion of the proposed transaction, and identify and realize additional opportunities;

● the risk of downturns and the possibility of rapid change in the highly competitive industry in which the Company operates;

● the risk that the Company and its current and future collaborators are unable to successfully develop and commercialize its products or services, or experience significant delays in doing so;

● the risk that the Company may never achieve or sustain profitability;

● the risk that the Company will need to raise additional capital to execute its business plan, which may not be available on acceptable terms or at all;

● the risk that the Company experiences difficulties in managing its growth and expanding operations;

● the risk that third-party suppliers and manufacturers are not able to fully and timely meet their obligations;

● the risk that the Company is unable to secure or protect its intellectual property;

● the risk that the Company’s operations are disrupted by world events, including new and ongoing hostilities between Israel, where the Company has operations, and its neighbors;

● the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and

● other risks and uncertainties that may be described in this Current Report on Form 6-K or in other reports filed by the Company with the Securities and Exchange Commission from time to time, which are available on the SEC website at www.sec.gov.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provide information which our management believes is relevant to an assessment and understanding of the Company’s consolidated results of operations and financial condition. This discussion and analysis should be read together with our unaudited interim condensed consolidated financial statements and related notes as of June 30, 2023 included elsewhere in this Report on Form 6-K, and the audited consolidated financial statements and related notes as of December 31, 2022 of our company and our predecessor companies included in our Annual Report on Form 20-F filed with the Securities and Exchange Commission on May 1, 2023. This discussion and analysis should also be read together with the section of the Annual Report on Form 20-F entitled “Item 4. Information of the Company.” In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. See the section entitled “Cautionary Statement Regarding Forward-Looking Statements” above. Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or elsewhere in the Annual Report on Form 20-F.

Business

SMX integrates chemistry, physics, and computer science to give materials memory and create a culture of transparency and trust across multiple industries. The Company’s nearly 100 patents support unique marking, measuring, and tracking technologies allowing clients to seamlessly deploy transparency at all levels of development and provide stakeholders with a complete provenance of material composition and history, from virgin material to recycled, to address manufacturing challenges and ESG goals while maintaining sustainable growth. As a result, SMX’s technologies are designed and developed to help companies address ESG commitments and transition more successfully to a low-carbon economy.

The Company’s technology seeks to enable global companies across various industries to transition more successfully to a sustainable circular economy. By adopting our technology, they would be able to tangibly measure and track the raw material from origination, through the supply chain and at the end of life—where the amount of material recycled/reused from that product item can be measured and as well as the number of times that specific material/item has been recycled/reused.

The Company provides one solution to solve both authentication and track and trace challenges in order to uphold supply chain integrity and provide quality assurance and brand accountability to producers of goods. Its technology works as a track and trace system using a marker, a reader and an algorithm to identify embedded sub-molecular particles in order to track and trace different components along a production process (or any other marked good along a supply chain) to the end producer.

Its proprietary marker system embeds a permanent or removable (depending on the needs of the customer) mark on solid, liquid or gaseous objects or materials. Each marker is comprised of a combination of marker codes such that each marker is designed to be unique and unable to be duplicated. The marker system is coupled with an innovative patented reader that responds to signals from the marker and, together with a patented algorithm, captures the details of the product retrieved and stored on a blockchain digital ledger. Each marker can be stored, either locally on the reader and on private servers, cloud servers or on a blockchain ledger, to protect data integrity and custody.

History

SMX Security Matters Ltd. (Israel Corporate Number 515125771) (“SMX Israel”) was incorporated in 2014 to provide brand protection and supply chain integrity solutions to businesses. It provides these solutions through the commercialization of the initial technology of tracking and tracing materials by observing and identifying markers (the “Source IP”). SMX Israel’s Source IP was initiated from the Soreq Nuclear Research Center, an Israeli government research and development institute for nuclear and photonic technologies under the Israeli Atomic Energy Commission (“Soreq”). In January 2015, SMX Israel entered into the Isorad License Agreement with Isorad Ltd. (an IP holding company of Soreq) to license the Source IP and develop and commercialize the technology (the “Isorad License Agreement”). Under the Isorad License Agreement, as amended, the Source IP can be utilized in almost any industry and with any product.

SMX Israel merged into Security Matters PTY Ltd., an Australian company with Australian Company Number (ACN) 626 192 998 (“Security Matters PTY”), to effect a listing on the Australian Securities Exchange under the symbol “ASX: SMX.” At that time, Security Matters PTY had three wholly-owned subsidiaries: Security Matters Ltd. (Israel), SMX Fashion and Luxury (France), and SMX Beverages Pty Ltd. (Australia). It also held 50% of Yahaloma Technologies Inc., a Canadian company and, as of October 3, 2023, 51.9% of trueGold Consortium Pty Ltd., an Australian company.

On March 7, 2023 (the “Closing Date”), the Company consummated its previously announced business combination with Lionheart III Corp (“Lionheart”) pursuant to which, among other things (the “Business Combination”):

● Security Matters PTY proposed a scheme of arrangement under Part 5.1 of the Corporations Act (“Scheme”) and Capital Reduction which resulted in all shares in Security Matters Limited being cancelled in return for the issuance of the Company’s Ordinary Shares, with the Company being issued one share in Security Matters PTY (“Security Matters Shares”) (this resulted in Security Matters PTY becoming a wholly owned subsidiary of the Company);

● Security Matters PTY proposed an option scheme of arrangement under Part 5.1 of the Corporations Act (“Option Scheme”), which resulted in the Security Matters PTY options held by participants in the Option Scheme being subject to a cashless exercise based on a Black-Scholes valuation, in exchange for Security Matters Shares. Under the Scheme those shares were cancelled and the participants received Ordinary Shares on the basis of the Scheme consideration;

● Security Matters PTY shareholders received consideration under the Scheme of 1 Ordinary Share per 10.3624 Security Matters Shares having an implied value of $10.00 per Ordinary Share and the Company became the holder of all of the issued shares in Security Matters PTY and Lionheart, with Security Matters PTY being delisted from the Australian Stock Exchange;

● A newly-formed, wholly-owned subsidiary of the Company merged with and into Lionheart, with Lionheart surviving the merger as a wholly owned subsidiary of the Company;

● Existing Lionheart stockholders received Ordinary Shares in exchange for their existing Lionheart shares and existing Lionheart warrant holders had their warrants automatically adjusted to become exercisable in respect of Ordinary Shares instead of Lionheart shares; and

● The Company’s Ordinary Shares were listed on NASDAQ under the ticker SMX and the Public Warrants were listed under the ticker SMXWW.

As a result of the Business Combination, the Company owns the entire share capital of Security Matters PTY. Accordingly, for financial reporting purposes, Security Matters PTY (the legal subsidiary) is the accounting acquirer and the Company (the legal parent) is the accounting acquiree. The consolidated financial statements prepared following the reverse acquisition are issued under the name of the Company, but they are a continuance of the financial statements of Security Matters PTY and reflect the fair values of the assets and liabilities of the Company (the acquiree for accounting purposes), together with a deemed issuance of shares by Security Matters PTY at fair value based on the quoted opening share price of the Company in its first trading day following the closing of the Business Combination, and a recapitalization of its equity. This deemed issuance of shares is in fact both an equity transaction under IAS 32 (receiving the net assets of the Company) and an equity-settled share-based payment transaction under IFRS 2 (receiving the listing status of the Company). The difference between the fair value of the shares deemed to have been issued by Security Matters PTY and the fair value of the Company’s identifiable net assets represent a payment for the service of obtaining a stock exchange listing for its shares and it is therefore expensed immediately to profit or loss at the closing date.

Key Factors Affecting Operating Results

The Company believes that its performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the risk factors of the Company included from time to time in the Company’s filings with the Securities and Exchange Commission.

Commercial Agreements

The Company’s technology seeks to enable global companies across various industries to transition more successfully to a sustainable circular economy. By adopting our technology, they can be able to tangibly measure and track the raw material from origination, through the supply chain and at the end of life—where the amount of material recycled/reused from that product item can be measured and as well as the number of times that specific material/item has been recycled/reused.

Due to the fact that we aim our sales efforts at large international market-makers conglomerates, our sale cycle is relatively slow and there is a larger risk that at any time, due to many reasons that are beyond our control, the sale cycle will be broken and all efforts will be lost.

The Company has received interest in its technology from several international market-makers conglomerates as well as parties interested in making such technology a market standard, which will greatly assist the creation of future income. Any delays in the successful completion of projects or the creation of a market standard, as well as the materialization of any of the risks described in the section entitled “Risk Factors” above may impact the ability to generate revenue.

Components of Operating Results

The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Report and in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2022.

Revenue

To date, we have not yet generated significant revenue from the sale of our technology, partly as a result of focusing on onboarding a client portfolio, building the foundation to be an industry standard and best practice and to be ready for full and fast deployment to commercial global service.

Operating Expenses

The Company’s current operating expenses consist of the following components: research and development expenses, general and administrative expenses and selling and marketing expenses. The Company has proven an ability to maintain discipline on expense over time with creating greater delivery and outcome.

Research and Development Expenses, net

The Company’s research and development expenses consist primarily of wage and salary related expenses, subcontractors and consultants, depreciation and amortization of equipment, research expenses and share-based compensation expenses. The Company expects that its research and development expenses will increase as the Company continues to develop its products and recruit additional research and development employees.

The Company is engaged in Proof of Concept (POC) agreements according to which it receives funds for financing research and development expenses from prospective customers. Those funds are reimbursements for expenses and therefore are offset against the related R&D expenses in profit or loss.

General and Administrative Expenses

General and administrative expenses consist primarily of professional services fees, wages and salary related expenses, share-based compensation, facility-related costs, insurance and other general and administrative expenses. In the six months ended June 30, 2023, general and administrative expenses also include the costs that are related to the Business Combination.

Selling and Marketing Expenses

Selling and marketing expenses consist primarily of digital advertising and business development consultants.

Finance Income and Expenses

Finance expenses, net consists primarily of revaluation of financial liabilities at fair value, interest on borrowings, exchange rate difference, fees and commissions to banks and income on short-term deposits.

Foreign currency

The consolidated financial statements are prepared in US Dollars, which is the presentation currency of the Company. Security Matters PTY’s functional currency is Australian Dollars. The functional currency of SMX Israel is New Israeli Shekels.

Transactions and balances in foreign currencies are converted into US Dollars in accordance with the principles set forth by International Accounting Standard (IAS) 21 (“The Effects of Changes in Foreign Exchange Rates”). Accordingly, transactions and balances have been converted as follows:

● Assets and liabilities – at the rate of exchange applicable at the reporting date;

● Expense items – at annual average rate at the statements of financial position date.

● Share capital, capital reserve and other capital movement items were at rate of exchange as of the date of recognition of those items.

● Accumulated deficit was based on the opening balance for the beginning of the reporting period in addition to the movements mentioned above.

● Exchange gains and losses from the aforementioned conversion are recognized in the statement of other comprehensive lose in Foreign.

Comparison of the Six Months Ended June 30, 2023, and 2022

The following table summarizes our historical results of operations for the periods indicated:

	Six Months Ended June 30
U.S. dollars in thousands (except of per share data)	2023			2022
Research and development expenses		(1,172	)		(933	)
Selling and marketing expenses		(228	)		(378	)
General and administrative expenses		(13,350	)		(1,200	)
Listing expenses		(16,802	)		(- )
Operating Loss		(31,552	)		(2,511	)
Finance expenses		(2,496	)		(36	)
Finance income		1,143			105
Share of net loss of associated companies		(104	)		-
Loss before income tax		(33,009	)		(2,442	)
Income tax		—			—
Loss for the period		(33,009	)		(2,442	)
Basic and diluted loss per share attributable to shareholders		*(39.46	)		**(3.36	)

* After giving effect to the reverse stock split

** Restated as a result of the Business Combination and after giving effect to the reverse stock split

Operating loss for the six months ended June 30, 2023 was $31,552 thousand compared to $2,511 thousand for the six months ended June 30, 2022, an increase of $29,041 thousand, or 1,156%. The major increase is due to the costs that are related to the Business Combination, with listing expenses which amounted to $16,802 thousand and transaction cost which amounted to $7,792 thousand.

Research and Development Expenses, net

The Company’s research and development expenses for the six months ended June 30, 2023, amounted to $1,172 thousand representing an increase of $239 thousand, or 26%, compared to $933 thousand for the six months ended June 30, 2022. The major changes in research and development expenses were an increase of $169 thousand in Share based compensation, a decrease of 327 thousand in salaries and related expenses and a decrease of $265 thousand in Subcontractors and research expenses that were offset against the reimbursement from paid pilots and proof of concept projects that decreased in $671 thousand.

General and Administrative Expenses

The Company’s general and administrative expenses amounted to $13,350 thousand for the six months ended June 30, 2023, an increase of $12,150 thousand, or 1,013%, compared to $1,200 for the six months ended June 30, 2022. The increase was primarily attributable to $7,792 thousand in transaction cost, an increase of $1,526 thousand in Advertising, Public and Investors Relations, an increase of $1,723 thousand in share-based compensation, an increase of $375 thousand in travel expenses, an increase of $310 thousand in insurance costs and an increase of $235 thousand in wages and salaries related expenses reflecting an increase in the number of employees and in related salary expenses.

Selling and Marketing Expenses

The Company’s selling and marketing expenses totaled $228 thousand for six months ended June 30, 2023, a decrease of $150 thousand, or 40%, compared to $378 thousand for the six months ended June 30, 2022, and was primarily due to a decrease in digital advertising cost.

Finance Income and Expenses

The Company’s finance income for the six months ended June 30, 2023, totaled $1,143 thousand, an increase of $1,038 thousand, or 989%, compared to $105 thousand for the six months ended June 30, 2022. The increase is primarily due to revaluation of financial liabilities, which consist of warrants and a Convertible note, at fair value.

The finance expense for the six months ended June 30, 2023, totaled $2,496 thousand, an increase of $2,460 thousand, or 6,833%, compared to $36 thousand for the six months ended June 30, 2022. The increase is related to a revaluation of financial liabilities, which consist of bridge loans, at fair value.

Share of Net Profit/Loss of Associated Companies

As of June 30, 2023, and December 31, 2022, the carrying amount of the investment in associated companies is $112 thousand and $221 thousand, respectively.

Share of net loss of associated companies consists of equity loss from associated joint venture activity for the six months ended June 30, 2023, totaled $104 thousand.

Income Tax

As of June 30, 2023, the Company estimated carry forward tax losses was $56,106 thousand (June 30, 2022: $19,927 thousand) which may be carried forward and offset against taxable income for an indefinite period in the future. The Company did not recognize deferred tax assets relating to carry forward losses in the financial statements because their utilization in the foreseeable future is not probable.

Net Loss attributable to shareholders

As a result of the forgoing, our net loss for the six months ended June 30, 2023, was $33,009 thousand, compared to $2,442 thousand for the six months ended June 30, 2022, an increase of $30,567 thousand, or 1,252%.

Comparison of the Years Ended December 31, 2022 and December 31, 2021

The following table summarizes our historical results of operations for the periods indicated:

	Year Ended December 31,
U.S. dollars in thousands (except of per share data)	2022			2021
Research and development expenses		1,898			2,039
Selling and marketing expenses		569			453
General and administrative expenses		2,723			2,482
Operating Loss		(5,190	)		(4,974	)
Finance expenses		(1,128	)		(101	)
Finance income		28			237
Share of net profit (loss) of associate companies		106			(101	)
Loss before income tax		(6,184	)		(4,939	)
Income tax		—			—
Loss for the year		(6,184	)		(4,939	)
Basic and diluted loss per share attributable to shareholders**		(8.47	)		(7.41	)

** Restated as a result of the Business Combination and after giving effect to the reverse stock split

As a result of the foregoing, our operating loss for year ended December 31, 2022 was $5,190 thousand compared to an operating loss of $4,974 thousand for year ended December 31, 2021, an increase of $216 thousand, or 4.3%.

Research and Development Expenses, net

The Company’s research and development expenses for the year ended December 31, 2022, amounted to $1,898 thousand, representing a decrease of $141 thousand, or 7%, compared to $2,039 thousand for the year ended December 31, 2021. The major changes in research and development expenses were an increase of $371 thousand in salaries and related expenses that were offset against the reimbursement from paid pilots and proof of concept projects that increased in $335 thousand and Subcontractors and consultants’ expenses that decreased in $257 thousand.

General and Administrative Expenses

The Company’s general and administrative expenses totaled $2,723 thousand for the year ended December 31, 2022, a net increase of $241 thousand, or 10%, compared to $2,482 for the year ended December 31, 2021. The net increase was primarily attributable to an increase of $183 thousand in wages and salaries related expenses reflecting an increase in the number of employees and an increase of $223 thousand in travel expenses offset by decrease of $194 thousand in share-based compensation expenses.

Selling and Marketing Expenses

The Company’s selling and marketing expenses totaled $569 thousand for the year ended December 31, 2022, an increase of $116 thousand, or 26%, compared to $453 thousand for the year ended December 31, 2021, and was primarily due to an increase in digital advertising cost associated with our marketing efforts.

Finance Income and Expenses

The Company’s finance income for the year ended December 31, 2022, totaled $28 thousand, a decrease of $209 thousand, or 88%, compared to $237 thousand for the year ended December 31, 2021. The Company’s finance expenses totaled $1,128 thousand for the year ended December 31, 2022, an increase of $1,027 thousand or 1,017%, compared to $101 thousand for the year ended December 31, 2021.

Share of Net Profit/Loss of Associated Companies

Shares of net profit of associated companies consists of equity profit from associated joint venture activity for the year ended on December 31, 2022 at the amount of $106 thousand and share of net loss of associated companies consists of equity loss from associated joint venture activity for the year ended on December 31, 2021 at the amount of $101 thousand. As of December 31, 2022 and December 31, 2021, the carrying amount of the investment in associated companies is $221 thousand and $147 thousand, respectively.

Income Tax

As of December 31, 2022, the Company estimated carry forward tax losses of approximately $24,106 thousand (December 31, 2021: $17,659 thousand) which may be carried forward and offset against taxable income for an indefinite period in the future. The Company and its subsidiaries did not recognize deferred tax assets relating to carry forward losses in the financial statements because their utilization in the foreseeable future is not probable.

Net Loss attributable to shareholders

As a result of the forgoing, our net loss for the year ended December 31, 2022 was $6,184 thousand, compared to $4,939 thousand for the year ended December 31, 2021, an increase of $1,245 thousand, or 25%.

Liquidity and Capital Resources

Overview

Since our inception through June 30, 2023 and thereafter, the Company has funded its operations principally through the issuance of Ordinary Shares, warrants, convertible notes, loans from investors and related parties and reimbursement from prospected customers for paid pilots and proof-of-concept projects. As of June 30, 2023, the Company had $3,020 thousand in cash and cash equivalents. In addition, in September 2023, the Company raised gross proceeds of approximately $2,500 thousand, before deducting fees and other offering expenses payable by the Company, from the sale of a convertible promissory note and warrants to an institutional investor.

The table below presents our cash flows for the periods indicated:

	For the Six Months Ended June 30,					For the Year Ended December 31,
U.S. dollars in thousands	2023		2022			2022			2021
Net cash used in operating activities		7,675		2,862			5,223			3,908
Net cash used in investing activities		393		966			1,127			1,765
Net cash provided by financing activities		9,703		542			3,846			6,118
Net increase (decrease) in cash and cash equivalents		1,635		(3,286	)		(2,504	)		445

Operating Activities

Net cash used in operating activities was $7,675 thousand during the six months ended June 30, 2023, compared to net cash used in operating activities of $2,862 thousand during the six months ended June 30, 2022. The increase was primarily used for transaction costs and payments that are related to the Business Combination.

Net cash used in operating activities was $5,223 thousand during the year ended December 31, 2022, compared to net cash used in operating activities of $3,908 thousand during the year ended December 31, 2021. The increase was primarily used for payment of salaries and related expenses, travel expenses, research and development, subcontractors, consultants and materials. In addition, the increase in cash used in operating activities derived from a material increase in prepaid expenses related to the Business Combination Agreement, dated as of July 26, 2022, by and among the Company, Security Matters PTY, Lionheart and Aryeh Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (the “BCA”).

Investing Activities

Net cash used in investing activities was $393 thousand during the six months ended June 30, 2023 and consisted of cost of capitalized development expenses in the amount of $383 thousand and $10 thousand used for purchasing property, plant and equipment. Net cash used in investing activities was $966 thousand during the six months ended June 30, 2022, consisted of cost of capitalized development expenses in the amounts of $783 thousand and $183 thousand, which were used for purchasing property and equipment.

Net cash used in investing activities was $1,127 thousand during the year ended December 31, 2022 and consisted of cost of capitalized development expenses in the amount of $975 thousand and $152 thousand used for purchasing property, plant and equipment. Net cash used in investing activities was $1,765 thousand during the year ended December 31, 2021, and consisted of cost of capitalized development expenses in the amounts of $1,468 thousand and $297 thousand, which were used for purchasing property and equipment.

Financing Activities

Net cash provided by financing activities was $9,703 thousand during the six months ended June 30, 2023, consisted mainly of $3,220 thousand in advance payment for equity, $2,923 thousand for net proceeds from issuance of shares in the Business Combination, an aggregate of $2,811 thousand net proceeds from the issuance of bundled securities, $550 thousand in proceeds from bridge loans and $250 thousand in proceeds from the issuance of a convertible note.

Net cash provided by financing activities was $542 thousand during the six months ended June 30, 2022, consisted mainly of $581 thousand in proceeds from the issuance of convertible notes, which was partially offset by payment of $39 thousand for lease liabilities.

Net cash provided by financing activities was $3,846 thousand during the year ended December 31, 2022, consisted mainly of $3,310 thousand in proceeds from bridge loans and warrants and $581 thousand of net proceeds from issuance of convertible notes and $182 thousand net issuance of shares, which was partially offset by payment of $172 thousand for loan repayment to related parties. Net cash provided by financing activities was $6,118 thousand during the year ended December 31, 2021, consisted mainly of $5,892 thousand in proceeds from net issuance of shares and warrants and $395 thousand of net proceeds from the exercise of warrants, which was partially offset by payment of $98 thousand for lease liabilities and loan repayment to related parties of $103 thousand.

Current Outlook

The Company has incurred and continues to incur losses, and continues to generate negative cash flows from operations since inception in 2015. Since the Company’s inception, it has not generated significant revenue from the sale of products.

As of June 30, 2023 and December 31, 2022, the Company had $3,020 thousand and $1,398 thousand, respectively, in cash and cash equivalents. The Company expects that its existing cash and cash equivalents, including the approximately $2.5 million in net proceeds raised on September 6, 2023, and along with amounts it may draw down under the SEPA, and receivables from clients once paid, will be sufficient to fund its operations for the foreseeable future but perhaps at a delayed or reduced scope. In addition, the Company has outstanding approximately $12 million in existing payables and other liabilities related to expenses of the Business Combination, of which approximately $8.5 million is deferred through the second quarter of 2024 when such amounts are expected to be paid. The Company expects to fund the payment of such amounts out of available cash, the Yorkville SEPA, referred to below, ongoing activities of the Company and possibly other capital raisings in 2023. Further, the Company’s operating plans may change as a result of many factors that may currently be unknown to it, and it may need to seek additional funds sooner than planned. The Company’s future capital requirements will depend on many factors, including:

● the progress and costs of our research and development activities;

● the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;

● the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally; and

● the magnitude of our general and administrative expenses.

Until the Company can generate significant recurring revenues and profit, the Company expects to satisfy its future cash needs through capital raising and shareholders’ financial support. The Company cannot be certain that additional funding will be available when needed, on acceptable terms, if at all. The Company’s outstanding warrants are either out of the money or have nominal exercise prices; accordingly, the Company does not expect to raise any material additional funds from the exercise of outstanding warrants in at least the short-term. If funds are not available, the Company may be required to delay or reduce the scope of research or development plans.

We can give no assurances that we will be able to secure additional sources of funds to support our operations on acceptable terms, or at all, or, if such funds are available to us, that such additional financing will be sufficient to meet our needs. If we raise additional funds by issuing equity or convertible debt securities, including pursuant to the SEPA, it could result in dilution to our existing stockholders or increased fixed payment obligations. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. If we incur additional indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but may not be on terms that are favorable to us. Any of the foregoing could significantly harm our business, financial condition and results of operations. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may be required to reduce the scope of the commercialization of our planned products or delay, scale back or discontinue the development of one or more of our product candidates.

We may also need to take certain other actions to allow us to maintain our projected cash and projected financial position, including but not limited to additional reductions in general and administrative costs, sales and marketing costs, and other discretionary costs. Although we believe such plans, if executed and coupled with the above described sources of liquidity, should provide us with financing to meet our needs, successful completion of such plans is dependent on factors outside of our control.

We anticipate that we will continue to incur net losses into the foreseeable future as we continue our development of our product candidates, and expand our corporate infrastructure.

Contractual Obligations

Reciprocal Standby Equity Purchase Agreement

Effective March 7, 2023, we entered into the SEPA with Yorkville, whereby we have the right, but not the obligation, to sell to Yorkville up to $25.0 million of our Ordinary Shares at our request, subject to the terms therein. We have received as loans Pre-Advances of $3.5 million, of which as of the date of this Report on Form 6-K, an aggregate of $1.8 million in principal have been converted into our Ordinary Shares or repaid in cash. We may from time to time offer and sell our Ordinary Shares under the SEPA, which is expected to provide us with an additional source of liquidity.

Our decision to make any Advance under the SEPA will depend on a variety of factors to be determined by us from time to time, including, among other things, the trading price of our Ordinary Shares and determination by us that other sources of capital may be more beneficial, and determinations by us as to the appropriate sources of funding for our business and operations.

We do not believe that the existence of the SEPA will have any adverse effect on our ability to raise any capital from other sources except that pursuant to the SEPA, we are not permitted to enter into any variable rate transactions during the term of the SEPA, which could result in potential investors declining to consider investing in our Company on terms agreeable to us or at all.

Leases

SMX Israel is a party to a lease agreement dated January 14, 2020, and amended as of December 24, 2020 (the “Lease”). Under the Lease, it is obligated to pay ILS 253 thousand plus VAT per year. The Lease will expire on May 31, 2027, with an additional option of 5 years, unless terminated by the landlord due to a requirement of a governmental authority to modify or terminate the Lease, pursuant to the terms of the lease.

Borrowings

On September 19, 2023, the Company amended its loan agreements dated September 7, 2015, by and between the Company, its shareholders and Kamea Fund. Pursuant to the amendment to the loan agreements, Kamea agreed to convert US$657 thousand of indebtedness under the loan agreements into 487,281 ordinary shares (post share reverse split) of the Company, as payment in full for such indebtedness; provided however, that in the event the proceeds received from Kamea with respect to any sales of the shares are not at least equal to the indebtedness amount, the Company will remain liable to Kamea for the balance of the indebtedness amount

Additionally, Kibbutz Ketura provides administrative services for SMX Israel for which it was debited $19 thousand and $25 thousand for the six month ended June 30, 2023 and June 30, 2022, respectively.

Security Matters PTY and the Company borrowed an aggregate of $3,860 thousand from private investors between September 2022 and February 2023, which loans are due no earlier than May 31, 2024. All of such loans have an interest rate of 10% per annum. Each such lender (except for one lender which lent an amount of $1,000 thousand which is not entitled to the redeemable warrants), further received 20% redeemable 5-year warrant coverage to subscribe for Ordinary Shares at $11.50 per share, plus 5% 5-year bonus warrant coverage to subscribe for Ordinary Shares at $11.50 per share and a first priority security interest in the shares of Security Matters PTY’s interest in trueGold Consortium Pty Ltd. In March 2023, the Company signed an addendum to the Bridge Loans agreements which converted $1,350 thousand into common shares and deferred the remaining cash payments to March 31, 2024.

In January 2023, the Company borrowed $250 thousand from a private investor, which loan is due December 31, 2024. Such loan has an interest rate of 15% per annum, and is convertible at a conversion price of $10.00 per share, and the holder further received 5% redeemable 5-year warrant coverage to subscribe for Ordinary Shares at $11.50 per share, plus 5% 5-year bonus warrant coverage to subscribe for Ordinary Shares at $11.50 per share.

On September 6, 2023, the Company consummated the transactions pursuant to a Securities Purchase Agreement dated as of September 5, 2023 and issued and sold to an institutional investor a promissory note with a fixed conversion price of $1.6378 and warrants, for gross proceeds to SMX of approximately $2,500 thousand, before deducting fees and other offering expenses payable by the Company. The note is in the principal amount of $4,290 thousand. The actual amount loaned by the investor pursuant to the Note is $2,574 thousand after a 40% original issue discount. The maturity date of the note is the 12-month anniversary of the Effective Date, and is the date upon which the principal amount, as well as any accrued and unpaid interest and other fees, shall be due and payable. Interest accrues in the amount of 12% per year and shall be payable on the maturity date or upon acceleration or by prepayment or otherwise. The investor has the right, at any time, to convert all or any portion of the then outstanding and unpaid principal amount and interest (including any costs, fees and charges) into Ordinary Shares at a fixed conversion price of $1.6378 per share. Any such conversion is subject to customary adjustments and limitations set forth in the note, including for fundamental transactions. Additionally, as part of the transaction, we issued two warrants to the Investor, an “A” Warrant and a “B” Warrant. The A Warrant for 3,929,051 Ordinary Shares has an exercise price of $0.0022 per share, subject to customary adjustments, and may be exercised at any time until the five year anniversary of the A Warrant. The B Warrant for 2,619,367 Ordinary Shares has an exercise price of $1.6378 per share, subject to customary adjustments, and may be exercised at any time until the five year anniversary of the B Warrant. In no case shall the Company convert the note or exercise the A Warrants or the B Warrants if the result of the issuance of Ordinary Shares thereby would result in the beneficial ownership of the investor of ordinary shares in excess of 4.99% of the Company’s issued and outstanding Ordinary Shares.

Government Grants

As of June 30, 2023 and December 31, 2022, the Company has a contingent liability of $141 and $135 thousand respectively, for government grant it received for the use of research and development activities from Israel Innovation Authority (IIA). The Company is subject to paying 3% of its relevant revenues for the first three years, and 4% of the relevant revenues for further years, until repayment of the entire grant.

Isorad License Agreement

In January 2015, the Company entered into the Isorad License Agreement with Isorad Ltd. (a company wholly owned by the State of Israel with rights to exclusively commercialize the Soreq Research Center technology for civilian uses), according to which the Company was granted technological license in return for future royalties based on 2.2% of gross sales by the Company and its affiliates and after 25 years the license becomes royalty-free. Upon the occurrence of an M&A event (as such event is defined in the agreement to include mergers, sale of all or substantially all the assets of ours and similar event), in the first M&A event, the Company is to pay a consideration equal to 1% of the amount received or transferred and in the second M&A event, a consideration equal to 2% of the amount received or transferred. This will not apply to any future offer of shares, merger or sale of assets thereafter.

In January 2023, the Company signed an amendment to the Isorad License Agreement that provided for the following: (1) for the BCA with Lionheart, (a) Isorad was issued 864,000 options to purchase shares of the Company, which options were issued in January 2023 and valued using the Black-Scholes pricing model, with the main parameters used being: (1) risk-free rate: 3.42%; (2) expected volatility: 81.92%: (3) expected term: up to 3 years; and (4) expected dividend yield: 0%; and (b) Isorad will be entitled to 1% of any amount actually received against equity or other funding convertible into equity at the closing of the transaction and until 13 months thereafter (to be paid after reaching an aggregated received amount of $27 million, or at the end of such 13 months, the earlier thereof); and (2) Exit fee - in the occurrence of the first M&A event (as such event is defined in such agreement to include mergers, sale of all or substantially all the assets of the Company and similar event) after the closing of the BCA, the Company is to pay a cash amount equal to 1.5% of the amount received or transferred. This will not apply to any future offer of shares, merger or sale of assets thereafter. In the six months ended June 30, 2023, based on the funds the Company actually received, the Company recognized a technology license intellectual property at the amount of $101 thousand against a liability that reflects the due amount.

Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risks in the ordinary course of business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of U.S. dollar/ILS Israeli Shekels exchange rates, which is discussed in detail in the following paragraph.

Foreign Currency Exchange Risk

Currency Fluctuations

The Company’s operating expenses are denominated in USD and ILS, and therefore are currently subject to foreign currency risk. We have been affected by changes in the rate of ILS currency compared to the U.S. dollar, as the ILS decreased against the U.S. dollar by approximately 6% and 13% in the six months ended June 30, 2023 and June 30 2022, respectively.

The Company’s policy is not to enter into any currency hedging transactions, and we cannot assure you that we will not be adversely affected by currency fluctuations in the future.

Credit Risk

Credit risk is a risk of financial loss if a counterparty or customer fails to meet its contractual obligations. We closely monitor the activities of our counterparties and control the access to its intellectual property which enables it to ensure a prompt collection. Our main financial assets are cash and cash equivalents as well as other receivables and represent the Company’s maximum exposure to credit risk in connection with its financial assets. Wherever possible and commercially practical, the Company holds cash with major and sound financial institutions in Israel and Australia.

Liquidity Risk

Liquidity risk is the risk that we will encounter in meeting our obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. The Company has procedures to minimize that risk by maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities. For more details, please refer to the section titled, “Liquidity and Capital Resources”.

Critical Accounting Policies and Estimates

Reverse Acquisition Transaction

As a result of the Business Combination, the Company owns the entire share capital of Security Matters PTY Ltd. Accordingly, for financial reporting purposes, Security Matters PTY Ltd. (the legal subsidiary) is the accounting acquirer, and the Company (the legal parent) is the accounting acquiree. The consolidated financial statements prepared following the reverse acquisition are issued under the name of the Company, but they are a continuance of the financial statements of Security Matters PTY Ltd. and reflect the fair values of the assets and liabilities of the Company (the acquiree for accounting purposes), together with a deemed issuance of shares by Security Matters PTY Ltd. at fair value based on the quoted opening share price of the Company in its first trading day following the closing of the transaction ($11,599 thousand), and a recapitalization of its equity. This deemed issuance of shares is in fact both an equity transaction under IAS 32 (receiving the net assets of the Company) and an equity-settled share-based payment transaction under IFRS 2 (receiving the listing status of the Company). The difference, in the amount of $16,802 thousand, between the fair value of the shares deemed to have been issued by Security Matters PTY Ltd. and the fair value of the Company’s identifiable net assets represent a payment for the service of obtaining a stock exchange listing for its shares and it is therefore expensed immediately to profit or loss at closing date.

The Company is initially consolidated in the financial statements from the Closing Date of the Business Combination. Substantially all of the assets and liabilities of the Company were comprised of marketable securities held in a trust account ($4,921 thousand) and trade and other payables and warrants ($10,127 thousand) respectively, with fair values that were equivalent to their carrying amounts. Below are the implications of the accounting treatment on the financial statements:

1.	The assets and liabilities of Security Matters PTY have been recognized and measured in the consolidated financial statements of the Company for the six month period ended June 30, 2023, at their pre-combination carrying amounts.
2.	The retained earnings and other equity balances recognized in the consolidated financial statements of the Company for the six month period ended June 30, 2023, are the retained earnings and other equity balances of Security Matters PTY immediately before the Business Combination.
3.	The amount recognized as issued equity instruments in the consolidated financial statements of the Company for the six month period ended June 30, 2023, has been determined by adding to the issued equity of Security Matters PTY immediately before the Business Combination the fair value of the deemed issuance of shares, as described above. However, the equity structure (the number and type of shares issued) reflects the equity structure of the Company, including the shares issued by the Company through recapitalization. Accordingly, the equity structure of Security Matters PTY (issued capital and addition paid in capital) in comparative periods is restated using the exchange ratio established in the Business Combination to reflect the number and par value of shares of the Company issued in the reverse acquisition transaction.
4.	The statement of comprehensive loss in the consolidated financial statements of the Company for the six month period ended June 30, 2023, reflects that of Security Matters PTY for the full period together with the post-acquisition results of the Company from the Closing Date. Loss per share of Security Matters PTY for periods prior to the acquisition date is restated such the denominator of the historical loss per share calculation is adjusted by multiplying the weighted-average shares used in each historically reported loss per share calculation by the exchange ratio established in the Business Combination.

Exhibit No.	Description
99.1	Interim Condensed Consolidated Financial Statements as of June 30, 2023
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 3, 2023

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
By:	/s/ Haggai Alon
Name:	Haggai Alon
Title:	Chief Executive Officer

EX-99.1

Exhibit 99.1

SMX (SECURITY MATTERS)

PUBLIC LIMITED COMPANY

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2023

UNAUDITED

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2023

UNAUDITED

TABLE OF CONTENTS

	Page
Interim condensed consolidated statements of financial position	1
Interim condensed consolidated statements of comprehensive loss	2
Interim condensed consolidated statements of changes in shareholders’ equity (deficit)	3-4
Interim condensed consolidated statements of cash flows	5-6
Notes to the unaudited interim condensed consolidated financial statements	7-18

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

UNAUDITED INTERIM CONDENSED CONSOLIDATED

STATEMENTS OF FINANCIAL POSITION

		As of June 30, 2023			As of December 31, 2022
	Note	US$ in thousands
Current assets
Cash and cash equivalents			3,020			1,398
Other current receivables			1,037			3,673
Total current assets			4,057			5,071
Non-current assets
Property and equipment, net			820			969
Intangible assets, net			5,269			5,027
Investment in associated companies			112			221
Total non-current assets			6,201			6,217
Total assets			10,258			11,288
Current liabilities
Trade payables			7,281			2,972
Lease liabilities			30			30
Other payables			2,415			650
Convertible notes	3		304			563
Warrants			856			-
Pre-paid advance	5.1		3,050			-
Bridge loans and derivative financial liabilities	4		2,363			3,682
Borrowings from related parties			689			710
Total current liabilities			16,988			4,925
Non-current liabilities
Lease liabilities			403			440
Bridge loans and derivative financial liabilities	4		938			-
Long term payables			3,930			85
Total non-current liabilities			5,271			4,207
Total liabilities			22,259			9,132
Shareholders’ equity (deficit)
Issued capital and additional paid in capital	6		51,730			32,711
Foreign currency translation reserve			(702	)		(537	)
Accumulated losses			(63,029	)		(30,020	)
Total Shareholders’ equity (deficit)			(12,001	)		2,156
Total liabilities and shareholders’ equity (deficit)			10,258			11,288

/s/ Limor Moshe Lotker	/s/ Haggai Alon	/s/ Pauline Khoo	November 3, 2023
Limor Moshe Lotker Chief Financial Officer	Haggai Alon Chief Executive Officer	Pauline Khoo Audit Committee Chairperson	Date of approval of financial statements

The accompanying notes are an integral part of the financial statements.

-1-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

UNAUDITED INTERIM CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE LOSS

		For the Six Months Ended
		June 30, 2023			June 30, 2022
	Note	US$ in thousands except share and per share data
Research and development expenses, net			1,172			933
Selling and marketing expenses			228			378
General and administrative expenses	7		13,350			1,200
Listing expenses			16,802			-
Operating loss			31,552			2,511
Finance income			1,143			105
Finance expenses			2,496			36
Share of net loss of associated companies			104			-
Loss before income tax			33,009			2,442
Income tax			-			-
Loss after income tax for the period attributable to shareholders			33,009			2,442
Other comprehensive loss:
Items that will be reclassified to profit or loss:
Foreign currency translation			(165	)		(639	)
Other comprehensive loss, net of tax			(165	)		(639	)
Total comprehensive loss			33,174			3,081
Loss per share attributable to shareholders
Basic and diluted loss per share attributable to shareholders (in dollars)	8		*(39.46	)		**(3.36	)

* After giving effect to the reverse stock split (see also Note 9.1)

** Restated as a result of the SPAC transaction and after giving effect to the reverse stock split (see also Note 1 and 9.1)

The accompanying notes are an integral part of the consolidated financial statements.

-2-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

UNAUDITED INTERIM CONDENSED CONSOLIDATED CHANGES IN SHAREHOLDERS’ EQUITY

(US$ in thousands)

	Issued capital and Additional paid-in capital		Foreign currency translation reserve			Accumulated loss			Total equity
Balance as of January 1, 2023		32,713		(537	)		(30,020	)		2,156
Comprehensive loss
Loss after income tax for the period		-		-			(33,009	)		(33,009	)
Other comprehensive loss for the period		-		(165	)		-			(165	)
Total comprehensive loss for the period		-		(165	)		(33,009	)		(33,174	)
Issuance of shares, net		170		-			-			170
Recapitalization due to issuance of shares following the SPAC transaction, net		11,460		-			-			11,460
Share-based compensation		2,092		-			-			2,092
Conversion of convertible notes to shares		175		-			-			175
Conversion of bridge loans to shares		2,983		-			-			2,983
Exercise of options		10		-			-			10
Conversion of warrants A to ordinary shares, net (See note 5.2)		290								290
Issuance of Security Bundle, net (See note 5.2)		1,837		-			-			1,837
Balance as of June 30, 2023		51,730		(702	)		(63,029	)		(12,001	)

The accompanying notes are an integral part of the consolidated financial statements.

(*) Represents an amount lower than US$ 1 thousand, see Note 2D.

-3-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

UNAUDITED INTERIM CONDENSED CONSOLIDATED CHANGES IN SHAREHOLDERS’ EQUITY

(US$ in thousands)

	Issued capital and Additional paid-in capital		Foreign currency translation reserve			Accumulated loss			Total equity
Balance as of January 1, 2022		31,504		223			(23,836	)		7,891
Comprehensive income
Loss after income tax for the period		-		-			(2,442	)		(2,442	)
Other comprehensive loss for the period		-		(639	)		-			(639	)
Total comprehensive loss for the period		-		(639	)		(2,442	)		(3,081	)
Issuance of shares, net		721		-			-			721
Share-based compensation		219		-			-			219
Balance as of June 30, 2022		32,444		(416	)		(26,278	)		5,750

The accompanying notes are an integral part of the consolidated financial statements.

-4-

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$ in thousands)

	For the Six Months Ended
	June 30, 2023			June 30, 2022
	US$ in thousands
Cash flows from operating activities:
Net Loss		(33,009	)		(2,442	)
Share-based compensation		2,052			165
Depreciation and amortization		114			176
Increase (decrease) in other receivables		2,575			(1,727	)
Increase in trade payables		2,545			831
Increase in other payables		70			110
Decrease in other liabilities		13			32
Revaluation of financial liabilities at fair value		(41	)		-
Financial expenses due to bridge loans principal amounts		1,421			-
Interest on leases		7			28
Provision of borrowing to related parties		14			(89	)
Revaluation of convertible notes		(382	)		-
Share of net loss of associated companies		104			-
Issuance of shares for directors		40			54
SPAC transaction - listing costs		16,802			-
Net cash flow used in operating activities		(7,675	)		(2,862	)
Cash flows from investing activities:
Purchase of property, plant and equipment		(10	)		(183	)
Capitalized development cost		(383	)		(783	)
Net cash flow used in investing activities		(393	)		(966	)
Cash flows from financing activities:
Payment of lease liabilities		(21	)		(39	)
Proceeds from issuance of convertible notes		250			581
Proceeds from issuance of Security Bundle, net		914			-
Issuance of warrants		923			-
Issuance of derivative financial liability		974			-
Proceeds from bridge loans		550			-
Repayment of bridge loans		(30	)		-
Advance payment for equity, net (see Note 5.1)		3,220			-
Issuance of shares in the SPAC transaction, net		2,923			-
Net cash flow from financing activities		9,703			542
Increase (decrease) in cash and cash equivalents		1,635			(3,286	)
Cash and cash equivalents at beginning of period		1,398			4,171
Exchange rate differences on cash and cash equivalent		(13	)		(26	)
Cash and cash equivalents at end of period		3,020			859

The accompanying notes are an integral part of the consolidated financial statements.

-5-

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$ in thousands)

	For the Six Months Ended
	June 30, 2023		June 30, 2022
	US$ in thousands
Appendix A – Non-Cash transactions during the period:
Conversion of liability to ordinary shares (see Note 5.1)		450		-
Conversion of warrants to ordinary shares (see note 5.2)		290		-
Conversion of bridge loans and derivative financial liability to ordinary shares		2,983		-
Exercise of options and warrants to ordinary shares		2,229		-
Conversion of convertible notes to ordinary shares		175		-

The accompanying notes are an integral part of the consolidated financial statements.

-6-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 1 - GENERAL:

A. SMX (Security Matters) Public Limited Company (“Security Matters” or the “Company” and together with its subsidiaries, the “Group”) was incorporated in July 1, 2022 under the laws of Ireland with registered number 722009 and its registered office at Mespil Business Center, Mespil House, Sessex Road, Dublin 4, Ireland, D04 T4A6. The Company was incorporated in 2022 as part of the Business Combination (see Note 1.B).

The Group provides one solution to solve both authentication and track and trace challenges in order to uphold supply chain integrity and provide quality assurance and brand accountability to producers of goods. Its technology works as a track and trace system using a marker, a reader and an algorithm to identify embedded sub-molecular particles in order to track and trace different components along a production process (or any other marked good along a supply chain) to the end producer. Its proprietary marker system embeds a permanent or removable (depending on the needs of the customer) mark on solid, liquid or gaseous objects or materials. Each marker is comprised of a combination of marker codes such that each marker is designed to be unique and unable to be duplicated. The marker system is coupled with an innovative patented reader that responds to signals from the marker and, together with a patented algorithm, captures the details of the product retrieved and stored on a blockchain digital ledger. Each marker can be stored, either locally on the reader and on private servers, cloud servers or on a blockchain ledger, to protect data integrity and custody.

B. The Business Combination - the SPAC transaction (“Business Combination”):

On March 7, 2023 (the “Closing Date”) the Company completed its Business Combination with Lionheart III Corp (“Lionheart”), following that Lionheart and Security Matters PTY Ltd. (formerly named Security Matters Limited, which was incorporated in May 2018 under Australian law) became the Company’s wholly-owned subsidiaries and the Company listed its ordinary shares and public warrants on the NASDAQ stock market under the tickers SMX and SMXWW, respectively. On July 26, 2022, Security Matters PTY Ltd. and Lionheart, a publicly traded special purpose acquisition company (SPAC), entered into a business combination agreement (the “BCA”) and accompanying scheme implementation deed (“SID”). Under the BCA, the existing Lionheart stockholders received the Company’s shares and warrants in exchange for their existing Lionheart shares and warrants and all shares existed in Security Matters PTY Ltd were cancelled in return for the Company’s shares and resulting in Security Matters PTY Ltd. becoming a wholly owned subsidiary of the Company. Security Matters PTY Ltd. shareholders received consideration of 1 ordinary share per 10.3624 Security Matters PTY Ltd. shares, having an implied value of $10.00 per ordinary share and the Company became the holder of all of the issued shares in Security Matters PTY Ltd. and Lionheart, with Security Matters PTY Ltd. being delisted from the Australian Stock Exchange.

The Business Combination resulted in 97.58% redemption by Lionheart’s public shareholders which resulted in leaving $3,061 of funds remaining in the trust account (See also Note 6 and Note 2.E as for the accounting treatment of the transaction in these financial statements).

-7-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 1 – GENERAL (CONT.):

C. The Company operates primarily through 8 wholly owned subsidiaries, all of which have been consolidated in these consolidated financial statements.

Controlled entity	Country of Incorporation		Percentage Owned June 30, 2023			Percentage Owned December 31, 2022
Security Matters PTY Ltd. (Formerly - Security Matters Limited)		Australia		100	%		-
Lionheart III Corp		USA		100	%		**
SMX Circular Economy Platform PTE, Ltd.		Singapore		100	%		*
SMX (Security Matters) Ireland Limited		Ireland		100	%		*
SMX (Security Matters) Israel Ltd. (Formerly - Security Matters Ltd.)		Israel		100	%		100	%***
Security Matters Canada Ltd.		Canada		100	%		100	%***
Security Matters France Ltd.		France		100	%		100	%***
SMX Beverages Pty Ltd.		Australia		100	%		100	%***

In addition, the Company’s has the following investments in associated companies:

Entity	Country of Incorporation		Percentage Owned June 30, 2023			Percentage Owned December 31, 2022
Yahaloma Technologies Inc.		Canada		50	%		50	%***
True Gold Consortium Pty Ltd		Australia		44.4	%		44.4	%***

The proportion of ownership interest is equal to the proportion of voting power held.

* Incorporated in 2023.

** Merger occurred in March 2023.

*** Owned by Security Matters PTY Ltd. (formerly - Security Matters Limited) as of December 31, 2022.

D. During the six months ended June 30, 2023, the Company incurred operating losses and negative cash flows from operating activities. The Company has not yet generated revenues. As discussed in Note 4, during the period, the Company entered into binding loan agreements with existing shareholders. As discussed in Note 5.1, the Company executed an equity line agreement to raise up to $25,000 in consideration of the issuance of common stock over the course of 36 months with YA II PN, LTD (“Yorkville”). As discussed in Notes 4 and 9.4, the Company signed agreements to convert indebtedness by issuance of shares. As discussed in Note 9.3 the Company is continuing with additional capital raising, and post balance sheet date it received an additional $2,500 in funding. The Company has also the ability to decrease its expenses in order to meet its existing cash flow streams. Management believes that the proceeds from the recent funding agreements, combined with its cash on hand, equity line and the Company’s plans, are sufficient to meet the Company’s obligations as they come due in the foreseeable future. There are no assurances, however, that the Company will be able to obtain an adequate level of financial resources that are required for its long-term business plan.

-8-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:

A. Basis of preparation

These interim consolidated financial statements have been prepared in a condensed format in accordance with IAS 34 Interim Financial Reporting. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the annual consolidated financial statements as of December 31, 2022 of the Company and of Security Matters PTY Ltd. (formerly - Security Matters Limited).

B. Functional currency

The consolidated financial statements are prepared in US Dollars, which is the functional and presentation currency of the Company.

C. Application of accounting policies

The Group has applied the same accounting policies and methods of computation in its interim condensed consolidated financial statements as in its 2022 annual financial statements and as in the 2022 annual financial statements of Security Matters PTY Ltd, except as stated below in note 2D and 2E.

Several amendments to IFRS Standards apply for the first time in 2023, but do not have an impact on the interim condensed consolidated financial statements.

D. Issue of a unit of financial instruments

The issue of a unit of financial instruments such as a financial liability (e.g., a loan) and free-standing derivative (e.g. warrants) involves the allocation of the proceeds received (before issuance costs) to financial derivatives and other financial instruments measured at fair value in each period and to financial liabilities that are measured at amortized cost, with residual allocated to equity instruments. Issuance costs are allocated to each component pro rata to the amounts determined for each component in the unit.

E. Reverse acquisition transaction

The result of the merger between the Company and Security Matters PTY Ltd. as described in Note 1B is that legally the Company owns the entire share capital of Security Matters PTY Ltd.

Accordingly, for financial reporting purposes, Security Matters PTY Ltd. (the legal subsidiary) is the accounting acquirer, and the Company (the legal parent) is the accounting acquiree. The consolidated financial statements prepared following the reverse acquisition are issued under the name of the Company, but they are a continuance of the financial statements of Security Matters PTY Ltd. and reflect the fair values of the assets and liabilities of the Company (the acquiree for accounting purposes), together with a deemed issuance of shares by Security Matters PTY Ltd. at fair value based on the quoted opening share price of the Company in its first trading day following the closing of the business combination transaction ($11,599), and a recapitalization of its equity. This deemed issuance of shares is in fact both an equity transaction under IAS 32 (receiving the net assets of the Company) and an equity-settled share-based payment transaction under IFRS 2 (receiving the listing status of the Company). The difference, in the amount of $16,802, between the fair value of the shares deemed to have been issued by Security Matters PTY Ltd. and the fair value of the Company’s identifiable net assets represent a payment for the service of obtaining a stock exchange listing for its shares and it is therefore expensed immediately to profit or loss at the closing date.

-9-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):

E. Reverse acquisition transaction (Cont.)

The Company is initially consolidated in the financial statements from the Closing Date of the Business Combination. Substantially all of the assets and liabilities of the Company were comprised of marketable securities held in a trust account ($4,921) and trade and other payables and warrants ($10,127) respectively, with fair values that were equivalent to their carrying amounts. Below are the implications of the accounting treatment on the financial statements:

1. The assets and liabilities of Security Matters PTY Ltd. have been recognized and measured in these consolidated financial statements at their pre-combination carrying amounts.

2. The retained earnings and other equity balances recognized in those consolidated financial statements are the retained earnings and other equity balances of Security Matters PTY Ltd. immediately before the Business Combination.

3. The amount recognized as issued equity instruments in these consolidated financial statements has been determined by adding to the issued equity of Security Matters PTY Ltd. immediately before the Business Combination the fair value of the deemed issuance of shares, as described above. However, the equity structure (the number and type of shares issued) reflects the equity structure of the Company, including the shares issued by the Company through recapitalization. Accordingly, the equity structure of Security Matters PTY Ltd. (issued capital and addition paid in capital) in comparative periods is restated using the exchange ratio established in the Business Combination to reflect the number and par value of shares of the Company issued in the reverse acquisition transaction.

4. The statement of comprehensive loss reflects that of Security Matters PTY Ltd. for the full period together with the post-acquisition results of the Company from the Closing Date. Loss per share of Security Matters PTY Ltd. for periods prior to the acquisition date is restated such the denominator of the historical loss per share calculation is adjusted by multiplying the weighted-average shares used in each historically reported loss per share calculation by the exchange ratio established in the Business Combination.

F. Reverse stock split

The presentation of loss per share amounts has been retrospectively adjusted to give effect to the reverse share split which occurred on August 8, 2023. Except otherwise specifically provided, no other adjustments have been made in these notes to reflect the reverse share split. See also Note 9.1.

NOTE 3 – CONVERTIBLE NOTES

On January 25, 2023, the Company received an amount of $250 in consideration for issuance of convertible notes (the “Convertible Notes”) and two types of warrants. The Convertible Notes principal amount is $250 and maturity date is the earlier between December 31, 2024, and the date of any change in control (excluding the Business Combination). The Convertible Notes have an interest rate of 15% per annum and shall be converted into ordinary shares: (1) at the note holder’s discretion, at a fixed conversion price of USD 10 per ordinary share, or (2) through issuance of the Company’s ordinary shares at a 20% discount.

As part of the Convertible Note agreements, the investor was granted two types of warrants:

(i) Bonus Warrants – 12,500 warrants to purchase ordinary shares of the Company at an exercise price of USD 11.50 per share. The Bonus Warrants term is five years commencing upon the Business Combination.

(ii) Redeemable Warrants – 12,500 warrants to purchase ordinary shares of the Company at a purchase price of USD 11.50 per share. The Redeemable Warrants term is five years commencing upon the Business Combination. The Redeemable Warrants shall be redeemable on a non-cumulative basis at the option of the holder, according to a schedule for USD 5.00 per warrant. The investor has the option to decide that the Company will satisfy any or each redemption through the issuance of ordinary shares of the Company based upon a 20% discount to the 20-trading day VWAP preceding each such anniversary.

The Convertible Notes are recorded in accordance with their fair value. The Redeemable Warrants are accounted for as a derivative financial liability. Management utilized a third-party appraiser to assist them in valuing the Convertible Notes and Redeemable Warrants.

In order to calculate the fair value of the Convertible Notes, the Company discounted the payment schedule by a discount rate of 30.7%.

The fair value of the Redeemable Warrants was calculated using Monte-Carlo simulation model with expected volatility of 71.54% and the risk-free interest rate used is 4.19%. As of June 30, 2023, the fair value of the Convertible Notes was $218 and the fair value of the Redeemable Warrants was $71.

-10-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 4 – BRIDGE LOANS AND DERIVATIVE FINANCIAL LIABILITY:

Between August 2022 to January 2023, Security Matters PTY Ltd. entered into bridge loan agreements (the “Bridge Loans”) with eleven lenders, which lent Security Matters PTY Ltd. an aggregate amount of $3,860. The Bridge Loans have a maturity date of up to two years and bear an interest rate of 10% per annum. The Bridge Loans were accounted for in accordance with the amortized cost method.

As part of the Bridge Loans agreements, the lenders were granted two types of warrants:

(iii) Bonus Warrants – 243,000 warrants to purchase ordinary shares of the Company at an exercise price of USD 11.50 per share. The Bonus Warrants term is five years commencing upon the Business Combination.

(iv) Redeemable Warrants – 572,000 warrants to purchase ordinary shares of the Company at a purchase price of USD 11.50 per share. The Redeemable Warrants term is five years commencing upon the Business Combination. The Redeemable Warrants shall be redeemable on a non-cumulative basis at the option of the holder, according to a schedule for USD 5.00 per warrant.

Each investor has the option to decide that the Company will satisfy any or each redemption through the issuance of ordinary shares of the Company based upon a 20% discount to the 20-trading day VWAP preceding each such anniversary.

Management with the assistance of a third-party appraiser valued the Bonus and the Redeemable Warrants. The fair value of the Bonus Warrants was calculated using the Black-Scholes model. As of June 30, 2023, the fair value of the Bonus Warrants was less than $1 (December 31, 2022 - the fair value of the Bonus Warrants was $24).

The fair value of the Redeemable Warrants was calculated using Monte-Carlo simulation model. As of June 30, 2023, the fair value of the Redeemable Warrants was 2,133 (December 31, 2022, the fair value of the Redeemable Warrants was $2,669).

The main assumptions used in the three valuation models described above were: (1) risk free rate 3.99%; (2) volatility of assets 81.03%; and (3) excepted terms of the warrants -5.18 years. All warrants were classified as a derivative financial liability and are re-measured each reporting date, with changes in fair value recognized in finance expense (income), net.

During 2023, the Company entered into an additional bridge loan agreement (the “Additional Bridge Loans”), in which the Company raised an aggregate amount of $550. The Additional Bridge Loans have a maturity date of up to two years and bear interest rate of 10% per annum. In March 2023, the Company signed an addendum to the Bridge Loans agreements which convert principal amount of $1,350 and redeemable warrants at the amount of $1,000 into 872,418 ordinary shares and defer the remaining cash payments to March 31, 2024.

-11-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 5 – MATERIAL EVENTS DURING THE PERIOD

1. The Company entered in February 2023 into a Standby Equity Purchase Agreement (“SEPA”) to raise up to $25,000 in consideration of the issuance of ordinary shares over the course of 36 months with Yorkville. According to the SEPA, the Company may issue Yorkville the ordinary shares at a purchase price as one of two options (i) equal to 96% of the weighted average price (“VWAP”) of the common stock during the applicable pricing period (ii) equal to 97% of the lowest VWAP of the common stock during a pricing period of 3 consecutive trading days commencing on the relevant period.

Yorkville advanced to the Company an aggregate principal amount of $3,500 (the “Pre-Paid Advance”). The Pre-Paid Advance was disbursed in two separate installments evidenced as convertible loans, the first for $1,500 at the closing of the Business Combination, and the second, as subsequently amended, for $2,000 upon the effectiveness of the Initial Yorkville Registration Statement. The purchase price for the Pre-Paid Advance is 92.0% of the Pre-Paid Advance. Such Pre-Paid Advances will be offset upon the issuance of ordinary shares to Yorkville at a price per share equal to the lower of (a) 100% of the daily VWAP of the Ordinary Shares on The Nasdaq Stock Market as of the trading day immediately prior to the date of the disbursement of the Pre-Paid Advance (the “Fixed Price”) (in the case of the first Pre-Paid Advance, $3.65), or (b) 93.0% of the lowest daily VWAP of the Ordinary Shares on Nasdaq during the seven trading days immediately prior to each purchase (the “Variable Price” and the lower of the Fixed Price and the Variable Price shall be referred to as the “Purchase Price”); however, in no event shall the Purchase Price be less than $1.10 (the “Floor Price”). On July 27, 2023, the Company amended the promissory note evidencing the remaining Pre-Paid Advance to decrease the Floor Price to $1.10 (as adjusted for reverse stock split which occurred on August 21, 2023, see also Note 9.1), after the Company was required to repay in cash $500 of principal amount as a result of the Company’s share price being below the original Floor Price. The maturity date will be 12-months after the initial closing of each Pre-Paid Advance. In July 2023, the Company repaid in full the first Pre-Paid Advance in the amount of $1,500. In the period, the Company issued ordinary shares in consideration of $450 in accordance with the terms of the SEPA.

2. On June 22, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with EF Hutton, LLC (the “Underwriter”) relating to the public offering of (i) 13,333,333 ordinary shares of the Company, at a subscription price per share of $0.24 (the “Firm Shares”), (ii) 13,333,333 warrants in the form of Warrant A to subscribe for 13,333,333 ordinary shares, at an exercise price of $0.24 per share (“Warrant A”), and (iii) 13,333,333 warrants in the form of Warrant B to subscribe for 13,333,333 ordinary shares, at an exercise price of $0.24 per share (“Warrant B” and together with Warrant A, the “Firm Warrants” and, collectively with the Firm Shares, the “Firm Securities”).

The Company also granted the Underwriter a 45-day option to subscribe for, in the aggregate, (a) up to 1,999,999 additional ordinary shares (15% of the Firm Shares) at a subscription price per share of $0.24 (100% of the public offering price allocated to each Firm Share) (the “Option Shares” and together with the Firm Shares, the “Shares”) or Pre-Funded Warrants to subscribe for up to 1,999,999 ordinary shares at a price per share of $0.2399 (100% of the public offering price allocated to each Firm Share less $0.0001) and the remaining non pre-funded exercise price of each pre-funded warrant will be $0.0001 per share, and/or (b) 1,999,999 warrants in the form of Warrant A to subscribe for an aggregate of 1,999,999 ordinary shares (15% of the Firm Warrants) at an exercise price of $0.24 per warrant (100% of the public offering price allocated to each set of warrants in the form of Warrant A), and/or (c) 1,999,999 warrants in the form of Warrant B to purchase an aggregate of 1,999,999 ordinary shares (15% of the Firm Warrants) at a purchase price of $0.24 per warrant (100% of the public offering price allocated to each set of warrants in the form of Warrant B) (the “Option Warrants” and together with the Firm Warrants and Pre-Funded Warrants, if any, the “Warrants”), which may be subscribed for in any combination of Option Shares and/or the Option Warrants. The Option Shares and the Option Warrants are referred to as the “Option Securities”.

The offering closed on June 27, 2023. The Company delivered the Firm Shares (or Firm Share equivalents in the form of Pre-Funded Warrants), the Firm Warrants and the Option Warrants to the Underwriter on the same day.

The Warrant A terms specify that the warrants may be exercised at any time on or before June 27, 2028. On or after the earlier of (i) the thirty day anniversary of the date of the Underwriting Agreement and (ii) the date on which the aggregate composite trading volume of the Company’s ordinary shares as reported by Bloomberg LP beginning on the date of the Underwriting Agreement exceeds 15,000,000 ordinary shares, a holder of Warrant A warrants may also provide notice and elect a “cashless exercise” pursuant to which the holder would receive an aggregate number of ordinary shares equal to the product of (x) the aggregate number of ordinary shares that would be issuable upon a cash exercise and (y) $0.50. As of the date of publication of these financial statements, an aggregate of 15,195,332 Warrant A warrants were cashless exercised into an aggregate of 7,597,665 ordinary shares.

-12-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 5 – MATERIAL EVENTS DURING THE PERIOD (CONT.)

The Warrant B terms specify that the warrants may be exercised at any time on or before June 27, 2028. All of such Warrant B warrants remain outstanding as of the end of period.

Warrant A was valued at $0.0635 which is half of the share market price at the end of the period, assuming cashless exercise. Warrants A were considered to be a derivative financial liability. The terms of warrants B specify that each warrant has a cash exercise price of $0.24. Warrant B was valued at $0.0602 by using the Black-Scholes option-pricing model, with expected volatility of 70.39% and the risk-free interest rate used is 4.13%. Warrants A and B expire in June 2028.

The net proceeds to the Company upon the closing of this offering were approximately $2,580. The capital raise fee amounted to $660.

The Company also granted to the Underwriter, 666,667 warrants at an exercise price of $0.264 per share, which expires after 5 years. The Underwriter’s warrants were valued at $0.0575 per option by using the Black & Scholes option-pricing, with expected volatility of 70.39% and the risk-free interest rate used is 4.13%.

3. In January 2023, the Company signed an amendment to the agreement with Isorad that determine the following: (1) for the BCA with Lionheart, (a) Isorad was issued 864,000 options to purchase shares of the Company, which options were issued in January 2023 and valued using the Black-Scholes pricing model, with the main parameters used are: (1) risk-free rate: 3.42%; (2) expected volatility: 81.92%: (3) expected term: up to 3 years; and (4) expected dividend yield: 0%; and (b) Isorad will be entitled to 1% of any amount actually received against equity or other funding convertible into equity at the closing of the transaction and until 13 months thereafter (to be paid after reaching an aggregated received amount of $27 million, or at the end of such 13 months, the earlier thereof). In the period, based on the funds the Company actually received, the Company recognized a technology license intellectual property at the amount of $101 against a liability that reflects the due amount; and

(2) Exit fee - in the occurrence of the first M&A event (as such event is defined in such agreement to include mergers, sale of all or substantially all the assets of the Company and similar event) after the closing of the BCA, the Company is to pay a cash amount equal to 1.5% of the amount received or transferred. This will not apply to any future offer of shares, merger or sale of assets thereafter.

4. On March 2, 2023, the Company amended its loan agreement dated September 7, 2015, between the Company, its Shareholders and Kamea Fund that postponed the repayment of the borrowings from related party (Bonus Payment) to March 31, 2024 (refer also to Note 9.4 – Subsequent Events).

-13-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 6 - SHAREHOLDERS’ EQUITY

A. Share capital:

	Number of shares
	June 30, 2023				December 31, 2022
	Authorized		Issued and outstanding		Authorized		Issued and outstanding
Ordinary shares USD 0.0001 par value		800,000,000,000		38,364,447		500,000,000		1
Preferred shares USD 0.0001 par value		200,000,000,000		-		-		-
Deferred shares Euro 1 par value		25,000		25,000		25,000		25,000

Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have a par value per share of $0.0001 (before the reverse split) and par value per share of $0.0022 (post reverse split) and the Company does not have a limited amount of authorised capital.

Preferred shares

preferred shares with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors.

Deferred shares

Deferred Ordinary Shares are non-voting shares and do not convey upon the holder the right to be paid a dividend or to receive notice of or to attend, vote or speak at a general meeting. The Deferred Shares confer the right on a return of capital, on a winding-up or otherwise, only to the repayment of the nominal value paid up on the Deferred Shares after repayment of the nominal value of the Ordinary Shares.

Changes in Share capital

A. On March 7, 2023 (the “Closing Date”), the Company consummated the Business Combination pursuant the BCA, dated July 26, 2022, and also consummated the SID, dated July 26, 2022.

Beginning on the day immediately prior to the Closing Date and ending on the day immediately after the Closing Date, the following transactions occurred:

1. The AUD 828,240 of the 2022 Convertible Notes have been cancelled in consideration for the issuance of 1,000,000 ordinary shares in Security Matters PTY Ltd.

2. Security Matters PTY Ltd. performed acceleration of vesting for all unvested warrants and options, the expense for the acceleration amounted to $186.

3. 32,211,716 warrants have been exercised on cashless basis to 24,568,773 shares in Security Matters PTY Ltd.

4. 18,673,253 ordinary shares of the Company have been issued to Security Matters PTY Ltd.’s shareholders in return for their 193,500,379 ordinary shares in Security Matters PTY Ltd. that were cancelled. Security Matters PTY Ltd.’s shareholders received as consideration 1 ordinary share of the Company per 10.3624 Security Matters PTY Ltd.’s ordinary shares.

5. The Company issued 3,525,000 ordinary shares, 2,200,000 private warrants and 6,250,000 public warrants to Lionheart’s stockholders, in exchange for their existing Lionheart shares and warrants. The warrants exercise price is $11.5 per share, expiring in March 2028. The warrants are considered to be a derivative financial liability and measured at fair value, which is the market price as of the end of the period, amounted to $0.0204 per warrant.

-14-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 6 – SHAREHOLDERS’ EQUITY (CONT.)

6. The Company issued 303,053 ordinary shares for an aggregate of $3,110 net proceeds.

7. The Company issued 872,418 ordinary shares for the conversion of bridge loan at principal amount of $1,350 and 200,000 redeemable warrants ($5 per warrant, 5 years, exercise price of $11.5 per share).

B. In May and June 2023, the Company issued 675,168 ordinary shares to Yorkville, for an aggregate of $450 net proceeds (see also Note 5.1).

C. In June 2023, the Company raised capital as part of issuance of a unit of financial instruments in consideration of an aggregate of $2,580 net proceeds. As part of this issuance, the Company issued 13,333,333 shares, 15,333,332 warrants A and 15,333,332 warrants B (see also Note 5.2).

D. After the balance sheet date, on August 21, 2023, the Company’s ordinary shares began trading on the Nasdaq Global Market on a post-Reverse Stock Split basis, after consolidating every twenty-two ordinary shares of the Company into one ordinary share (see also Note 9.1).

Incentive Equity Plan

In April 25, 2023, the Company’s board of directors and its shareholders approved and adopted the SMX Public Limited Company 2022 Incentive Equity Plan, which was subsequently amended the Company’s board of directors, subject to applicable Nasdaq requirements, which reserved for grant a number of ordinary shares equal to 15% of the number of issued and outstanding ordinary shares on a fully diluted basis immediately after the closing of the Business Combination, or 5,082,417 authorized ordinary shares.

1. During the six-month period ended June 30, 2023, the Company granted 4,334,000 RSUs to employees, directors and service providers. The fair value at grant date of RSUs granted in the period were $1-$1.09. The related share-based expenses that were recognized in the period amounted to $1,738.

RSUs granted to employees, directors and service providers:

	Six months period ended June 30, 2023 (in thousands)			Six months period ended June 30, 2022 (in thousands)
Outstanding at beginning of period		-			-
Granted		4,334			-
Vested		(945	)		-
Outstanding at June 30, 2023		3,389			-

2. During the six-month period ended June 30, 2023, the Company granted 790,408 options to employees and service providers. These grants carry an exercise price of between $1.04 - $4.0, vesting period up to 4 years from the grant date, contractual life of the options under the plan is 5 years. The fair value of the grant at grant date is $185. The related share based expenses that were recognized in the six months period ended June 30, 2023 amounted to $168.

-15-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 6 - SHAREHOLDERS’ EQUITY (CONT.)

Options granted to employees and service providers:

	Six months period ended June 30, 2023
	Number of options (in thousands)			Weighted average exercise price per share (US$)
Outstanding at beginning of period		1,251			2.01
Granted		790			3.47
Exercised		(7	)		1.39
Expired		-			-
Outstanding at June 30, 2023		2,034			2.58
Exercisable options at June 30, 2023		1,825			2.48

	Six months period ended June 30, 2022
	Number of options (in thousands)			Weighted average exercise price per share (US$)
Outstanding at beginning of period		3,346			2.02
Granted		989			2.86
Exercised		-
Expired		(375	)		2.16
Outstanding at June 30, 2022		3,960			2.21
Exercisable options at June 30, 2022		2,703			2.33

The options to employees and service providers outstanding as of June 30, 2023, are comprised, as follows:

Exercise price (US$)	Outstanding as of June 30, 2023 (in thousands)		Weighted average remaining contractual term		Exercisable as of June 30, 2023 (in thousands)		Weighted average remaining contractual term
			(years)				(years)
0.84-1.39		845		1.18		845		1.18
1.81-2.51		335		2.59		335		2.59
3.57-4.0		707		4.89		498		4.86
4.18		10		1.74		10		1.74
4.87		137		3.51		137		3.51
		2,034				1,825

-16-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 7 – GENERAL AND ADMINISTRATIVE EXPENSES

	Six Months Ended
	June 30, 2023		June 30, 2022
	US$ in thousands		US$ in thousands
Transaction cost		7,792		-
Advertising, Public and Investors Relations		1,526		-
Share based compensation		1,805		82
Professional services		718		545
Wages and salaries related		664		429
Travel expenses		379		4
Insurance		329		19
Office and maintenance		37		80
Depreciation and amortization		15		15
Others		86		26
Total		13,350		1,200

NOTE 8 - LOSS PER SHARE

	Six months ended
	June 30, 2023			June 30, 2022
Net loss attributable to the owners of the Company	$	(33,009	)	$	(2,442	)
Basic and diluted loss per share	$	(39.46	)	$	*(3.36)
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic and diluted loss per share (in thousands)		837			*727

As a result of the reverse share split described in Note 9.1, the calculation of the basic and diluted loss per share for all periods presented have been adjusted retrospectively based on the new number of shares as derived from the conversion ratio.

* Restated as a result of the SPAC transaction

-17-

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 9 – SUBSEQUENT EVENTS

Since the reporting date, the following significant events have occurred:

1. Reverse Stock Split - On August 8, 2023, at the Extraordinary General Meeting of Shareholders of the Company, the Company’s shareholders voted in favor of consolidating every twenty-two ordinary shares in the authorized but unissued and in the authorized and issued share capital of the Company into one ordinary share (the “Reverse Stock Split”).

On August 21, 2023, the Company’s ordinary shares began trading on the Nasdaq Global Market on a post-Reverse Stock Split basis under the current symbol “SMX”.

Following is a table which presents the loss per share before the change (see also Note 8).

Loss per share have been calculated using the weighted average number of shares in issue during the relevant financial periods, the weighted average number of equity shares in issue and loss for the period as follows:

	Six months ended
	June 30, 2023			June 30, 2022
Net loss attributable to the owners of the Company		(33,009	)		(2,442	)
Basic and diluted loss per share		(1.79	)		(0.15	)
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic and diluted loss per share		18,404			15,984

2. On July 27, 2023, the Company amended its Pre-Paid Advance agreement with Yorkville (see also Note 5.1) evidencing the remaining Pre-Paid Advance to decrease the Floor Price to $1.10 (as adjusted for the Reverse Stock Split which occurred on August 21, 2023, see also Note 9.1), after the Company was required to repay in cash $500 of principal amount as a result of the Company’s share price being below the original Floor Price. The maturity date will be 12-months after the initial closing of the Pre-Paid Advance. In July 2023, the Company repaid in full the first Pre-Paid Advance in the amount of $1,500. In the period, the Company repaid approximately $450 principal amount by ordinary share issuance in accordance with the terms of the SEPA and subsequent to the period, the Company repaid approximately $1,350 through September 30, 2023.

3. On September 6, 2023, the Company consummated the transactions pursuant to a Securities Purchase Agreement dated as of September 5, 2023 and issued and sold to an institutional investor a promissory note with a fixed conversion price of $1.6378 and warrants, for gross proceeds to SMX of approximately $2,500, before deducting fees and other offering expenses payable by the Company to their service providers. The note is in the principal amount of $4,290. The actual amount loaned by the investor pursuant to the Note is $2,574 after a 40% original issue discount. The maturity date of the note is the 12-month anniversary of the Effective Date, and is the date upon which the principal amount, as well as any accrued and unpaid interest and other fees, shall be due and payable. Interest accrues in the amount of 12% per year and shall be payable on the maturity date. The investor has the right, at any time, to convert all or any portion of the then outstanding and unpaid principal amount and interest (including any costs, fees and charges) into the Company’s ordinary shares, at a fixed conversion price of $1.6378 per share. Any such conversion is subject to customary conversion limitations set forth in the Purchase Agreement so the investor beneficially owns less than 4.99% of the Company’s ordinary shares. Additionally, the Company has the right to convert in whole or in part the note into ordinary shares; provided that in no case shall the Company so convert the note if the result of the issuance of Ordinary Shares thereby would result in the beneficial ownership of the investor of ordinary shares in excess of 4.99%.

4. On September 15, 2023, the Company paid $250 to EF Hutton, division of Benchmark Investments, LLC, pursuant to a Satisfaction and Discharge of Indebtedness Pursuant to Promissory Note Dated March 7, 2023. Upon paying such amount, the promissory note dated March 7, 2023 in the principal sum of $900 was deemed fully paid and satisfied and the Note was thereafter canceled, discharged and no longer of any further force or effect.

5.

On September 19, 2023, the Company amended its loan agreements dated September 7, 2015, by and between the Company, its shareholders and Kamea Fund (the “Loan Agreements”). Pursuant to the amendment to the Loan Agreements, Kamea agreed to convert $657 of indebtedness under the Loan Agreements (the “Indebtedness Amount”) into 487,281 ordinary shares (post Reverse Stock Split) of the Company, as payment in full for the Indebtedness Amount; provided however, that in the event the proceeds received from Kamea with respect to any sales of such shares are not at least equal to the Indebtedness Amount, the Company will remain liable to Kamea for the balance of the Indebtedness Amount.

6.

On October 3, 2023, the Company has signed an agreement with True Gold Consortium Pty Ltd (“TrueGold”) (see also Note 1C) shareholders to acquire an additional 7.5% which will increase the Company’s holdings to 51.9% in TrueGold and result in the Company’s gain control over TrueGold. As part of the agreement and in consideration for the additional 7.5%, it was agreed that the outstanding payables from TrueGold to the Company which amounted to AU$ 475 as of June 30, 2023 (approximately $307) would be forgiven in full. The transaction is based on past valuation, which was prepared in October 2021, which evaluates TrueGold’s fair value in the range of $78.5 million to $90 million and at a mean of $84.3 million. This past valuation was not audited or reviewed. As of the agreement’s closing date, both parties agreed to engage an independent third party appraiser to prepare an updated TrueGold valuation as of closing date by November 30, 2023. Accordingly, the Company will recognize in its financial statements the fair value of TrueGold’s assets & liabilities at closing date as will be valued by the independent third party appraiser. Once this valuation will be completed, there may be material differences between TrueGold’s past valuation from October 2021 to the updated valuation.

-18-

XML

Cover	6 Months Ended
	Jun. 30, 2023
Cover [Abstract]
Document Type	6-K
Amendment Flag	false
Entity File Number	001-41639
Entity Registrant Name	SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
Entity Central Index Key	0001940674
Entity Address, Address Line One	Mespil Business Centre
Entity Address, Address Line Two	Mespil House
Entity Address, Address Line Three	Sussex Road
Entity Address, City or Town	Dublin 4
Entity Address, Country	IE
City Area Code	+353-1
Local Phone Number	920-1000

XML

Interim Condensed Consolidated Statements of Financial Position (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Current assets
Cash and cash equivalents	$ 3,020	$ 1,398
Other current receivables	1,037	3,673
Total current assets	4,057	5,071
Non-current assets
Property and equipment, net	820	969
Intangible assets, net	5,269	5,027
Investment in associated companies	112	221
Total non-current assets	6,201	6,217
Total assets	10,258	11,288
Current liabilities
Trade payables	7,281	2,972
Lease liabilities	30	30
Other payables	2,415	650
Convertible notes	304	563
Warrants	856
Pre-paid advance	3,050
Bridge loans and derivative financial liabilities	2,363	3,682
Borrowings from related parties	689	710
Total current liabilities	16,988	4,925
Non-current liabilities
Lease liabilities	403	440
Bridge loans and derivative financial liabilities	938
Long term payables	3,930	85
Total non-current liabilities	5,271	4,207
Total liabilities	22,259	9,132
Shareholders’ equity (deficit)
Issued capital and additional paid in capital	51,730	32,711
Foreign currency translation reserve	(702)	(537)
Accumulated losses	(63,029)	(30,020)
Total Shareholders’ equity (deficit)	(12,001)	2,156
Total liabilities and shareholders’ equity (deficit)	$ 10,258	$ 11,288

XML

Interim Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023		Jun. 30, 2022
Analysis of income and expense [abstract]
Research and development expenses, net	$ 1,172		$ 933
Selling and marketing expenses	228		378
General and administrative expenses	13,350		1,200
Listing expenses	16,802
Operating loss	31,552		2,511
Finance income	1,143		105
Finance expenses	2,496		36
Share of net loss of associated companies	104
Loss before income tax	33,009		2,442
Income tax
Loss after income tax for the period attributable to shareholders	33,009		2,442
Items that will be reclassified to profit or loss:
Foreign currency translation	(165)		(639)
Other comprehensive loss, net of tax	(165)		(639)
Total comprehensive loss	$ 33,174		$ 3,081
Loss per share attributable to shareholders
Basic loss per share attributable to shareholders	$ (39.46)	[1]	$ (3.36)	[2],[3]
Diluted loss per share attributable to shareholders	$ (39.46)	[1]	$ (3.36)	[3]

[1] After giving effect to the reverse stock split (see also Note 9.1)

[2] Restated as a result of the SPAC transaction

[3] Restated as a result of the SPAC transaction and after giving effect to the reverse stock split (see also Note 1 and 9.1)

XML

Interim Condensed Consolidated Changes in Shareholders' Equity - (Unaudited) - USD ($) $ in Thousands	Issued capital [member]	Foreign Currency Translation [Member]	Retained earnings [member]	Total
Balance at Dec. 31, 2021	$ 31,504	$ 223	$ (23,836)	$ 7,891
IfrsStatementLineItems [Line Items]
Loss after income tax for the period			(2,442)	(2,442)
Other comprehensive loss for the period		(639)		(639)
Total comprehensive loss for the period		(639)	(2,442)	(3,081)
Issuance of shares, net	721			721
Share-based compensation	219			219
Balance at Jun. 30, 2022	32,444	(416)	(26,278)	5,750
Balance at Dec. 31, 2022	32,713	(537)	(30,020)	2,156
IfrsStatementLineItems [Line Items]
Loss after income tax for the period			(33,009)	(33,009)
Other comprehensive loss for the period		(165)		(165)
Total comprehensive loss for the period		(165)	(33,009)	(33,174)
Issuance of shares, net	170			170
Recapitalization due to issuance of shares following the SPAC transaction, net	11,460			11,460
Share-based compensation	2,092			2,092
Conversion of convertible notes to shares	175			175
Conversion of bridge loans to shares	2,983			2,983
Exercise of options	10			10
Conversion of warrants A to ordinary shares, net (See note 5.2)	290			290
Issuance of Security Bundle, net (See note 5.2)	1,837			1,837
Balance at Jun. 30, 2023	$ 51,730	$ (702)	$ (63,029)	$ (12,001)

XML

Interim Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities:
Net Loss	$ (33,009)	$ (2,442)
Share-based compensation	2,052	165
Depreciation and amortization	114	176
Increase (decrease) in other receivables	2,575	(1,727)
Increase in trade payables	2,545	831
Increase in other payables	70	110
Decrease in other liabilities	13	32
Revaluation of financial liabilities at fair value	(41)
Financial expenses due to bridge loans principal amounts	1,421
Interest on leases	7	28
Provision of borrowing to related parties	14	(89)
Revaluation of convertible notes	(382)
Share of net loss of associated companies	104
Issuance of shares for directors	40	54
SPAC transaction - listing costs	16,802
Net cash flow used in operating activities	(7,675)	(2,862)
Cash flows from investing activities:
Purchase of property, plant and equipment	(10)	(183)
Capitalized development cost	(383)	(783)
Net cash flow used in investing activities	(393)	(966)
Cash flows from financing activities:
Payment of lease liabilities	(21)	(39)
Proceeds from issuance of convertible notes	250	581
Proceeds from issuance of Security Bundle, net	914
Issuance of warrants	923
Issuance of derivative financial liability	974
Proceeds from bridge loans	550
Repayment of bridge loans	(30)
Advance payment for equity, net (see Note 5.1)	3,220
Issuance of shares in the SPAC transaction, net	2,923
Net cash flow from financing activities	9,703	542
Increase (decrease) in cash and cash equivalents	1,635	(3,286)
Cash and cash equivalents at beginning of period	1,398	4,171
Exchange rate differences on cash and cash equivalent	(13)	(26)
Cash and cash equivalents at end of period	3,020	859
Appendix A – Non-Cash transactions during the period:
Conversion of liability to ordinary shares (see Note 5.1)	450
Conversion of warrants to ordinary shares (see note 5.2)	290
Conversion of bridge loans and derivative financial liability to ordinary shares	2,983
Exercise of options and warrants to ordinary shares	2,229
Conversion of convertible notes to ordinary shares	$ 175

XML

GENERAL

6 Months Ended

Jun. 30, 2023

General

GENERAL

NOTE 1 - GENERAL:

A. SMX (Security Matters) Public Limited Company (“Security Matters” or the “Company” and together with its subsidiaries, the “Group”) was incorporated in July 1, 2022 under the laws of Ireland with registered number 722009 and its registered office at Mespil Business Center, Mespil House, Sessex Road, Dublin 4, Ireland, D04 T4A6. The Company was incorporated in 2022 as part of the Business Combination (see Note 1.B).

The Group provides one solution to solve both authentication and track and trace challenges in order to uphold supply chain integrity and provide quality assurance and brand accountability to producers of goods. Its technology works as a track and trace system using a marker, a reader and an algorithm to identify embedded sub-molecular particles in order to track and trace different components along a production process (or any other marked good along a supply chain) to the end producer. Its proprietary marker system embeds a permanent or removable (depending on the needs of the customer) mark on solid, liquid or gaseous objects or materials. Each marker is comprised of a combination of marker codes such that each marker is designed to be unique and unable to be duplicated. The marker system is coupled with an innovative patented reader that responds to signals from the marker and, together with a patented algorithm, captures the details of the product retrieved and stored on a blockchain digital ledger. Each marker can be stored, either locally on the reader and on private servers, cloud servers or on a blockchain ledger, to protect data integrity and custody.

B. The Business Combination - the SPAC transaction (“Business Combination”):

On March 7, 2023 (the “Closing Date”) the Company completed its Business Combination with Lionheart III Corp (“Lionheart”), following that Lionheart and Security Matters PTY Ltd. (formerly named Security Matters Limited, which was incorporated in May 2018 under Australian law) became the Company’s wholly-owned subsidiaries and the Company listed its ordinary shares and public warrants on the NASDAQ stock market under the tickers SMX and SMXWW, respectively. On July 26, 2022, Security Matters PTY Ltd. and Lionheart, a publicly traded special purpose acquisition company (SPAC), entered into a business combination agreement (the “BCA”) and accompanying scheme implementation deed (“SID”). Under the BCA, the existing Lionheart stockholders received the Company’s shares and warrants in exchange for their existing Lionheart shares and warrants and all shares existed in Security Matters PTY Ltd were cancelled in return for the Company’s shares and resulting in Security Matters PTY Ltd. becoming a wholly owned subsidiary of the Company. Security Matters PTY Ltd. shareholders received consideration of 1 ordinary share per 10.3624 Security Matters PTY Ltd. shares, having an implied value of $10.00 per ordinary share and the Company became the holder of all of the issued shares in Security Matters PTY Ltd. and Lionheart, with Security Matters PTY Ltd. being delisted from the Australian Stock Exchange.

The Business Combination resulted in 97.58% redemption by Lionheart’s public shareholders which resulted in leaving $3,061 of funds remaining in the trust account (See also Note 6 and Note 2.E as for the accounting treatment of the transaction in these financial statements).

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 1 – GENERAL (CONT.):

C. The Company operates primarily through 8 wholly owned subsidiaries, all of which have been consolidated in these consolidated financial statements.

Controlled entity	Country of Incorporation		Percentage Owned June 30, 2023			Percentage Owned December 31, 2022
Security Matters PTY Ltd. (Formerly - Security Matters Limited)		Australia		100	%		-
Lionheart III Corp		USA		100	%		**
SMX Circular Economy Platform PTE, Ltd.		Singapore		100	%		*
SMX (Security Matters) Ireland Limited		Ireland		100	%		*
SMX (Security Matters) Israel Ltd. (Formerly - Security Matters Ltd.)		Israel		100	%		100	%***
Security Matters Canada Ltd.		Canada		100	%		100	%***
Security Matters France Ltd.		France		100	%		100	%***
SMX Beverages Pty Ltd.		Australia		100	%		100	%***

In addition, the Company’s has the following investments in associated companies:

Entity	Country of Incorporation		Percentage Owned June 30, 2023			Percentage Owned December 31, 2022
Yahaloma Technologies Inc.		Canada		50	%		50	%***
True Gold Consortium Pty Ltd		Australia		44.4	%		44.4	%***

The proportion of ownership interest is equal to the proportion of voting power held.

* Incorporated in 2023.

** Merger occurred in March 2023.

*** Owned by Security Matters PTY Ltd. (formerly - Security Matters Limited) as of December 31, 2022.

D. During the six months ended June 30, 2023, the Company incurred operating losses and negative cash flows from operating activities. The Company has not yet generated revenues. As discussed in Note 4, during the period, the Company entered into binding loan agreements with existing shareholders. As discussed in Note 5.1, the Company executed an equity line agreement to raise up to $25,000 in consideration of the issuance of common stock over the course of 36 months with YA II PN, LTD (“Yorkville”). As discussed in Notes 4 and 9.4, the Company signed agreements to convert indebtedness by issuance of shares. As discussed in Note 9.3 the Company is continuing with additional capital raising, and post balance sheet date it received an additional $2,500 in funding. The Company has also the ability to decrease its expenses in order to meet its existing cash flow streams. Management believes that the proceeds from the recent funding agreements, combined with its cash on hand, equity line and the Company’s plans, are sufficient to meet the Company’s obligations as they come due in the foreseeable future. There are no assurances, however, that the Company will be able to obtain an adequate level of financial resources that are required for its long-term business plan.

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

XML

SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2023

Significant Accounting Policies

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:

A. Basis of preparation

These interim consolidated financial statements have been prepared in a condensed format in accordance with IAS 34 Interim Financial Reporting. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the annual consolidated financial statements as of December 31, 2022 of the Company and of Security Matters PTY Ltd. (formerly - Security Matters Limited).

B. Functional currency

The consolidated financial statements are prepared in US Dollars, which is the functional and presentation currency of the Company.

C. Application of accounting policies

The Group has applied the same accounting policies and methods of computation in its interim condensed consolidated financial statements as in its 2022 annual financial statements and as in the 2022 annual financial statements of Security Matters PTY Ltd, except as stated below in note 2D and 2E.

Several amendments to IFRS Standards apply for the first time in 2023, but do not have an impact on the interim condensed consolidated financial statements.

D. Issue of a unit of financial instruments

The issue of a unit of financial instruments such as a financial liability (e.g., a loan) and free-standing derivative (e.g. warrants) involves the allocation of the proceeds received (before issuance costs) to financial derivatives and other financial instruments measured at fair value in each period and to financial liabilities that are measured at amortized cost, with residual allocated to equity instruments. Issuance costs are allocated to each component pro rata to the amounts determined for each component in the unit.

E. Reverse acquisition transaction

The result of the merger between the Company and Security Matters PTY Ltd. as described in Note 1B is that legally the Company owns the entire share capital of Security Matters PTY Ltd.

Accordingly, for financial reporting purposes, Security Matters PTY Ltd. (the legal subsidiary) is the accounting acquirer, and the Company (the legal parent) is the accounting acquiree. The consolidated financial statements prepared following the reverse acquisition are issued under the name of the Company, but they are a continuance of the financial statements of Security Matters PTY Ltd. and reflect the fair values of the assets and liabilities of the Company (the acquiree for accounting purposes), together with a deemed issuance of shares by Security Matters PTY Ltd. at fair value based on the quoted opening share price of the Company in its first trading day following the closing of the business combination transaction ($11,599), and a recapitalization of its equity. This deemed issuance of shares is in fact both an equity transaction under IAS 32 (receiving the net assets of the Company) and an equity-settled share-based payment transaction under IFRS 2 (receiving the listing status of the Company). The difference, in the amount of $16,802, between the fair value of the shares deemed to have been issued by Security Matters PTY Ltd. and the fair value of the Company’s identifiable net assets represent a payment for the service of obtaining a stock exchange listing for its shares and it is therefore expensed immediately to profit or loss at the closing date.

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):

E. Reverse acquisition transaction (Cont.)

The Company is initially consolidated in the financial statements from the Closing Date of the Business Combination. Substantially all of the assets and liabilities of the Company were comprised of marketable securities held in a trust account ($4,921) and trade and other payables and warrants ($10,127) respectively, with fair values that were equivalent to their carrying amounts. Below are the implications of the accounting treatment on the financial statements:

1. The assets and liabilities of Security Matters PTY Ltd. have been recognized and measured in these consolidated financial statements at their pre-combination carrying amounts.

2. The retained earnings and other equity balances recognized in those consolidated financial statements are the retained earnings and other equity balances of Security Matters PTY Ltd. immediately before the Business Combination.

3. The amount recognized as issued equity instruments in these consolidated financial statements has been determined by adding to the issued equity of Security Matters PTY Ltd. immediately before the Business Combination the fair value of the deemed issuance of shares, as described above. However, the equity structure (the number and type of shares issued) reflects the equity structure of the Company, including the shares issued by the Company through recapitalization. Accordingly, the equity structure of Security Matters PTY Ltd. (issued capital and addition paid in capital) in comparative periods is restated using the exchange ratio established in the Business Combination to reflect the number and par value of shares of the Company issued in the reverse acquisition transaction.

4. The statement of comprehensive loss reflects that of Security Matters PTY Ltd. for the full period together with the post-acquisition results of the Company from the Closing Date. Loss per share of Security Matters PTY Ltd. for periods prior to the acquisition date is restated such the denominator of the historical loss per share calculation is adjusted by multiplying the weighted-average shares used in each historically reported loss per share calculation by the exchange ratio established in the Business Combination.

F. Reverse stock split

The presentation of loss per share amounts has been retrospectively adjusted to give effect to the reverse share split which occurred on August 8, 2023. Except otherwise specifically provided, no other adjustments have been made in these notes to reflect the reverse share split. See also Note 9.1.

XML

CONVERTIBLE NOTES

6 Months Ended

Jun. 30, 2023

Notes and other explanatory information [abstract]

CONVERTIBLE NOTES

NOTE 3 – CONVERTIBLE NOTES

On January 25, 2023, the Company received an amount of $250 in consideration for issuance of convertible notes (the “Convertible Notes”) and two types of warrants. The Convertible Notes principal amount is $250 and maturity date is the earlier between December 31, 2024, and the date of any change in control (excluding the Business Combination). The Convertible Notes have an interest rate of 15% per annum and shall be converted into ordinary shares: (1) at the note holder’s discretion, at a fixed conversion price of USD 10 per ordinary share, or (2) through issuance of the Company’s ordinary shares at a 20% discount.

As part of the Convertible Note agreements, the investor was granted two types of warrants:

(i) Bonus Warrants – 12,500 warrants to purchase ordinary shares of the Company at an exercise price of USD 11.50 per share. The Bonus Warrants term is five years commencing upon the Business Combination.

(ii) Redeemable Warrants – 12,500 warrants to purchase ordinary shares of the Company at a purchase price of USD 11.50 per share. The Redeemable Warrants term is five years commencing upon the Business Combination. The Redeemable Warrants shall be redeemable on a non-cumulative basis at the option of the holder, according to a schedule for USD 5.00 per warrant. The investor has the option to decide that the Company will satisfy any or each redemption through the issuance of ordinary shares of the Company based upon a 20% discount to the 20-trading day VWAP preceding each such anniversary.

The Convertible Notes are recorded in accordance with their fair value. The Redeemable Warrants are accounted for as a derivative financial liability. Management utilized a third-party appraiser to assist them in valuing the Convertible Notes and Redeemable Warrants.

In order to calculate the fair value of the Convertible Notes, the Company discounted the payment schedule by a discount rate of 30.7%.

The fair value of the Redeemable Warrants was calculated using Monte-Carlo simulation model with expected volatility of 71.54% and the risk-free interest rate used is 4.19%. As of June 30, 2023, the fair value of the Convertible Notes was $218 and the fair value of the Redeemable Warrants was $71.

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

XML

BRIDGE LOANS AND DERIVATIVE FINANCIAL LIABILITY

6 Months Ended

Jun. 30, 2023

Notes and other explanatory information [abstract]

BRIDGE LOANS AND DERIVATIVE FINANCIAL LIABILITY

NOTE 4 – BRIDGE LOANS AND DERIVATIVE FINANCIAL LIABILITY:

Between August 2022 to January 2023, Security Matters PTY Ltd. entered into bridge loan agreements (the “Bridge Loans”) with eleven lenders, which lent Security Matters PTY Ltd. an aggregate amount of $3,860. The Bridge Loans have a maturity date of up to two years and bear an interest rate of 10% per annum. The Bridge Loans were accounted for in accordance with the amortized cost method.

As part of the Bridge Loans agreements, the lenders were granted two types of warrants:

(iii) Bonus Warrants – 243,000 warrants to purchase ordinary shares of the Company at an exercise price of USD 11.50 per share. The Bonus Warrants term is five years commencing upon the Business Combination.

(iv) Redeemable Warrants – 572,000 warrants to purchase ordinary shares of the Company at a purchase price of USD 11.50 per share. The Redeemable Warrants term is five years commencing upon the Business Combination. The Redeemable Warrants shall be redeemable on a non-cumulative basis at the option of the holder, according to a schedule for USD 5.00 per warrant.

Each investor has the option to decide that the Company will satisfy any or each redemption through the issuance of ordinary shares of the Company based upon a 20% discount to the 20-trading day VWAP preceding each such anniversary.

Management with the assistance of a third-party appraiser valued the Bonus and the Redeemable Warrants. The fair value of the Bonus Warrants was calculated using the Black-Scholes model. As of June 30, 2023, the fair value of the Bonus Warrants was less than $1 (December 31, 2022 - the fair value of the Bonus Warrants was $24).

The fair value of the Redeemable Warrants was calculated using Monte-Carlo simulation model. As of June 30, 2023, the fair value of the Redeemable Warrants was 2,133 (December 31, 2022, the fair value of the Redeemable Warrants was $2,669).

The main assumptions used in the three valuation models described above were: (1) risk free rate 3.99%; (2) volatility of assets 81.03%; and (3) excepted terms of the warrants -5.18 years. All warrants were classified as a derivative financial liability and are re-measured each reporting date, with changes in fair value recognized in finance expense (income), net.

During 2023, the Company entered into an additional bridge loan agreement (the “Additional Bridge Loans”), in which the Company raised an aggregate amount of $550. The Additional Bridge Loans have a maturity date of up to two years and bear interest rate of 10% per annum. In March 2023, the Company signed an addendum to the Bridge Loans agreements which convert principal amount of $1,350 and redeemable warrants at the amount of $1,000 into 872,418 ordinary shares and defer the remaining cash payments to March 31, 2024.

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

XML

MATERIAL EVENTS DURING THE PERIOD

6 Months Ended

Jun. 30, 2023

Material Events During Period

MATERIAL EVENTS DURING THE PERIOD

NOTE 5 – MATERIAL EVENTS DURING THE PERIOD

1. The Company entered in February 2023 into a Standby Equity Purchase Agreement (“SEPA”) to raise up to $25,000 in consideration of the issuance of ordinary shares over the course of 36 months with Yorkville. According to the SEPA, the Company may issue Yorkville the ordinary shares at a purchase price as one of two options (i) equal to 96% of the weighted average price (“VWAP”) of the common stock during the applicable pricing period (ii) equal to 97% of the lowest VWAP of the common stock during a pricing period of 3 consecutive trading days commencing on the relevant period.

Yorkville advanced to the Company an aggregate principal amount of $3,500 (the “Pre-Paid Advance”). The Pre-Paid Advance was disbursed in two separate installments evidenced as convertible loans, the first for $1,500 at the closing of the Business Combination, and the second, as subsequently amended, for $2,000 upon the effectiveness of the Initial Yorkville Registration Statement. The purchase price for the Pre-Paid Advance is 92.0% of the Pre-Paid Advance. Such Pre-Paid Advances will be offset upon the issuance of ordinary shares to Yorkville at a price per share equal to the lower of (a) 100% of the daily VWAP of the Ordinary Shares on The Nasdaq Stock Market as of the trading day immediately prior to the date of the disbursement of the Pre-Paid Advance (the “Fixed Price”) (in the case of the first Pre-Paid Advance, $3.65), or (b) 93.0% of the lowest daily VWAP of the Ordinary Shares on Nasdaq during the seven trading days immediately prior to each purchase (the “Variable Price” and the lower of the Fixed Price and the Variable Price shall be referred to as the “Purchase Price”); however, in no event shall the Purchase Price be less than $1.10 (the “Floor Price”). On July 27, 2023, the Company amended the promissory note evidencing the remaining Pre-Paid Advance to decrease the Floor Price to $1.10 (as adjusted for reverse stock split which occurred on August 21, 2023, see also Note 9.1), after the Company was required to repay in cash $500 of principal amount as a result of the Company’s share price being below the original Floor Price. The maturity date will be 12-months after the initial closing of each Pre-Paid Advance. In July 2023, the Company repaid in full the first Pre-Paid Advance in the amount of $1,500. In the period, the Company issued ordinary shares in consideration of $450 in accordance with the terms of the SEPA.

2. On June 22, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with EF Hutton, LLC (the “Underwriter”) relating to the public offering of (i) 13,333,333 ordinary shares of the Company, at a subscription price per share of $0.24 (the “Firm Shares”), (ii) 13,333,333 warrants in the form of Warrant A to subscribe for 13,333,333 ordinary shares, at an exercise price of $0.24 per share (“Warrant A”), and (iii) 13,333,333 warrants in the form of Warrant B to subscribe for 13,333,333 ordinary shares, at an exercise price of $0.24 per share (“Warrant B” and together with Warrant A, the “Firm Warrants” and, collectively with the Firm Shares, the “Firm Securities”).

The Company also granted the Underwriter a 45-day option to subscribe for, in the aggregate, (a) up to 1,999,999 additional ordinary shares (15% of the Firm Shares) at a subscription price per share of $0.24 (100% of the public offering price allocated to each Firm Share) (the “Option Shares” and together with the Firm Shares, the “Shares”) or Pre-Funded Warrants to subscribe for up to 1,999,999 ordinary shares at a price per share of $0.2399 (100% of the public offering price allocated to each Firm Share less $0.0001) and the remaining non pre-funded exercise price of each pre-funded warrant will be $0.0001 per share, and/or (b) 1,999,999 warrants in the form of Warrant A to subscribe for an aggregate of 1,999,999 ordinary shares (15% of the Firm Warrants) at an exercise price of $0.24 per warrant (100% of the public offering price allocated to each set of warrants in the form of Warrant A), and/or (c) 1,999,999 warrants in the form of Warrant B to purchase an aggregate of 1,999,999 ordinary shares (15% of the Firm Warrants) at a purchase price of $0.24 per warrant (100% of the public offering price allocated to each set of warrants in the form of Warrant B) (the “Option Warrants” and together with the Firm Warrants and Pre-Funded Warrants, if any, the “Warrants”), which may be subscribed for in any combination of Option Shares and/or the Option Warrants. The Option Shares and the Option Warrants are referred to as the “Option Securities”.

The offering closed on June 27, 2023. The Company delivered the Firm Shares (or Firm Share equivalents in the form of Pre-Funded Warrants), the Firm Warrants and the Option Warrants to the Underwriter on the same day.

The Warrant A terms specify that the warrants may be exercised at any time on or before June 27, 2028. On or after the earlier of (i) the thirty day anniversary of the date of the Underwriting Agreement and (ii) the date on which the aggregate composite trading volume of the Company’s ordinary shares as reported by Bloomberg LP beginning on the date of the Underwriting Agreement exceeds 15,000,000 ordinary shares, a holder of Warrant A warrants may also provide notice and elect a “cashless exercise” pursuant to which the holder would receive an aggregate number of ordinary shares equal to the product of (x) the aggregate number of ordinary shares that would be issuable upon a cash exercise and (y) $0.50. As of the date of publication of these financial statements, an aggregate of 15,195,332 Warrant A warrants were cashless exercised into an aggregate of 7,597,665 ordinary shares.

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 5 – MATERIAL EVENTS DURING THE PERIOD (CONT.)

The Warrant B terms specify that the warrants may be exercised at any time on or before June 27, 2028. All of such Warrant B warrants remain outstanding as of the end of period.

Warrant A was valued at $0.0635 which is half of the share market price at the end of the period, assuming cashless exercise. Warrants A were considered to be a derivative financial liability. The terms of warrants B specify that each warrant has a cash exercise price of $0.24. Warrant B was valued at $0.0602 by using the Black-Scholes option-pricing model, with expected volatility of 70.39% and the risk-free interest rate used is 4.13%. Warrants A and B expire in June 2028.

The net proceeds to the Company upon the closing of this offering were approximately $2,580. The capital raise fee amounted to $660.

The Company also granted to the Underwriter, 666,667 warrants at an exercise price of $0.264 per share, which expires after 5 years. The Underwriter’s warrants were valued at $0.0575 per option by using the Black & Scholes option-pricing, with expected volatility of 70.39% and the risk-free interest rate used is 4.13%.

3. In January 2023, the Company signed an amendment to the agreement with Isorad that determine the following: (1) for the BCA with Lionheart, (a) Isorad was issued 864,000 options to purchase shares of the Company, which options were issued in January 2023 and valued using the Black-Scholes pricing model, with the main parameters used are: (1) risk-free rate: 3.42%; (2) expected volatility: 81.92%: (3) expected term: up to 3 years; and (4) expected dividend yield: 0%; and (b) Isorad will be entitled to 1% of any amount actually received against equity or other funding convertible into equity at the closing of the transaction and until 13 months thereafter (to be paid after reaching an aggregated received amount of $27 million, or at the end of such 13 months, the earlier thereof). In the period, based on the funds the Company actually received, the Company recognized a technology license intellectual property at the amount of $101 against a liability that reflects the due amount; and

(2) Exit fee - in the occurrence of the first M&A event (as such event is defined in such agreement to include mergers, sale of all or substantially all the assets of the Company and similar event) after the closing of the BCA, the Company is to pay a cash amount equal to 1.5% of the amount received or transferred. This will not apply to any future offer of shares, merger or sale of assets thereafter.

4. On March 2, 2023, the Company amended its loan agreement dated September 7, 2015, between the Company, its Shareholders and Kamea Fund that postponed the repayment of the borrowings from related party (Bonus Payment) to March 31, 2024 (refer also to Note 9.4 – Subsequent Events).

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

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SHAREHOLDERS’ EQUITY

6 Months Ended

Jun. 30, 2023

Shareholders Equity

SHAREHOLDERS’ EQUITY

NOTE 6 - SHAREHOLDERS’ EQUITY

A. Share capital:

	Number of shares
	June 30, 2023				December 31, 2022
	Authorized		Issued and outstanding		Authorized		Issued and outstanding
Ordinary shares USD 0.0001 par value		800,000,000,000		38,364,447		500,000,000		1
Preferred shares USD 0.0001 par value		200,000,000,000		-		-		-
Deferred shares Euro 1 par value		25,000		25,000		25,000		25,000

Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have a par value per share of $0.0001 (before the reverse split) and par value per share of $0.0022 (post reverse split) and the Company does not have a limited amount of authorised capital.

Preferred shares

preferred shares with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors.

Deferred shares

Deferred Ordinary Shares are non-voting shares and do not convey upon the holder the right to be paid a dividend or to receive notice of or to attend, vote or speak at a general meeting. The Deferred Shares confer the right on a return of capital, on a winding-up or otherwise, only to the repayment of the nominal value paid up on the Deferred Shares after repayment of the nominal value of the Ordinary Shares.

Changes in Share capital

A. On March 7, 2023 (the “Closing Date”), the Company consummated the Business Combination pursuant the BCA, dated July 26, 2022, and also consummated the SID, dated July 26, 2022.

Beginning on the day immediately prior to the Closing Date and ending on the day immediately after the Closing Date, the following transactions occurred:

1. The AUD 828,240 of the 2022 Convertible Notes have been cancelled in consideration for the issuance of 1,000,000 ordinary shares in Security Matters PTY Ltd.

2. Security Matters PTY Ltd. performed acceleration of vesting for all unvested warrants and options, the expense for the acceleration amounted to $186.

3. 32,211,716 warrants have been exercised on cashless basis to 24,568,773 shares in Security Matters PTY Ltd.

4. 18,673,253 ordinary shares of the Company have been issued to Security Matters PTY Ltd.’s shareholders in return for their 193,500,379 ordinary shares in Security Matters PTY Ltd. that were cancelled. Security Matters PTY Ltd.’s shareholders received as consideration 1 ordinary share of the Company per 10.3624 Security Matters PTY Ltd.’s ordinary shares.

5. The Company issued 3,525,000 ordinary shares, 2,200,000 private warrants and 6,250,000 public warrants to Lionheart’s stockholders, in exchange for their existing Lionheart shares and warrants. The warrants exercise price is $11.5 per share, expiring in March 2028. The warrants are considered to be a derivative financial liability and measured at fair value, which is the market price as of the end of the period, amounted to $0.0204 per warrant.

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 6 – SHAREHOLDERS’ EQUITY (CONT.)

6. The Company issued 303,053 ordinary shares for an aggregate of $3,110 net proceeds.

7. The Company issued 872,418 ordinary shares for the conversion of bridge loan at principal amount of $1,350 and 200,000 redeemable warrants ($5 per warrant, 5 years, exercise price of $11.5 per share).

B. In May and June 2023, the Company issued 675,168 ordinary shares to Yorkville, for an aggregate of $450 net proceeds (see also Note 5.1).

C. In June 2023, the Company raised capital as part of issuance of a unit of financial instruments in consideration of an aggregate of $2,580 net proceeds. As part of this issuance, the Company issued 13,333,333 shares, 15,333,332 warrants A and 15,333,332 warrants B (see also Note 5.2).

D. After the balance sheet date, on August 21, 2023, the Company’s ordinary shares began trading on the Nasdaq Global Market on a post-Reverse Stock Split basis, after consolidating every twenty-two ordinary shares of the Company into one ordinary share (see also Note 9.1).

Incentive Equity Plan

In April 25, 2023, the Company’s board of directors and its shareholders approved and adopted the SMX Public Limited Company 2022 Incentive Equity Plan, which was subsequently amended the Company’s board of directors, subject to applicable Nasdaq requirements, which reserved for grant a number of ordinary shares equal to 15% of the number of issued and outstanding ordinary shares on a fully diluted basis immediately after the closing of the Business Combination, or 5,082,417 authorized ordinary shares.

1. During the six-month period ended June 30, 2023, the Company granted 4,334,000 RSUs to employees, directors and service providers. The fair value at grant date of RSUs granted in the period were $1-$1.09. The related share-based expenses that were recognized in the period amounted to $1,738.

RSUs granted to employees, directors and service providers:

	Six months period ended June 30, 2023 (in thousands)			Six months period ended June 30, 2022 (in thousands)
Outstanding at beginning of period		-			-
Granted		4,334			-
Vested		(945	)		-
Outstanding at June 30, 2023		3,389			-

2. During the six-month period ended June 30, 2023, the Company granted 790,408 options to employees and service providers. These grants carry an exercise price of between $1.04 - $4.0, vesting period up to 4 years from the grant date, contractual life of the options under the plan is 5 years. The fair value of the grant at grant date is $185. The related share based expenses that were recognized in the six months period ended June 30, 2023 amounted to $168.

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 6 - SHAREHOLDERS’ EQUITY (CONT.)

Options granted to employees and service providers:

	Six months period ended June 30, 2023
	Number of options (in thousands)			Weighted average exercise price per share (US$)
Outstanding at beginning of period		1,251			2.01
Granted		790			3.47
Exercised		(7	)		1.39
Expired		-			-
Outstanding at June 30, 2023		2,034			2.58
Exercisable options at June 30, 2023		1,825			2.48

	Six months period ended June 30, 2022
	Number of options (in thousands)			Weighted average exercise price per share (US$)
Outstanding at beginning of period		3,346			2.02
Granted		989			2.86
Exercised		-
Expired		(375	)		2.16
Outstanding at June 30, 2022		3,960			2.21
Exercisable options at June 30, 2022		2,703			2.33

The options to employees and service providers outstanding as of June 30, 2023, are comprised, as follows:

Exercise price (US$)	Outstanding as of June 30, 2023 (in thousands)		Weighted average remaining contractual term		Exercisable as of June 30, 2023 (in thousands)		Weighted average remaining contractual term
			(years)				(years)
0.84-1.39		845		1.18		845		1.18
1.81-2.51		335		2.59		335		2.59
3.57-4.0		707		4.89		498		4.86
4.18		10		1.74		10		1.74
4.87		137		3.51		137		3.51
		2,034				1,825

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

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GENERAL AND ADMINISTRATIVE EXPENSES

6 Months Ended

Jun. 30, 2023

General And Administrative Expenses

GENERAL AND ADMINISTRATIVE EXPENSES

NOTE 7 – GENERAL AND ADMINISTRATIVE EXPENSES

	Six Months Ended
	June 30, 2023		June 30, 2022
	US$ in thousands		US$ in thousands
Transaction cost		7,792		-
Advertising, Public and Investors Relations		1,526		-
Share based compensation		1,805		82
Professional services		718		545
Wages and salaries related		664		429
Travel expenses		379		4
Insurance		329		19
Office and maintenance		37		80
Depreciation and amortization		15		15
Others		86		26
Total		13,350		1,200

XML

LOSS PER SHARE

6 Months Ended

Jun. 30, 2023

Loss Per Share

LOSS PER SHARE

NOTE 8 - LOSS PER SHARE

	Six months ended
	June 30, 2023			June 30, 2022
Net loss attributable to the owners of the Company	$	(33,009	)	$	(2,442	)
Basic and diluted loss per share	$	(39.46	)	$	*(3.36)
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic and diluted loss per share (in thousands)		837			*727

As a result of the reverse share split described in Note 9.1, the calculation of the basic and diluted loss per share for all periods presented have been adjusted retrospectively based on the new number of shares as derived from the conversion ratio.

* Restated as a result of the SPAC transaction

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

XML

SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2023

SUBSEQUENT EVENTS

NOTE 9 – SUBSEQUENT EVENTS

Since the reporting date, the following significant events have occurred:

1. Reverse Stock Split - On August 8, 2023, at the Extraordinary General Meeting of Shareholders of the Company, the Company’s shareholders voted in favor of consolidating every twenty-two ordinary shares in the authorized but unissued and in the authorized and issued share capital of the Company into one ordinary share (the “Reverse Stock Split”).

On August 21, 2023, the Company’s ordinary shares began trading on the Nasdaq Global Market on a post-Reverse Stock Split basis under the current symbol “SMX”.

Following is a table which presents the loss per share before the change (see also Note 8).

Loss per share have been calculated using the weighted average number of shares in issue during the relevant financial periods, the weighted average number of equity shares in issue and loss for the period as follows:

	Six months ended
	June 30, 2023			June 30, 2022
Net loss attributable to the owners of the Company		(33,009	)		(2,442	)
Basic and diluted loss per share		(1.79	)		(0.15	)
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic and diluted loss per share		18,404			15,984

2. On July 27, 2023, the Company amended its Pre-Paid Advance agreement with Yorkville (see also Note 5.1) evidencing the remaining Pre-Paid Advance to decrease the Floor Price to $1.10 (as adjusted for the Reverse Stock Split which occurred on August 21, 2023, see also Note 9.1), after the Company was required to repay in cash $500 of principal amount as a result of the Company’s share price being below the original Floor Price. The maturity date will be 12-months after the initial closing of the Pre-Paid Advance. In July 2023, the Company repaid in full the first Pre-Paid Advance in the amount of $1,500. In the period, the Company repaid approximately $450 principal amount by ordinary share issuance in accordance with the terms of the SEPA and subsequent to the period, the Company repaid approximately $1,350 through September 30, 2023.

3. On September 6, 2023, the Company consummated the transactions pursuant to a Securities Purchase Agreement dated as of September 5, 2023 and issued and sold to an institutional investor a promissory note with a fixed conversion price of $1.6378 and warrants, for gross proceeds to SMX of approximately $2,500, before deducting fees and other offering expenses payable by the Company to their service providers. The note is in the principal amount of $4,290. The actual amount loaned by the investor pursuant to the Note is $2,574 after a 40% original issue discount. The maturity date of the note is the 12-month anniversary of the Effective Date, and is the date upon which the principal amount, as well as any accrued and unpaid interest and other fees, shall be due and payable. Interest accrues in the amount of 12% per year and shall be payable on the maturity date. The investor has the right, at any time, to convert all or any portion of the then outstanding and unpaid principal amount and interest (including any costs, fees and charges) into the Company’s ordinary shares, at a fixed conversion price of $1.6378 per share. Any such conversion is subject to customary conversion limitations set forth in the Purchase Agreement so the investor beneficially owns less than 4.99% of the Company’s ordinary shares. Additionally, the Company has the right to convert in whole or in part the note into ordinary shares; provided that in no case shall the Company so convert the note if the result of the issuance of Ordinary Shares thereby would result in the beneficial ownership of the investor of ordinary shares in excess of 4.99%.

4. On September 15, 2023, the Company paid $250 to EF Hutton, division of Benchmark Investments, LLC, pursuant to a Satisfaction and Discharge of Indebtedness Pursuant to Promissory Note Dated March 7, 2023. Upon paying such amount, the promissory note dated March 7, 2023 in the principal sum of $900 was deemed fully paid and satisfied and the Note was thereafter canceled, discharged and no longer of any further force or effect.

5.

On September 19, 2023, the Company amended its loan agreements dated September 7, 2015, by and between the Company, its shareholders and Kamea Fund (the “Loan Agreements”). Pursuant to the amendment to the Loan Agreements, Kamea agreed to convert $657 of indebtedness under the Loan Agreements (the “Indebtedness Amount”) into 487,281 ordinary shares (post Reverse Stock Split) of the Company, as payment in full for the Indebtedness Amount; provided however, that in the event the proceeds received from Kamea with respect to any sales of such shares are not at least equal to the Indebtedness Amount, the Company will remain liable to Kamea for the balance of the Indebtedness Amount.

6.

On October 3, 2023, the Company has signed an agreement with True Gold Consortium Pty Ltd (“TrueGold”) (see also Note 1C) shareholders to acquire an additional 7.5% which will increase the Company’s holdings to 51.9% in TrueGold and result in the Company’s gain control over TrueGold. As part of the agreement and in consideration for the additional 7.5%, it was agreed that the outstanding payables from TrueGold to the Company which amounted to AU$ 475 as of June 30, 2023 (approximately $307) would be forgiven in full. The transaction is based on past valuation, which was prepared in October 2021, which evaluates TrueGold’s fair value in the range of $78.5 million to $90 million and at a mean of $84.3 million. This past valuation was not audited or reviewed. As of the agreement’s closing date, both parties agreed to engage an independent third party appraiser to prepare an updated TrueGold valuation as of closing date by November 30, 2023. Accordingly, the Company will recognize in its financial statements the fair value of TrueGold’s assets & liabilities at closing date as will be valued by the independent third party appraiser. Once this valuation will be completed, there may be material differences between TrueGold’s past valuation from October 2021 to the updated valuation.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2023

Significant Accounting Policies

Basis of preparation

A. Basis of preparation

These interim consolidated financial statements have been prepared in a condensed format in accordance with IAS 34 Interim Financial Reporting. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the annual consolidated financial statements as of December 31, 2022 of the Company and of Security Matters PTY Ltd. (formerly - Security Matters Limited).

Functional currency

B. Functional currency

The consolidated financial statements are prepared in US Dollars, which is the functional and presentation currency of the Company.

Application of accounting policies

C. Application of accounting policies

The Group has applied the same accounting policies and methods of computation in its interim condensed consolidated financial statements as in its 2022 annual financial statements and as in the 2022 annual financial statements of Security Matters PTY Ltd, except as stated below in note 2D and 2E.

Several amendments to IFRS Standards apply for the first time in 2023, but do not have an impact on the interim condensed consolidated financial statements.

Issue of a unit of financial instruments

D. Issue of a unit of financial instruments

The issue of a unit of financial instruments such as a financial liability (e.g., a loan) and free-standing derivative (e.g. warrants) involves the allocation of the proceeds received (before issuance costs) to financial derivatives and other financial instruments measured at fair value in each period and to financial liabilities that are measured at amortized cost, with residual allocated to equity instruments. Issuance costs are allocated to each component pro rata to the amounts determined for each component in the unit.

Reverse acquisition transaction

E. Reverse acquisition transaction

The result of the merger between the Company and Security Matters PTY Ltd. as described in Note 1B is that legally the Company owns the entire share capital of Security Matters PTY Ltd.

Accordingly, for financial reporting purposes, Security Matters PTY Ltd. (the legal subsidiary) is the accounting acquirer, and the Company (the legal parent) is the accounting acquiree. The consolidated financial statements prepared following the reverse acquisition are issued under the name of the Company, but they are a continuance of the financial statements of Security Matters PTY Ltd. and reflect the fair values of the assets and liabilities of the Company (the acquiree for accounting purposes), together with a deemed issuance of shares by Security Matters PTY Ltd. at fair value based on the quoted opening share price of the Company in its first trading day following the closing of the business combination transaction ($11,599), and a recapitalization of its equity. This deemed issuance of shares is in fact both an equity transaction under IAS 32 (receiving the net assets of the Company) and an equity-settled share-based payment transaction under IFRS 2 (receiving the listing status of the Company). The difference, in the amount of $16,802, between the fair value of the shares deemed to have been issued by Security Matters PTY Ltd. and the fair value of the Company’s identifiable net assets represent a payment for the service of obtaining a stock exchange listing for its shares and it is therefore expensed immediately to profit or loss at the closing date.

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US$ in thousands except share and per share data)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):

E. Reverse acquisition transaction (Cont.)

The Company is initially consolidated in the financial statements from the Closing Date of the Business Combination. Substantially all of the assets and liabilities of the Company were comprised of marketable securities held in a trust account ($4,921) and trade and other payables and warrants ($10,127) respectively, with fair values that were equivalent to their carrying amounts. Below are the implications of the accounting treatment on the financial statements:

1. The assets and liabilities of Security Matters PTY Ltd. have been recognized and measured in these consolidated financial statements at their pre-combination carrying amounts.

2. The retained earnings and other equity balances recognized in those consolidated financial statements are the retained earnings and other equity balances of Security Matters PTY Ltd. immediately before the Business Combination.

3. The amount recognized as issued equity instruments in these consolidated financial statements has been determined by adding to the issued equity of Security Matters PTY Ltd. immediately before the Business Combination the fair value of the deemed issuance of shares, as described above. However, the equity structure (the number and type of shares issued) reflects the equity structure of the Company, including the shares issued by the Company through recapitalization. Accordingly, the equity structure of Security Matters PTY Ltd. (issued capital and addition paid in capital) in comparative periods is restated using the exchange ratio established in the Business Combination to reflect the number and par value of shares of the Company issued in the reverse acquisition transaction.

4. The statement of comprehensive loss reflects that of Security Matters PTY Ltd. for the full period together with the post-acquisition results of the Company from the Closing Date. Loss per share of Security Matters PTY Ltd. for periods prior to the acquisition date is restated such the denominator of the historical loss per share calculation is adjusted by multiplying the weighted-average shares used in each historically reported loss per share calculation by the exchange ratio established in the Business Combination.

Reverse stock split

F. Reverse stock split

The presentation of loss per share amounts has been retrospectively adjusted to give effect to the reverse share split which occurred on August 8, 2023. Except otherwise specifically provided, no other adjustments have been made in these notes to reflect the reverse share split. See also Note 9.1.

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GENERAL (Tables)

6 Months Ended

Jun. 30, 2023

Notes and other explanatory information [abstract]

SCHEDULE OF COMPANIES SUBSIDIARIES

Controlled entity	Country of Incorporation		Percentage Owned June 30, 2023			Percentage Owned December 31, 2022
Security Matters PTY Ltd. (Formerly - Security Matters Limited)		Australia		100	%		-
Lionheart III Corp		USA		100	%		**
SMX Circular Economy Platform PTE, Ltd.		Singapore		100	%		*
SMX (Security Matters) Ireland Limited		Ireland		100	%		*
SMX (Security Matters) Israel Ltd. (Formerly - Security Matters Ltd.)		Israel		100	%		100	%***
Security Matters Canada Ltd.		Canada		100	%		100	%***
Security Matters France Ltd.		France		100	%		100	%***
SMX Beverages Pty Ltd.		Australia		100	%		100	%***

In addition, the Company’s has the following investments in associated companies:

Entity	Country of Incorporation		Percentage Owned June 30, 2023			Percentage Owned December 31, 2022
Yahaloma Technologies Inc.		Canada		50	%		50	%***
True Gold Consortium Pty Ltd		Australia		44.4	%		44.4	%***

The proportion of ownership interest is equal to the proportion of voting power held.

* Incorporated in 2023.

** Merger occurred in March 2023.

*** Owned by Security Matters PTY Ltd. (formerly - Security Matters Limited) as of December 31, 2022.

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SHAREHOLDERS’ EQUITY (Tables)

6 Months Ended

Jun. 30, 2023

IfrsStatementLineItems [Line Items]

SCHEDULE OF SHARE CAPITAL

	Number of shares
	June 30, 2023				December 31, 2022
	Authorized		Issued and outstanding		Authorized		Issued and outstanding
Ordinary shares USD 0.0001 par value		800,000,000,000		38,364,447		500,000,000		1
Preferred shares USD 0.0001 par value		200,000,000,000		-		-		-
Deferred shares Euro 1 par value		25,000		25,000		25,000		25,000

SCHEDULE OF SHARE OPTION GRANTED

	Six months period ended June 30, 2023
	Number of options (in thousands)			Weighted average exercise price per share (US$)
Outstanding at beginning of period		1,251			2.01
Granted		790			3.47
Exercised		(7	)		1.39
Expired		-			-
Outstanding at June 30, 2023		2,034			2.58
Exercisable options at June 30, 2023		1,825			2.48

	Six months period ended June 30, 2022
	Number of options (in thousands)			Weighted average exercise price per share (US$)
Outstanding at beginning of period		3,346			2.02
Granted		989			2.86
Exercised		-
Expired		(375	)		2.16
Outstanding at June 30, 2022		3,960			2.21
Exercisable options at June 30, 2022		2,703			2.33

SCHEDULE OF OPTIONS TO EMPLOYEES AND SERVICE PROVIDERS OUTSTANDING

The options to employees and service providers outstanding as of June 30, 2023, are comprised, as follows:

Exercise price (US$)	Outstanding as of June 30, 2023 (in thousands)		Weighted average remaining contractual term		Exercisable as of June 30, 2023 (in thousands)		Weighted average remaining contractual term
			(years)				(years)
0.84-1.39		845		1.18		845		1.18
1.81-2.51		335		2.59		335		2.59
3.57-4.0		707		4.89		498		4.86
4.18		10		1.74		10		1.74
4.87		137		3.51		137		3.51
		2,034				1,825

Restricted share units [member]

IfrsStatementLineItems [Line Items]

SCHEDULE OF SHARE OPTION GRANTED

	Six months period ended June 30, 2023 (in thousands)			Six months period ended June 30, 2022 (in thousands)
Outstanding at beginning of period		-			-
Granted		4,334			-
Vested		(945	)		-
Outstanding at June 30, 2023		3,389			-

XML

GENERAL AND ADMINISTRATIVE EXPENSES (Tables)

6 Months Ended

Jun. 30, 2023

General And Administrative Expenses

SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES

	Six Months Ended
	June 30, 2023		June 30, 2022
	US$ in thousands		US$ in thousands
Transaction cost		7,792		-
Advertising, Public and Investors Relations		1,526		-
Share based compensation		1,805		82
Professional services		718		545
Wages and salaries related		664		429
Travel expenses		379		4
Insurance		329		19
Office and maintenance		37		80
Depreciation and amortization		15		15
Others		86		26
Total		13,350		1,200

XML

LOSS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2023

Loss Per Share

SCHEDULE OF LOSS PER SHARE

	Six months ended
	June 30, 2023			June 30, 2022
Net loss attributable to the owners of the Company	$	(33,009	)	$	(2,442	)
Basic and diluted loss per share	$	(39.46	)	$	*(3.36)
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic and diluted loss per share (in thousands)		837			*727

As a result of the reverse share split described in Note 9.1, the calculation of the basic and diluted loss per share for all periods presented have been adjusted retrospectively based on the new number of shares as derived from the conversion ratio.

* Restated as a result of the SPAC transaction

XML

SUBSEQUENT EVENTS (Tables)

6 Months Ended

Jun. 30, 2023

SCHEDULE OF LOSS PER SHARE

Loss per share have been calculated using the weighted average number of shares in issue during the relevant financial periods, the weighted average number of equity shares in issue and loss for the period as follows:

	Six months ended
	June 30, 2023			June 30, 2022
Net loss attributable to the owners of the Company		(33,009	)		(2,442	)
Basic and diluted loss per share		(1.79	)		(0.15	)
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic and diluted loss per share		18,404			15,984

XML

SCHEDULE OF COMPANIES SUBSIDIARIES (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Security Matters PTY Ltd [Member]
IfrsStatementLineItems [Line Items]
Country of Incorporation	Australia
Percentage Owned	100.00%
Lion heart III Corp [Member]
IfrsStatementLineItems [Line Items]
Country of Incorporation	USA
Percentage Owned	100.00%		[1]
SMX Circular Economy Platform PTE Ltd [Member]
IfrsStatementLineItems [Line Items]
Country of Incorporation	Singapore
Percentage Owned	100.00%		[2]
SMX Ireland Limited [Member]
IfrsStatementLineItems [Line Items]
Country of Incorporation	Ireland
Percentage Owned	100.00%		[2]
SMX Israel Ltd [Member]
IfrsStatementLineItems [Line Items]
Country of Incorporation	Israel
Percentage Owned	100.00%	100.00%	[3]
Security Matters Canada Ltd [Member]
IfrsStatementLineItems [Line Items]
Country of Incorporation	Canada
Percentage Owned	100.00%	100.00%	[3]
Security Matters France Ltd [Member]
IfrsStatementLineItems [Line Items]
Country of Incorporation	France
Percentage Owned	100.00%	100.00%	[3]
SMX Beverages Pty Ltd [Member]
IfrsStatementLineItems [Line Items]
Country of Incorporation	Australia
Percentage Owned	100.00%	100.00%	[3]
Yahaloma Technologies Inc [Member]
IfrsStatementLineItems [Line Items]
Country of Incorporation	Canada
Percentage Owned	50.00%	50.00%	[3]
True Gold Consortium Pty Ltd [Member]
IfrsStatementLineItems [Line Items]
Country of Incorporation	Australia
Percentage Owned	44.40%	44.40%	[3]

[1] Merger occurred in March 2023.

[2] Incorporated in 2023.

[3] Owned by Security Matters PTY Ltd. (formerly - Security Matters Limited) as of December 31, 2022.

XML

GENERAL (Details Narrative) $ / shares in Units, $ in Thousands		6 Months Ended
	Jul. 26, 2022 USD ($) $ / shares shares	Jun. 30, 2023 USD ($) $ / shares shares	Jun. 30, 2023 € / shares	Mar. 07, 2023 shares	Jan. 31, 2023 shares	Dec. 31, 2022 $ / shares	Dec. 31, 2022 € / shares
IfrsStatementLineItems [Line Items]
Number of shares issued | shares		13,333,333			864,000
Share price | $ / shares	$ 10.3624
Implied value | € / shares			€ 1				€ 1
Equity Line Agreement [Member]
IfrsStatementLineItems [Line Items]
Consideration of issuance of common stock		$ 25,000
Additional capital raising		$ 2,500
Lionheart [Member] | Business Combination Agreement [Member]
IfrsStatementLineItems [Line Items]
Redemption percentage of business combination	97.58%
Remaining funds in trust account	$ 3,061
Ordinary shares [member]
IfrsStatementLineItems [Line Items]
Number of shares issued | shares	1			1
Implied value | $ / shares	$ 10.00	$ 0.0001				$ 0.0001

XML

SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) $ in Thousands	6 Months Ended
	Jun. 30, 2023 USD ($)
Significant Accounting Policies
Fair value based on the quoted opening share price	$ 11,599
Fair value of the shares	16,802
Marketable securities held in a trust account	4,921
Trade, other payables and warrants	$ 10,127

XML

CONVERTIBLE NOTES (Details Narrative) $ / shares in Units, $ in Thousands		1 Months Ended	6 Months Ended
	Jan. 25, 2023 USD ($) $ / shares shares	Jan. 31, 2023	Jun. 30, 2023 USD ($) $ / shares	Jun. 30, 2023 € / shares	Feb. 28, 2023 USD ($)	Dec. 31, 2022 $ / shares	Dec. 31, 2022 € / shares	Jul. 26, 2022 $ / shares
IfrsStatementLineItems [Line Items]
Principal amount | $					$ 3,500
Par value per share | € / shares				€ 1			€ 1
Volatility rate		81.92%
Risk-free interest rate		3.42%
Fair value of convertible notes | $			$ 218
Fair value of the redeemable warrants | $			$ 71
Redeemable Warrants [Member]
IfrsStatementLineItems [Line Items]
Volatility rate			71.54%
Risk-free interest rate			4.19%
Convertiable Note Agreements [Member] | Bonus Warrants [Member]
IfrsStatementLineItems [Line Items]
Warrants to purchase ordinary shares | shares	12,500,000
Exercise price | $ / shares	$ 11.50
Warrants term	5 years
Convertiable Note Agreements [Member] | Redeemable Warrants [Member]
IfrsStatementLineItems [Line Items]
Discount rate	20.00%
Warrants to purchase ordinary shares | shares	12,500
Warrants term	5 years
Share purchase price | $ / shares	$ 11.50
Par value per share | $ / shares	$ 5.00
Description of approach used to determine discount rates	The investor has the option to decide that the Company will satisfy any or each redemption through the issuance of ordinary shares of the Company based upon a 20% discount to the 20-trading day VWAP preceding each such anniversary.
Ordinary shares [member]
IfrsStatementLineItems [Line Items]
Fixed conversion price | $ / shares								$ 10
Par value per share | $ / shares			$ 0.0001			$ 0.0001		$ 10.00
Convertible Notes [Member]
IfrsStatementLineItems [Line Items]
Issue of convertible instruments | $	$ 250
Principal amount | $	$ 250
Maturity date	December 31, 2024
Interest rate	15.00%
Discount rate	20.00%		30.70%

XML

BRIDGE LOANS AND DERIVATIVE FINANCIAL LIABILITY (Details Narrative) $ / shares in Units, $ in Thousands	1 Months Ended		6 Months Ended			12 Months Ended
	Mar. 31, 2023 USD ($) shares	Jan. 31, 2023 $ / shares shares	Jun. 30, 2023 USD ($) shares	Jan. 31, 2023 USD ($) $ / shares shares	Jun. 30, 2022 USD ($)	Dec. 31, 2023 USD ($)	Sep. 19, 2023 shares	Jun. 30, 2023 € / shares	Dec. 31, 2022 USD ($)	Dec. 31, 2022 € / shares
IfrsStatementLineItems [Line Items]
Par value | € / shares								€ 1		€ 1
[custom:FairValueOfRedeemableWarrants-0]			$ 71
Risk-free interest rate		3.42%
Volatility rate		81.92%
Proceeds from borrowings, classified as financing activities			$ 550
Number of shares | shares		864,000	13,333,333	864,000
Non adjusting Event [Member]
IfrsStatementLineItems [Line Items]
Number of shares | shares							487,281
Redeemable Warrants [Member]
IfrsStatementLineItems [Line Items]
Risk-free interest rate			4.19%
Volatility rate			71.54%
Bridge loan agreements [member]
IfrsStatementLineItems [Line Items]
Borrowings, interest rate		10.00%		10.00%
Excepted terms			5 years 2 months 4 days
Description of approach used to determine discount rates				Each investor has the option to decide that the Company will satisfy any or each redemption through the issuance of ordinary shares of the Company based upon a 20% discount to the 20-trading day VWAP preceding each such anniversary.
Fair value of the bonous Warrants									$ 24
[custom:FairValueOfRedeemableWarrants-0]			$ 2,133						$ 2,669
Risk-free interest rate			3.99%
Volatility rate			81.03%
Aggregate amount of convertible instruments issued	$ 1,350
Redeemable warrants	$ 1,000
Number of shares | shares	872,418
Bridge loan agreements [member] | Non adjusting Event [Member]
IfrsStatementLineItems [Line Items]
Borrowings, interest rate						10.00%
Proceeds from borrowings, classified as financing activities						$ 550
Bridge loan agreements [member] | Top of range [member]
IfrsStatementLineItems [Line Items]
Fair value of the bonous Warrants			$ 1
Bridge loan agreements [member] | Bonus Warrants [Member]
IfrsStatementLineItems [Line Items]
Warrants to purchase ordinary shares | shares				243,000
Exercise price of warrants | $ / shares				$ 11.50
Excepted terms				5 years
Bridge loan agreements [member] | Redeemable Warrants [Member]
IfrsStatementLineItems [Line Items]
Warrants to purchase ordinary shares | shares				572,000
Exercise price of warrants | $ / shares				$ 11.50
Excepted terms				5 years
Par value | $ / shares		$ 5.00		$ 5.00
Bridge loan agreements [member] | Top of range [member]
IfrsStatementLineItems [Line Items]
Borrowings maturity				two years
Bridge loan agreements [member] | Top of range [member] | Non adjusting Event [Member]
IfrsStatementLineItems [Line Items]
Borrowings maturity						two years
Bridge loan agreements [member] | Eleven Lenders [Member]
IfrsStatementLineItems [Line Items]
Proceeds from loans and warrants				$ 3,860

XML

MATERIAL EVENTS DURING THE PERIOD (Details Narrative) $ / shares in Units, $ in Thousands		1 Months Ended		6 Months Ended
	Jun. 22, 2023 $ / shares shares	Feb. 28, 2023 USD ($)	Jan. 31, 2023 USD ($) shares	Jun. 30, 2023 USD ($) $ / shares shares	Sep. 19, 2023 shares	Jul. 31, 2023 USD ($)	Jul. 27, 2023 USD ($)	Jun. 30, 2023 € / shares	Dec. 31, 2022 USD ($)	Dec. 31, 2022 € / shares
IfrsStatementLineItems [Line Items]
Principal amount | $		$ 3,500
Purchase price pre paid advance description		The purchase price for the Pre-Paid Advance is 92.0% of the Pre-Paid Advance. Such Pre-Paid Advances will be offset upon the issuance of ordinary shares to Yorkville at a price per share equal to the lower of (a) 100% of the daily VWAP of the Ordinary Shares on The Nasdaq Stock Market as of the trading day immediately prior to the date of the disbursement of the Pre-Paid Advance (the “Fixed Price”) (in the case of the first Pre-Paid Advance, $3.65), or (b) 93.0% of the lowest daily VWAP of the Ordinary Shares on Nasdaq during the seven trading days immediately prior to each purchase (the “Variable Price” and the lower of the Fixed Price and the Variable Price shall be referred to as the “Purchase Price”); however, in no event shall the Purchase Price be less than $1.10 (the “Floor Price”). On July 27, 2023, the Company amended the promissory note evidencing the remaining Pre-Paid Advance to decrease the Floor Price to $1.10 (as adjusted for reverse stock split which occurred on August 21, 2023, see also Note 9.1), after the Company was required to repay in cash $500 of principal amount as a result of the Company’s share price being below the original Floor Price.
Issued ordinary shares value | $				$ 51,730					$ 32,711
Options to purchase shares			864,000	13,333,333
Option granted description	The Company also granted the Underwriter a 45-day option to subscribe for, in the aggregate, (a) up to 1,999,999 additional ordinary shares (15% of the Firm Shares) at a subscription price per share of $0.24 (100% of the public offering price allocated to each Firm Share) (the “Option Shares” and together with the Firm Shares, the “Shares”) or Pre-Funded Warrants to subscribe for up to 1,999,999 ordinary shares at a price per share of $0.2399 (100% of the public offering price allocated to each Firm Share less $0.0001) and the remaining non pre-funded exercise price of each pre-funded warrant will be $0.0001 per share, and/or (b) 1,999,999 warrants in the form of Warrant A to subscribe for an aggregate of 1,999,999 ordinary shares (15% of the Firm Warrants) at an exercise price of $0.24 per warrant (100% of the public offering price allocated to each set of warrants in the form of Warrant A), and/or (c) 1,999,999 warrants in the form of Warrant B to purchase an aggregate of 1,999,999 ordinary shares (15% of the Firm Warrants) at a purchase price of $0.24 per warrant (100% of the public offering price allocated to each set of warrants in the form of Warrant B) (the “Option Warrants” and together with the Firm Warrants and Pre-Funded Warrants, if any, the “Warrants”), which may be subscribed for in any combination of Option Shares and/or the Option Warrants. The Option Shares and the Option Warrants are referred to as the “Option Securities”.
Expected volatility			81.92%
Risk-free rate			3.42%
Net proceeds | $				$ 2,580
Capital raise fee | $				$ 660
Par value per share | € / shares								€ 1		€ 1
Expected term			3 years
Expected dividend yield			0.00%
Convertible percentage			1.00%
Aggregated received amount | $			$ 27,000
Payment of cash percent			1.50%
Warrant A [Member]
IfrsStatementLineItems [Line Items]
Warrant share price cashless exercise | $ / shares	$ 0.0635
Number of shares issued warrants				15,333,332
Warrant B [Member]
IfrsStatementLineItems [Line Items]
Warrant share price cash exercise | $ / shares	0.24
Exercise price | $ / shares	$ 0.0602
Expected volatility	70.39%
Risk-free rate	4.13%
Number of shares issued warrants				15,333,332
Underwriter Warrant [Member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares	$ 0.264
Expected volatility	70.39%
Risk-free rate	4.13%
Number of shares issued warrants	666,667
Warrants expiration date	5 years
Par value per share | $ / shares	$ 0.0575
Underwriting Agreement [Member]
IfrsStatementLineItems [Line Items]
Options to purchase shares	13,333,333
Subscription price per share | $ / shares	$ 0.24
Number of warrants issued	13,333,333
Underwriting Agreement [Member] | Warrant A [Member]
IfrsStatementLineItems [Line Items]
Options to purchase shares	15,000,000
Subscription price per share | $ / shares	$ 0.24
Number of warrants issued	15,195,332
Number of warrants issued	13,333,333
Warrant share price cash exercise | $ / shares	$ 0.50
Number of warrant cashless exercised	7,597,665
Underwriting Agreement [Member] | Warrant B [Member]
IfrsStatementLineItems [Line Items]
Subscription price per share | $ / shares	$ 0.24
Number of warrants issued	13,333,333
Non adjusting Event [Member]
IfrsStatementLineItems [Line Items]
Cash | $							$ 500
Options to purchase shares					487,281
First Installment [Member]
IfrsStatementLineItems [Line Items]
Pre-paid advance | $		$ 1,500
First Installment [Member] | Non adjusting Event [Member]
IfrsStatementLineItems [Line Items]
Pre-paid advance | $						$ 1,500
Second Installment [Member]
IfrsStatementLineItems [Line Items]
Pre-paid advance | $		2,000
Bottom of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares				$ 1.04
SEPA [Member]
IfrsStatementLineItems [Line Items]
Issued capital, ordinary shares | $		$ 25,000
Percentage of weighted average price of common stock		96.00%
SEPA [Member] | Non adjusting Event [Member]
IfrsStatementLineItems [Line Items]
Issued ordinary shares value | $						$ 450
SEPA [Member] | Bottom of range [member]
IfrsStatementLineItems [Line Items]
Percentage of common stock		97.00%

XML

SCHEDULE OF SHARE CAPITAL (Details) - shares	Jun. 30, 2023	Dec. 31, 2022
Deferred Shares [Member]
IfrsStatementLineItems [Line Items]
Number of shares authorized	25,000	25,000
Number of shares issued and outstanding	25,000	25,000
Ordinary shares [member]
IfrsStatementLineItems [Line Items]
Number of shares authorized	800,000,000,000	500,000,000
Number of shares issued and outstanding	38,364,447	1
Preference shares [member]
IfrsStatementLineItems [Line Items]
Number of shares authorized	200,000,000,000
Number of shares issued and outstanding

XML

SCHEDULE OF SHARE CAPITAL (Details) (Parenthetical)	Jun. 30, 2023 $ / shares	Jun. 30, 2023 € / shares	Dec. 31, 2022 $ / shares	Dec. 31, 2022 € / shares	Jul. 26, 2022 $ / shares
IfrsStatementLineItems [Line Items]
Par value per share | € / shares		€ 1		€ 1
Ordinary shares [member]
IfrsStatementLineItems [Line Items]
Par value per share	$ 0.0001		$ 0.0001		$ 10.00
Preference shares [member]
IfrsStatementLineItems [Line Items]
Par value per share	$ 0.0001		$ 0.0001

XML

SCHEDULE OF RESTRICTED SHARES UNITS GRANTED (Details) - shares shares in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
IfrsStatementLineItems [Line Items]
Number of options outstanding, beginning balance	1,251	3,346
Number of options, granted	790	989
Number of options, vested	(7)
Number of options outstanding, ending balance	2,034	3,960
Restricted share units [member]
IfrsStatementLineItems [Line Items]
Number of options outstanding, beginning balance
Number of options, granted	4,334
Number of options, vested	(945)
Number of options outstanding, ending balance	3,389

XML

SCHEDULE OF SHARE OPTION GRANTED (Details) shares in Thousands	6 Months Ended
	Jun. 30, 2023 shares $ / shares	Jun. 30, 2022 shares $ / shares
Shareholders Equity
Number of options outstanding, beginning balance | shares	1,251	3,346
Weighted average exercise price, outstanding beginning balance | $ / shares	$ 2.01	$ 2.02
Number of options, granted | shares	790	989
Weighted average exercise price, granted | $ / shares	$ 3.47	$ 2.86
Number of options, exercised | shares	(7)
Weighted average exercise price, exercised | $ / shares	$ 1.39
Number of options, expired | shares		(375)
Weighted average exercise price, expired | $ / shares		$ 2.16
Number of options outstanding, ending balance | shares	2,034	3,960
Weighted average exercise price, outstanding ending balance | $ / shares	$ 2.58	$ 2.21
Number of options, Exercisable | shares	1,825	2,703
Weighted average exercise price, Exercisable | $ / shares	$ 2.48	$ 2.33

XML

SCHEDULE OF OPTIONS TO EMPLOYEES AND SERVICE PROVIDERS OUTSTANDING (Details) shares in Thousands	6 Months Ended
	Jun. 30, 2023 shares $ / shares	Dec. 31, 2022 shares	Jun. 30, 2022 shares	Dec. 31, 2021 shares
IfrsStatementLineItems [Line Items]
Number of outstanding shares	2,034	1,251	3,960	3,346
Number of exercisable shares	1,825		2,703
Exercise price one [member]
IfrsStatementLineItems [Line Items]
Number of outstanding shares	845
Weighted average remaining contractual life of outstanding share options	1 year 2 months 4 days
Number of exercisable shares	845
Weighted average remaining contractual life of exercisable share options	1 year 2 months 4 days
Exercise price one [member] | Bottom of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares	$ 0.84
Exercise price one [member] | Top of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares	$ 1.39
Options Outstanding Two [Member]
IfrsStatementLineItems [Line Items]
Number of outstanding shares	335
Weighted average remaining contractual life of outstanding share options	2 years 7 months 2 days
Number of exercisable shares	335
Weighted average remaining contractual life of exercisable share options	2 years 7 months 2 days
Options Outstanding Two [Member] | Bottom of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares	$ 1.81
Options Outstanding Two [Member] | Top of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares	$ 2.51
Options Outstanding Three [Member]
IfrsStatementLineItems [Line Items]
Number of outstanding shares	707
Weighted average remaining contractual life of outstanding share options	4 years 10 months 20 days
Number of exercisable shares	498
Weighted average remaining contractual life of exercisable share options	4 years 10 months 9 days
Options Outstanding Three [Member] | Bottom of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares	$ 3.57
Options Outstanding Three [Member] | Top of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares	$ 4.0
Options Outstanding Four [Member]
IfrsStatementLineItems [Line Items]
Number of outstanding shares	10
Weighted average remaining contractual life of outstanding share options	1 year 8 months 26 days
Number of exercisable shares	10
Weighted average remaining contractual life of exercisable share options	1 year 8 months 26 days
Options Outstanding Four [Member] | Top of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares	$ 4.18
Options Outstanding Five [Member]
IfrsStatementLineItems [Line Items]
Number of outstanding shares	137
Weighted average remaining contractual life of outstanding share options	3 years 6 months 3 days
Number of exercisable shares	137
Weighted average remaining contractual life of exercisable share options	3 years 6 months 3 days
Options Outstanding Five [Member] | Top of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares	$ 4.87

XML

SHAREHOLDERS’ EQUITY (Details Narrative) $ / shares in Units, $ in Thousands, $ in Thousands					1 Months Ended		6 Months Ended
	Jun. 22, 2023 $ / shares	Apr. 25, 2023 shares	Mar. 07, 2023 USD ($) $ / shares shares	Mar. 07, 2023 AUD ($) shares	Jun. 30, 2023 USD ($) $ / shares shares	May 31, 2023 USD ($) shares	Jun. 30, 2023 USD ($) shares $ / shares	Jun. 30, 2023 € / shares	Jan. 31, 2023 shares	Dec. 31, 2022 $ / shares shares	Dec. 31, 2022 € / shares shares	Jul. 26, 2022 $ / shares shares
IfrsStatementLineItems [Line Items]
Explanation of fact that shares have par value							The fully paid ordinary shares have a par value per share of $0.0001 (before the reverse split) and par value per share of $0.0022 (post reverse split) and the Company does not have a limited amount of authorised capital.
Number of shares issued					13,333,333		13,333,333		864,000
Warrants acceleration amount | $			$ 186
Exercise of warrants			32,211,716	32,211,716
Number of shares on cashless basis			24,568,773	24,568,773
Share price | $ / shares												$ 10.3624
Implied value | € / shares								€ 1			€ 1
Net proceeds | $							$ 2,580
Related share based expenses | $							$ 168
Vesting period description							vesting period up to 4 years from the grant date, contractual life of the options under the plan is 5 years.
Fair value | $					$ 185		$ 185
Bottom of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares							$ 1.04
Top of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares							$ 4.0
Restricted share units [member]
IfrsStatementLineItems [Line Items]
Related share based expenses | $							$ 1,738
Restricted share units [member] | Bottom of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares							$ 1
Restricted share units [member] | Top of range [member]
IfrsStatementLineItems [Line Items]
Exercise price | $ / shares							$ 1.09
2022 Incentive Equity Plan [Member]
IfrsStatementLineItems [Line Items]
Number of issued and outstanding ordinary shares percentage		15.00%
Number of shares authorized		5,082,417
Yorkville [Member]
IfrsStatementLineItems [Line Items]
Number of shares issued					675,168	675,168	675,168
Net proceeds | $					$ 450	$ 450
Employees Directors And Service Providers [Member] | Restricted share units [member]
IfrsStatementLineItems [Line Items]
Options granted							4,334,000
Employees And Service Providers [Member]
IfrsStatementLineItems [Line Items]
Options granted							790,408
Warrant A [Member]
IfrsStatementLineItems [Line Items]
Shares issued warrants					15,333,332		15,333,332
Warrant B [Member]
IfrsStatementLineItems [Line Items]
Shares issued warrants					15,333,332		15,333,332
Exercise price | $ / shares	$ 0.0602
Ordinary shares [member]
IfrsStatementLineItems [Line Items]
Number of shares issued			1									1
Implied value | $ / shares					$ 0.0001		$ 0.0001			$ 0.0001		$ 10.00
Number of shares authorized					800,000,000,000		800,000,000,000			500,000,000	500,000,000
Ordinary Shares One [Member]
IfrsStatementLineItems [Line Items]
Number of shares issued			303,053
Proceeds from issuance of stock | $			$ 3,110
Ordinary Shares Two [Member]
IfrsStatementLineItems [Line Items]
Number of shares issued			872,418
Exercise price | $ / shares			$ 11.5
Implied value | $ / shares			$ 5
Principal amount | $			$ 1,350
Redeemable warrants | $			$ 200,000
Warrants term			5 years	5 years
Security Matters PTY Ltd [Member]
IfrsStatementLineItems [Line Items]
Number of shares issued			18,673,253
Share price | $ / shares			$ 10.3624
Security Matters PTY Ltd [Member] | Ordinary shares [member]
IfrsStatementLineItems [Line Items]
Number of shares issued			193,500,379
Lion heart III Corp [Member]
IfrsStatementLineItems [Line Items]
Number of shares issued			3,525,000
Exercise price | $ / shares			$ 11.5
Implied value | $ / shares			$ 0.0204
Lion heart III Corp [Member] | Private Warrants [Member]
IfrsStatementLineItems [Line Items]
Number of shares issued			2,200,000
Lion heart III Corp [Member] | Public Warrants [Member]
IfrsStatementLineItems [Line Items]
Number of shares issued			6,250,000
2022 Convertible Notes [Member]
IfrsStatementLineItems [Line Items]
Convertiable notes | $				$ 828,240
Number of shares issued			1,000,000

XML

SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
IfrsStatementLineItems [Line Items]
Share based compensation	$ 2,052	$ 165
Total	13,350	1,200
General And Administrative Expenses [Member]
IfrsStatementLineItems [Line Items]
Transaction cost	7,792
Advertising, Public and Investors Relations	1,526
Share based compensation	1,805	82
Professional services	718	545
Wages and salaries related	664	429
Travel expenses	379	4
Insurance	329	19
Office and maintenance	37	80
Depreciation and amortization	15	15
Others	$ 86	$ 26

XML

SCHEDULE OF LOSS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended
	Jun. 30, 2023		Jun. 30, 2022
IfrsStatementLineItems [Line Items]
Net loss attributable to the owners of the Company	$ (33,009)		$ (2,442)
Basic loss per share attributable to shareholders	$ (39.46)	[1]	$ (3.36)	[2],[3]
Diluted loss per share attributable to shareholdersDiluted loss per share attributable to shareholders	$ (39.46)	[1]	$ (3.36)	[3]
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic and diluted loss per share	837		727	[2]
Reverse stock split [Member]
IfrsStatementLineItems [Line Items]
Net loss attributable to the owners of the Company	$ (33,009)		$ (2,442)
Basic loss per share attributable to shareholders	$ (1.79)		$ (0.15)
Diluted loss per share attributable to shareholdersDiluted loss per share attributable to shareholders	$ (1.79)		$ (0.15)
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic and diluted loss per share	18,404		15,984

[1] After giving effect to the reverse stock split (see also Note 9.1)

[2] Restated as a result of the SPAC transaction

[3] Restated as a result of the SPAC transaction and after giving effect to the reverse stock split (see also Note 1 and 9.1)

XML

SUBSEQUENT EVENTS (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands			1 Months Ended
	Sep. 30, 2023	Sep. 06, 2023	Sep. 15, 2023	Jul. 31, 2023	Jul. 27, 2023	Sep. 19, 2023	Jun. 30, 2023	Jan. 31, 2023
IfrsStatementLineItems [Line Items]
Number of shares							13,333,333	864,000
Non adjusting Event [Member]
IfrsStatementLineItems [Line Items]
Floor price					$ 1.10
Repayment of debt	$ 1,350			$ 450	$ 500
Pre-paid advance				$ 1,500
Debt principal smount			$ 900
Payments for promissory notes			$ 250
Maturity date			Mar. 07, 2023
Number of shares converted						657
Number of shares						487,281
Non adjusting Event [Member] | Securities Purchase Agreement [Member]
IfrsStatementLineItems [Line Items]
Debt conversion price		$ 1.6378
Gross proceeds		$ 2,500
Debt principal smount		4,290
Loans payable		$ 2,574
Discount rate		40.00%
Investor owned percentage		4.99%